Leading Through Hypergrowth At Keurig

After leading Keurig through more than five years of warp speed growth from November 2008 through October 2013, Michelle Stacy is having a lot of fun figuring out what she wants to do next.

“It was a great five years. To lead a company that was growing at a 5-year compound annual growth rate of 61 percent was the job of a lifetime,” she said.

Keurig Green Mountain grew in the five years of Stacy’s leadership from approximately $400 million to more than $4 billion in net revenues.

“About a year ago we had a CEO change, which was the right change for the company,” she said. “But it also made me reflect on what I wanted to do next. I am totally comfortable with the decision I made to leave at this time.”

For now, Stacy is taking some much needed time to ski, ride horses and plan her next big career adventure.

“When you’re sitting at the top of an organization, you just don’t have a lot of time for anything else,” she said. “I am enjoying a much needed break.”

Stacy was a partner at ArchPoint Consulting in 2007-2008.

“When I left ArchPoint to go to Keurig, the CEO of Green Mountain told me he thought we could grow the business by 60 percent,” Stacy said.

Then came the crash of 2008, and Stacy wondered if that seemingly lofty prediction was realistic.

“The economy was tanking and here we were selling a coffee maker that sold for four times the going rate. I had to ask, ‘Is the consumer going to show up for Christmas and buy a premium coffee maker?’”

Once the shopping season had come and gone — despite the economic slump and downturn, Keurig had grown by nearly 100 percent.

“That’s when I realized that the features and benefits of the Keurig were something the consumer was looking for,” she said. “It was a combination of great tasting coffee, total convenience and a broad choice of coffee brands that made the consumer feel like they had unlimited choices. The consumer doesn’t want to be locked in to just one brand of coffee. That ability to offer choices to the consumer took the brand from being just another single serve to becoming THE single serve.”

Q: As an organization succeeds, it gets bigger. As it gets bigger, what are the things to watch out for?

There are a variety of hurdles that come at you very quickly when you are growing at this scale — some of them are obvious and some are surprising.

The first is building processes to support the larger organization — and we knew to expect those necessary changes.

Secondly and attached closely, is the more costly side of growth, building infrastructure and capabilities. This can require significant investments that need to be prioritized, budgeted and managed. Of course, bringing the right people to take an organization into the future is a major capability and perhaps the most important single task, but there so many other areas as well — technology resources, supply chain, manufacturing capabilities and infrastructure. The organization’s leaders have to make sure manufacturing, distribution and sales can scale to the business, but ignoring the behind-the-scenes capabilities like IT, customer service, space management and human resource systems, to name a few, could land an organization in hot water.

There are a hundred different capabilities to keep an eye on. I knew we had grown too much when I walked in one day and there were two desks in a closet. That was a major wake-up call for me. I never thought I’d be thinking about space management. Eventually we ended up building one of the largest private construction projects in Massachusetts.

The third area is in people growth. Books have been written that say once an organization has more than 100 or 200 employees at a location, it is “big” and the culture changes. At Keurig, we were doubling our size approximately every 18 months. We started with just over 100 people and when I left, Keurig had close to 500 people. A $400 million company has different needs and people requirements than a $4 billion company. Leaders must recognize the need for different types of people, with varied strengths and skill sets who can take an organization through hyper growth. We needed to focus on recruiting, interviewing and on-boarding skills. Unlike many companies, I chose to keep my original management team and build around them to fill in capabilities and prepare the organization for the future. This provided great stability during the high growth years.

Fourth, never take your foot off innovation. Even though we had a great formula for what Keurig was, the innovation never stopped. Regardless of the rate of our success, we knew from an early stage that we needed to think about continued innovation. We developed a constant stream of innovation both on the brewer and beverage sides. Leaders have to keep focused on the sustainable competitive advantage. The minute one company sees success the playing field by nature gets more competitive. Leaders must innovate to sustain the competitive advantage.

Fifth and finally, in consumer package goods companies, leaders need to make brand a very important part of the sustainable and competitive advantage. We wanted to build Keurig to be a power brand with both high awareness and high purchase interest. Companies that build a strong bond with their consumers are more easily sustained with increased competition. Outside of Keurig, an example of this is Gillette’s bond with men supported by the long standing “The best a man can get” positioning.

To do this, the marketing team has to focus on consumer insights to truly know the consumer. In addition, social media offered Keurig the opportunity to communicate with consumers in a unique way. The bottom line is that people love their Keurig. By using the tools available, we were able to engage consumers in a dialogue with us about their unabashed love for their Keurigs. That two-way communication allowed us to have an accelerated growth curve because consumers were our best advocates. The Keurig consumer usually recommended or bought a brewer for a friend within six months of their first purchase — “Brewers beget brewers.”

Q: As the organization gets bigger, do you believe the amount of passion and initiative goes down?

Gallup research results say that only 30 percent of the work force is engaged. That means that 70 percent of our workforce is not engaged or actively disengaged and therefore not working at or near their capacity. Think about that amount of waste! How do we change this dynamic? A disengaged workforce is one of the biggest problems corporations face.

We have to figure out how to engage the entire workforce because the sad truth is, if left unmanaged, employee engagement will remain flat — that means employee disengagement costs the United States $550 billion dollars a year, according to Gallup.

If I said that only 50 percent of a company’s machines were working, a CEO would think, “What an amazing opportunity for cost savings!” If I told the same CEO that she was overpaying by 50 percent for cost of goods, she’d take immediate action. But for some reason with people, so many businesses walk right by the substantial loss caused by a disengaged workforce.

The most powerful tool we have is an engaged workforce. Keurig was voted one of the top two places to work in Massachusetts while we were in the middle of this astronomical growth curve. We built a culture that captured people’s minds and hearts. We had an extremely high commitment to “doing good while doing well,” that allowed us to fuel a tremendous amount of employee engagement. Living the vision and values of a company was critical to the organization — and to me personally. We accomplished incredible things while many times we were under-resourced to do so.

Q: The legacy of many companies that grew from nothing is typically based on great customer service and the ability to make decisions quickly. The question for these companies is how to maintain this nimbleness as part of the culture as they grow?

First it’s, “Communicate. Communicate. Then, over communicate.”

One of the great things about small entrepreneurial companies is to be fast and nimble. Communicating a decision when you’re small is fast. There are fewer repercussions of those decisions and who they’re impacting. As the business grows, maintaining that level of nimbleness is difficult. You have a lot more people to get on the bus and driving in the same direction.

As you grow, the costs and scale of the decisions are larger.

We were not as nimble at $4 billion as we were at $400 million. However, we kept the level of bureaucracy to a minimum because we had the right group of people. Keeping bureaucracy to a minimum is essential — especially in high growth.

The second is to be as authentic in your leadership as you can be. Building employee and supplier trust is critical. We were asking suppliers and employees to do amazing things like double their warehouse space or their manufacturing floor.

Maintaining trust with all major constituencies — employees, suppliers, customers and shareholders — is essential. You are going to make mistakes when you’re growing that fast, but you have to be careful not to lose the trust.

Sometimes, the area least expected is the area to watch the most carefully. In hypergrowth, I don’t recommend adhering to the adage, “If it ain’t broke, don’t fix it.” You have to keep your eyes on the things that aren’t broken too! For example, I didn’t realize, because of our growth rate, just how close to breaking our quality assurances and IT systems were. It’s human nature to rest on the capabilities that are OK. Another example goes back to those desks in the closet. I was so bent on making sure we resourced the company with the right people that I missed that we had no place to put them. Those things can trip you up a little.

There’s a yin and a yang. On one side, I have to ask, “What are the capabilities I need that I don’t have?” On the other side, I have to stay vigilant in making sure the capabilities I have are robust enough. I learned that one the hard way!

Q: How does an organization adjust to the need for more formal communications ensuring consistent execution?

For us, that came quite naturally, especially in our early years. I made a point of having quarterly meetings. When I started, we held them in the cafeteria. When I left, we held them in a huge ballroom at the Marriott. We had a corporate intranet. I did a lot of breakfasts with the president and Lunch and Learns. I found that a particularly good way to communicate. The team could talk to me and I could talk to them about where the business was going. Also, it’s important to make sure that the leadership team is doing a good job of communicating — making sure they walk the walk and talk the talk.

Q: With more to lose, there’s more pressure not to lose it. What are your thoughts on the reality that success brings with it the fear of blowing it?

We weren’t as fearful of blowing it. We were concerned about forecasting it. We were a public company. We were in hypergrowth. There’s nothing that the street wants more than a company to be predictable — and predictability is difficult to do when you’re growing like Keurig was. There are very few forecasting tools that work on high-growth companies. We were focused both on maintaining the capacity for growth and answering the question, “How do we become predictable?”

Beyond predictability, as companies get large, it’s difficult to grow at the same rate. Adding a 25 percent growth rate to a $4 billion business is still a billion dollars.