The Change Guy

The CEO Advantage Journal sat down with David Brandon about five months into his current job. In this edited interview, he generously shares his experiences, business philosophies, and practical leadership applications as he pursues positive change for an institution still deeply embedded in the tradition of his mentor.

Sports has always been a big part of David Brandon’s life, and as long as he can remember, teammates have always looked to him to lead. His success as a high school quarterback led to a scholarship to play for the University of Michigan and its legendary coach, Bo Schembechler.

As a four-year backup, Brandon really didn’t play much at all. And that turned out to be a good thing, for instead of focusing exclusively on opposing defenses, Brandon focused on Bo. He says he got a degree from the “Schembechler School of Leadership,” and it launched him into a very successful business career.

With a personal endorsement from Bo, he started his career at Procter & Gamble. After a quick succession of promotions, he left when he realized he had advanced as far as would be allowed for a man of his young age. Instead, he joined Valassis, a small coupon company in Livonia, Michigan. “The cultural shock was incredible,” says Brandon, “but I knew I could go as fast and as far as my talents would take me.” He did just that, becoming CEO in 1987 and leading the growing company to an IPO on the New York Stock Exchange.

In 1999, Brandon became CEO of Domino’s Pizza in Ann Arbor, Michigan and served for eleven years, a period during which Domino’s enjoyed enormous success. Domino’s expects to cut the ribbon on their 10,000th store in a couple years, something that seemed impossible when Brandon first got there. “And I’ll be there [when that happens],” says Brandon, “just as I promised I would be.” During his time at Domino’s, Brandon was elected to the University of Michigan Board of Regents and joined multiple corporate boards on which he continues to serve, including Burger King, Kaydon Corporation, and TJX Companies.

From there, the story returns to sports. Early in 2010, Brandon declined requests to run for public office and became the Athletic Director at the University of Michigan. As could be expected, Michigan Athletics is a labor of love for Brandon, uniting his passions for business management and the maize and blue.

When you walk into a new situation as the CEO or leader, what do you do first?
I look at an org chart. Where do we have talent and what gaps need to be filled? It’s been somebody else’s team; I have to figure out how to make it my own team. While I’m doing that, I’m constantly assessing how we go to market and how we organize our talent to fit my model for getting our work done efficiently and effectively.

Do you use a specific tool for assessing people?
I’ve used different assessment tools, but a lot of it is meeting with them one on one. I basically conduct a job interview with each one. I want to understand where they’ve been, what they’ve done, their priorities, and their management style. I want to know if these are people that I would hire.

This is the third time I’ve done this. Every place I’ve been has had its own culture. [The University of Michigan] is a place that finds change really hard. Part of that is good because it’s deep in tradition and loves its history. Universities, in general, are places where people want to eat at the same restaurants, tour at the same dorms, go to the same football stadium, and sit in the same seat. They want every trip to be a reunion – a return to a fun time in their lives.

But I’m a change guy, so I’m looking at my team to determine who likes change and responds well to change. The people who are only comfortable keeping things the way they’ve been probably won’t be very happy because I did not come here to be a caretaker. I came to put my mark on this place, grow it faster than it’s been growing, and achieve some things that I consider important.

And that is philosophically consistent with your career. Talk about how this current opportunity is similar and/or different to your roles at Valassis and Domino’s.
Each of my three CEO roles have been unique. Valassis was an opportunity to create a culture. When I arrived, they were small and trying to find their identity. For the first five years, it was small enough for me to personally interview everyone we hired. Everything was created around the culture we wanted to build.

Then I went to Domino’s, a 38-yearold company with a culture all its own. I was the new leader in a situation where they had been doing the same thing for decades. I had to convince that organization that there was a reason to break away from patterns of the past and embrace much higher expectations. At that time, there were already rumors of a big IPO on the New York Stock Exchange. I came in to say, “Listen, we’ve got to get ready for prime time. I’ve done that before. I know what that looks like. Follow me and I’ll get you there.” And that worked pretty well.

The University of Michigan Athletic Department is a not-for-profit organization – no IPO here. In this culture, they say, “Our revenue slightly exceeds our costs, so we’re financially doing our jobs. We can reinvest in some facilities and a few other projects, and we’re fine.” That’s the expectation. But I want to do more. My message is, “We’re going to make some changes, but everything will be driven by a passion to build the best athletic department in the United States of America.” I know how to get there, but we’ve got to change.

Is that a tough message to deliver?
Yes, it is – particularly when you parachute in from the outside. But change does not have to be a criticism of the past. It just means the future is going to be different.

The world of public university athletic departments is pretty transparent. We know our competitors’ revenues, academic rankings, athletic rankings, ticket sales. . .  As I look at those measures, there is absolutely no evidence that we are the biggest and best in the country. There are schools out there with more sports, more money, better facilties, and better academic performance than us. No matter how much we might want to think we’re the best, we’re not. We have a great brand, a great department, a great history, and huge potential. We’ve won three championships in the short time I’ve been here, so we do some good work. But we’re not as good as we can be, and that’s why I’m excited to be here.

What is the role of a CEO?
The CEO role is both a leadership and an operating role. I’ve always felt that a COO makes the CEO nothing more than a hood ornament. In those cases, the CEO does things like investor relations, representing the company in the community, and giving lots of speeches while the COO runs the day-to-day business. That’s not the kind of CEO I want to be. Sure, I’ll do some of those things, but I also want to be very close to the daily operations of the organization. I’ve only been here five months, but I can discuss just about anything that’s going on in this place because I like to dig in and understand the detailed mechanics of how this department works.

Was there a point when you knew you wanted to be a CEO, or did that role just naturally evolve for you?
Athletics hugely influenced me. While growing up, I was usually elected captain of the team in whatever sport I was playing. Eventually, I wanted to be captain of everything because that responsibility felt good to me. I wanted the authority, the visibility, and the accountability. Then I was president of the student council and began to emerge as someone who people looked to for leadership. I studied to be a teacher in hopes of being a coach because, to me, coaching is the ultimate in leadership. I wanted to be a coach of a big-time program.

Then my career got rerouted into business. I was probably at Procter & Gamble for three days when I started identifying how their corporate leaders’ career path worked. I learned about their responsibilities, their authority, and their salaries, and I said, “I want to be one of those.”

I had a great experience at P&G. I love the company to this day and still feed off the things I learned there. But I’ll tell you why I left. I spent a day working with one of the corporate big shots who flew in on the company plane to “check me out.” As we sat in a car at the end of the day waiting for the plane’s engines to get going, he turned to me and said, “Dave, you’re as good as anyone I’ve ever seen in this job. You’re doing everything well. I know you’re ready for the next job, but you’re going to need a few gray hairs before you get it.” That was big company code for, “You’re ready, but you’re going to have to wait in line because there are guys ahead of you.”

So I sent out my resume. It was no longer about being the best for the job; it was about serving time, and serving time is not something that interests me.

From there, you went to Valassis.
That’s right. With P&G, I had been living in Salt Lake City with eleven people working for me. I was responsible for five states, and I was commuting by air to a Colorado office. I was a hot shot 20-something who suddenly found himself working in an old warehouse in Livonia, Michigan at a small family business that people confused with a pickle company! The cultural shock was incredible, but I knew I could go as fast and as far as my talents would take me without having to wait in line.

So to answer your question, I’ve wanted to be a leader for as long as I can remember. I don’t know if I was wired that way or if my experiences taught me to be that way, but that’s what I’ve always wanted to be.

You mentioned that some things from P&G still influence you today. Are you willing to share any examples?
They were very much into promotion from within. Domino’s is now hiring dozens of people out of college because of a people pipeline program I implemented. That was a P&G thing, and we do the same thing here. I like hiring people who soak up learning like sponges and have something to prove. Never underestimate the power of someone who has something to prove. Bring those people in the organization and develop them; let them grow and grow with them.

P&G’s whole performance review process – they gave very crisp and direct feedback to people and kept it separate from pay. Many organizations now give annual appraisals and your percent increase in pay is tied to your score. P&G had a salary administration program based on qualified assessments, but they also had a very separate tool that was not conducted under the pressure of negotiating pay; it was about a great exchange between you and your boss regarding what you were getting right, what you were getting wrong, your strengths and weaknesses, and your career prospects. It was truly geared toward personal development. We’re in the process of implementing that here.

When I first got here, this didn’t look like a sharp, disciplined enterprise where people are proud to come to work and focused on execution. It felt like a college atmosphere – piles of stuff everywhere. We had a day when I told everyone, “I’ll buy pizza (and you all know what brand it will be), you can all wear jeans to work, and we’re going to clean this place up.” We took dump trucks full of stuff out of here to create an environment where we feel sharp. That was a P&G thing: you play like you look.

Speaking of cleaning this place up, your desk is immaculate. I understand that you diligently keep it that way and also return all of your own emails. Why is that so important to you?
I have always answered my own email – hundreds a day – and get them all done before I go to bed each day. I refuse to give up on that. It lets people know I’m open, available, and engaged. I think it’s very important for me to stay in touch with my people. I’m like a blind dog in a meat house right now. I have 27 sports and 27 coaches – practices are going on everywhere and I’m running around because I want to meet people and let them know I’m interested and involved.

In my second week on the job, our hockey team won the CCHA Tournament and a spot in the NCAA Tournament. On Saturday morning, I drove down to Fort Wayne for their semifinal game which ended at midnight. Our women’s basketball team was playing back in Ann Arbor in the women’s NIT, so I left Fort Wayne the next morning and arrived ten minutes before tipoff. When that game was over, I sprinted to my car and got back to Fort Wayne fifteen minutes before the puck dropped in the championship game. Now maybe I’m nuts, but I want to be everywhere. I want to be seen. I want those coaches to know I care. I want the athletes to know I care about their big contests and how they represent our school.

As a leader, you really set the pace in the first few months. People are watching you to determine the standard for work ethic and ethics. I’ve been challenged a couple times with people who chose not to tell the truth. People were watching to see if the new guy would look the other way or set the tone.

I set high expectations for myself and everyone around me, and I take care of my people who live up to those expectations.

You also have a history here. That must have helped your transition into this role.
Yes, it did. It would be really challenging to parachute in here with no prior connection or credibility. But I played four years for Bo Schembechler. I’ve got three Big Ten championship rings. I got a degree here. I’ve been the CEO for the last 22 years of my life. I was elected regent of the university on a statewide ballot and served for eight years. My colleagues and I hired the current president of the university who’s now my boss. So when I came here, few asked, “What does this guy know?” My background made this transition relatively easy. It’s really a lot of the same stuff – just a different mission. Instead of being rewarded for creating shareholder value, I’m rewarded for maintaining strong financial posture, graduating student athletes, and winning championships.

I’m sure that you hit some moments early in your career when you thought, “My goodness, what do I do now?” How did you handle those situations?
I’m not really that good at much except picking great people. Leaders get in trouble when they surround themselves with “yes men” or weak people. When you’re in a difficult situation where you need unconditional advice, you need people who love to share the load and will have your back. With those kinds of people, you’re fine in tough times. Without them, you’re dead.

The only reason I survived 22 years as a CEO was by having terrific teams around me. That requires the courage to get rid of the ones that don’t meet the test and find the ones who do. At Domino’s, I inherited six people on my leadership team. Within 18 months, four of them were gone. Some of them were tough good-byes, but they were necessary good-byes.

Did you let them go or did they take themselves out?
For the most part, I picked my team. As a new leader, you must have people around who you can trust, so I have specific criteria for who will make it and who won’t.

I was a quarterback in high school. When there’s four minutes to go and you’re ahead by three touchdowns, everyone in the huddle is happy, confident, and supportive. But when you’re two touchdowns behind and you step into that huddle, you can look into your teammates’ eyes and see who you want on your team. They’re the ones looking back at you and saying, “We can do this and I will help you.” The others are already thinking about the excuses they’ll make in the locker room about why this didn’t work. You can’t win with those guys.

Once you get the right people around you, what is your role in disagreement and decision making?
I love debate. In fact, I probably sometimes keep it going longer than it needs to because I love the sparring back and forth and seeing who will come up with the next persuasive point. But it has to be respectful. If someone shouts down or demeans another, they are punished. I won’t tolerate it. We’re a team, so we’re looking out for each other, not taking shots.

I have leadership team meetings every other week. I prepare an agenda with the issues on which I need help with a decision. If all nine of my teammates say, “Dave, we need to go north,” that’s an easy decision for me. It’s extremely rare for me to say, “Well I’m smarter than all of you, and we’re going south.”

I get paid the big bucks for the decisions where it’s 50-50. When I’ve got half the room arguing for one position and the other half vociferously fighting for another position, the rule is that I break the tie. And when I break the tie, I expect all of them to commit to the success of that position. When you leave the room, you pretend that it was your opinion even if it wasn’t. I’ll give everyone a fair shot to share their point of view, but if I ever hear that you went back and told your people, “I wanted something else, but this is what Dave says we’re doing,” that’s disloyal, divisive, and I won’t tolerate it.

When you must confront someone who has demeaned another team member, do you call it out right there with everyone in the room?
If it’s subtle enough, I won’t call you out in front of the group. In that case, we’ll get together after the meeting and I’ll say, “You know, when you said that, maybe you didn’t intend it this way but it came across as pretty aggressive and somewhat hurtful. I think you owe them an apology and I never want to see it again.” Usually, that’s enough. I’m not looking to embarrass anyone.

There have only been a few instances when I’ve had to tell someone, “You are excused from this meeting. As it relates to you, this meeting is over.” Then they go sit alone somewhere and wonder what comes next. Most people won’t make that mistake twice, but if they do, they will be finding another place to work.

I’m not trying to sound like a tough guy, but I don’t come to work to referee squabbling among my team. I won’t do it. I know who the enemy is; it’s the competition. I want to beat Ohio State. I want to beat Michigan State. I don’t want to spend a lot of energy refereeing among factions within my department. That also went for the pizza business and the coupon business. I really coach that hard.

What other things have you found effective in preventing the development of silos in your organization?
One is to move people around. I frequently move people between departments because it helps them understand a bigger world than their specific functions. Hence, they don’t develop the silo mentality.

Another example is how incentive plans are constructed. When I arrived at Domino’s , there were four definite silos: the distribution business, the corporate store entity, the franchise entity, and the international business. Each had its own P&L and bonus program. The result was that each team would fight to meet its numbers, sometimes at each other’s expense, and that required the CEO to spend time refereeing internal cost transfers and other nonsense. So the first thing I did was to put everybody on the same plan with the same target. To this day, Domino’s has a corporate EBITDA target. Everyone is measured against the same bottom line, so people behave as if they’re on the same team – because they are. Putting everyone on the same plan is a huge way to break down silos.

Finally, I have always used highlycentralized functional support – HR, IT, financial, corporate processes, etc. If you put everyone in the same world doing things the same way, you’ll prevent the silo mentality from happening.

What is your approach to strategic planning?
Every organization needs an aspirational statement, a definition of what they are and what they want to be. I don’t care what you call it as long as the words are carefully chosen and memorable. The aspirational statement at Domino’s is “Exceptional team members and franchisees on a mission to be the best pizza delivery company in the world.” Everyone gets it, and it portrays a sense of urgency.

Every organization needs longrange goals. At Domino’s, it was $100 million EBITDA, then $200 million EBITDA, and now $300 million EBITDA. We wanted to be one of the hundred best companies to work for in America. We wanted to cut the ribbon on the opening of our 10,000th store. We wanted to gain market share on the pizza delivery segment every year. Those goals didn’t have specific timetables, but they were out there and everyone knew the direction we were going. Domino’s has 9,200 stores now. 10 years ago, 10,000 stores seemed like an impossible dream, but we expect to cut the ribbon on that 10,000th store in a couple years, and I’ll be there, just as I promised I would be.

Every organization also needs a three-year outlook. Make the first year as accurate as you can make it, do the best you can in year two, and know that year three is going to be more guess than accurate, but at least you’ll have something from which to work and refresh. I don’t believe in five-year or ten-year plans. Long-range planning doesn’t make sense at the rate the world is changing. The Japanese model of 100- year business plans and the old 10-year marketing plans – I think they’re kind of nuts. To get this year right and have a sense for what the next couple of years will look like is as good as you can be.

The organizations that will be successful in today’s world are not those who can forecast accurately (because nobody can); it’s those who can react quickly to change. What do you do with a 9/11? What do you do when gas hits $4 a gallon and you’re driving 10 million miles each week delivering pizza? What do you do with the worst recession of our lifetime? What do you do when the bank system suddenly fails and there’s no financing? Your organization must be able to react quickly to new challenges, overcome the obstacles, and even take advantage of them.

Once your plan is in place, how do you ensure it is properly executed?
I’m big on managing by objectives. We’re just getting ready to teach our people SMAC objective writing. That’s an acronym I learned at P&G 30 years ago. A good business objective must be Specific, Measurable, Achievable, and Compatible with the overall corporate objectives. The “compatible” piece is very important. For example, your objective may be to learn how to play the piano, but that is not compatible with what we’re trying to accomplish here.

Once the vision, long-range goals, and 3-year plans are in place, each department and individual will author their own two or three “SMACable” business objectives. In my mind, an objective is specific, measurable, and far more near-term than a goal, which is an aspirational thing that doesn’t have to be measured within a certain timetable. These objectives are the criteria on which salaries, bonuses, and promotions are based. So one’s understanding of what he is able to deliver is critical to his ability to be successful.

How often do you review those objectives throughout the year?
We have quarterly checkpoint conferences. We all get together, put the objectives on the board, and see how we’re doing. It’s very simple. The objectives that have been accomplished get a green circle, those that are still incomplete but deemed viable get a yellow circle, and those that we’ve decided are not going to get done get a red circle. This made it very easy on our Domino’s Board of Directors. They could just look at the report card for each division and know how we were doing based on the colors.

Interestingly, in years that we exceeded our EBITDA target, I would go back and look at the books and see a lot of green. In years that we underachieved, our books would be primarily red. This showed that we were doing a good job of tying our objectives to financial outcomes. To have a lot of green in a year that we missed our EBITDA target by 15% would have indicated poor objectives.

Here’s a very detailed question, but it’s one that many executive teams ask. You talked about tying everyone’s incentives to the corporate goals, but is there ever a place for individual considerations? I know you want to win and lose as a team, but the reality is that some individuals perform much better than others.
At both Valassis and Domino’s, we were very true to the team sport concept. Bo (Schembechler) would always say “the team, the team, the team.”

In fact, if anyone approached Bo about one of his players being considered for the Heisman Trophy, he would say, “Get out of here.” He didn’t believe in anything that elevated an individual above the team. He drilled that into me.

That said, you might have a division with a standalone P&L that’s separate from the core business. In that case, you might tie 80% of the bonus to the corporate target and 20% to divisional performance, but the corporate target is always the driver.

What is the lowest percentage you would ever tie to the corporate target?
The lowest I can remember going was 60%. I want everyone understanding that the team has to succeed for any one of us to succeed. We win together, and we lose together.

Do you approach salary increases in the same way?
Salaries are much more individualized than variable incentives. It starts with your position in the company. As CEO of Domino’s, one-third of my compensation came from base salary, one-third came from variable pay on annual performance, and one-third was based on stock price equity appreciation. So two-thirds of my pay was based on performance. I believe that if you’re making millions of dollars a year, you should be much more leveraged on performance with less guarantees than a lower-compensated employee. The executive team would have 50% of compensation come from salary and 25 % from each variable driver, and the directors would be 70%, 15%, and 15%. The higher you were in the organization, the more you impacted variable performance, so your compensation package reflected that.

When determining an employee’s salary, we rated every element of their job description on a five-point scale. Then we looked at his SMACable objectives to see how many were green and how many were red. Finally, we subjectively evaluated his attitude, work ethic, and other such things. So to maximize one’s salary, he had to make sure he was doing a great job in his fundamental responsibilities, delivering on his SMACable objectives, and demonstrating an attitude that was worthy of reward.

Thank you for sharing your experience on that. It’s an issue that is a struggle for many executive teams.
One of the reasons I love serving on Boards is to see how other people approach these challenges. The biggest mistake that I see is that they all try to outsource their compensation plans. They bring in a consultant with a cookie-cutter approach that’s completely disconnected from the culture of the organization. I’ve always been a rebel who says, “Incentives are crucial to this organization, and I don’t want to outsource them.”

People will do what they are incentivized to do. If you tell people they will make an extra $5,000 tomorrow if they come to work dressed in clown suits, many of them will do just that. Incentives are so important, so you want to get them right and make sure they fit with who you are, not what some outside consultant tells you they ought to be.

In my 22 years as a CEO, we’ve always had a consultant looking things over and providing market data, but the structure of our compensation program is something that we always control internally.

In closing, what is most unique about this job relative to your former positions?
The schedule! With 27 teams, it’s not unusual for me to be in 14-16 meetings a day. Everybody wants some of my time. The former athletes, current athletes, coaches, alumni, major benefactors, faculty, staff – they all have an ownership stake in this place. Add the media to that, and there is a huge appetite for my time and attention. Don’t get me wrong – I like that! But every minute has to count for it to work.

I knew I was going to be a bit of a shock to this place. I move fast and my expectations are high. My executive assistant (who came with me from Domino’s) has been very valuable in managing that. People would come to her in the first two weeks and say, “Does he really work that hard?” “Is his office always that clean?” “Does he expect our offices to look like that?” “Is that how he wants all of us to dress for work?” She became my ambassador of information. Yes, he works that hard. Yes, he expects your office to look professional. No, he doesn’t like blue jeans at work. She became this trusted figure that really eased the transition around here with a level of professionalism.

When we got here, the office itself was a mess. The Friday before I started, my wife, my assistant, and I came in after everybody left and worked all weekend. We ripped everything off the walls, painted, cleaned the carpet, emptied cupboards, put new art on the walls, wiped stains off the conference tables… When everyone walked in here on Monday, they couldn’t believe what they saw.

That was the smartest thing we ever did because people immediately understood there was a new sheriff in town and things would be different. It’s amazing how most people respond when you display an attitude like that.

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