Leading The Way: Sal Edwards – The Next Phase
I realized that challenging times call for strong leadership so I’m focusing on what it takes to be a good leader. Before COVID, Heart Zones had a team leadership model that worked well because everyone was in charge of their area of responsibility. Six months later, that model led to confusion and low morale …
Since our last conversation, Sal Edwards, CEO of Heart Zones, has made several more pivots driven by both internal and external factors.
Tell me about your first pivot – The 8 Point Pandemic Plan.
In March 2020, Heart Zones’ business was up 25% over the prior year. But when the pandemic forced our two primary customers – schools and health clubs – to shut down, I saw a huge business crisis developing. I started reaching out to other business leaders, asking what they were doing. After I decided what I wanted to do, I called a company-wide meeting and laid out the eight points of our initial plan. PPP loans were just becoming available so I made a commitment to my team that I wouldn’t layoff or furlough anyone, but because there wouldn’t be enough for people to do, there would be cutbacks in hours due to decreased workload. People decided to work from home so we got everyone set up with what they needed to do that.
Our Phase 1 plan was focused on retaining our team, cutting expenses and positioning ourselves to hit the ground running when the shelter-in-place order was lifted.
What made you realize that you needed a Phase 2 plan – Then|Now|Next?
Two months after we launched our Phase 1 plan, Heart Zones’ Vice President of Marketing called me and said, “I don’t think we’re on the same page any more.” The disbursement of people and communication and the loss of face-to-face interaction created confusion about the direction of our company and our goals. Our customers had shutdown and were also trying to figure out how to move forward. We were seeing fewer sales, fewer demos of our product, etc.
So I decided to create a second plan that focused on getting everyone moving in the same direction. Isolation can cause disagreements and hard feelings, and we found both were happening. We’d had to make cutbacks of 20-25% because of the decreased demand, and people were afraid of what was going to happen next. I also think I needed to show stronger leadership. I had been focused on the release of our new products and our move to selling online. This shift, from the physical world to the virtual world, was hard on the team.
Credibility and authenticity are both hallmarks of Heart Zones. Between distrust of the market and worry about the future, we got off track. I now needed to navigate a new set of issues that I had not seen coming.
We met as an executive team, and then I put out a new plan focused on getting everyone in the same boat moving in the same direction. The idea was to get everybody rowing together instead of disagreeing. I called it “Reassuring, Rethinking and Reshaping.”
In the plan, I acknowledged where we were in December 2019 – focused on growth and the release of new products; where we were now in May 2020 – everyone working remotely, challenging financial conditions, no timeline for reopening the country; and where we needed to go over the next three months – a shift in focus to business-to-business sales, the release of new products, the need to stay flexible, how hard the current climate is on team morale.
What led you to create Heart Zones' Phase 3 plan – the Aesops Business Strategy?
I watched people taking care of themselves first. We saw an uptick in business that later fizzled. When I told three members of my team it looked like we were going to be able to come back in early August, they said ‘No. We are making too much money between unemployment and the $600/week stimulus, or free money, so we don’t want to come back until after the stimulus payments end.”
We hadn’t terminated or laid anyone off at Heart Zones. Our team had less work to do so I cut salaries by 25% but everyone still had a job. When I saw our business turning around – we’re getting more orders, we’re shipping more product, we’re ordering more inventory – I asked the team to come back full time. And they didn’t want to until the free money expired.
I didn’t expect this response, and it deeply bothered me. Heart Zones needed them, but in business, because they’re collecting these short-term stimulus payments, they’re going to take care of themselves instead of the company. I liken this to the Golden Goose fable by Aesop. If we don’t feed and care for the goose, she won’t continue laying golden eggs.
So when August 1st arrived, my employees asked about coming back full-time. I told them the uptick had fizzled, and that the business hadn’t finished bottoming out yet. They weren’t happy about this so I called a colleague who runs the largest battery manufacturer in the country and asked if he’d experienced anything similar. He said, “I ran into all the same problems, Sal. I did all the PPP protections so we could continue to make batteries. When I asked employees to return to work and told them we had plastic dividers and COVID standards in place, some of my employees said ‘no’. Those people who wouldn’t return because of the stimulus money will be the last ones brought back, and they won’t receive the twice-yearly bonuses we give out this year.”
What is the Aesops Business Strategy?
Phase 3 is focused on making decisions based on what’s good for the company. The company can’t come back if we don’t take care of it, just like the Aesop fable – first, take care of the goose (i.e., the company). We’re in a strong financial position and can last another year to year and a half under the current conditions. But we can’t come back strong if we don’t take care of the goose. People need to respect and appreciate employment here, not just for the health of the company but for the well-being of everybody on the team. If you’re not pulling your full load, someone else has to pick it up.
I decided we were going to make business decisions based on what’s good for the company. We’re going to focus on leveraging our existing assets rather than on acquiring new assets or solutions. That means using intellectual property we own but had been ignoring, mostly courses and putting everything online including workshops and certifications, too.
Tell me about your new online solution for PE.
We released a new online physical education technology solution called ePE that uses a $60 sensor instead of the $100 sensor we were selling before. PE teachers can login to the portal and see data from all of their students – who did the workout, how long they exercised, how hard they exerted themselves, etc. Many school districts are financially stretched right now, but we can approach parent-teacher organizations about investing in kids being active while they’re home. Our technology gives them the ability to measure and track what the kids are actually doing. We’re making sales because parents are worried about obesity during COVID. They want their kids to exercise, and they know that students get more out of their Zoom classes if they move around.
Where's your focus right now?
Most health clubs are still shut down or operating under tight restrictions — 10% or 25% of normal capacity. So in additional to PE programs, we’re focusing on selling direct to consumer via our online store. We offer 15% your first order. Most of what we sell are proprietary products that no one else has. We offer monthly specials, match pricing and free shipping. Our monthly sales have gone up significantly. More importantly, we’re gaining new customers and generating cash flow.
What's been the biggest surprises?
I thought COVID would end sooner. I thought it would end period, but now I see it’s not going to. Even when we get the vaccine, it will take time for everyone to get access to it. So the first surprise is that I miscalculated how long the pandemic was going to go on, and I don’t want to make that mistake again.
The second surprise is that I thought we wouldn’t hit bottom until October/November, and it looks like we hit it in mid- to late September. So that’s good news.
The third surprise is that I didn’t expect some of my team to put themselves ahead of the well-being of the company.
Finally, I realized that challenging times call for strong leadership so I’m focusing on what it takes to be a good leader. Before COVID, we had a team leadership model. That model worked well because everyone was in charge of their area of responsibility. Six months later, that model led to confusion and low morale.
What's next?
I call this phase “being in the unknown zone.” We need the economy to grow. We need people to be able to have faith in their health and safety at work. We’re going to remain focused. Stay structured. Keep on our course. Leverage our assets. Do our best to feed the golden goose. And who knows, maybe that goose will get fat again and start laying some good eggs. She’s slowed down the egg production a lot but she’s still producing. Heart Zones isn’t broke. We’re not going out of business. We can sit out for a long, long time and still survive. But, like so many others, I want to get out of this unknown zone and back into the prosperity zone.
Sal Edwards, MA, MBA is one of America's leading experts in business, exercise science and lifestyle living. Sal is a serial entrepreneur, prolific author, professional runner and triathlete. Her passion is to get America healthy and moving and has become known as the "Mother of Heart Rate Training." Her company, Heart Zones, Inc., is a fitness and health technology and wearable devices company.