Hawaii Business CEO of the Year: Eric Yeaman
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Photos: Mark Arbeit
“I knew it was a long shot to get Eric,” Dods admits. “When he came in, the company was going through bankruptcy, going to be torn apart, and the workers didn’t know if they’d have jobs. He saved the company and almost all the jobs. That’s the way it really ought to be looked at.”
Dods says Yeaman first appeared on his radar during the Kamehameha Schools restructuring. “I had heard on the street that he did a very good job on the accounting side … [that] he was extremely principled and competent.” A little later, Dods spoke to a group of young, future leaders that included Yeaman and afterward they talked. “The more we talked the more I identified with him,” says Dods. “It was my first insight into how he handled people and what his personality and demeanor were like, and I was quite impressed.”
By the time Dods went looking for someone to save Hawaiian Telcom, Yeaman was at HEI. “He had all the qualities I felt were needed,” says Dods. “He understood strategic planning, was a utility executive, believed in community service. … One of the things I look for, too, was he started at the bottom, picking coffee in the Kona mountains.”
When Dods asked, Yeaman felt a sense of mission to rebuild the homegrown utility and reposition it for a more global future. But when he took over in June 2008, the company was falling apart. “The financial situation was dire,” he remembers. The company was $1.1 billion in debt, over-leveraged and requiring total restructuring.
“You have to assess the brutal facts and be honest about the situation and then you can find the path. … We needed to restructure the balance sheet, stabilize the business and reposition it for growth. And that would be shaped by looking for a combination of leaders who would work well in our local culture along with industry expertise from the mainland.”
Yeaman wasted no time. His new leadership team developed what he calls a “believable, strategic, back-to-basics” plan with a focus on what success would look like. Then a broad-based employee committee created a set of company values everyone could relate to their jobs. “I’ve had people tell me, ‘Now I know how my job related to the objectives of the company,’ ” he says.
He ordered an employee engagement survey in his first week and discovered that just 56 percent of employees were happy in their jobs. In the latest similar survey, at the end of 2010, 85 percent said they were happy.
Clockwise from top left: As a one-year-old playing “Mr. Aloha”
“The culture is the hardest thing to change, but it’s the ballgame,” Yeaman says. “I read, ‘Who Says Elephants Can’t Dance?’ by Louis Gerstner, the guy who turned around IBM, and at IBM he said the culture was the single most important thing.
“We needed to give employees hope that we had a plan and that this company was being led by someone who grew up here, cares about this company and came here to run it. … I believe we’ve made a lot of progress but there’s still a lot to do.”
Overall, Hawaiian Telcom had 1,500 employees when Yeaman came aboard, and has about 1,300 now. The job losses came from attrition, retirements, outsourcing, store closures and a realignment of job positions due to changes in communications technology. For example, to fast-track growth in areas where it competes with Oceanic Time Warner, the company realigned and redefined some jobs, Yeaman says. The realignment affected about 100 positions, primarily in areas of the business that have eroded or changed, but it opened 70 new or vacant positions geared to growth areas.
Of the union employees initially identified for change, about 30 percent stayed in their same positions because others in the same job classification took new positions; around 25 percent moved into newly created or different positions; and about 40 percent took buyouts. While job losses of any kind are hard, says Yeaman, his focus must be HT’s long-term success.
“There’s no question I’ve faced major challenges and [the labor issue] is a difficult challenge … My job is always to decide what is in the best interests of the company. I have to look at all the stakeholders and come up with what’s best, but we’ll stay the course.”
IBEW Local 1357’s business manager Scot Long declined to be interviewed for this story because of the sensitive nature of the union’s contract dispute, but former Local 1357 leader George Waialeale wasn’t so reticent. He says Yeaman’s compensation has created a stumbling block for some.
At left, Yeaman with Melanie in 1993, before they were
“When Eric gets a 400-percent raise, and everyone else gets squat, people are not too happy,” says Waialeale, who retired from the company six years ago, yet stays in touch. “But, when it’s better to have a job than no job, then everyone stays quiet. That’s what I hear. Sure they want their jobs. But, if you push the pendulum too far one way, it will swing back to the other and sooner or later the guys are going to get pissed.”
What few know is how much compensation Yeaman relinquished during the two years of bankruptcy proceedings, along with cuts in his compensation package mandated by the company’s lenders.
“All employees, including me, are part of a performance compensation program designed to make sure we are all focused on the things that are going to create value for the company,” says Yeaman. “It’s very much an incentive-based program, so if I wasn’t successful in working with the team, there would have been nothing. But if we were successful, there would be a payout. In the first year of a payout – 2009 – I waived my $600,000 bonus. I felt if I did that the court would be more apt to approve the payout for all the other employees. And it did. The total payout for all other employees was roughly $6 million, divided according to level and performance.”
Yeaman waived a second $5 million payment that would have come with the company’s change of control. His compensation – a package worth $6.7 million – must be earned over several years, he says, even though it’s sometimes reported as a single year’s total compensation.
While some sources say the recent labor difficulties reflect growing employee confidence in the company’s viability, Yeaman says Hawaiian Telcom still has far to go to solidify its future. He says it won’t get there without a dedicated team united around strong, central values.
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