When ADT combined with Protection 1 last year and Tim Whall took the helm as CEO, he challenged his now more than 18,000 employees to participate in an exciting transformation — taking this gigantic organization from a good company to a great one by providing gold-standard customer service. With a new management approach, the support of the latest in analytics and other back-end technology, and a customer-first mantra, the results 18 months in are impressive and are what led SDM to choose ADT as its 2017 Dealer of the Year.
ADT was founded in 1874 as the American District Telegraph company and is among the last companies that can still boast the word “telegraph” in its name. Despite the old-world moniker, since the beginning ADT has prided itself on technology innovation, from embracing the call box in the 1890s so that watchmen could transmit signals to a district office, to creating one of the first central stations in the 1920s, to being one of the first to embrace the smart home/Internet of Things trend with the introduction of its ADT Pulse in 2010.
That drive to disrupt the security industry is a thread that has been in ADT’s tapestry from the start and was aided over the years by an explosive growth in the residential security market and a number of acquisitions along the way — both as acquirer and acquired. In May 2016, ADT was acquired by Apollo Global Management, a private equity firm that also owned Protection 1 (a $468 million company, ranked No. 6 on the 2015 SDM 100). With more than 18,000 employees working in over 200 offices nationwide and Canada, and more than 8 million customers, the combined forces of ADT and P1 would now enjoy a market share of approximately 31 percent nationally, and be the largest security and home automation provider in the country.
In a rather unusual move, Apollo chose to put David in charge of Goliath and tasked P1 CEO Tim Whall with leading the combined organization. Many of ADT’s top executives were replaced with P1 staff and Whall and company set out to bring the P1 signature passion for customer service to an unprecedented scale.
ADT had always been known as a leader — within the security industry, the company is often referred to as the “800-pound gorilla” — but when it came to customer service, it was not always the first name to come to mind. This is true of almost any organization of this size; but Whall was undaunted in taking the formula for success that had worked at P1 and applying it to a company more than seven times its size.
Anyone who knows Tim Whall may not be too surprised that ADT has been chosen as SDM’s 2017 Dealer of the Year. In fact it is his third time winning this distinction. (See “A Three-peat Coach,” page 66.) But for those unfamiliar with his approach, in less than 18 months Whall took ADT from a longest-call wait of 35 to 54 minutes down to less than a minute for 99 percent of calls; taken an average seven-day service call backlog to same-day or next-day service, and dropped customer attrition levels by three percentage points. Abandoned calls have gone from 10 percent to less than one percent, and employee turnover is down by 10 percent. And by year end, every call will be answered live, taking away the automated call service so hated by consumers in any industry.
Sometimes when companies go through a massive change, other priorities are put on hold and sales or other areas dip significantly as things adjust. But at ADT revenues and RMR are holding steady and even rising, from $3.6 billion in 2015 (ADT only) to a combined estimate of $4.3 billion in 2017. Recurring monthly revenue was estimated to be greater than $300 million in 2017.
Jim DeVries, who was named president of ADT after the merger, attributes this success to Whall’s often repeated mantra: “The best way for us to grow our company is to take care of and retain our existing customers.”
DeVries continues, “We now have a disciplined growth approach to sales and more focus on customer service so attrition is improved. The way we acquire customers is also more disciplined and robust.”
When large companies look to execute big changes the analogy of turning a gigantic ship is often used (it takes much more time than turning a small boat). The story of how ADT transformed much of its culture and customer service in just over a year is a fascinating one, and a large part of the reason ADT was selected this year — and that is before you factor in the new technologies and offerings the company has introduced or is planning for next year and the reemergence of ADT in the commercial space after focusing solely on residential for a number of years.
The ‘New’ ADT
Bringing together two distinct companies with two different cultures is always a challenge, but Whall approached it in the same way he had done at other companies he led — go into the field and spread the message. With 200 offices and five central stations located all over the country and Canada, however, this was a whole new scale.
“Visiting 200 sites is harder than visiting 20,” Whall says. “We spent the first few months just visiting places. It gives you a chance to share a little bit of your vision, ask what is working or not, and explain the things you believe in regardless of the name of the company.”
These beliefs can be summed up in one short phrase: Customers first.
“One of the more substantial transformational changes for the new ADT was the focus on customers and the priority around great customer service,” DeVries says. “Not only was that one of the most fundamental changes but it was also a unifying theme as we brought P1 and ADT together. Our customer was a rallying point of sorts — our North Star.”
But simply saying “focus on the customer” wasn’t going to do the trick. Along with the road trip, Whall also immediately set out to implement a formula for success that had worked for him previously: the GM (general manager) model.
DeVries explains, “When ADT and P1 came together, Tim and I and several leaders met with every single general manager at ADT and selected the best talent to lead our 80 individual markets. The model reflects a strongly held belief that the GM ‘owns’ the customers in the area or town where they have leadership. The way we look at it, the customer of the corporate office is the local general manager and the customers of the local GMs are the actual customers in any given market. We give a lot of authority to our GMs to take care of their customers and each of them have accountability to deliver across a whole spectrum of financial and customer service metrics. That is the lynchpin of our operating model.”
This new way of doing things was a big change for ADT, which previously had 50 area managers and more of a silo concept, Whall says. “ADT over the years has had different models. But each company I have been in I have always gone with the GM model.”
In addition to adding more than 30 new managers, this also had an immediate boost on employee morale and company culture, adds Jamie Haenggi, chief marketing and sales officer. “Each branch office is locally run and operated. Even though we are a big national company, we are actually 18,000 moms, dads, brothers and sisters in that local market. We are really 200 small companies.”
That feeling is presented from the top down, with a term Whall calls “get low.” This involves management visiting employees and really engaging in what they do on a daily basis. “It is easy to get caught up at the higher levels of executive management as opposed to going and sitting next to someone and taking calls and learning what we are actually doing there,” Whall says. “The executive team has done a great job of that.”
DeVries adds that while all top-level management was “encouraged” (read required) to do this, there is no arguing with the results of their efforts. “It is another example of the new operating model. Tim’s expectation of executives is we go low, that we are customer centric. There is a strong parallel between executive talk and executive walk.”
Whall quickly found that this was quite a change for employees, as well. “The first time I called someone up to my office I had no idea the panic that would cause. I told them, ‘I just didn’t know who you were and am trying to get to know more people.’ I want to do even more of that in 2018 and invite even more folks into the conversation.”
Change is never easy at any size and getting employees on board was a priority for Whall and his team. “You have three choices when you bring two companies together: Stick to your guns and defend everything you did before; sit back and not participate and just wait to get instruction; or choose to say, ‘What can I do and how can I add value?’ You have to work hard to get people to take the third approach.”
Many successful companies talk about a culture that is “open door,” and the new ADT follows that philosophy as well. But with 18,000 employees the idea of a lower level employee walking into Whall’s office and sharing an idea can be a little daunting.
“You have to seek out their opinions,” Whall says of his approach at ADT. “The average person isn’t going to dial up past their immediate boss level. Having an open door is great when they actually do it but you have to go a lot further. We look for ways to recognize people, call out to them, catch up with them. I tell my managers, ‘Give me some names of employees that are crushing it for you’ and I set up calls with those employees. Last week I spoke with three GMs and one person in a corporate support role. I try to find 15 people a month to talk to for a 20- to 30-minute conversation. You can’t just wait to hear from people. You have to get out there and create that two-way conversation.”
It wasn’t easy, but the word is getting out, and employees are happy with the change, DeVries says. “Our employee reaction to the change has been very positive. The vast majority are in customer-facing jobs. When the true north of the ADT team is our customer, employees — all of us — are attracted to that mission.”
Amelia Pulliam, chief human resource officer, who has worked for ADT since 2014, agrees. “If you look at how different things are now than before, we always revolved around a customer service mentality, but we are significantly more focused on creating an excellent experience now than before.” Pulliam attributes this to the merging of two former competitors: “Whenever that happens, iron sharpens iron. You have two competitors now fighting for the same cause. The changes we have put in place to take care of the customer are huge, and that constant focus on the customer is a significant difference from where we were just a short time ago.”
Pulliam also points to the field visits as a tremendous help in changing the corporate culture. “Over the past year we have spent time going out to the field and visiting with employees and asking about pain points and what we can help with…. If I am working in a center and I see leadership groups come in and talk to me and ask me what is and isn’t working, the lines become crossed in a good way. That has had a significant impact.”
Another change in thinking was to stop measuring averages, DeVries explains. “We look at absolutes, not averages. Instead of looking at the average speed of answer, we focused on the longest call waiting, the single longest time a customer has to wait on hold before they have an agent take care of them. In averages you can hide bad performance. When you measure absolutes you have the opportunity to diagnose problem areas much more quickly.”
Whall calls this “looking at the worst thing you did yesterday.” By using that philosophy, the company has substantially reduced its call waiting time down to less than a minute for 99 percent of calls. For the less than one percent of calls that go over one minute, ADT set up a system where the entire chain of command — including DeVries and Whall — are immediately notified by text. That doesn’t mean top management has to stop what they are doing when this happens, but it did result in a change in mentality for every employee, DeVries says.
“In the past when we had problems with heavier call volumes and customers, the front line leaders didn’t automatically jump on the phones to help. Today when we get to a certain threshold, it is all hands on deck to take care of the customer. Most often the leaders and call center managers are all over the problem before we even get a text.”