First, the crisis. In January 2009, Heartland’s computer systems were
breached on what Carr calls “a devastating scale.” It would later be called the largest security breach in history, with credit and debit card numbers and information for millions of transactions potentially exposed. Carr knew this could be the end of Heartland. The company responded immediately, reporting the information to law enforcement authorities and filing the required disclosure with the SEC – everything it was legally required to do. But Carr felt the company need- ed to do more. He wanted to tell his employees and customers what had happened and what it meant. That required him to also announce the breach to the public. Other Heartland leaders, lawyers, and the crisis response team fought against him, saying the company could better protect its reputation if they kept quiet about the whole thing. Carr argued that they were ethically bound to fully disclose the problem. As he writes in Fires, “We had a corporate culture at stake. All along, we had been saying that we were a differ- ent kind of company. And we had behaved like a different kind of company. But when we are faced with trouble, I challenged my leadership team, are we just going to duck and dive like everybody else?...How does our brand and reputation for transparency survive by disclosing only the bare minimum about this disastrous breach?” After many hours of intense argument, Carr ordered his chief counsel to send the announcement to the New York Stock Exchange. He then held a conference call with all Heartland employees to explain what had happened and directed them to call their customers to inform them of the breach and of Heartland’s plan to fix it.
As he expected, the stock plummeted as headlines across the country spread the news of the breach. Carr was forced to sell his stock for just $3.45 a share (down from a high of $33) and borrow 500,000 shares from the trusts of his children to pay off margin loans. “I had been worth $330 million – and now it was gone,” he says. “I had been the largest stockhold- er in the company – and now I did not own a single share.” But almost as quickly as the storm came, it began to
clear. Carr’s openness started being held up as a model for crisis response. Business Week published an article about what other companies could learn from Heartland. Other media outlets and public relations experts commented that Heartland had strengthened its brand through its response to the crisis. The company’s stock price rose to $15 by the fall of 2009 and kept climbing until its sale last year at $103.09 per share. Through it all, Carr and his team saved every one of Heartland’s 2,500 jobs and all but 2 percent of its 150,000 customers. “When you are willing to show people your warts, and not try to cover up things that are unpleasant,” observes Carr, “the customers are more likely to trust your word about everything else.”
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Industry-Defying Sales Practices Today, when he is asked what he is most proud of in his business career, Carr acknowledges the data breach response as a standout moment. But he also points to the Heartland sales team. Carr says he “considers develop- ment of a winning sales organization to be one of the most important successes of my career.” Why? Just as he did with the data breach, he bucked the trends, creating poli- cies that go against traditional sales approaches – and that worked spectacularly. In fact, when asked what he would do today if he had to start a sales force from scratch, Carr responds without hesitation: “I would implement the same policies we have in effect today.” So what are the policies that make the Heartland sales model so different from most? Six things:
1. No territories. Although reps are hired to work oppor- tunities on, say, the north side of Chicago, they are free to work any opportunity they find – anywhere in the country – that is not already being worked by another rep. “With the Internet, territories don’t make sense,” says Carr.
2. Player-coach strategy. Heartland has a rung on the sales structure called Territory Manager. It’s a bit of a misnomer as this group isn’t responsible for managing territories – they are responsible for managing three to four people. Carr is clear that these are not sales managers. They are salespeople who manage on a small scale. One of the benefits of this “player-coach” strategy is that it gives sales reps a no-jeopardy op- portunity to try out a management role to see if it is something that is right for them. If they don’t like it, they can return to the rep role; if they do, they can keep growing into management ranks. Carr says about half the reps who become territory managers ultimately decide management isn’t for them and step back down to the rep level.
3. Revenue ownership. Heartland gives ownership of revenue to “vested” salespeople – those who reach a certain level of sustainable business. It takes most solid performers a year to a year and a half to become vested. Once they do, they earn portfolio equity, which Heartland will buy back at 30 times its monthly value.
4. Signing bonus for new reps. When a new commis- sioned salesperson first starts working for Heartland, the company pays the person six months of estimated mar- gin (revenue minus true direct costs). This policy gives the new hire a paycheck every Friday as they first begin to make sales. After a year, Heartland trues up the initial check based on the rep’s performance.
5. Three strikes, you’re out. Carr is known for leading with compassion and kindness, but he admits he isn’t very
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