Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

It Pays To Have A “Flexible Front End” Ask Any Elephant

An Interview With Ellen Philip And Cal Donly Of Ellen Philip Associates

Editor: It’s been a while since we last sat down to chat, and with the forces that are changing the shareholder services industry to such a significant extent, I’ve wondered how niche players like you have been making out. Your company, after all, is the closest thing our industry has to a  general

utility. What sort of impact has the relentless consolidation and also the more recent surge in shareholder activism had on your business? Do you find there’s still a well-defined place for you?

Ellen: I must say that in the 35 years we’ve been in business - and we’ve had some ups and downs - we’ve never encountered anything as rocky as the last few years, with one financial crisis after another. Corporate actions pretty much dried up for a while, and work surrounding such activities has been our mainstay over the years.

The landscape has been altered, certainly. So many once key players have disappeared. And many of the survivors are changed companies – often with growing pains – and sometimes with shrinking pains – and typically with all kinds of structural and systems challenges that have to be tackled. As a result, I feel more strongly than ever that there’s a more important role than ever for a nimble entity like our own; One with a deep bench of talent, with a deep understanding of the many systems and procedures that need to come together quickly, and seamlessly, in order to process the new deals that seem to be popping up more frequently than ever before. So being able to turn on a dime, so to speak –and to get things done quickly, accurately and with the kind of flawless service that is expected by everyone involved these days continues to be a major strength for us.

Editor: Shrinkage in personnel is usually a key feature of consolidation, so it’s no wonder that we’re seeing a continuing drive to shift the burden of work from people to systems and machines. Seems to me this must have had a big impact on the way a manager thinks before reaching out for the services you offer.

Cal: There’s no doubt that the overall scene is a very different one, as we go into our 36th year. Times are tougher. A manager will think twice, three times before letting anything out of his or her own shop. That’s understandable. But there are still opportunities out there for a player who can fit seamlessly into an ongoing work flow, a player like us who’s willing to handle not only an entire process but any part of the process that might have a sticky aspect to it – perhaps even the need for manual interventions.

Recently, we met with a long-term client – a major service provider in our space – to discuss a breaking deal that involved a multitude of players. One of the discussion leaders had a rather amazing observation that sort of sums us up: “What we need most here is a ‘flexible front-end’…and you folks have it” he said.

When there are anomalies in a work flow that require some sort of by-pass or work-around – and especially when there are multiple players, with multiple files that don’t readily talk to one another, or mesh with one another – that’s where our ‘flexible front-end’ does indeed become the key. Very important to note, issues like these need to be resolved before any of the ‘standardized steps’ in the process can get under way. So our ‘flexible front end’ is  the

critically important feature that we can provide for clients who are using a process with a front end that has no give or very little give in it.

Editor: What sort of situations come to mind?

Ellen: Certainly situations in which timing is a factor. The question becomes, how quickly can you get the process started? Can you get up and running within the timeframe dictated by the circumstances? A “yes” to your client or a “no” to your client frequently hinges on the answer you come up with.

Cal: This is particularly true of events triggered by the shareholder activists you mentioned. Forget about regular setup timetables, for example, in events brought on by activists. They have their own way of arranging things. Forget about time- honored proxy conventions. Forget about proxy proposals being ordered in the regular way. Start thinking about such things as short slates, cumulative, proportionate and ‘weighted’ voting, and other changes that are called for in the processes you need to establish – literally overnight most times.

Editor: Can you describe a specific situation where your ‘flexible front end’ produced a big pay-off?

Ellen: Very recently we got a call about a tender offer. The mailing to registered holders had already taken place, but two employee plans had been overlooked, somehow. The call came in mid-afternoon, and we were asked to mail the following day. There were two different trustees, two different record-keepers and two different sets of files to deal with. One file was almost unworkable. We had to process the files, build two telephone and Internet voting sites, design and print two different instruction forms and envelope sets, and build two online reporting sites. And we did mail the next day.

Editor: Responsiveness like that seems central to the enviable brand you’ve built over time. Can you put your finger on what has enabled your company to pull rabbits out of the hat, so to speak?

Ellen: That’s a great question. One key factor is our small size and uncomplicated structure. That’s given us an ability to move quickly, not only in decision-making but on a number of different practical levels.

Another vital factor, I believe, is that our entire company operates as a single production unit. Players on the team, myself included, have well-defined but not rigidly defined roles. This wouldn’t work in a company that operates on a larger scale, but it’s paid off well in ours. We all have an eye on the ball, we slip into easy, well-oiled coordination, and we’re ready to do whatever it takes to keep the ball in play. I might add that we’ve kept our team intact, through good times and bad times, for something like 20 years. This makes a huge difference.

Editor: Seems to me this sort of continuity, an intact, well-seasoned production team, is a sought-after asset in a time marked by the widespread disappearance of experience and know-how – a brain drain, if you will. Have you found this to be the case?

Ellen: Yes, for sure. Virtually every job a service provider is called on to do these days requires a front-end that’s flexible – and not just in terms of systems: You need to act at the drop of a hat – almost by instinct. There’s no time to dither around. When the time comes to act you have to already know what has to be done, and how to get it done.

Editor: I’d be interested in your personal take on the sweeping automation in shareholder services and the impact that has had on flexibility, if any.

Ellen: Well, I have to say, first of all, that automation is not only inevitable but imperative. There’s no way to survive without it. That said, however, automation does have a downside – that’s something, I feel, that deserves broader recognition.

The prime victim of automation, the way I see it, often turns out to be the flexibility we’ve been talking about. There’s been a decline, overall, in readiness and willingness to deal with variation – situations that differ in some way from the norm. This is not without reason, but, in my view, it’s a challenge that needs closer attention, so that work-arounds can be explored and put in place.

In automated environments it’s not uncommon to find situations in which component players, through no fault of their own, have a fine understanding of what procedures are and how they’ve been set up, but little or no understanding of why they’ve been set up that way. Vital links in the logic chain have gone missing, for one reason or another. How, if you don’t understand why things are done a certain way, could you be rash enough to make changes? You’d be inviting catastrophe.

Editor: Any other closing thoughts here?

Cal: You know how Ellen and I love animals, and animal photos – and it struck us that we are sort of like an elephant in the way we go about our business: Not in terms of our size, of course, but because of that flexible front-end – and because of our ability to work through tangled jungles of systems-underbrush – and to get around seemingly immovable obstacles. You may remember our stork-photo too – demonstrating the benefit of having highly specialized tools. And Pepper, our much photographed mascot – who clients always ask us about – is still going strong as well…inspiring us to continually  ‘pull rabbits out of our hat.’