Fit for Business: Q&A Round Table With Diana Williams

Friday, September 1, 2006 - 15:29

In business, successful leaders need the determination to achieve and succeed. They need to take the right people with them on their journey. One example is Diana Williams, Founder and Executive Chairman of Fernwood Women's Health Clubs.

In 1989 the economy was going into recession, credit was tightening and capital was scarce. Gymnasiums were considered high risk, and most failed. It was in this environment that Fernwood started out, opening its first health club in country Victoria. Despite these tough conditions, Fernwood went on to become a hugely successful Australian venture.

Diana Williams, Founder and Executive Chairman of the chain of Fernwood Women's Health Clubs, speaks with Susan Heron, CEO of the Australian Institute of Management - Victoria and Tasmania, about business growth and the importance of building a solid corporate culture.

Q. Can I start by asking how Fernwood evolved and how you went about it? After all, you started with one gym in Bendigo and have now created a successful national franchise.

A. When I started Fernwood, I didn't anticipate that it would grow to be such a large business. It was something I enjoyed doing. I was excited with the effects of weight training and going to the gym. I could see that there were women who were going to the gym who weren't enjoying it, they weren't coming back; it was a pretty intimidating environment. So for women who didn't like that environment, I thought how nice it would be to have a gym where women could go, and work out, and have the little touches that women appreciate. So when I started it, it was pretty much something that I wanted to do, rather than making it into a business.

Q. When did you realise it could take off?

A. Very quickly after I opened the doors. I was having a lot of customers, I was employing staff, I had to learn about business operations and requirements, and obviously management skills were something I needed to learn about. So in those early days, I was basically transforming it from just thinking about it as a hobby to a business. I didn't have a strategic plan or a business plan at those early stages.

I had the strategy in my head, but there was nothing on paper, there was nothing scientific about it. I hadn't done enough research or even asked people their feelings, when I first started it, and I wondered if it would work. When I found that it did work, well, then I started working at ways to make it better. That's basically when the research started, and some strategic thought went into making it happen. I wanted to make it different to anything else that was out there, hence the name. I didn't want it to be like just another gym.

Q. So what was the next stage, from 1994 to 2003 when the 50th health club was opened?

A. Once we started to franchise, and the clubs started opening, I had to attract other franchisees. It was hard because the industry had gone belly up about five years earlier. The financial industry didn't want to have a bar of us and they wouldn't lend any money. They actually advised franchisees not to go into the fitness industry. We had no credibility, even though our business model was totally different. For instance, in the past health clubs sold full memberships, and we had a pay-as-you-go business plan, so there wasn't the risk to the members or to the business. I thought, how can we get the credibility so that people will see that we are different, that we have values, that we have integrity, and we're not a fly-by-night operation. Lisa Curry came to mind as the obvious person who could help us get there, to elevate us away from just another fitness centre. I wanted people to sit up and take notice of us. I was a woman from a country town with no business background, and I needed to get that credibility. Someone like Lisa would be able to do that. So we talked to Lisa, and she was instantly interested, because of what the business stood for and what it's all about.

Q. When and why did you decide on the franchise model?

A. In 1993 I looked at different ways of expanding, and franchising, to me, seemed to be the best way because it's a people-based business, very customer-focused. I felt that a franchise would be the best way to move forward because franchisees are the owner-operators; they're the locally-based people in each club, and they're involved in their local communities.

Financially, it also meant we didn't have to borrow money, or bring in an equity partner. With franchising you are using other people's capital, and because we are using their capital, that strengthens the focus to make sure it works.

Q. But when you're using someone else's capital, you have to have your model in place because they, the owners, have an expectation of a return?

A. Yes, and this was the rough period where there was no sleep and lots of tears and worry and concern - not concern that we wouldn't make it, but you have to reach a critical mass in franchising. You can't be a franchisor with one franchisee, they expect the level of support that, for instance, McDonald's give. You have to provide a HR division and a marketing department. So the secret is to build a critical mass as quickly as you possibly can, so you can afford to make the right decisions, not based on what you can afford to do, but what you should do. Basically, we thought that 15 or 16 clubs would be enough for us, but we kept raising the bar. You want to provide more, you want to create something bigger and better, so the number kept changing; critical mass was more like 30 or 40.

Q. So opening the 50th club was a very significant milestone?

A. Absolutely, it enabled us to give a better level of support to the franchisees. In our first year as a franchise, we opened 14 clubs in one year, and it was an awful lot for just a handful of people. The infrastructure wasn't there, we had to go back and fix all that up, but we needed to grow quickly to a size where we could afford to stay in business.

Q. How did you bring in the skills you needed during this period of growth?

A. As much as I tried to learn and improve my management skills, my main skill is innovation. I'm very solutions-focused, and an ideas person, I'm creative, I can see the big picture, I can see the vision, and I can convince everyone else in the world that it's going to happen and we're going to get there.

So that's my strength. My weaknesses are in implementing plans. Once I've got the kernel of the idea and handed it over to someone else, I'm done with it. I'm off for a new idea, so I need a team behind me to put all those ideas in place - and they make it happen.

Q. Does this create problems of control for you, because you want to have a go, tweak it this way and see it through?

A. I think it comes down to respect for the people who work for me. And they respect me because they are my ideas, and I make it happen. It has been very difficult in the past to let go and not get back in there, because I haven't always had the people to be able to do it. But once I started employing people I had faith in, people I trust and respect, then it was much easier for me to rely on them. I now know I could go away for six months and this business would be absolutely fine without me. After all, I create the vision of what the business is all about.

Q. How do you encourage innovation in the organisation, and how do you allow that risk appetite, to allow people to make mistakes and have a go?

A. I don't mind people making mistakes, as long as they don't make more mistakes than good decisions. Without making mistakes, you don't make decisions; if you don't make decisions, you go nowhere, you shrink and die. So people are going to make mistakes. Everyone in this organisation has made some whoppers. But we learn from them, hopefully we don't make too many of them.

However, because of the early days, I've been very respectful of the value of a dollar. There are many stakeholders in this organisation, staff, members, franchisees, there's a whole lot of people out there who need this business to remain stable. So even though I'm the entrepreneur, and want to get out there, I'm wise enough, and have enough people behind me, to say, "hold on, we're not sticking to our strategic plan here, just slow it down".

Q. When you recognised you didn't have the management skills, what did you do about it?

A. Around 2000 I realised that I needed to step back from the business, but I thought I might have a problem when it actually happened. And that's when I decided I needed a coach, someone to work with me, to work through that process. It's helped a lot because I've been able to put the mirror up to myself, and that's what coaching is about. It's about holding a mirror up and showing you what you need to do, and you talk yourself into what you need to do.

Q. But even with a coach, you created this business, you've also created the culture, and having started it, how do you keep it going?

A. I think it's the people you surround yourself with in the organisation. If they don't have the same values, if they don't believe in the culture themselves, if they don't have the integrity or the respect, if they don't believe in it, if they don't walk the talk, then they're going to disrupt the culture.

However, it tends to sort itself out very quickly. If people come into the organisation who don't fit, they move on. Either they're encouraged to move on, or they see they won't fit. The culture wins, I think.

Q. And how would you describe your culture?

A. I think the culture is enthusiastic, empathetic, and very committed.

Q. And as the person who has instigated this culture, and as the leader, what is your leadership style?

A. I try and be visionary, and lead through example, walking the talk. You know, I go to the gym, I expect everyone who works here to go to the gym as well.

I think if I behave that way, if I live by the values, then it flows through the organisation. If I don't, if I was somebody else and I was just pretending to be this person, then there is no substance to it.

Q. What type of negotiator are you?

A. Better now than I used to be. I think I'm probably not that good at negotiating, because I'm a bit gung-ho. Toughness, assertiveness, it's not something that I'm shy about. I'm not one for sitting back to talk last. I'm better at negotiating as long as I have someone else to do the negotiating for me.

Q. What would you say is the biggest mistake you have made?

A. If I had to go back and rewrite it there are two things I would consider. Not that I really regret anything. But the two things are: one, I might bring in an equity partner upfront, so that would have alleviated a lot of the struggle. Having said that, there were opportunities for equity partners down the track, but there was too much blood and sweat and tears to sell the baby. But I could see the big picture. But now we don't need funding.

The other thing I would probably do is, maybe not an MBA, but perhaps take a management course. I think I have very good business nous, I've got my antennas out, and I can see the signs. But from a credibility point of view, it would have been very helpful to me to have some kind of qualifications.

Q. There were many reasons why starting your business could be considered risky, the downturn in the industry, the recession, what made you decide to go for it?

A. I did know there was a recession, but I had such a strong belief in what we were providing, and the value of it, and that's the entrepreneur in me. I've always been a strong believer that 98 per cent of the things you worry about never happen. I believed that while the economy goes up and down, people continue spending, and this industry is such a growing area, everybody knows that they need to exercise more and be more active.

Q. You spoke about starting off with an obligation you had to the franchisees, and instantly there was an infrastructure, you've got a name, you've got a vision, it's out there, someone's got to actually represent your brand, what are you looking for in a franchisee?

A. Okay, that changes too, especially with the amount of choice you have. Obviously, when you start up, with no credibility, you don't have a lot of options, so you have to take people you wouldn't take 10 years on. And that's not being disrespectful to some of those people, they're still with us today, some of those early franchisees. Some have grown with us, some have not and some have moved on. So these days the kind of people we look for have business acumen, that's the number one skill, and that doesn't mean they have to have an MBA.

Q. But how do you determine that they have business nous? It's almost like a gut [instinct], isn't it?

A. Well, the kind of questions they ask you is very important. You can easily tell. If someone is sitting there, and saying, "this is really exciting, and I can't wait to do this", and "I love working out", it's great; but do they ask intelligent questions? Do they think like a businessperson?

That's how you can usually tell if someone has got that acumen or not. As I said, it's not necessarily that they have got qualifications, but there's reasonable questions to ask if they're going to invest half a million dollars in this sort of venture.

The other attribute we look for is passion for what we do. They need to believe in empowering women, for instance. Some of our franchisees are men, but they still believe in what we do.

Q. Now that you are a much larger business and expanding overseas, is there a tension between process and maintaining that flexibility that you used to create the company?

A. Not really. We're a very dynamic group of people that run the company, everyone here has to be. And they love a challenge, they thrive on that. So I don't think we are less flexible. But I think we have to try harder all the time. We have a newsletter called Gung Ho that's handed out with pay slips to every employee so they get to feel the culture. They get to understand what head office is all about and what happens here, and how they're part of the bigger picture.

We've only started doing that over the past couple of years, because they felt we were losing touch with them, in the bigger organisation. We've had to try a bit harder, I think, to make sure that everybody understands the culture. We're always spruiking what our values are, what our core purpose is, and so I think the larger an organisation gets, the more important that that happens, and the people within the organisation understand and live by those values.