When Ken Diggs began his role as CFO with Greenleaf Hospitality Group Inc. in 2011, he joined a company amid a series of financial challenges.
The Kalamazoo-based firm owned 23 separate business units, including the AA professional Kalamazoo Wings hockey team, the Wings Event Center, the Radisson Plaza Hotel, restaurants, retail shops and parking garages. Of those business units, only the parking garages were profitable, and the company was operating at a $3 million loss, Diggs told MiBiz.
To begin to turn the company around, Diggs first ingrained himself with all of the intricacies of the business.
“I was selling merchandise at concerts, I assisted on banquet events and really tried to learn the business and understand how they make money and how they don’t make money,” said Diggs, a winner in the 2016 MiBiz CFO of the Year Awards.
Diggs found that one of Greenleaf Hospitality’s primary challenges stemmed from its financial reporting. Instead of breaking out fixed costs such as utilities, marketing and facility rental for each business unit, the company reported them as one sum, giving executives a false picture on the operation’s financial health.
“All of these shared costs were in one lump sum, so it looked to the business unit operators that they were making money, when in reality the entire operation was losing money once you put all the fixed costs in,” Diggs said. “One of the first things I focused on was breaking that out correctly. We treated every business, as much as we could, as a standalone business. In some cases, we were driving revenue, but we were actually losing money.”
With a more accurate understanding of the firm’s financial health, Diggs was able to work with the rest of the executive team to lean out Greenleaf’s operations and trim the company’s various holdings from 23 to 18 business units.
The company shuttered a catering business and a restaurant it had operated in Birmingham, Mich. and disbanded the Junior K-Wings hockey team, Diggs said. Greenleaf also closed a struggling flower shop in the Radisson hotel, turning it into a high-end wedding studio that better caters to the company’s clientele, he added.
Five years after beginning his role, the hard work for Diggs has paid off. Greenleaf recorded its best year so far in 2015, generating $2 million in profit, a $5 million improvement compared to the $3 million in losses it posted in 2011.
“It certainly didn’t happen overnight,” Diggs said. “It was a series of understanding the financials and where we were making money, where we were losing money and adjusting those.”
Despite raising overall profitability, Diggs and the rest of the Greenleaf executive team are still working to turn around the K-Wings business through a combination of enhanced marketing efforts and through partnering with local charities to help drive ticket sales.
Beyond crunching the numbers, Diggs also helped drive a new sense of urgency among Greenleaf’s management group to increase profitability as soon as possible.
“When I started in the organization, not everyone, but a significant amount thought it was OK to lose money,” Diggs said. “We didn’t have the sense of urgency, and that was in part because we have generous owners. That was something I focused on. We can’t turn things out overnight, but we need to improve every day.”
In particular, Diggs revamped the bonus incentive structure for managers to align it directly with Greenleaf’s performance. In the past, there had been cases of a business unit performing poorly, yet the manager still received 50 percent of his or her bonus, Diggs said.
“Now all the managers are looking at their numbers and looking for opportunities,” he said.
While he worked to create urgency and drive financial awareness for the management team, Diggs was careful not to otherwise change Greenleaf’s corporate culture.
“I’ve seen stories where people come in and may make major layoffs or take other major actions, and that can really destroy that culture,” Diggs said. “Certainly, if I wanted to improve the profitability, we could have done it faster. We could have taken more extreme actions and trimmed down the benefits, but we didn’t focus on that.”
Sidebar: Ken Diggs, Greenleaf Hospitality Group
- Gross Revenue for 2015: $40 million
- Number of employees: 600
- Important moment: “The vision I have of being a business partner and learning the business came from when I started in the business at Intel. When I went to Intel, that was always my vision at finance. We are not just the scorekeepers (or) recordkeepers, we are full business partners fully invested in the business. That’s always been a focus of mine.”
- Mission critical: Diggs and his management team draft and examine daily flash reports that compare how the business is doing versus the current budget and the budget for previous years. His financial team also teaches financial literacy to all Greenleaf employees so that team members know their target metrics and how that fits into the overall business.
- Academic degrees: MBA from Indiana University Kelley School of Business; Bachelor of Arts in accounting, Ball State University; CPA certificate
- Community involvement: Treasurer of Southern Shores Field Service Council, Boy Scouts of America; Volunteer at Kalamazoo Loaves & Fishes and Ministry with Community
- Company advisers: Jansen Valk Thompson Reahm PC (accountant); Lake, Waldorf & Schau PLC (legal); PNC Bank and Huntington Bank (financial)