Deepak Reddy - Interview with the Broadridge CEO

I was originally a finance major and accounting major. I grew up in Queens, and I had a lot of street smarts. Very quickly in public accounting at Arthur Andersen, I was assigned to challenged companies. Early on in my career, I was assigned to a company that was a startup proxy business. It became clear to management that I could add value. One of the principals there approached me about leaving my job with Deloitte and joining that company, which was the first proxy business. Having a good understanding of the numbers, and at the same time a passion about business models, enabled me to add value. I became an owner in that company, but with complications. I ended up leaving and going to Wall Street. I was Senior Vice President of Operations in the operations group at Thomson McKinnon. In that role, I understood there was a better way to service the Wall Street market. That's when I decided to start what was then called Certified Services. I had a backer who unfortunately died, a VC pulled out, so entrepreneurs have very interesting journeys. After the VC pulled out, ADP replaced the VC. I ran this for 17 years at ADP, taking it from zero to about $1.7 billion. The broker group, of which the communications business was the largest piece, was spun out in 2007 to be what's now called Broadridge. It's not a traditional CEO public company journey.

1987, when I was on Wall Street, I decided there was probably a better way to do this, but I didn't want to put my family at risk. While I was still Senior Vice President of Operations at Thomson McKinnon, I started hiring programmers to write the code for the next generation of proxy communications.

1987 we started. My backer died in 1988. I thought I had a VC to replace him. I began discussions with ADP after Labor Day of 1988, and we closed on January 15, 1989.

It sounds corny, but probably my paper route. I delivered news at 9:00 AM in Queens, and it became clear to me that the more orders I got, the more money I made, so I sold a lot of new orders. In a business sense, there's an opportunity for people in every job, and an entrepreneurial spirit makes every role better as long as you color within the lines and play within the rules. In public accounting, the reason I got put on problem accounts is because I stood up and said something doesn't make sense. I found fraud because I refused to just put a tick mark next to something that said it was working when I couldn't get it to work. Using the filter 'what's the right thing to do' is pretty good. For entrepreneurship, using the filter 'what's the opportunity and do I believe in it' is very effective. When offered the opportunity with the first proxy business, I felt they had a great opportunity, and we made that business very successful. When I left and was on Wall Street, I believed they were only doing it half right, and there was an opportunity for someone to do it more completely for the benefit of the market. Business life cycles are not easy or forgiving. I remember when Sony and RCA were the greatest names in electronics. People don't think about RCA at all, and Sony struggles in electronics. Not only do you need to be differentiated with a better value proposition when you start, but you have to remain passionate and committed every day, looking for ways to disrupt yourself before someone disrupts you. That's what makes capitalism so powerful. It's not for the faint of heart, but there's extraordinary opportunity for everyone.

Going back to what I said, when you start a business, you need a very strong value proposition. That's what enables Broadridge to be who we are today. We focus on making sure the value we bring to our clients is meaningful. But the most significant thing from idea to viable sustainable company has been our commitment to the service profit chain. We recognize that every company wants growing profits for shareholders and to exceed customer expectations, but most companies don't get that unless you have the best, most engaged workforce, you can't sustainably exceed customer expectations and create growing profits. Focusing on people is a necessity, not a nice-to-have. It's the people who consistently exceed our customers' expectations. The original business plan said this could be a $25 million business in 5 years, not $25 billion. What enabled that growth is our associates coming here and believing this is their company, and that they will drive it to the next level. Any entrepreneur must recognize that as soon as you hire your first associate, it goes from an 'I' company to a 'we' company. You want to empower and engage that intellectual capital. Empowering people to be the best they can, versus beating them up for mistakes, will lead to a long success story. Building to last means engaging associates and measuring customer satisfaction, not just assuming they're happy.

A long time ago, in a conversation on strategy, the phrase was: 'A good strategy is to know what you're going to do and to know what you're not going to do.' There are a thousand ideas Broadridge could look at, and every person with an interest in one will present it as a game changer. You need to have a view on where you are and where you need to get to, then look at key areas where you're likely to be successful. Heaven knows we're not smarter than anyone else. Anyone who believes that will be in trouble. But we are far more focused than anyone else. We service financial services, the largest, most complicated industry. Our clients' activities are ten miles wide and ten miles deep. We are ten miles deep but about a football field wide. With our 6,700 associates, we are far more focused and committed, bringing more intellectual capital to that subject matter, to be viewed as experts. We are not a commodity player looking to undercut. We want to be efficient, accurate, dependable, and viewed as the best. People have said we should be in healthcare processing. I said we have no brand or expertise. We would be delusional to think we are smarter than others. I look for adjacencies and try not to get more than two dominoes away from where we are.

I've seen good ideas with wrong resources, and right ideas with wrong resources. If you have the right idea and wrong resources, you waste time and don't get where you want. That's frustrating because you made the right bet but didn't execute. If you are confident in your resources, it's easier to decide if the idea is good or bad. We try to ensure that if the idea is good, the resources are allocated properly. Getting the right resources on the job is critical. Someone outstanding at keeping the lights on has a very different skill set from someone who goes into a new space with a clean sheet of paper. Identifying someone with a track record for getting something different done is critical. Then set milestones. If you hit them, invest more to make it more successful faster. If you don't, it gets dicey. Did you miss the milestone because it's a good idea taking longer, or is the market opportunity just not there? We've probably erred on the side of putting more time into things that haven't worked because we vet things well upfront. A pretty high percentage of what we pursue works out pretty darn well.

If you don't have a support network, it's very hard to start something. I've been with my wife since I was 16 and she was 15. We came from a modest background and knew we would support a lot of people beyond our own families. Being successful to enable a family to do better was a high priority. I had a lot of support. In public accounting, I worked long hours. In my first business, I worked long hours. When starting something with a full-time job on Wall Street, it gets hairy. You work all day, then work with programmers at night and weekends. Entrepreneurs generally have incredible support from the beginning, or they don't start families until after that stage. In my case it wouldn't have worked because I never changed my mode. I still like to get involved, spend time with customers at night, and sit in the office thinking through ideas. The world, because of technology, is moving at paces beyond anything I imagined. I remember people saying technology was making the world move faster. You need to be all in, and you need a family that can accept that. I've been very fortunate.

It's not a black-and-white question like 'do you want to be an accountant or a doctor?' Most people say they'd like to be their own boss. You must have the intestinal fortitude to accept that means you are never off. There are folks who love what they do and love that when they leave the building, they go to the next phase of life. If you set out wanting to be an entrepreneur, you must have the intestinal fortitude that there isn't a set number of hours. It's whatever it takes. As it becomes more successful, there's a moral responsibility. Even if you achieve personal success, you have obligations to associates betting their careers, customers relying on you for mission-critical services, and shareholders who entrusted their investment. You would do a disservice by not being fully engaged all the time. That doesn't mean you can't take a day off or spend time with family, but you can't just shut the phone off. You need to recognize that building something becomes part of who you are.

We live in a world where people said there would never be another Henry Ford. We went through the Industrial Revolution, then the technological revolution, and saw Bill Gates, Steve Jobs, and Larry Ellison. The software play evolved into a device play with apps that enable everyone to live life at a higher level. I marvel at Google and Facebook even more than Apple. A college student created a website to look at girls at Harvard, and it evolved into something where my wife and two daughters get countless hits every day. The thing I would tell people is there are two paths. There's the traditional path: people go to Wharton, become investment bankers or private equity. Then there's Jack Dorsey with Foursquare or Twitter. He had a passion for maps as a kid and created Twitter wanting to tell his mother where he was. He took a routine need and looked beyond it. Henry Ford needed capital and came up with a way to mass-produce a car cost-effectively. I had a cell phone in 1984; I paid $4,000 for the phone and $10 a minute for service. That wasn't for the masses. Now think about apps. I use Waze for navigation. It's exceptional. What I would say to entrepreneurs is you have to look at what's not there versus what's there. That's what those folks are doing. There'll always be someone coming up with a new sandwich, but the exciting entrepreneurship is in seeing beyond what's there. If you don't have that natural creativity, there are traditional plays. My road as an entrepreneur hasn't been inventing technology, but using technology to create better service and value. At Broadridge, we're pursuing our fluent digital strategy, which includes our Inlet joint venture to communicate to investors through the channels they live their lives in. That's a different form of entrepreneurship with great opportunity.

We invest in products ourselves. You could call that investing in a startup. I mentioned Inlet: we contributed, Pitney Bowes contributed capital, and we formed a new company. There are many products here that could be their own company with more resources than my original proxy company. Most public companies are hesitant to invest in products themselves, preferring to buy something. We do both: we invest in our emerging products and in acquired products. But go back to the earlier point: know who you are and who you're not. If I had an epiphany about telepathy communications, we don't bring that technical skill set, so we shouldn't invest in that. We invest in things where we bring real skills: knowledge, customer relationships, brand credibility, technical expertise.

Startup is a relative term. We've done ten tuck-in acquisitions. Both were early-stage companies a couple of years old, with clients, revenue, and opportunity. That's our tuck-in strategy: by putting our controls, systems, and operations in, we can make them more scalable and effective. If someone came to me with a good idea and we thought it fit, we would consider it. I'm looking for more people because being an entrepreneur requires lots of skill sets, including dealing with not having a specific path. Think about our 6,700 associates: how many go to work not knowing what they need to do? Very few. As CEO, I know what I need to get done, but I also need to work with my senior team on what we aren't doing that we should be. An entrepreneur's life is all day. When you start something, there are magical moments where you're looking into the abyss. I have a picture of myself and my daughter on the beach, looking perfect, but I was deciding whether to give up on what is now Broadridge. My backer died, a VC pulled out, and I was funding the business, risking more money going out than coming in. That intestinal fortitude is critical. There aren't many people who raise their hand to give up a job with a known title and bonus to go into something with no revenue or customers. But if it works, you have the American dream in spades. It's not for the faint of heart, but it makes life exciting.

Being an entrepreneur is interesting. I said I wanted to own my business because my dad had friends who owned their own businesses and their quality of life seemed higher. They weren't massive businesses, but they appeared to have more control of their destiny. That doesn't count the people I didn't meet who tried and got into debt. When I went into public accounting, I wanted to be a partner. It wasn't until I had ownership in that first company and it didn't work out that I really wanted to start my own business. I tell people: I'm CEO of Broadridge, but I often view myself as a failed entrepreneur because Certified Services was supposed to be my company. Now it's the shareholders' company, and I have the privilege of being CEO and working with Broadridge associates. Even though I never envisioned things evolving this way, I can't believe how fortunate I've been. People tell me to enjoy it more and relax more. I look at it differently: I like doing what I do. I like the sense of significance. If I were a great golfer, I could get significance out of that, but when I play golf on the weekend, I can't wait to get back to work. Be careful what you wish for. If you wish for entrepreneurship because you perceive a wonderful end state but don't recognize the level of engagement required, it'll be more difficult than you anticipate. If you're not doing it for all the reasons that make it your life versus just wanting the end result, it could make you miserable. I know many successful entrepreneurs; very few had a Hollywood script.

I've been overrated and underrated in life. If you have a choice, pick overrated. The decisions we made after the financial crisis, when people thought they were dumb and the stock was getting hammered, we continued to invest in the business and create long-term value. That enabled us to get here today. Those decisions during tough times required far more intestinal fortitude than recent ones when people think we got smart. We were never as dumb as people thought, and we're probably not as smart as some think now. If you want to be an entrepreneur, you need a high level of self-awareness. Be very critical of yourself. Don't ever believe the press clippings, good or bad. In bad times, you might get discouraged and give up. In good times, you might think you're smarter than you are, and a little hubris can take anything down. I tell my management team: there is no Miller time. When things are good, you have to work harder to keep them good. When they're not good, you work harder to make them good. My Miller time will come when I leave the building. If it's your own company, it's your money, but I wouldn't want to work for that entrepreneur. Talent wants to work for a company that will be better tomorrow than today. People joining Broadridge today will have the opportunity to run an even bigger, better company with more opportunities, associates, and products. That's what's required to be successful and stay successful. Entrepreneurs who don't want to do that anymore do the right thing and sell. Some companies on Long Island, like Nature's Bounty, were taken to the next level by new management. Rather than letting something muddle along, giving the keys to someone else is the right thing.

Thank you so much for your time, Rich. I really appreciate that.