Nutrisystem

How Dawn Zier engineered a healthy turnaround for Nutrisystem

By Samantha Drake

Photography by Mitro Hood

When Dawn Zier became president and CEO of the struggling Nutrisystem, Inc. in 2012, she instituted a practice of celebrating employee successes, big and small. The stepped-up recognition helped get the workforce excited about the company and on the road to reversing several years of declining revenue.

A year later, at a quarterly company-wide gathering, four employees took over the Q&A portion of the meeting to express their gratitude for Zier’s leadership and guidance. Then they presented Zier with a sheet cake and a certificate of appreciation to mark her one-year anniversary. The surprise honor was a sign that the once-dispirited workforce had bought into Zier’s philosophy of celebrating the small wins that lead to big successes.

Zier, the first female CEO in Nutrisystem’s 43-year history, is bringing the Fort Washington, PA-based company back to top form. Zier announced on April 30 that Nutrisystem achieved its seventh consecutive quarter of year-over-year revenue growth. Total revenue for 2015 is estimated to be in the range of $440 million to $455 million.

Nutrisystem has 420 employees, half of whom work in the company’s customer contact center. In addition to its Fort Washington headquarters, Nutrisystem has distribution centers in Nevada and Pennsylvania. Zier won’t disclose the number of customers Nutrisystem has; she says merely that the company has helped “millions of people lose millions of pounds over the years.”

“As a busy mom and a working professional, it’s hard to find time to do everything. Structured weight-loss programs do help you lose weight,” says Zier, 50, who acknowledges her own issues with weight.

Two-thirds of the American population is considered overweight or obese and at any given time there are 108 million people dieting, says Zier. That means there’s no shortage of potential customers, but there’s no shortage of competition, either.

Nutrisystem sets itself apart from the weight-loss program heavyweights like Weight Watchers and Jenny Craig by providing busy dieters with portion control and a structured plan. Non-dieters may recognize Nutrisystem as the company with the long-time celebrity spokespeople Marie Osmond and Dan Marino.

Nutrisystem sells structured, home-delivered weight-loss meal plans and meals that are frozen and ready to go, including popular bars and shakes. Customers buy food packages containing a month’s supply of breakfasts, lunches, dinners, snacks and desserts that are either pre-selected or determined by the customer. Customers provide their own fresh fruits, vegetables and dairy. Nutrisystem also offers complimentary counseling from trained weight-loss counselors, registered dietitians and certified diabetes educators, with additional support available through its online community and tools. While proponents like the absence of calorie-counting or monthly weigh-ins, critics have said the structured meal plans leave little room for deviation, such as eating out at a restaurant.

FLUCTUATING FORTUNES

Nutrisystem’s fortunes have yo-yo’ed wildly since its founding in 1972 by Philadelphia entrepreneur Harold Katz in Willow Grove, PA. Initially named Shape-Up, the business eventually launched 700 company-owned and franchised locations called Nutri/System Centers, which offered weight-loss products and counseling. Katz sold the business in 1986 and went on to found the H. Katz Capital Group, a private equity firm in Southampton, PA.

Subsequent leadership of Nutrisystem boosted sales to more than $1 billion, according to Forbes magazine. But mounting debt, lawsuits related to food safety, and the fallout from a Federal Trade Commission investigation into Nutrisystem’s claims about the performance and safety of its weight-loss programs ultimately took a heavy toll. Nutrisystem filed for bankruptcy in 1993.

Nutrisystem emerged from bankruptcy that same year under new ownership. The company ventured into selling its products online and went public in 1999. But despite the fresh start and shedding of its system of company-owned and franchised centers, Nutrisystem continued to struggle, Forbes reported.

In 2002, an investor group headed by Michael Hagan acquired the company and named Hagan CEO and chairman of the board. The company had what Hagan calls “a good run” between 2002 and 2008 before he moved on and became CEO at LifeShield Inc. in Langhorne, PA. Under Hagan, Nutrisystem’s revenues grew from $28 million to $777 million.

Forbes named him Entrepreneur of the Year in 2006 for his achievements at the company.

But without Hagan’s leadership, Nutrisystem faltered once again, this time faced with a recession as well as increasing competition.

At the board’s request, Hagan rejoined Nutrisystem’s board of directors in 2012. He led the search to find a new CEO who could turn the company around. Specifically, Nutrisystem needed a leader who possessed a deep knowledge of direct and ecommerce marketing and who could address myriad problems in the organization, Hagan notes.

ENGINEERING SOLUTIONS

Zier came from Reader’s Digest, where she had worked from 1992 to 2012 in a variety of posts. Among them, Zier served as president of the publishing company’s international and European businesses, and oversaw the global and consumer marketing divisions.

Although marketing became her focus, Zier actually started out in engineering. She earned a degree in computer science and electrical engineering from Stony Brook University and a master’s degree in electrical engineering from the Massachusetts Institute of Technology (MIT), followed by a master’s in business administration from MIT. Her first job out of Stony Brook was a technical staff position at AT&T, and Zier transitioned into marketing in her next job at Chase Manhattan Corp.

Zier says her engineering background provided the foundation for how she solves problems. “When you’re writing code or designing a circuit, you tend to do it in pieces and modules. So when I problem solve, I tend to break it down into modules or components similar to the way my mind was wired for writing software,” she explains. “You can take a problem that seems big and daunting and break it down into different sub-segments, and all of a sudden it doesn’t seem as scary or as challenging.”

When Zier joined Nutrisystem in November 2012, the organization had more than its share of challenges. These included a stagnating portfolio of weight-loss products, a misguided focus on discounts, and a corporate culture that was adrift, says Hagan. Zier quickly made her mark on the company. “Dawn has over-delivered on all of her promises,” Hagan says, noting that Nutrisystem’s stock has roughly tripled since she took over.

Turning the company around was no small feat, says Keira Krausz, Nutrisystem’s chief marketing officer and a former Reader’s Digest colleague, who joined the company in February 2013. “Almost everything needed to be fixed in some regard,” she notes.

Krausz describes Zier as a very hands-on CEO who can quickly pinpoint problems and issues. “She’s definitely not afraid to roll up her sleeves,” she says. For example, Zier can look at a large Excel spreadsheet of numbers and spot a number that doesn’t look right, saying, “I smell smoke there.” She’ll immediately pull out a calculator to figure out the problem herself, Krausz says, adding, “On any day of the week, she’ll jump in as you need her to.”

CULTURE SHIFT

Understanding the company’s culture was one of Zier’s first priorities. Maintaining a productive culture in a workplace can fall by the wayside in the drive for results, “but if you don’t have the right foundation in place, you’re not going to succeed,” she says.

Zier started by listening to what employees across all departments had to say and heard that several years of declining revenue had resulted in feelings of resignation and defeat in many people. The challenge, Zier realized, was getting employees who hadn’t experienced success in a long time excited and passionate about their work.

“I think the team was a little beaten down,” she says. “They needed hope, but I always say that hope’s not a strategy. So we actually needed results.”

Zier set clear expectations for employees and goals for the company. She gave every person in the company in a leadership role a laminated handout containing the goals for the year and strategies for achieving them. It’s Nutrisystem’s “bible for the year” and helps keep everyone on the same page, says Zier.

To ensure discussions and decisions are supported by numbers and facts, not conjecture and hypothesis, Zier put in place what she calls a “Just the FACTS culture.” “I was really regimented in making sure we had the facts, which I think comes from my engineering background,” she notes. The acronym FACTS stands for Focused, Accountable, Customer-centric, Team-oriented, and Solution-driven, Zier explains, and is intended to remind employees to focus on the priorities, clearly understand their goals, listen to customers without making assumptions, work as a team, and be driven to find solutions.

Recently, Nutrisystem began celebrating employees’ everyday successes in a campaign called “#Makingithappen.” If someone goes above and beyond in the organization or demonstrates passion for the work, he or she is recognized each month, says Zier. The achievement could be anything from a notable number of sales to negotiating a great medical benefit, she adds.

Robert F. Bernstock, a member of Nutrisystem’s board of directors who participated in hiring Zier, credits her with facilitating the company’s new attitude. “A lot of the cultural change comes from Dawn herself,” he says, noting Zier’s strong work ethic, along with her ability to work collaboratively while holding people accountable, were very attractive attributes. She’s “a straight shooter and a good listener” who has a clear sense of the path forward, Bernstock says.

At the same time, Zier says she needed to demonstrate from the top down that “if something didn’t go exactly as planned, it wasn’t game over, it was game starting.” If Plan A didn’t work, they simply had to move on to Plan B and Plan C if necessary, she says.

Bumps still occur, of course, agrees Krausz, “but I see a major difference in how people react to those bumps.”

Kraus says it’s no secret that Zier is very competitive, and competitive people realize that sometimes you lose a game. Except when it comes to playing sports. At company picnics, Zier quickly joins the best volleyball team so she can be on the winning side, Krausz explains, adding, “She can’t just show up like the rest of us and laugh about it. She has to win. For her, everything is full-out.”

PRODUCT PLACEMENT

Nutrisystem’s revenue decline between 2008 and 2012 was attributed, in part, to the recession triggered by the economic crisis in 2008. Ineffective sales and marketing strategies also played a significant role. “A lot of what happened was self-inflicted wounds,” acknowledges Zier.

In an effort to boost sales, the company had started discounting its products, which is not a good sales strategy, says Zier. Nutrisystem was also talking less about weight loss and more about how inexpensive the food was. Both strategies were misguided and sent the wrong message to customers, she says.

Zier took a different direction by making select Nutrisystem products available at certain retail outlets for the first time. The direct-to-consumer channel has a lot of potential for the company, she notes. Nutrisystem’s five-day weight loss kit, for example, is available at Walmart stores and on Amazon.com, and is designed to give consumers who wouldn’t ordinarily buy the product a chance to sample it. Dieters can lose several pounds in just one week, a quick win that lays the groundwork for more success. “Studies show that the initial weight loss is actually very motivating,” says Zier.

Nutrisystem also now offers its snacks as a standalone product in addition to being part of the meal packages. Although Zier is generally very analytical, Krausz says, her reasoning behind making snacks more available was simply: “People snack.”

In addition, the company is focusing on developing more options for dieters with specific needs, including vegetarians and people with diabetes. Nutrisystem’s focus on diabetes isn’t new, but under Zier’s guidance, the company created more options for diabetics and also began selling the diabetic meals through its retail partners.

To meet dieters’ growing desire for more fresh food, Nutrisystem is testing a new delivery program called Simply Fresh. All meals are shipped to customers via FedEx and can be prepared in less than five minutes. The food, including fresh fruits and vegetables, is kept cool during shipment in a specially designed temperature-controlled carrier.

Zier’s efforts to understand and cultivate Nutrisystem’s customer base haven’t gone unnoticed. “Nutrisystem is a little more attuned to what customers want,” says John LaRosa, president at Marketdata Enterprises, Inc. in Tampa, FL, which recently released its biennial study, The U.S. Weight Loss & Diet Control Market. Nutrisystem’s fortunes are on the upswing again because of its focus on good management and serving the customers, he says.

Nutrisystem is well positioned for the future because of its diverse products and services, and its partnerships with retailers, notes LaRosa. Yet Nutrisystem’s biggest competition isn’t from other weight-loss programs, it’s from do-it-yourself dieters with shrinking budgets and increasing time commitments, he says. A decade ago, DIY dieters comprised 70 percent of the dieting market; today that figure is 82 percent, points out La Rosa.

Among its recent initiatives, Nutrisystem launched NuMi, a digital device that integrates with wearable fitness devices and health platforms.

PERSONAL STAKE

If Zier’s leadership style makes her one of Nutrisystem’s most effective CEOs, it also makes her one of its most relatable leaders.

One of Nutrisystem’s marketing themes is “Put yourself first.” Zier puts this idea into practice in her own life by making time for exercise — particularly biking, whether it’s outdoors or in a spin class — and spending time with her husband and two children.

Because Zier’s principal residence is not in Pennsylvania, she spends a lot of time commuting to Fort Washington. Both she and Krausz have lengthy drives to work, so they sometimes use that time to discuss the business.

Zier downplays her role as Nutrisystem’s first female CEO, while emphasizing her insight into the company’s customers. “I really don’t think about female versus male or things like that,” she explains. “But I think certainly as a woman who has also struggled with weight that I do bring a good perspective to the company for really understanding our customers.”

Three-quarters of Nutrisystem’s customers are women, Zier notes. So the ability to spin her experiences into every woman’s experience is an asset to her job. “My issues with my weight are what I think 80 percent of the population has, so I think it’s something we can all relate to,” she notes. “I think most women in America have dieted at one point.”

Whether someone is trying to transform physically or revitalize a company, change is never easy or simple. But, just as Nutrisystem encourages new dieters with small, quick weight-loss victories, Zier is banking on the new culture of innovation and optimism she’s created at the company to continue building a new future. As Zier notes, “Success begets success.” CEO

Samantha Drake is a freelance writer based in Lansdowne, PA. Contact us at editorial@smartceo.com.

TURNAROUND TIPS

Nutrisystem, Inc. president and CEO Dawn Zier has been on the job for just a few years but has already put the company well on the road back to success. Turning an organization around financially and culturally is a tall order, and means the new leader has to hit the ground running. Zier gives the following advice to CEOs facing big challenges:

Listen closely. In typical turnaround situations, the company culture has contributed to inhibiting the company’s growth. Zier says listening to the employees across all departments is the key to understanding the culture and what the company’s issues are. In fact, a CEO’s first month on the job should be all about listening.

Build a team. Zier brought several former colleagues with her to Nutrisystem to help her assess the situation and reinvigorate the company. But she was careful to create a diverse team. “I was really big on making sure I had a melded team of newcomers as well as people who had been valuable to the company over time,” Zier points out. “I didn’t want to create an ‘us versus them’ culture.”

Move fast. Importantly, Zier didn’t wait to start launching new initiatives. She relied on what she calls the “90-day rule.” A new leader has just 90 days to start enacting change. “You’ve got to move fast and you’ve got to be brave,” says Zier.

Take chances. Turning a company around is the time to be bold. Zier says she decided not long after she joined Nutrisystem that the company should start selling selected products at Wal-Mart. Going into retail for the first time was a risk, but Zier says she knew Nutrisystem had to strike out in a promising new direction.

FOCUS ON THE FACTS

Given her engineering background, Dawn Zier, president and CEO of Nutrisystem, Inc., approaches problems with an analytical eye. She built a “FACTS” culture at the company to base decisions on numbers and facts, not just gut feelings and speculation.

FOCUSED
We prioritize our activities and act with a sense of urgency on those initiatives which will meaningfully move our business forward.

ACCOUNTABLE
We take responsibility for our commitments, decisions and actions and own the results regardless of the outcome.

CUSTOMER-CENTRIC
We honor our customers with a commitment to genuine service.

TEAM-ORIENTED
We are “all hands in” — we work, win and overcome trials as one company.

SOLUTION-DRIVEN
When faced with problems, we come equipped with solutions.

Source: www.nutrisystem.com

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