As we head into the fall, some things seem clear. Our government remains in a dreadful mess (yes, we have a higher gross debt limit). Our growth is so anemic that many economists are saying that we’re back in a recession.
Manufacturing is barely a burp now. Housing, except for rentals, is off the map. And Europe continues to struggle, with Greece, Italy and Spain near default.
Let’s pretend that the CEO of Ajax, a fictitious company, was fired for not responding to this never-ending stagnant economy.
You, Bentley, a 25-year metal fabricating executive from Nebraska, are being interviewed for the job. Your prospective employer is an original equipment manufacturer and metal fabricator, born in the Milwaukee area 75 years ago.
Its sales, once at $50 million, have dropped to $35 million. Two of its four mostly automotive customers are gone, leaving one domestic and one foreign customer. Ajax hasn’t been profitable for three years and is living on short-term and long-term step-down credit from a bank that was recently sold to an out-of-state suitor.
Ajax’s board – family members and a few outsiders – are interviewing you. Let’s listen in. (If the company doesn’t hire you after the interview, call the TEC office. We’ll find another opportunity for you.)
The interview
The board: “Bentley, what did you find when you did your due diligence on the company?”
Bentley: “Well, I found that the culture is virtually non-existent. As one 30-year employee said to me, ‘I put in a fair day’s work for a fair day’s pay. What else is there?’ Others commented that morale is terrible, and all they see are weekly layoff notices.”
The board: “What else did you find?”
Bentley: “Upper management has no sense of direction. There is no long-term plan or strategy. People don’t know what to expect from one day to the next. Bottom line, they’re scared!”
The board: “And?”
Bentley: “We have state-of-the-art automated welding machines and great software accessories. But the skilled tradespeople still don’t understand the software because they were never trained. Those machines are at the heart of the company’s ability to produce fast customer turnarounds.”
The board: “So what do you recommend?”
Improve the culture
Bentley: “We need to survey all of our employees, using the services of an outside consultant who is a culture specialist.” Bentley lists things the company needs to know:
- Do employees trust management? If so, how much?
- Does the company keep them updated on progress? How often?
- How often are they recognized for a job well done, and are they satisfied with the feedback?
- How satisfied are they with their pay and benefits?
- What kind of training and tools are required to get the job done?
- Does management provide effective leadership? What can be improved?
- Do their supervisors provide effective direction?
- How satisfied are employees with the people they work with?
Provide training
Bentley: “We need to develop top-down training and certification programs, including detailed instruction in lean manufacturing techniques and continuous improvement programs, like Kanban.” (The Kanban scheduling system tells companies what to produce, when to produce it, and how much to produce.)
Manage inventory
Bentley: “Our inventories are being mismanaged at a significant cost to the company. Lead times are seldom adequate to meet shortened customer requirements. There’s a constant rush to get the product out the door. Even reject levels indicate serious inattention to quality.”
Diversify the customer base
Bentley: “Eighty percent of our sales are dependent upon industry. We need stronger representation from the food, agriculture and mining industries, not to mention a much stronger international presence.”
Ensure financial stability
Bentley: “We are at the mercy of one institution in transition with severely limiting loan covenants affecting our ability to expand. We need to find other sources of debt, or with board approval, equity capital.”
A member of the board exclaims: “Bentley, we aren’t GM and no government bailout is feasible. Aren’t you being a little extreme here?”
Bentley: “No sir. Taking the steps I am recommending will turn the company around and set it on a path of future success, just like it was in the old days. Doing nothing will simply continue to erode the assets and put this proud company out of business.”
My own observation: Over the years, I have seen many TEC companies in this predicament, aggravated by the onslaught of recessions or very slow growing GDPs.
I have also seen many young “Bentleys” come onto the scene and truly make a difference with fresh ideas and new approaches while concentrating on the basics that make every business strong: people, capital and know-how.
Until next month, I sure hope “Bentley” is on your team!
