--- url: 'https://www.fmjlaw.com/manufacturing-war-story-how-giants-grow-up/' title: 'Manufacturing War Story: How Giants Grow Up' author: name: Georgie Stocks url: 'https://www.fmjlaw.com/author/gstocks/' date: '2020-11-03T14:58:12+00:00' modified: '2021-08-10T16:05:07+00:00' type: post categories: - Article - Case Study - Thought Leadership image: 'https://www.fmjlaw.com/wp-content/uploads/2020/11/AdobeStock_254888086.jpeg' published: true --- # Manufacturing War Story: How Giants Grow Up *The below piece was written by [Jim Seifert](https://www.fmjlaw.com/professional/james-j-seifert/), head of our [Manufacturing ](https://www.fmjlaw.com/practice-area/manufacturing/)practice group.* Last month, I told you a story about [the demise of an American manufacturing giant.](https://www.fmjlaw.com/manufacturing-war-story-a-giants-demise/) This month, I will contrast that story with the story of an iconic Minnesota manufacturer that faced a set of economic and market conditions that would have sunk most firms in the early 80s. Precipitated by the spike in oil prices in 1979, the period from 1980-1983 was the worst recession since 1945. This economic backdrop, coupled with back-to-back winters that inflated inventories of key high-margin seasonal products, raised the real possibility of bankruptcy. Instead of being the end of the story for this important firm, it marked a new beginning. ## The Story The new beginning was not pretty. Year over year sales had dropped 25% from 400mm to 300mm. The split-adjusted stock price was around 30 cents per share compared to the 88 dollars share price today. The COO and three senior vice-presidents were dismissed, 125 salaried persons were laid off, 75% of the manufacturing workers were idled, and all of this was on top of layoffs the previous year. Today we think of culture and customer focus as being keys to success. What do you think the mindset was of the people that remained at the company and had to carry on in the face of probable failure? What kind of confidence did customers, bankers, debt holders, dealers, and vendors have in the firm after such an announcement? This was not a small hole in the hull above the waterline, the ship had taken on a lot of water fast. Nothing in the firm’s history prepared it for the challenges it faced. But the firm prevailed in the face of these dire circumstances. Today, the firm has a market capitalization of 9.3 billion, 6,000 employees, is a market leader in several global markets, and continues to grow and innovate. ## What Happened? Why this history and not the business graveyard? One person and one unifying philosophy. Following the business earthquake caused by the economy and market conditions, not only did the firm layoff people, it changed CEOs. The new CEO created a new business playbook using an old idea: leaders lead best when they serve the people they are leading. This form of leadership looks like this: - Leaders are holistic examples of business acumen, competitiveness, team builders, and decent human beings. - Systematic, genuine, regular, and broad engagement is foundational. - Strategic direction is widely communicated and understood. - Innovation is allowed to emerge from any area of the company. - Compensation is fully aligned with performance, no exceptions. - Recognition is objective, annual, company-wide, and reinforces the values of business success, breakthroughs, and respect for the team and individual teammates. Over my career, I have seen firms treat their employees as serfs and perhaps this is how many old-line manufacturing firms were started and survived. But in the face of seemingly unsolvable business problems (what to do with 350,000 units no one wants?) effective leaders don’t reinforce serfdom and then expect innovation and an extraordinary amount of discretionary effort. Something quite different is called for. ## The Lessons What this firm achieved by defining leadership as fundamentally a service exercise is this: - Create a **cultural foundation** that is **sustainable and timeless**. - **Weave firm-wide business results seamlessly into individual success **(compensation, training/education, and advancement). - **Drive discretionary effort** to an **extraordinary level**. - **Seek and receive pay reductions** when deep business cycles require it. - **Reduce turnover**, thus retaining critical institutional and technical knowledge. - **Create the ability to transfer all of the above to acquisitions**, thus creating enhanced value above traditional Wall Street measures. ## Conclusion **Finding the right set of cultural factors for your firm is more art than science. When you get it right, the business and individuals succeed in exceptional ways.** ***If you have questions about the above, our ***[***Manufacturing***](https://www.fmjlaw.com/practice-area/manufacturing/)*** practice group is here to help. Please contact ***[***Jim Seifert***](https://www.fmjlaw.com/professional/james-j-seifert/)*** (Head of the Practice Group), at ***[***james.seifert@fmjlaw.com***](mailto:james.seifert@fmjlaw.com)***, ***[***Bob Fafinski***](https://www.fmjlaw.com/professional/robert-r-fafinski-jr/)*** (Shareholder) at ***[***robert.fafinski@fmjlaw.com***](mailto:robert.fafinski@fmjlaw.com)***, or ***[***Heidi Carpenter***](https://www.fmjlaw.com/professional/heidi-a-carpenter/)*** (Shareholder) at ***[***heidi.carpenter@fmjlaw.com***](mailto:heidi.carpenter@fmjlaw.com)***.*** [](https://www.addtoany.com/add_to/facebook?linkurl=https%3A%2F%2Fwww.fmjlaw.com%2Fmanufacturing-war-story-how-giants-grow-up%2F&linkname=Manufacturing%20War%20Story%3A%20How%20Giants%20Grow%20Up)[](https://www.addtoany.com/add_to/twitter?linkurl=https%3A%2F%2Fwww.fmjlaw.com%2Fmanufacturing-war-story-how-giants-grow-up%2F&linkname=Manufacturing%20War%20Story%3A%20How%20Giants%20Grow%20Up)[](https://www.addtoany.com/add_to/email?linkurl=https%3A%2F%2Fwww.fmjlaw.com%2Fmanufacturing-war-story-how-giants-grow-up%2F&linkname=Manufacturing%20War%20Story%3A%20How%20Giants%20Grow%20Up)[](https://www.addtoany.com/add_to/linkedin?linkurl=https%3A%2F%2Fwww.fmjlaw.com%2Fmanufacturing-war-story-how-giants-grow-up%2F&linkname=Manufacturing%20War%20Story%3A%20How%20Giants%20Grow%20Up)