c-level 7

At C-Level #7: Unprofitable operations – underutilized capacity, underperforming operations, logistical challenges

c-level 7At C-Level #7 is the seventh blog of an eight-part series following a first time CEO’s educational journey in a very challenging business environment, and exploring global concepts in leadership theory and practice.

At the end of each blog are reflection questions for readers to consider as they navigate their own leadership journey. 

This guest post by Mike Sayre — experienced software, e-commerce and manufacturing services CEO, COO, CFO and Board Director—is based on his first-hand experiences as a fledging CEO. Its intent is to provide additional insight or ideas to those in, close to, aspiring to, or trying to understand the top leadership role in any organization. Mike was also featured in the October 4, 2016 Innovative Leaders Driving Thriving Organizations interview with Maureen Metcalf on VoiceAmerica focusing on the importance of leader trustworthiness in driving organizational change.

As a first-time CEO with a couple of years leading and starting up new manufacturing and distribution operations in an operations leadership role, I was still not totally prepared for operational challenges we faced as I took on this role.

  • Prior to my new role as CEO, we had acquired a competitor across the country with the same large customer/small margin challenges that we had. However, the competitor’s leadership had not been willing to face those brutal facts and was about to close its doors when we acquired it. The primary reasons for the acquisition were increased sales, engineering capability, overhead reduction and profitability. Nonetheless, the circumstances and late timing had not given us enough time to sort that out and benefits from the acquisition had not yet been realized.
  • Both of our operations had significant inventory and production control, as well as quality and delivery, challenges – and neither operation was a very impressive place to walk a potential new customer through. Those challenges had also driven at least one of our largest customers to demand daily order status calls so they could pressure our customer service staff to improve shipping performance (our staff referred to them as “the daily beatings”), and, thus, we were about to lose one of our best program managers.
  • Our bid opportunities for additional work for our core service business were dwindling because we were doing work for global electronics manufacturers who began requiring operations in Europe and Asia to reduce transit time and logistics costs, and we only had a presence in the U.S. We had to expand globally.

Although I did not know all the theories I’m now writing about, I believe that I enabled our turnaround success on some key tenets of those theories that I now better understand. I am sharing them with you in this blog series because it has been easier to replicate my success since I understood the principles on which that success was based. And I hope this may be the same for you. Some of the principals:

  • The tenets from Jim Collin’s book, Good to Great, referenced in At C-Level #1, the first blog of this series:
    • The right people in the right seats on the bus make all the difference;
    • Find the truth and act on it by facing the brutal facts of reality while maintaining an unwavering faith that you will succeed; and
    • Greatness comes from sustained commitment to disciplined people, disciplined thinking, and disciplined action that creates breakthrough momentum.
  • Additionally, I relied heavily on the Conscious Capitalism concepts introduced in At C-Level #3 that take into consideration all of the key stakeholders in making important decisions – in particular, the employee stakeholders in this installment of the series.
  • Remember the Strategist Competency model from At C-Level #4. It said that Strategists are unstoppable and unflappable when on a mission. This one was foundational for me in every difficult situation we encountered. I won’t say it was easy. While personally feeling the pain of making all these changes, I tried to make sure we were doing the “right thing,” and with that in mind, I mustered the courage to stay the difficult path that we, as a leadership team, had set.

Here’s how we approached those challenges. Our changes focused on people, process, and investment.

  • We faced the brutal facts, closed the acquired operation across the country and moved the work to our existing local operations, cutting our total combined expenses by more than 7 percent. Treating the people who were being laid off in the acquired operation as we would like to be treated (the Golden Rule) gave us three months of solid production and work transfer help from the people being laid off. They were awesome.
  • I called the customer and stopped the “daily beating” calls. With a Golden Rule philosophy, we could not allow someone to berate our people like that and I told that to the person who was making the calls. He was very upset and threatened to come into our operation from his European location to monitor his orders and manage our people. I told him he would get no further than the lobby. The news of our conversation spread quickly and had a tremendous impact on associate morale and engagement. Having said all that, we knew that his expectations were not unreasonable and we could not continue to miss our shipment commitments to our customers. So, I promised him a daily email with the status of any orders that were not on track to meet our commitment, and what we were doing to get them back on track. The customer could call us with any specific questions or challenges of course. That call and process change had three major effects on our organization:
    • It affirmed to our associates that I meant what I said about following the Golden Rule, showed them that I cared about them, and they stepped up. It took awhile to correct the shipping problem.
    • Although the customer’s shipments did see some early improvement, it took awhile to correct the shipping problems, but there were no more “daily beatings.” Because the e-mail I promised was sent out daily without fail, the customer always knew what was going on with their shipments and our team was more committed than ever to solve our shipping challenges.
    • It also saved us a lot of time…there were several people in those meetings and it only took one person to do the email! The rest could now work on the root issues of our shipping challenges.
  • As I wrote in the last installment of this series, At C-Level #6, we raised capital, bought an operation in Europe and started a new one with a partner in Asia.
  • We implemented Lean Manufacturing at all three of our operations that made our associates more excited about what we were doing and more productive, in addition to making our operations better organized and better run for existing and potential customer business and production audits.
  • We also used some of the capital we raised for our first Agile development process to build an inventory tracking system that was used at all three operations and gave our global customers one place to track all their products within our company.

It took a couple of years of intensely hard work with the team to reorganize and turnaround our operations. It also took the hiring of very talented and experienced operations and IT leaders to help implement the Lean Manufacturing and Agile methodologies that I wanted to help drive the turnaround process. The large customer that was holding the “daily beatings” was the same customer (not the same person) that later confirmed to me that we were indeed accomplishing our vision of being the best in the business (the world) at what we do.

There is one more concept in play here that was essential to our successes: the resulting shift to a much higher level of “harmonic vibrancy.” The Institute for Strategic Clarity defines harmonic vibrancy as the overall quality of life people experience in their relationships with themselves, each other, and the various communities or collectives in which they participate. When harmonic vibrancy is high, they typically experience gratitude, joy, enthusiasm, creative capacities, trust, and social solidarity; when it is low, ingratitude, anxiety, apathy, mistrust, and anti-social competitiveness. The changes we made significantly raised the level of harmonic vibrancy in our company. Ironically, you can grow a business without it, but sustaining success is much more likely with a vibrant organization than one that operates by fear and manipulation.

Reflection questions:

  • What are the two to three major strategic operations challenges in your business today? What are some of the brutal facts?
  • Are you acting on them? How?
  • In your current situation, on a scale of 1 to 5 with 5 being the highest, how would you rate the harmonic vibrancy in your organization or company? More importantly, how do you think your associates would rate it?
  • How might you and/or your leadership team improve it?

If you identify with the leadership models I’ve been writing about in these blogs and need

  • Leadership assessments (including a harmonic vibrancy assessment) and development for you and/or your team based on these models, or
  • Executive advisory services on how to implement strategic, financial, operational and/or cultural transformations to turnaround and/or grow your company, please contact Metcalf & Associates or me for further information on our services.

In At C-Level #8, Mike wraps up this blog series about his experiences being a first-time CEO responsible for overall company strategy and execution during a steep economic downturn affecting the business.

To become a more innovative leader, you can begin by taking our free leadership assessments and then enrolling in our online leadership development program.

Check out the companion interview and past episodes of Innovating Leadership, Co-creating Our Future, via iTunes, TuneIn, Stitcher, Spotify, Amazon Music, Audible,  iHeartRADIO, and NPR One.  Stay up-to-date on new shows airing by following the Innovative Leadership Institute LinkedIn.

About the Author

Mike Sayre, executive advisor and organizational transformation practice lead, has been a successful CEO, COO, CFO and board director for multiple organizations in technology (cybersecurity, ecommerce payments processing and engineered computer products) and manufacturing (electronics and steel products). He shares his expertise with client boards and C-Level leaders, and advises, designs, plans, and oversees the implementation of successful strategies for turnarounds, growth, profitability and sustainability.

Mike brings 25+ years of organizational and business leadership and hands-on implementation experience to his clients.  His teams have achieved significant increases in growth, profitability and valuation, as well as shareholder, customer, supplier and employee engagement and satisfaction.

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