When Rupesh Shah saw headlines about companies cutting costs, staff and basically whatever they could to stay afloat, he wanted to take another course as the recession that began in 2008 tightened its grip on the American economy.
“Anyone can cut costs, and that’s probably the low-hanging fruit,” says Rupesh, co-president at M S International Inc. “But we view cost-cutting as a last resort. If everything else fails, let’s look at cost-cutting. We said, ‘Let’s take a hard look at our business. If we know the industry is contracting, how can we expand our addressable industry?’”
MSI is a distributor of countertop, flooring, wall tile and hardscaping products. The company of more than 900 employees manages 50 million square feet of inventory and has international purchasing offices in India, China, Turkey and Brazil.
Rupesh and his brother, fellow co-president Rajesh Shah, have taken the company that their parents founded in 1975 and have made it even stronger.
Now they needed to find a way to battle through this tough time and give their customers a reason to continue doing business with MSI.
“What else are our customers buying that we’re not selling them?” says Rupesh. “Are those industries we can get to? What are we losing to our competition and what can we do to regain that? What can we do to get more market share?
“We didn’t engage in layoffs — probably one of the few companies that did not do that. Instead, we started expanding our product line and started getting into new product lines where we could use our same sales force to sell the same set of customers.”
It’s not always an easy strategy to follow, especially when it goes against the grain of what everyone else seems to be doing.
“The outside pressures and priorities, both internally and outside, can take over if you’re not disciplined about it,” Rajesh says. “They can take over your thinking, and you can slip on the disciplines that made you good. You can easily fall into the simple and quick versus what may be a little more difficult, but longer term, and is the right thing to do.”
Set your course
Before the company embarked on this growth strategy, a meeting was convened with the management team to list the company’s options.
“We can aggressively do cost-cutting and downsize our business by 20 to 25 percent,” Rupesh says. But before the company did that, Rupesh presented an observation.
He posed the growth opportunities as he and his brother saw them and attempted to calculate what it might take to make them work.
“Let’s make some reasonable market share calculations,” Rupesh says. “How long will it take? Can we stomach it financially? Should we do it? It helped get our culture and all our management team to move in that direction. We had a series of meetings on it.”
Certainly there is emotion involved when you’re in the midst of a recession and jobs and business relationships are potentially hanging in the balance. But Rajesh says he and his brother focused more than ever on taking emotion out of the equation and trying to make decisions based on facts.
“With the downturn happening and business slowing down, we said we’re going to survive and thrive, but the only way it works is if we make data-driven decisions and prioritize quickly,” Rajesh says. “We don’t have infinite manpower, resources or investment dollars. So we have to use all these approaches to decide how we unleash those resources and use them, including their own time being one of the biggest resources that we had limits on.”
Once the decision was finalized to not make cuts, but to instead pursue data-driven growth opportunities, it was critical that everyone was on board to make it work.
“Failure is not an option,” Rupesh says. “Changing course is not an option. As a distributor, you have vendors, salespeople and customers. You’re creating a view that this is not optional — it’s mandatory.
“We start judging salespeople by how many new products or product lines they are selling. You look at it very analytically. It’s not just the sales. It’s why aren’t you selling porcelain? Why aren’t you selling quartz? Why aren’t you selling wall tile? Get them to feel the pressure of it.”
One of the keys to being effective with limited resources is the ability to know what doesn’t work for your business.
“We tell all our managers your what-not-to-do list has to be longer than your what-to-do list,” Rajesh says. “It’s funny, but most people don’t believe in that. They always want to show what you did do. People don’t get objective credit for not doing something. We internally believe some of the best things we ever did are the things we didn’t do.”
If your business has products that had been big sellers but aren’t anymore, and you’re still trying to push them instead of promoting a new product that has a lot of potential, you’re asking for trouble.
“It’s a discipline change, and it’s not simple,” Rajesh says. “It’s a change of thinking. You need to make it a priority and continuously communicate it. You can’t just stand up and say, ‘We’re doing this. We’re done.’ It’s an ongoing process. And you can only do it by example. You can’t make decisions on gut instinct yourself, and then expect everyone else to do it with knowledge.”
The effort to drive results has to be constant to maintain momentum and reinforce the message that this is a very important thing you’re doing for your business.
“Let’s create a culture and an environment where everyone is thinking, ‘OK, right now, most customers are buying 15 to 20 percent of their product from us. Can we get them to buy 30 percent, and what will it take to do that?’” Rupesh says. “So we made a very strong push and created a culture. Everyone from 2008 to 2011, all they thought about was market share, market share, market share. How can we get more market share?”
MSI has positioned itself to succeed in the post-recession economy, but that doesn’t mean the evolution is over.
“You have one set of challenges to go from $40 million to $100 million in revenue,” Rupesh says, “another set to go from $100 million to $250 million and a third set to go from $250 million to $500 million. And now we’re looking at what it’s going to take to get us to $1 billion. That’s kind of the next major milestone for us.”
Just as it was in recovering from the recession, the makeup and attitude of MSI’s employees will be crucial in determining whether the company reaches that ambitious milestone.
“With our current set of employees, the majority of them have done a great job adapting,” Rupesh says. “So first, we look internally and say, ‘For the changes that need to take place, what skill sets do we have to have?’ Where there are gaps, we look to the outside.”
And while they want people who have experienced success, they also want employees who have experience setting a goal and working hard to achieve it.
“We’re very cautious and wary of hiring people who have just been in large organizations,” Rupesh says. “They probably have tremendous experience, but they worked in an organization that was already set up for what we want to get to. Ideally, we’re looking for people with transitional experience.”
The goal is to find people, either within your current ranks or externally, who can continue to identify those new opportunities and help the company take steps to better serve its customers.
“How are they going about solving problems?” Rajesh says. “Make sure when you interview or you’re promoting from within or reviewing within, that you’re grading on that question. How do you solve problems?”
The ability to solve problems and process data to make smarter decisions is a key reason why MSI has grown as quickly as it has.
“In 10 years, we’ve grown tenfold,” Rajesh says. “I don’t think we would have taken the market share we have taken because we would have been correcting a lot of wrong decisions. Of course, a decision isn’t always right or wrong. It can also be the wrong priority. This is a lower priority thing, and if we had done the higher priority thing, it would have generated faster or better results.”
If you have concerns about the systems you have in place to manage your company and its potential growth curve, the best advice is not to wait to act.
“The longer you wait, the harder it becomes,” Rupesh says. “To do a change in systems when you have several hundred employees is a lot more challenging than when you have 30 employees. As you think about any company’s transition, think first and foremost if you have the systems in place. If you don’t, how are you going to put them in place?” ●
- Agree to a plan.
- Hold your team accountable.
- Keep your eye on the future.
The Shah Files
Names: Rajesh Shah and Rupesh Shah
Company: M S International Inc.
Born: Fort Wayne, Ind.
Education: Finance and accounting degree, Wharton School of the University of Pennsylvania.
Who has been the biggest influence on you? My parents, Manu and Rika Shah. They always taught us to not be afraid to do things in life just because it’s risky.
What one person, past or present, would you most like to meet?
I actually wrote my college entrance essay on this. Wile E. Coyote, the cartoon character. No matter what he goes through, he just gets up the next morning and keeps trying it again. I would just love to talk to him. ‘You fail every time. What makes you get up and want to try again?’
Education: Bachelor of science in economics with a focus on finance and strategic management, Wharton School of the University of Pennsylvania.
Who has been the biggest influence on you?
It would have to be my parents. One thing my father did which has been very helpful to my brother and me is when we started, he never took the approach, ‘I’m going to show you the way to do things. This is what you’re going to do.’ He gave us a lot of autonomy to try things, and he provided a lot of support in those endeavors.
What one person, past or present, would you most like to meet?
I really admire Steve Jobs. He came to an industry and revolutionized it. I’ve read his book, and what I still don’t understand is how does someone like that have the vision he had and feel so passionate about it and execute on it.
How to reach: M S International Inc., (714) 685-7500 or www.msistone.com