Dick Giromini had never seen the likes of it ? a drop in business that would bring just about any company to its knees.
Giromini, president and CEO of Wabash National Corp., was in shock as he and other executives in the transportation equipment industry saw the recent economic downturn cause nearly an 80 percent drop from the peak in 2006 to the sinking operating levels in 2009.
His challenge was one of survival. In the first quarter of 2009, Wabash National sales dropped by more than half from the same period in 2008. The manufacturer of flatbed trailers, dry freight vans and refrigerated vans wanted to avoid what other companies ended up facing ? a restructuring filing.
“We were burning cash. It was really trying to find a way and a means to carry the company through the toughest period it ever faced,” Giromini says.
All the traditional cost optimization moves were made, including consolidation of plant operations and idling of work locations. Unfortunately, some 40 percent of the salaried work force and nearly 70 percent of hourly employees were laid off.
A shared-sacrifice approach was taken with the remaining workers: senior executives took 17.5 percent pay cuts; all the rest of the salaried workers took 15 percent; and hourly workers took a 5 percent pay cut.
“However, the drop in volume required us to do even more,” Giromini says.
What he did next ? to keep the company operating and indeed to rebound ? was to secure a private equity cash infusion of $35 million.
“We met with many potential investors and went through an assessment process. A number of them made investment proposals, we selected one and then went forward.
“The process took several months. It was nip and tuck as we continued to manage cash availability to be able to continue to pay suppliers, and I give a lot of credit to them with their extended payment terms as being part of the solution that helped us get through this.”
It was the final touch that saved the company, and after 14 months of astute management and economic recovery, Wabash National was free of its commitment to the private equity firm, and was back to being a public company. Many laid-off workers returned to work.
Here’s how Giromini took the steps to douse the fire that was burning Wabash National’s cash and injected fresh air into the $1 billion company.
Get the data and be decisive
When faced with financial challenges, you cannot afford to stall or appear uncertain of what to do.
“One of the most important things I learned early in my career was to be decisive,” Giromini says. “You can’t be afraid to make the decisions. You have to collect as much information as you can, but there is an element of gut-feel that has to come into this and also knowing that you’ve got to move.”
Taking a long period of time, for instance to wait and see what the market will do or the fear of acting lest it be a mistake, can be detrimental.
“I had one boss who would use the expression, ‘paralysis through analysis,’” he says. “That’s the one thing you have to avoid in business. You have to be able to collect as much information as possible, but you have to do it in an expeditious fashion. Then you’ve got to go.
“Never be afraid to make decisions, because you’re probably making far more decisions than the fellow who is afraid to make them since he may think he is batting 80 percent on decisions, but only makes 10 decisions. You make 100 decisions, bat 50 percent and you make 50 good decisions in that light.
“That’s the way I’ve always tried to operate, and I think leaders need to be decisive and act fast when faced with that kind of challenge.”
You’ve got to trust your judgment on that, and take the actions and move forward. That is critical to your success. Employees have to see that you are in charge and have a plan to execute.
“They have to buy in, they have to understand the burning platform that exists, the need for quick action, the need to buy in, and so I think it is very important to keep them informed about the process to assure that the support is there to be able to implement the actions necessary,” Giromini says.
Get a grip on fear and rumors
If you have a good relationship with employees when an economic downturn starts, consider yourself fortunate. If you communicate well with them, it probably will increase your chances of getting the buy-in needed to help turn around the situation. However, it may make the human side of employee cutback decisions more miserable for you.
That’s not a case for building only superficial relationships between management and labor so you can avoid some pain during financial straits. In the least, you have to take stock of your emotions and communicate to your work force that you are doing all you can do to survive the situation and to lessen fears.
“Fear is in the hallways, in the office, and in the aisles of the plants,” Giromini says.
“Those were tough, tenuous times. The work force and the community all understood when they didn’t see trailers in the lot waiting for customer pickup. That’s not a good sign, and when they didn’t see cars in the parking lot and saw all but one shift and not even that on Fridays, that’s not the normal way our business operated.”
When facing a dire situation, company employees may resort to drawing conclusions of their own and starting rumors. Management should expect that this is probable and should have a game plan to deal with them.
“Your senior management needs to go out and make sure that the message was received,” he says. “You’ll need to get in front of the work force to deliver a message, and you have to make certain that the communications are frequent and to the point so you can minimize as many of those rumors as best as you can.”
You’re never going to get them all. But you have to do the best you can to reduce them.
“My role was to be out there to continually reassure the work force, both the salary and hourly work force, that we were doing everything that we could and that we were going to get through this thing ? and to stick with us and see it through,” Giromini says.
“When I was able to communicate the actions that we had to take, they also understood that that we were doing it on a basis of who could deal with it the best. The executives and salaried workers took the bigger cuts, and we tried to preserve as much of hourly workers’ earning power as we could.”
One advantage that will be in your favor is if your corporate offices are connected to your main manufacturing operations. This will help break down the barriers that can prevent the flow of communication, and barriers in general.
“We don’t have any exclusive executive cafeteria, or any of those types of things,” Giromini says. “We don’t have reserved parking for executives. So I park where everybody else parks, and it’s first-come, first-served. I dine where everyone else dines. Our folks tell me, they know me by first name, they understand and trust when I tell them what the situation is.”
Meanwhile, during a downturn, your management team will be gaining experience that only comes once in a great while. It will make them a lot more knowledgeable, a lot more capable, and they also will go forward with confidence that no matter what any economy throws at them in the future, they are going to know how to deal with it.
“I’m really proud of them,” Giromini says. “It’s made them all better leaders as a result of having gone through the experience they went through in 2009.
“I like to tell them that they added tools to their toolbox that others who may be in the industry for 40 years and never have the chance to have those tools added. What we hope is that we never have to utilize some of those tools ever again. But they’re there.”
This is also time to build strong, healthy relationships with your suppliers as you do with your customers. You will accomplish long-range benefits if you view your suppliers as partners.
“You are only successful in this if you have strong relationships with your suppliers,” Giromini says. “They are only successful if you succeed also, so believe in reaching out. Have a high level of engagement with your suppliers. Start regular webcam teleconferences with them on a monthly basis so that they know what’s going on in your business. Also invite all of your major suppliers in for an annual supplier conference.
“We’ve enhanced the engagement with suppliers as the years have evolved but I think having an episode like we all faced in 2009 ? and many of our suppliers faced a very similar challenges that we faced ? I think it always does bring you closer. I think any time you face that kind of a challenge, it’s just going to make partners truly realize who their real partners are.”
Diversify and develop
While your company is trying to keep its head above water during an economic slowdown, remember you have to be ready for the finish line. Many companies learned the hard way when a customer that accounted for a large part of its business went under. It’s time to keep a focus on diversifying and developing.
“Never lose sight on diversification efforts for your business,” Giromini says. “Stay focused on finding ways to diversify from a sole dependence upon an industry to leveraging both the physical assets and the intellectual assets you have as an organization into other areas.”
Once you establish your survival game plan, it’s an opportunity to go revisit your core values, especially that of developing solutions for customers, to strengthen your position when the recovery picks up steam.
For instance, Wabash National formed a products group for its Duraplate composite panels. Rather than being used only in trailers, the panels are used in the manufacture of all PODS storage containers.
“Developing solutions is based on working with customers, identifying what their needs are,” Giromini says. “That’s the value you bring to the customers in the area of innovation; working with them and saying, ‘What are the problems that you have? What are the things that could make you more cost-effective, make you more productive, could help enhance your bottom line, relative to your product?’
Then you go back and your engineers work with your customers to develop solutions to those problems.
“Now with the recovery picking up steam and hopefully with the work we’ve done and the diversification efforts in our business, we’ll continue to grow and actually be able to have record levels as we go through the cycle over the next three to five years,” Giromini says.
How to reach: Wabash National Corp., (765) 771-5310 or www.wabashnational.com
The Giromini File
Born: Syracuse, N.Y.
Education: I have a bachelor of science degree in mechanical and industrial engineering and a master of science in industrial management, both from Clarkson University, in Potsdam, N.Y
What was your first job?
There are three or four that all could’ve been clearly characterized as my first job: babysitting, mowing lawns, shoveling snow or my paper route. I did all of those. Interestingly, as I think about it, I was in high demand, and I know now why because I only charged 25 cents an hour. I don’t think I was very smart as a salesman, but I could sure bring in the volume.
Whom do you admire in the business world?
Rather than focusing on a single person, I tend to think about what attributes that I admire. I really do admire those individuals who are able to lead their companies to outperform what the norm may be for their industry ? finding ways to be creative, innovative and having a business model that provides for long-term sustainability of their business but that has flexibility to allow them to adapt and adjust to the ever-changing business and economic environment that they face.
When we look at that, we look at the sustainable models of year-over-year improvement ? those are the businesses, and there are many of those. I think it’s unfair to single out a person because industries are so different.
On a more personal basis, the person that I certainly respect and admire is my dad who really is the one who taught me those basics that live with you forever. He said no matter what job you ever accept, for whatever pay you’ve accepted, you do that job to the best of your ability because that’s what you’ve agreed to. That’s a contract that you have entered into.
I’ve always believed that, and I kind of think it follows along with ‘your word is your bond.’ So that was the way we were raised, and he always taught us just good solid, core values of relationships and doing business that I never thought would translate into how I would act or perform years later.
What was the best business advice you ever received?
I had a boss when I was just a young graduate out of college who was talking about decision-making. He said, ‘You never want to be afraid to make a decision.’ His point was not to shoot for a 50 percent success rate but to make good decisions. The only way you can do that is to make a decision in the first place. So I’ve always remembered that throughout the years.
What is your definition of business success?
It goes in line with the attributes that I admire. I would like to look back and say that we were able to build a business model that was sustainable, we were able to build one that was flexible, we were able to adapt to whatever the operating environment this economy would throw at us ? it’s a global economy now. There are challenges continually that you have to be aware of and you have to be able to adapt to. That’s how I would view success, as being able to have that model that is sustainable, that means you are able to create jobs, sustain jobs, provide for families and be recognized as good corporate citizens that support the communities that you operate within.