Hitting the brakes Featured

8:00pm EDT October 26, 2009

A few years ago, Bendix Commercial Vehicle Systems LLC was bought by a German company, and in that transaction, Joe McAleese, who serves as Bendix’s president and CEO, had to shift his company’s focus from a quarterly, profit-driven mentality to a long-term, double-digit revenue growth outlook. It changed the game for the business, which develops air brake charging and control systems for trucks, trailers, buses and tractors, and he was now focusing on things that he never focused on before.

As a result, business boomed, the company doubled its size between 2002 and 2006, and he was seeing a pipeline of more growth opportunities awaiting him. At the time, it was the biggest challenge he had faced, but it was exciting to see the company change and even more thrilling to see all of its potential. But then everything changed.

“Before the recession started, we started being impacted with the housing starts slowing down and declining,” McAleese says. “Our customers have been in a prolonged freight recession for three years, so they don’t have a need for trucks, so the truck companies don’t need to build trucks, so it’s been a difficult time for our industry.”

McAleese had to change the game — again — to adapt with both the industry and the economy.

“For us, the challenge is in how do you manage through that?” he says. “We’re used to managing through very big cycles. Our industry is normally very cyclical — we go about from the top of the cycle to the bottom of the cycle 50 percent. That’s normal for us. We’re used to dealing with that kind of cyclicality. This time it’s 75 percent. We’re not used to dealing with that. We’re not used to the aftermarket business slowing down at the same time.”

To keep the company moving forward during the tough time, McAleese and his team took a processed approach to changing Bendix by getting all of their options on the table, making the right decisions, communicating with employees and then moving forward.

Know your options

When his human resources department sent him a memo saying that another company had cut executive pay by 10 percent, McAleese vividly remembers thinking it was the stupidest idea in the world.

“I said, ‘Well, that’s a dumb idea. That’s not a very good idea. We’re not going to do that,’” he says.

Coming to terms with your emotions is the first step in putting all of your options on the table.

“You need to get everybody willing to discuss the items, which means that you have to personally get there, too,” he says. “This is not just about managing other people’s emotions. It’s managing your own.”

Seeing his own emotions helped him start the process.

“You have to recognize your personal reaction to those things because these things are very personal,” McAleese says. “They’re very personal for you as an individual, and they’re going to be very personal for all of your employees if you go and decide to do those things.”

You have to know what’s going on in your industry and with the economy.

“You see one person out there doing something like that, you go, ‘That’s not a very good idea,’” he says. “You see two, you go, ‘Well, OK.’ When you see five or six or seven, you say, ‘OK, if other people are doing it, they’re going through the same set of issues we’re going through and they’re looking at the same set of facts, and they’re concluding that that’s a good option.’ I may not initially like it, but that has to be on the list of items we need to discuss.”

While his initial reaction to lowering executive pay was that it was out of the question, he eventually softened, which allowed him to think with an open mind.

“It’s the whole leadership team managing their emotional reactions to that,” McAleese says. “Until we can come to grips with it, we can’t go out and communicate it and execute it properly, so it’s getting us past that emotional hurdle that it’s an acceptable option for the short term — not the long term but for the short term.”

And that’s the key. Things such as pay cuts and furloughs or layoffs weren’t in his line of vision a year ago.

“Those were not things we’d even consider, but when you get in the depth of the economic crisis that our industry is in right now, you have to make sure you have the whole range of options in front of you, so that’s the first thing — making sure you have the whole range of options in front of you.”

Make good decisions

McAleese wants to double the size of the company from what it was in 2006 before things started to go downhill. This may seem silly, impossible or maybe even frivolous given the economy now, but it’s actually quite relevant to the second step in leading a company through hard times: making good decisions within the options you’ve laid out.

“You have to start with what’s your long-term vision,” he says. “Where do you want to be in the long term? Whatever decisions you’re making, you can’t sacrifice that. You’ve got to keep that out there in front of you of where you’re trying to go with the business. You can’t let yourself get carried away with the current situation and not recognize the context of the long term.”

Look at what fuels that as well as the roadblocks.

“You have to identify what the biggest issues are,” he says. “If you’re going to be successful this year, why are you going to be successful? What are those couple of items that you absolutely have to do to be successful, and if you’re going to fail this year, what are those couple of things that will cause you to fail? Then make sure you manage around those things.”

Knowing where you want to be down the road makes it easier to look at your options objectively.

“Then you have to really evaluate what’s the impact on the organization of taking each of these steps,” McAleese says. “What’s the impact of our strategic long-term, strategic intent? What’s the impact on the people in our organization? These are very painful and difficult decisions, not just for the leadership team but for the organization because we’re impacting people’s lives.”

Have other people help you in that process so you can overcome your own preconceived notions. McAleese engages his HR team so he can have a better idea of how people will react. He also has a team of about 15 to 20 senior people help him in making big decisions.

“You can’t have 50 people in the conversation, but if you do it with three or four, I think you’re making a mistake,” he says. “You need to have a good cross section that you get different inputs and points of view.”

The kind of people you involve in making decisions is crucial.

“You have to surround yourself with people who have an opinion and are in touch with the organization and that are willing to voice their opinion and are willing to disagree with you,” he says. “You have to be able to have this fruitful discussion, and it can’t just be a rubber stamp of something or a recommendation that comes into the meeting — not in these times. You have to really have good viable discussion on each of those items.”

During those discussions, be careful not to put your opinion out there too early because it can shut down the conversation. It’s also helpful to vocalize both sides of the argument.

“I have to play devil’s advocate sometimes on some things I don’t support,” he says. “I’ve got to be engaged in the conversation, but I’ve got to be willing to take both sides of an issue. I’ve got to be willing to take the side that I don’t really believe in and ask questions around that so that I try to balance the discussion because I can shut the discussion down by just asking all the questions on one side of the issue.

“ … As a leadership trait, the ability to ask questions and ask the right questions is critically important.”

Then make sure you work through all of the ideas and suggestions.

“You’re making decisions to get to an objective, and you can’t get hung up on one item,” McAleese says. “You can’t get hung up that this is the right answer. You have to be willing to explore all of them. You have a solution you need to get to, and there are multiple ways of getting there.”

Going through this process helps ensure that you don’t make rash decisions too quickly. For example, a lot of times when business gets tough, management first turns to cutting people, but that’s not always the best solution. Instead, McAleese said that was the last thing he wanted to do, so instead Bendix instituted a hiring freeze, lowered both executive and employee pay, discontinued its tuition reimbursement program, and trimmed other benefits. Additionally, the company put management processes in place to react to issues the business and industry were facing.

After doing those things and realizing that he was going to have to let people go after all, he first evaluated every salaried position in the company — about 800 of the 2,000 people.

He looked at which positions could be eliminated permanently, and those people would be let go. Then he looked at positions the company needed for the long term but could do without for the short term and what projects could be delayed, and all of those people were to be furloughed.

“People rush to conclusion on that stuff way too quickly,” he says. “We had that at the end of our decision-making process. That was the last thing that we implemented.”

Communicate

The town-hall meeting in which McAleese was going to communicate his decisions — the next step in leading your business during tough times — honestly wasn’t going to differ from how he had communicated all along.

Even in the good times, he always had five structured town-hall meetings each year to outline what’s happening in the world economy, how it’s impacting Bendix’s industry, how it’s impacting the company and what leadership is doing about those things.

During those meetings, he also shared with his employees the monthly scorecards that he used to monitor each of the initiatives in the company’s goals for that year.

“You need to decide which items that you’re going to communicate on a regular basis, …” McAleese says. “People who haven’t started it can be fearful of it because they complicate it. It’s a very simple thing. Communicating is at the core of our management system. It’s at the core of what’s important. It’s not a tremendous amount of preparation or a tremendous amount of work. You just have to get started.”

Keep your message to no more than an hour. Then give employees about a half an hour to ask questions.

“Once you get past that, people get antsy,” he says. “You got to get them out of there in an hour and a half.”

After each meeting, employees fill out a short survey about how effective and valuable they thought it was and their opinions on company matters, and meeting length was something that came up when he’d go too long.

“When you get into bad times, yeah, you need to communicate, and it’s more important than ever that you communicate in those bad times, but it’s a lot easier process if you started the communication process in the good times,” he says.

When times started to get tough, McAleese then shifted his message from talking about the scorecards half of the time to talking about the economy 80 percent of the time. As he and his team identified options for adapting to the hard times, he would share those with his employees so they knew what could happen in the future. As they made decisions, they communicated those openly in these forums, as well.

“During this time, it’s even more important that we communicate with them and explain where we’re going and what we might do, so we’re very transparent on the range of options, and we’ve tried to continuously communicate to them what’s the economy doing, how that impacts our industry, how the industry impacts our business and what we’re doing,” McAleese says.

He also made sure to talk about how the company was still being successful though.

“It’s very easy to get into these negative thoughts and negative spiral, but we have to recognize that there’s a lot of great things going on in the business,” he says.

So when McAleese and his team needed to lay off some employees and furlough others until the end of the year, he told them in the town hall.

“We had two options — you rush out and eliminate positions and impact people and then in the town hall tell people about it — that’s an option,” he says. “Or do you tell people about it in a town hall — what you’re doing, how you’re doing it, the magnitude of what you’re doing, and then you go and execute it?”

He chose the latter, so he told them what was happening and how many people it would affect — but not who. After the meeting, management spent the next day and a half communicating with the affected individuals. The downside is that it leaves employees in limbo for a day or so, but McAleese says he’d rather do that than not tell people upfront, and then have rumors flying once he started meeting with people because nobody knows what’s going on.

This process happened on a Tuesday and Wednesday, and employees were informed that Friday would be their last day.

“We didn’t march them out of the building when we told them,” he says. “We told them, ‘Friday is your last day, and now it’s up to you what you want to do. If you want to go home now and not come back, that’s fine with us. If you want to go home now, come back tomorrow or Friday to say goodbye to people, that’s fine with us. If you want to stay for the two and a half days, that’s fine with us.’ We let them manage their exit in their own way. I think that added dignity to how they left.”

After you have those conversations, though, there’s still more communication to be had.

“Whenever you go through that, there’s a lot of emotions in the organization — the people that are making the decisions, the people delivering the news, the people that are leaving the organization and then the people who are left behind,” he says. “You have to manage the emotions on all those levels.”

Immediately after those conversations, McAleese walked around to talk to people who had been furloughed and reinforce that he hopes to bring them back in the future.

“As a leader, you need to go out and be visible in the organization,” he says. “You need to walk around and talk to people. It’s not a time to go hide in your office.”

Keep your message consistent with what you’ve already told them. Most people he spoke with were not angry, and while they were disappointed and sad, they understood.

“You have to be willing to be out there and be visible and accept the consequences of the decisions that you made and be out there and talk to people and understand how they’re feeling,” McAleese says.

Move forward

As Bendix moves forward, McAleese is now in the fourth phase of this process.

“That’s the first three parts, and then the fourth phase is, OK, when you do the range of things you have to do, you’re going to cause some harm to the relationship between you and the employees, so we have to recover that,” he says.

That, too, comes down to communication and consistency.

“We have to do that by telling people what we’re going to do and then going and doing it, so demonstrating that we’re still credible, we’re still the same people we were before,” he says. “When we were telling you what we were doing on the upside, we did it. We’re telling you on the downside, and we’re going to go back into growth mode.”

McAleese anxiously awaits the day when he can call people back and once again focus on doubling the business. But knowing when that time has arrived is hard, especially when every day you read headlines and hear stories along the lines of “Economy bottomed; recession end nears.” He says you have to look at leading indicators for your industry and then at your actual business.

“This is not an economic climate where you can forecast that, in six months, things are going to be better,” McAleese says. “You can’t work off that kind of forecast. You have to wait until you see it in the incoming orders from your customers.”

Once he sees that, then he’ll begin adding things back as the company can afford them and can once again focus on growth instead of cuts.

“Our business has a great future,” he says. “Our business is really down, but in the end, all of the goods and services move on trucks, so when the economy gets rolling again, the trucks will then get rolling again, and our business is going to go right back to the size it was before then. This is just kind of a reset phase to get our business positioned to go flourish again in the future.”

How to reach: Bendix Commercial Vehicle Systems LLC, (800) 247-2725 or www.bendix.com