Matthew Figgie-Rick Solon

In his book “What the CEO Wants You to Know,” Ram Charan shares the universal laws of business success that it doesn’t matter whether you are selling from a fruit stand or running a Fortune 500 company, the same basic fundamentals dating back to his days working in the family shoe shop in India still hold true.

At Clark-Reliance, we focus on sharing concepts from the book with our employees with the goal of helping our team understand the basic fundamentals that drive business results. Every member of Clark-Reliance becomes a leader when the basic fundamentals of business are promoted and executed.

There are three things to hone in on in any business in order to be successful: cash generation, return on assets and growth. We want our team to understand these important concepts individually and the relationships that exist between them.

Charan tells you right up front ... you don’t need a formal education and it does not matter what size your company is, you still need to think about your company in the simplicity of a street vendor. He stresses the importance of keeping the entrepreneurial spirit that he learned on the streets of India and shares his sage advice:

Cash generation — Cash is generated when the inflow of revenue exceeds the outflow. The cash that goes out applies to salary, taxes and supplier costs. Cash in is generally payment from customers. Cash is the business’s oxygen supply.

If you do not have cash, nothing makes business sense. The underlying goal is to make sure that everyone is involved in the daily thinking of, “How can I generate cash?” Simple things such as getting invoices out on time by assuring mailroom efficiency will help with cash generation.

Return on assets — Return on assets measures how well you are using the capital you have invested in your business. You may use capital to buy equipment, plants, computers, inventory and more. What kind of money is being returned to you through the use of those assets? How fast do raw materials go through a factory and become finished goods and then get sold?

The velocity or speed with which you turn your inventory into sales has a great impact on your return. Within the return on assets calculation lies gross margin: your sales dollars less your costs of producing the product. Watching and evaluating your costs to produce your product gives you valuable clues to your competitiveness and material costs.

Growth — The question you have to ask is, “Are you growing profitably?” How do you continue to encourage growing profitably? The customers are critical to this analysis. You have to make sure that you are going to produce a product that the customer base knows that they can use to reduce their costs and expenses.

You also want to assure that your engineers design the product with the customer’s needs in mind. The customer’s satisfaction with design, performance and price directly affects the basic fundamentals of your own growth, return on investments and cash generation.

This book is a tremendous tool to get everyone in the business to grasp, understand and to drive good results moving forward. The best methodology that we have utilized is to give employees something they can read and go back and answer questions and use examples to implement in our industry. ●

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in more than 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. 

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Despite the underlying premise that United States manufacturing is a dead or dying business, manufacturing here in the states is alive, well and actually on the incline.

“The U.S. is fast becoming one of the lowest-cost countries for manufacturing in the developed world,” says CNBC, citing the Boston Consulting Group. BCG found that the average manufacturing costs in Germany, Japan, France, Italy and the United Kingdom will be 8 to 18 percent higher than the U.S. by 2015. So is manufacturing dead? On the contrary, it is increasing.

Watch for hurdles to overcome

In our soon-to-be-published book, “Maximizing Profits Immediately: How to Dramatically Improve your Company’s Bottom Line,” we continue the program started by Harry E. Figgie that helps manufacturing companies compete more effectively. Many people believe that the U.S. cannot compete in a global environment. This is simply not true; however, manufacturing does have some distinct hurdles:

There is no question that the manufacturing sector does not dominate the U.S. economy. In the past 60 years, the U.S. employment in manufacturing has wavered from 50 to 10 percent. If you measure this by the gross domestic product, the manufacturing share of the economy has fallen by 25 percent in the 1950s to 11 percent today.

While there is a profound shift, the collapse that we are so-called witnessing is simply a hangover from the earlier 2000s, when the number of workers declined from 17.3 million to 13.5 million. More than 4 million jobs were lost in manufacturing from the U.S. not being competitive and outsourcing. Since 2003 this has stabilized at low levels, and in the last several years manufacturing employment has actually risen for the first time since the late 1990s.

Manufacturing is moving forward, growing, thriving, competing and doing well. U.S. manufacturing still accounts for 50 billion exports every month. If you measure manufacturing on a stand-alone basis, it is still the eighth largest economy in the world. One in every six private sector jobs is in manufacturing.

An edge on global competition

Today, the manufacturing sector employs 12 million people or 9 percent of the total workforce. It also accounts for 6.6 million jobs in other sectors, including accounting, wholesaling, shipping and more. For $1 in manufacturing in manufactured sales, that final sale supports $1.37 in other areas of the economy, larger than any other economic multiplier.

Recent headlines highlight General Electric Co., Apple Inc. and other companies reporting that manufacturing is back in the U.S. They are employing better, faster and more economic processes than global competition, leading to increased productivity.  

It is widely reported that the labor transportation and energy costs in China have made offshore manufacturing more expensive. The Hackett Group reports that the gap between manufacturing in the U.S. and China has shrunk by nearly 50 percent in the last few years and likely will be less than 13 percent in 2013.  

With our ability to be nimble and creative, U.S. manufacturing is becoming more profitable. We are focusing on better design, better performance, safety and a superior product. Most importantly, we are offering a superior life cycle of a product — better than you can get anywhere else in the world.

With rising costs in China, the movement now is to eliminate sweatshops, push out the foreign competition and develop superior and lasting products. With that, the U.S. promises to continue its movement to keep manufacturing and jobs plentiful here at home. ●

 

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in over 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation and chairman of the National Kidney Walk.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.

Company executives are always seeking ways to grow their businesses and increase profitability. Sometimes, brand-new products and services are needed to drive growth. Looking at improving existing products or services, however, is often the best approach.

Redesigning them, even with a minor change in materials, process or labor, can lower costs and improve quality, which can drive additional growth. It is desirable and often possible to find a win-win of enhanced product quality and higher profitability.

Cost reduction is a major goal

Product cost reduction by redesign means that a manufacturer changes one or more aspects of the product without changing its functionality — in a way that reduces production cost and hopefully offers other benefits. Most manufacturers should have an ongoing, formal cost reduction process in place, but they also need to be flexible to address new ideas as they arise.

For example, Adidas is currently redesigning a shoe to produce 50 percent less waste, reduce the number of parts by 50 percent and make greater use of recycled materials. The company’s level of technical innovation is considered exemplary, and the rest of us can learn a lot from Adidas’ experiences.

Companies such as Clark-Reliance are also striving to innovate, reduce costs and redesign products to lower costs and improve quality. The first steps are to infuse design improvement thinking into your company and build a product design culture that involves the appropriate employees from across the organization.

Neglecting to act can hurt

Often overlooked is the importance of understanding the costs of doing nothing, which can result in being priced out of the market, obsolescence and not being able to meet customer specifications.

Ideas should always be encouraged. We recommend making the process as visual as possible by including preliminary sketches and eventually a 3-D drawing. The hope is that even people outside the core team will have ideas to contribute.

If employees feel they are free to act on their ideas, you will cultivate an innovative, continuous-improvement culture in which change is not feared or delayed, but greeted with enthusiasm and optimism.

While exciting, redesign can be taxing in terms of time and resources to fully evaluate the options and make change happen. Before you start a redesign, be sure you have the resources, talent and commitment to see the process through to resolution.  

We have identified four specific triggers for pursuing product redesign:

1. The cost of the product’s raw materials has increased significantly, so the product is losing some or all of its probability.

2. The competition has made improvements in technology or product performance.

3. There is so much competition that, if you are not continuously redesigning, you will fall behind.

4. Your market niche or market segment has changed.

It is a good idea to routinely review product offerings and look at the cost of material, labor and overhead. We pick a couple of products every quarter and keep looking at what we can do better or differently. Make it a common practice to look for cost-saving ideas through product redesign. ●

 

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in over 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation, and chairman of the National Kidney Walk.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.

Given the current economic and environmental realities, how do we find the right balance between the long-standing, heavy reliance on coal and alternative energy sources?

Energy is a fundamental driver of economic development and a contributor to people’s quality of life across the globe. The energy sector, however, faces serious challenges in the 21st century. Renewables alone do not offer us a path to a sustainable energy future. Economic development and poverty eradication depend on secure, affordable energy supplies such as coal, oil, gas, solar, hydro, fuel cells, etc.

Over the years, fossil fuels, despite environmental concerns, have contributed significantly to energy security, accessibility and affordability. Furthermore, the right technology and innovation, including clean coal and the ability to safely capture and store carbon, can effectively address many of the environmental questions. 

According to The World Bank, “Reliable energy is a key component of economic and social development ... lack of energy is among the key forces slowing down poverty reduction and growth of the rural sector.”

The world must find ways to meet the needs of a growing population, bring billions of people out of poverty, offer them a better standard of living and sustain the economic development of rich and poor countries alike. Meeting these challenges will lead to the growing demand for energy.

Consumption will increase

Even with energy conservation measures in developed countries, global energy consumption will continue to increase, driven by the economic growth and needs of developing countries. At the same time, society is demanding cleaner energy and less pollution. The desire for lower emissions has led to widespread questioning of the role of coal in particular. 

On the other hand, it is inconceivable that we could move toward a coal-free energy economy any time soon. It would be cataclysmic to our economy, level of convenience and standard of living.

All forms of energy production and use have their impacts, both positive and negative. There is no risk-free way of producing and using energy.

 

Consider the facts

Based on recent data from the International Energy Agency (IEA), coal provided 30.3 percent of the world’s energy supply. Outside of non-traditional fossil fuels, coal was the fastest-growing form of energy globally.

The top coal-producing nations include China, the U.S., India, Australia, Indonesia and Russia. China consumes approximately 42 percent of the world’s coal, followed by the U.S. at 13 percent and India at 9 percent.

There are an estimated 115 to 130 years of global coal output remaining in known reserves. According to the IEA, world reserves of coal are enormous and, compared with oil and natural gas, widely disbursed.  

 

Coal provides a lot of opportunity

In the U.S., the coal industry has a long record of creating jobs, and improving the economic well-being of a number of states and regions.

According to several estimates, there are potentially 1,199 new coal-fired power plants being proposed globally. There are 59 countries evaluating, proposing or under contract for new coal-fired power plants — China and India together account for 76 percent of the proposed new coal power in the world.

Much more research, development and implementation are needed. Coal is still important to the U.S. economy, but we need to figure out how to mitigate the emissions while continuing to utilize coal among other energy sources. ●

 

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in over 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation, and chairman of the National Kidney Walk.

 

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.

Our sales staff members are a vital component to our bottom line. Constantly upgrading their skill set will not only help us have a premier sales team, but will provide invaluable opportunities for them for their entire careers. At Clark-Reliance, we have a myriad of ways that we offer ongoing education to our employees.

Clark-Reliance University offers a series of online courses and interactive training that develop “soft” skills like leadership, coaching and management, and “hard” skills like technology, welding, machining, design and engineering. We offer a multi-tiered approach to our training, blending “in-house” training with training from partners like local universities and technical schools.

“Natural born salespeople” just don’t exist. Effective selling is still a skill that must be developed. Sales training can help aspiring salespeople develop and practice the skills they need to succeed and increase their confidence level or take a seasoned salesperson and refine and update their skills.

Many are untrained

What we have learned is that there are many people in sales who have never received professional sales training. While they may be proficient at their trade, all sales professionals should be properly trained not only in the presentation, but the process of sales.

When a sales person stands in front of a potential customer, being prepared with product knowledge and a PowerPoint presentation is not enough. Training directly translates into results in the field. These components will help any salesperson in any industry:

■  Sales people need to gain a better understanding of the relationship between the buyer’s decision process and the selling process. Buyers generally adhere to a specific process.

■  Sales people need to understand the proper sequencing of sales presentations.

■  Sales training will provide improvement in the overall sales call planning. A clear commitment objective for every sales interaction is important.

Take action

■  Seek to achieve dramatic improvements in questioning and listening skills. Have your sales staff practice asking open-ended questions so you can draw out the customer’s needs from those questions. Open-ended questions can help sell the salespersons’ expertise.

■  Develop the ability to differentiate from the competition. 

■  Form a common selling language between everyone. Develop an understanding of the sales sequence, common objectives, etc.

■  Make sales presentations based on solutions to the agreed upon needs of the customer. Your solutions need to address solving customer problems.

■  Increase ability to effectively gain commitment from customers. If you understand and have done a needs analysis you can gain a commitment to make the sale.

■  Document best practices of a core sales presentation. This important step documents the “best of the best.” You can incorporate some of your selling system, like commitment objectives, into your customer relationship management system. We use the customer relationship management system to capture specific accounts and contacts and to track sales opportunities and projects. In addition, a salesperson can plan their entire workflow on a daily basis.

Investing in formalized sales training is imperative and should constantly be evaluated, updated and reinforced. Quarterly sales meetings can be a venue to fine-tune your selling system. In the end, a sales training program will increase the efficiency and productivity of a sales person. This investment will help organizations remain sustainable and competitive in the long run.

 

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in over 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation, and chairman of the National Kidney Walk.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.

Looking to the future, every business can benefit by seeing what the trends are in the energy market and how those trends ultimately may affect business. As societies advance, they will continue to need energy to power homes, business, industry, transportation and other services.

By assessing the trends in energy supply, demand and technology, companies can make strategic plans and long-term investments that underpin their business strategy. Several key findings are relevant for all companies to consider when looking at macroeconomic views of the energy markets. This view must not only look at today, but years in advance.

One basic theme is that the appetite for energy will grow immensely as everything will be more electronic and driven by where we get energy from. Companies need to assess their growth strategy to suit their present needs and future consumption.

Here are some fundamentals:

Population: The population between now and 2040 will grow by 25 percent. In 2040, we will have almost 9 billion people on earth and it is anticipated that 75 percent of the world's population will reside in the Asia Pacific and Africa. A country’s working age population, people ages 15 to 64, represents the driver for its economic growth and energy demand. After 2030, India will have the largest population, and 70 percent of its population will be in the working age population range.

Energy: Efficiency will continue to play a key role in solving our energy challenges. Energy demands in developing nations will rise by 65 percent by 2040, reflecting growing prosperity and expanding economies. With all of this growth comes a greater demand for electricity.

Computers, smartphones, air conditioners, microwaves and washing machines — these things all depend on electricity to work. And as the number of homes and businesses across the world grows, so does the need for power. The fuels we use to power our world are also evolving, with natural gas and nuclear power generation in non-OECD countries increasing by 150 percent.

Residential: As economies and populations grow, so will energy needs. By 2040, residential and commercial demand is expected to rise approximately 50 percent.

This is being driven by developing countries. There are about 1.3 billion people today who do not have access to electricity, and while demand is anticipated to increase by 50 percent, energy use per person is actually declining thanks to energy-efficient buildings and appliances.

Transportation: Transportation-related energy demand will increase by more than 40 percent from 2010 to 2040. Most of this demand is driven by heavy-duty sources (freight trucks, buses, emergency vehicles and work trucks), but as personal vehicles are becoming significantly more energy-efficient, the demand will rise steadily.

More importantly, mpg will become more attractive, with anticipated mpg to increase from 27 to 47 mpg. The mpg increase is attributed to the use of improved engines and transmissions, along with lighter body and accessory parts, vehicle downsizing and increased use of hybrids. 

Industrial: Industrial energy demand will grow by 30 percent. The fastest growing area for industrial demand comes from heavy industries. The most flourishing is the chemical industry.

These global considerations are important as you look to the future to find those things from a macroeconomic basis that should have an impact on your business. It is necessary to find a series of relevant statistics that will help you identify early warning indicators of what you should do in terms of product development and industry growth.

 

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in more than 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation and chairman of the National Kidney Walk.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.