Meeting of the minds Featured

8:00pm EDT September 25, 2008

When Greg Faherty looked at his company last April, he saw too much manufacturing capacity and too many people serving a rapidly stagnating new housing market.

But before taking the drastic action of consolidating two of the window and patio door manufacturer’s plants, Faherty, president and CEO of Atrium Cos. Inc., sought the input of his leadership team, customers and vendors.

“We had to take a look at what we could do in terms of shutting down some of that capacity and reducing our cost,” he says. “We have a couple of facilities in Southern California. We decided that we could serve our Arizona and Nevada markets from California fine.”

The move — which consolidated the company’s Tolleson, Ariz., and Anaheim, Calif., manufacturing facilities into a single California location — shouldn’t have surprised anyone. Though the company experienced revenue growth during the first few years of the nationwide housing slump — moving from $720 million in 2004 to $840 million in 2006 — 75 percent of its sales originate in the new home construction market. But even with such conspicuous market indicators, Faherty couldn’t pull the trigger without first consulting with his people to get their input.

“You get input from your people, you get input from your customers, you get input from your suppliers,” he says.

What’s more, he can’t imagine any leader that wouldn’t.

“I can’t imagine a leader that on his own says, ‘This is what we’re going to do now,’ and his team disagrees, and he wants them to go out and implement it perfectly,” he says. “He’s going to have trouble.”

To avoid trouble during times of duress, maintaining a two-way flow of communication with your key constituents can make all the difference. Your employees, customers and vendors supply you with the information you need to make the best decisions, and being able to explain the rationale behind your decisions can facilitate understating while quelling anxiety or anger.

“You have to respond with the people who have provided input, and if you decide to go in a different direction, you need to explain why you’re doing what you’re doing,” Faherty says.

That’s exactly what Atrium’s president did in the events leading up to the company’s consolidation. By seeking input from his key constituents and then articulating the decision that resulted, Faherty successfully navigated through a tumultuous situation while keeping the 5,000-employee company charted toward a brighter horizon.

Seek input from key executives

Making a decision without the appropriate information is like shooting at a target without lining up the gun’s sight.

“You need to make sure that you’ve got all of the information to help you make the decision so that you’re not doing some kind of a hip-shot situation where you’re pulling the trigger without all of the information that you need,” Faherty says.

As the housing slump worsened and Atrium’s unused capacity was beginning to stifle incoming revenue, Faherty didn’t shoot wildly. Instead, he gathered up as much information from as many different sources as possible to home in on his target — the right decision.

Much of that information came from national reports and databases that report on past trends and predictions within the housing market. While that certainly was helpful, Faherty says no information dredge is complete without tapping into your constituents. But soliciting feedback from your leadership team can’t be a one-time request.

“That has to be a part of your style, a part of your culture, a part of the company’s culture,” Faherty says. “You can’t turn it on and turn it off like a switch.”

To establish that collaborative dialogue, Faherty says to hold regularly scheduled meetings with your key executives every month.

“You seek to bring them in,” he says. “You ask their opinion. You don’t give them a yes or no question. You give them a question that requires their responding with more than a yes or no type of answer.”

Asking open-ended questions is a great way to elicit feedback from your more introverted executives. It’s also a great way to pull multiple opinions on the table to get the conversation going. As each idea is being presented, just make sure to give them proper consideration.

“Don’t bite people’s heads off if they come up with a stupid idea,” Faherty says. “That’s the last time they’ll come up with any kind of an idea.”

When members from your leadership team contribute to the conversation, Faherty says they’ll begin to develop a sense of ownership about the ultimate decision. They may not like your chosen course of action, but at least you’ll foster a certain amount of buy-in.

“Nobody liked doing it, but if we had to do something, that was the right decision to make,” Faherty says of the consolidation. “If you get buy-in with all of the people involved, then the execution of it becomes a whole lot easier. Everybody wants to execute the strategy because they’ve played a part in that decision.”

Solicit customers and vendors

When Faherty first became Atrium’s president and CEO in January 2006, the housing market had just started to crater, and the company was beginning to feel the effects. One market that was hit particularly hard was Florida.

“We were having some difficulty servicing our customers in Florida,” he says. “We had a facility that really needed to be overhauled and get its service and quality right. I visited several builders in the Florida market, and every one of them told me the same thing: ‘You guys suck. You’ve got to really improve.’ That was good feedback. I wish it would have been different, but it was the honest feedback, and it told us where we stood and what we needed to fix.”

Your customers will often be your most honest barometer of performance in a given market.

“You’d be surprised by what they’re willing to tell you,” Faherty says. “They don’t sugarcoat it.”

But unlike your leadership team who will come to you with their feedback, you most often go out and seek customers yourself.

“You get out in the marketplace, and you meet with your customers,” he says. “You learn so much more because you really get what the true world is. Sometimes, things get filtered from up the organization from salesmen to sales managers to general managers. By the time it gets to me, it’s been so filtered that I’m not sure I’m getting the true story. So getting out and talking to the customers one on one really gives you an insight into how you’re doing and what you need to do better.”

That can be hard for a busy executive. You can’t expect to interact with the consumer on a daily basis. Instead, Faherty suggests organizing efficient visits with your sales force when time permits. If your team is making a West Coast swing over the course of two weeks, for example, that would be a much better use of your time than flying 500 miles to tag along on intermittent sales calls over the course of three months.

However you organize it, the important thing is to get out and interact with your customers face to face.

“You travel with your salespeople,” Faherty says. “You go visit, whether they’re a national account or whether they’re a local distributor or a builder. You just walk in and shake hands, sit down, and say, ‘How are we doing? What can we do better?’”

You should also direct those same questions at your vendors. At Atrium Cos., Faherty invites key suppliers to come in once a year to audit each facility.

“You’re buying their equipment to manufacture their products, and they know exactly how that equipment should be used to maximize the productivity and efficiency of the equipment, and how the men on the line ought to be using the equipment and what they ought to be doing,” he says. “From what is optimal to what we wind up doing, there’s often quite a big spread.”

Eliciting feedback from your suppliers also provides a great window into the practices of your competitors.

“They can go look in our plant and look at our operation and compare it to our competitors operation,” Faherty says. “They’ve got an opinion about what you can do better, so you elicit that, and you listen to them.”

Articulate the tough decisions

Whenever you make a hard decision, Faherty says you or your key executives need to explain the rationale behind it to enhance understanding and get buy-in. While this practice certainly comes in handy in the boardroom, it’s even more important when articulating a major decision that affects many of your employees.

Take the consolidation. When he and his team decided to close the Tolleson facility and consolidate it with one in Anaheim, Faherty knew the move had to be conveyed with care.

“You have to understand that consolidations are difficult, and they’re hard on the people,” he says. “There are going to be some people who lose their jobs.”

When articulating the rationale behind a hard decision, Faherty says the first thing you must consider is the messenger.

“An executive needs to be there,” he says. In this case, Faherty sent the company’s western regional president who oversaw the affected manufacturing facilities to deliver the news. Delivery from a key executive or manager always gives the rationale a stronger sense of credibility.

Once you’ve identified the messenger, Faherty says your next consideration is time. The worst thing you can do is sit on a decision and not inform your people.

“You need to let people know,” he says. “You can’t wait until the last minute and pull the trigger.”

After you’ve designated the messenger and time frame, the only thing left to do is to explain the decision and share the rationale.

“Let them know what you’re doing, why you’re doing it, more importantly, how’s it going to affect them,” Faherty says.

Part of that process involves allowing your employees to make their own voices heard. Faherty says you can’t simply announce a major decision and then cut and run.

“You give them an opportunity to ask questions,” he says. “You give them an opportunity to vent because a lot of them are going to be unhappy.”

That’s precisely what Faherty’s regional president did at the company’s Tolleson location. After explaining the rationale behind the consolidation, he allowed the facility’s employees to air their grievances and ask questions. Though the decisions itself didn’t make many people happy, devoting extra time to that process proved therapeutic when it was all said and done.

“At the end of the day, they still aren’t happy, but if you explain the rationale correctly, and you’ve taken the time to do it in person, and you’ve taken the time to let them ask you questions or vent, they’re never pleased, but at least they understand,” Faherty says. “They say, ‘Thanks for taking the time to come to talk to us in person to let us know what you’re doing, why you’re doing it. We don’t like it, but we understand it.’”

HOW TO REACH: Atrium Cos. Inc., (214) 630-5757 or www.atrium.com