Dunn-Edwards Corp. was a model of inefficiency when Karl Altergott arrived as president of the paint manufacturer three years ago.
“We drew a diagram of all the trips it took a manufacturing associate to build our product,” Altergott says. “It was 23 to 25 touches just to make a gallon of paint. When you laid out the spaghetti diagram and really just mapped out here’s a person making a gallon of paint and kind of track them over the course of a day and what they do, it became quite evident that it wasn’t efficient from a financial standpoint. It didn’t allow us to build the product we needed to build in a timely fashion.”
Dunn-Edwards had two plants. One was in Arizona and had been built in the early 1970s, while the one in Los Angeles was built in the mid-1940s. Both were extremely antiquated and lacking in modern automation capabilities.
“When we hit peak demand in 2006, we weren’t able to keep up with demand and since then it just further deteriorated,” Altergott says.
The pressure eased a bit for the 1,500-employee company, though not really in a good way, when the recession hit and the housing industry took a plunge.
“If we ever reverse course, which we knew would happen, we wouldn’t have had the capability to support that,” Altergott says. “Our biggest challenge was trying to figure out how to address that and then how do we deploy capital to fix manufacturing while reducing costs and bringing us into the 21st century?”
Make a decision
Despite the aging facilities Dunn-Edwards was dealing with, it still would have been easy to blame the economy and put off a major financial commitment to upgrade the company.
“We didn’t need the capacity today,” Altergott says. “So why invest the money? Why take critical dollars and deploy them in a down economy and take a contrarian approach to the market and invest in manufacturing when the economy is in a declining mode?”
You do it because it needs to be done. And when Altergott looked at the lack of modern technology and the massive inefficiency involved in simply making a gallon of paint, he knew something needed to change.
He began by determining if the existing plant could be renovated.
“Can you fix your current plant? Or something this old, do you just scrap it?” Altergott says. “So we did a lot of analysis on what it would take to fix our current facilities. We looked at and modeled out building on a green field, updating our current facility, building a new facility on our current location or building a new facility at other locations. We just mapped out a number of different models before we selected the correct approach to take.”
When you are entering into such an important process, you need to be clear about whether information should be shared or kept confidential. In this case, at this stage, Altergott wanted to keep discussions behind closed doors.
“You have to have confidence that they are not going to share the knowledge that they know,” Altergott says. “If people can’t be in that role, they are not going to be employed in the company. It’s as simple as that. If they want to be part of the team, they have to be part of the process.”
Altergott and his team of about six people developed a list of scenarios. He was open to hearing fresh ideas, but they had to be plausible.
“You don’t want to rule anything out, but it’s got to be within reason,” Altergott says. “It’s a manufacturing facility. We’re not going to build a new plant in Texas when all our business is here in California. So we had multiple scenarios and each one had a different cash flow model, payback and return on investment. We looked at how we were going to finance the different options. We continued to refine it and refine it every couple of weeks depending on the data we had.”
As you’re working through any type of process, whether it’s building a new plant or buying a new printer for the office, you need to make sure people know what responsibilities they have and then hold them accountable.
“You can’t outsource leadership,” Altergott says. “Every year, I have a plan that has probably 300 unique items on it. Every one has a name, a date and a deliverable. We meet every quarter and we go through that list item by item by item. People have to have things done. If they’re not done, I ask them why it didn’t get done. You don’t come to my meetings quarter after quarter and just say, ‘I didn’t get anything done.’ It just doesn’t work that way.”
As this process drew to a close, it became clear that the best option was to buy a spec building in Arizona that measured 300,000 square feet and could be transformed into a paint manufacturing plant with relatively little trouble.
“It was just an empty shell,” Altergott says. “It was built to be sold to somebody”
That somebody ended up being Dunn-Edwards.
Develop a plan
Altergott and his team approached the company’s board of directors and got the OK to proceed with turning this spec building into a paint manufacturing plant. It was now time to figure out how to make that happen. The one thing Altergott knew for sure was that he would NOT be leading that effort.
“During the construction phase, there are millions of decisions that need to be made every day,” Altergott says. “My job is not to be the project manager of this project because I have a whole company to run in addition to having this facility built.”
This would end up being a $40 million project and one that would shape Dunn-Edwards future for decades to come. So it was crucial that the project was given the proper attention and importance.
To that end, Altergott did not choose one of his own people to head up the construction team.
“One of my vice president subordinates wanted the job and I explained to him why he wasn’t going to get it,” Altergott says. “Once I hired Mark, who is my vice president of manufacturing, he clearly understood why I hired him. This other gentleman has really blossomed in the organization and he’s put himself into a position where if a job were to open up again, he’s in a great position to backfill it now because he has learned a lot in the last two years.”
If you’ve got a project that you view as being critically important to your company’s future, you can’t worry about bruising someone’s ego on your team.
“I’d simply ask, ‘Have you ever built a $40 million plant before?’” Altergott says for a response if someone is offended that you didn’t pick them for an important post. “If you’ve had that experience, we can go in that direction. But if you haven’t, we have to hire somebody in here who has the ability to really pull this off. You still tell those people they are valued and they have a future to grow within the company. But at this particular juncture, they didn’t have the qualifications that I was looking for.”
What you should be looking for is someone with experience managing a project similar to the one you want to carry out.
“For a project like this, I hired an engineer,” Altergott says. “Some plants are run from a maintenance perspective and some plants are run from an engineering perspective. I made sure I had a strong engineering mindset in the development of this plant. When it gets to flow dynamics and flow characteristics and the paint manufacturing plant, I really wanted a big engineer to help optimize the design for efficiencies and not just look at maintainability.”
You need to find the right person that matches your needs and the needs of the project so that you don’t have to worry about it. Well, worry as much about it.
“I don’t see how I could have done both,” Altergott says. “On the front end, from a strategic standpoint, I was heavily involved. Once we had the go decision, I was involved weekly with a conference call and understanding the pace and making decisions on things that were problematic. But I stayed out of everything else.”
You will never address every concern in planning for a project and you will never get through a project without at least one unexpected problem. And you’ll probably have several problems, some of which may cause you many sleepless nights.
“It’s never seamless,” Altergott says. “No matter how well you plan, there’s always things that you don’t anticipate. You have 1,000 decisions and 980 of them are great, but 20 will kill you. We had some bad data in our SAP system. You put bad data in and you get bad data out. So it took us a couple of runs through the process to cleanse the data so we could get better consistency in our deliveries.”
Altergott used his weekly meetings to get updates on what was happening and stay in touch and tried to stay away from his people working on the plant the rest of the week.
“We’d go through all the major issues that were surfacing that week,” Altergott says. “What are the big things that are not getting done? What is behind schedule? What is causing challenges?”
When problems do come to your attention, resist the urge to jump all over the leader you chose to lead the project and question why he didn’t anticipate the problem.
“I made a point to make sure he never felt as though he blew anything when we had some challenges,” Altergott says. “I made a point to bring him under my wing and say, ‘We’re in this as a team.’ When you move this quickly and make this many decisions, a couple times, you have a couple fumbles. As long as we get it fixed, and we did, it’s all good. When you see one of your subordinates and they are a little frustrated at the end of the table, you just need to bring them back in and tell them that it’s going to be OK. Provided you have the right person and you know that they are. If they’re not the right person, that’s a different scenario. But if you know they are one of your stars, you don’t just let them dangle out there.”
Despite the challenges, the project to construct a new paint manufacturing plant took about 27 months. The difference in efficiency brought about by the new facility and its automation capabilities was striking.
“It was 23 to 25 touches just to make a gallon of paint,” Altergott says. “Now we’ve got it down to two or three using our new automated system.”
The days of conveyor systems running from one building to another and then another are history too.
“We have over 1,500 automated valves that are all computer actuated,” Altergott says. “Historically, everything was done by hand and turning valves on and off and sometimes not even using valves. By using a lot of computer technology and using a lot of automation, we were able to really improve efficiencies by having it under one roof.”
It wasn’t easy though and the thing that surprised Altergott most was that much of the heavy lifting occurred as the project seemingly neared completion.
“Spending the money and building the plant is the easy part,” Altergott says. “Turning it on is the hard part. It’s everything. The complexity of a lot of automation just adds to it. Automation is great when it’s all up and running. But turning it on, just like debugging a computer system, it can be quite aggravating.”
How to reach: Dunn-Edwards Corp., (888) 337-2468 or www.dunnedwards.com
The Altergott File
Karl Altergott, President, Dunn-Edwards Corp.
Born: Los Angeles
Education: Bachelor of science in engineering, Loyola Marymount University, Los Angeles; MBA, Graziadio School of Business and Management, Pepperdine University, Los Angeles
How did your experience in the U.S. Marine Corps as a fighter pilot shape you?
You see so many great leaders when you are in the military. Gen. James F. Amos, the current commandant of the U.S. Marine Corps, is someone who I have met before. He actually taught me when I was a young captain and he is a great leader. When you see these strong leaders, you really understand what leadership is and how they take care of their people. And yet, they are very focused on the mission at hand. What I really learned out of the Marine Corps is the decisions you make are life and death, which are different than you do in the business world. No matter how crazy things can be in the business world, at the end of the day, I’ll go home to my family. You don’t always have that closure in the military.
Altergott on CEOs who fear talent: They want to be the smartest guy at the table and that’s the death of an organization. I’ve seen a lot of people struggle with it. You’re limiting yourself. I looked at my own personal success and growth and if I want to sit there and handicap myself by having subordinates that are not as intelligent as me, that’s a personal reflection of me and the success I will have. All you’re doing is handicapping yourself. Why would you build a team that is subpar just so you can be the smartest guy at the table? To me, that makes no sense.