Striking gold Featured

7:00pm EDT December 31, 2006

The 1990s weren’t particularly kind to John Ryan III and Mine Safety Appliances Inc. Indeed, they tested the mettle of the chairman and CEO who took the top job in 1991.

The company, which manufactures safety equipment, saw its growth rate slow in the late 1990s. Much of its safety equipment was produced for industrial workers, but employment in traditional factories in both the United States and Europe was falling, lessening demand for products aimed at those markets. “Our whole business was transformed by Joseph Schumpeter’s theory that economic growth is a process of creative destruction,” says Ryan. “We saw a lot of the latter in the 1990s.”

There was too much reliance on the old way of doing things and on old products in old markets. MSA had to change to adapt to new market realities.

To pull the company through the turmoil, Ryan had to fix unproductive manufacturing practices and regain the spirit of innovation and development that had kept MSA at the forefront of its industry since Ryan’s grandfather co-founded it in 1914.

Fixing processes
Ryan faced a tough choice 10 years ago. One of MSA’s U.S. factories had to be shuttered, and the decision came down to either its lowest-performing facility in Murrysville or a plant in Rhode Island, where the end of a defense contract meant either a shutdown or transfer of work to it from the company’s other facilities. “We had to shut one of them down because the economics were overwhelming,” Ryan says. “Murrysville really had the worst numbers, but we had to give them a chance. They didn’t know what was at stake. Therefore, we went out there and told them the productivity of this factory is not good, it’s the worst in the business because we probably didn’t ask you to do some of the right things, and we tolerated some things that we shouldn’t have.”

Ryan didn’t pull any punches when it came to leveling with the plant’s management and workers. He gave the factory, which was sputtering at about 75 percent productivity by the company’s measures, a year to shape up, with tough but achievable goals. “We told them what the consequences would be if we can’t get to our goals; we’d have to shut this thing right down,” says Ryan.

Ryan assembled a team of his managers and outside consulting help to tackle the problems at the Murrysville plant.

“We looked at the overall results,” Ryan says. “Our president of North America and our manufacturing manager and our financial people looked at it and said, ‘What goals do we have to achieve to make this a productive factory so that our products could be made competitively?’ At that point, we set the productivity goals and brought in some know-how, much of which was in our organization already, to determine how we could be more productive and what are the processes needed to make us more productive.

“Then we basically told the organization, ‘Here’s what we have to achieve, and you have to figure out how to achieve it, because you know more about the plant, you people collectively in the Murrysville plant know more than we or anyone in the outside world will ever know.’”

The plant’s management introduced processes such as lean manufacturing and Six Sigma, and performance evaluations for each employee. Managers met with each production worker every month and reviewed performance based on quality, productivity, safety, delivery and attendance.

Ryan says giving employees more of the responsibility to check their own work increased productivity by improving the plant’s quality.

“So the idea was, let’s have self-inspection, let’s have the operator right there, give her or him the tools that every so many parts they pull out, and they do the checking,” Ryan says.

While the threat of a shutdown provided an incentive for employees to work hard on improvement, Ryan realized that the specter of job loss wouldn’t be enough in the long run. So he introduced a goal-sharing plan, the company’s first, at the plant, with quarterly cash payments for hourly and salaried employees, tying them to factors such as quality, safety and attendance. He also instituted a classroom training program for employees in subjects such as ISO 9001, process control and calibration.

Ryan says he took a key role in making the decision to improve the plant’s performance, in setting goals and in monitoring progress but took a more hands-off approach when it came to the execution. “The more you delegate, the more you use people in a positive way, the more you ask them for their ideas, the more effective you’ll be because you’ll have more people with different insights,” Ryan says.

By the end of 1996, plant productivity had jumped to 86 percent. By 1999 the plant was posting productivity of 95 percent.

Instead of closing down because of poor performance, the Murrysville plant turned into a top manufacturing operation, earning IndustryWeek magazine’s award in 2000 as one of the 10 best in North America.

Ryan says the key to success was involving every employee at every level in the process.

“It was figuring out what had to be done and making clear what had to be done with a team of people at the management level and at the workbench level, the maintenance level, the tool shop and everywhere in between,” says Ryan. “They knew we were all in this together, and they knew we weren’t playing a game and knew that we were doing this because we had to.”

Reinvigorating innovation
By 1999, the company had little room to wiggle when it came to meeting its financial forecasts, but all through the 1990s, Ryan insisted on keeping the research and development engine fueled.

“When things were really difficult in 1999 and 2000, we had some pretty stern goals that we had to achieve,” says Ryan. “We absolutely had to meet them. It was the nadir of our situation because so much had changed in the world. You had your biggest source of profit in Europe and your second-biggest source of profit in America disappear just like that, and you had to adjust for all of this. At this time more than ever before or even since, I really felt under the gun, that we had to make the numbers.”

Ryan’s commitment to innovation was tested in the late 1990s. At the time, one bright spot for the company was its thermal imaging cameras, a new product used by firefighters to locate the source of fires and find their way out of burning buildings. Mine Safety Appliances was jobbing them for a manufacturer that had developed the cameras.

Then Ryan got news late on a Friday afternoon that could not have come at a worse time. The supplier said it wouldn’t be able to supply a new camera that Ryan had been counting on. Despite the tight financial situation, he decided to press on with the company’s own development program for the cameras. “We came to the conclusion this market was moving so fast that we had to give our R&D people more money to catch up because otherwise, we would get so far behind that we couldn’t catch up,” says Ryan. “Other people would get solid market share, and we could never do it. So we gulped and gave them the $500,000, which we weren’t in a position to cut out of anywhere else. We had no basis of knowing where we were going to get that back because we weren’t going to get any sales from it that year. We just had to have the faith that somehow, somewhere, we’d make the number anyway.”

That experience reinforced Ryan’s contention that his company would have to be an innovator in the market, much like it had been in its earlier history.

“You have to be ahead of the technological curve,” says Ryan. “So we had a strategic initiative that resulted in a global new-product strategy. We put together teams from around the world and teams from cross-functional areas of the company and made it our goal to be the technological leader, not just the most durable products, ones you could count on, which we did have, but how could we be out front and recognized as innovative and a company that is meeting new needs of the market?”

Ryan says the emphasis on new product development has paid off.

“That new product development process, where now I think we’re world class, a company people could and sometimes do benchmark to, made a huge difference,” says Ryan. “When we started, our goal was that 30 percent of sales would come from new products introduced in the last three years. At the time, that seemed difficult. The last two years in North America, it’s been 40 percent, almost a level that’s hard to sustain beyond that, although there are certain parts of our product lines where the number’s 100 percent, where there was nothing three years ago.” Ultimately, Mine Safety Appliances was able to weather the tough times not by finding the magic bullet but by sticking to the things it had done best and not straying into ventures that weren’t close to its core business. In 2005, it posted net sales of $908 million, a $400 million increase over what it was doing just five years ago.

Says Ryan: “It’s rarely one great innovative thing in a year that turns it around. You’ve got to work on it for several years. The strategy that will most likely work is one that builds to the strengths of your organization, to the skills that it has now. Improve their skills, make them better, learn things from the outside world, but down deep, count on what your organization does well. You want to let people know what the situation is, what the challenges are, that there won’t be some magic to get you where you want to be.”

HOW TO REACH: Mine Safety Appliances, www.msanet.com