When Joe Peilert came on board at Veka Inc. in 2010, the company was 2½ years into a more than five-year building recession. The company had gone through its first layoffs in its 30-year history, and it seemed there was no end in sight to the shrinking construction market.
Veka Inc. is a 500-employee, $110 million manufacturer of PVC and vinyl extrusions for residential and commercial windows, doors, fences and decks. As the number of homes being built in the United States continued to decline, Veka saw some of its customers shut their doors and its competition struggle to stay in business.
“By the time this was all said and done, 75 percent of the market was gone,” says Peilert, Veka president and CEO. “You’re looking at the peak of 2 million homes being built a year, down to 405,000 homes in 2011. It was a massive breakdown of opportunity.”
Peilert and his leadership team had to act to ensure Veka wouldn’t be the next company closing its doors.
“When you’re in a situation like that, morale is a challenge with employees and customers alike,” Peilert says. “That wasn’t something that was exclusive to Veka. It was a very tough emotional state for people because they were used to growth and success.”
As Veka’s new CEO, Peilert needed to do his due diligence within the organization, which gave him an opportunity to evaluate the business and gain a strong understanding of its operations. However, he had the added pressure of an industry that kept slipping more and more.
Here’s how Peilert identified key areas of strength for Veka and created opportunities within a shrinking market.
Evaluate the business
Peilert has spent a majority of his career in the building materials industry. He was attracted to Veka because it was a quality leader in the industry, and as a family-owned business, it provided a unique working environment.
“It’s a family-owned group with a global presence, which is a great mix because you get a long-term commitment to growing the business and what that provides to me is what I like to call the luxury to make the right decisions,” Peilert says.
“A lot of times you find companies with a three- to five-year horizon, and if you go through a recession, you can bet you start cutting maintenance, you start cutting people development, expenses and things like that.
“With the type of view we have for growing a business bigger and stronger for the next owner generations, you continue to do those things through difficult times and that is very attractive.”
Peilert took advantage of that luxury to make the right decisions. He addressed the people at Veka to share his plan for moving the company beyond the building recession.
“We gathered around 60 managers and supervisors here, which gave me the opportunity to introduce myself and talk about mainly what I considered to be key ingredients for a successful organization,” he says.
“What it boils down to are mainly two things — No. 1 is people who care. They care about the company, the customers and the co-workers. The second element is a well-defined strategy and an execution plan that’s linked to it. If we have those two things going in the right direction, it doesn’t matter what the industry and what the economy does; we’ll do well.”
Once he had met with key people he spent the rest of his first week listening.
“You have to spend time with the employees and with the customers and allow them to talk about their ideas, their concerns and their perspectives because you’re a sponge during that time,” he says.
A big part of what Peilert soaked up was the condition of the company’s customers and competition.
“With the customers, there was quite a bit of consolidation going on in the market,” he says. “As you can imagine, there were a number of people going out of business, so for us it was important to understand if we were aligned with the right people, both from a culture business philosophy point of view, as well as their approach to the market and product positioning.
“We wanted to make sure we provide them the right products. Our design capabilities that we have in-house allowed us to help our customers to transition from a new-construction-focused business into a renovation-focused business. That’s where we spend a lot of time proposing new concepts that help them get into those markets faster and more successfully.”
Peilert also had to fully understand the company’s three stakeholder groups — ownership, customers and employees — which he relates to a three-legged stool.
“There is an inherent balance to the system and the fact is you can’t neglect one group over an extended period of time because you introduce imbalance, and ultimately, that three-legged stool collapses or you fall off the stool,” Peilert says.
“You’ve got to understand the needs of those three groups and make sure that you address them in a balanced way. Understanding that inherent balance and managing that is the key.
“Once you’re there, you can never undercommunicate. You’ve got to constantly be visible, approachable and building trust all the time.”
Rally your team
Building that trust was crucial as Veka employees watched the building market continue to contract and began questioning whether the market would ever get better.
“Ultimately, communication is key in bad times more so than in good times,” Peilert says. “You need to be honest with people and you cannot overpromise. That is really dangerous.
“If you overpromise, then you lose your credibility and then you lose the buy-in and the business culture of the company is also being damaged.”
Peilert spread a message to the employees of Veka that he wanted to see them show an ownership and can-do attitude.
“You always find the people on any given day who will talk about the Steelers and find the negative things,” he says. “That’s really dangerous if that is prevailing in an organization. Fortunately, we have a lot of people, based on their seniority, that had seen the good times and they understand that this is a phase that, at some point, will come to an end.”
Not all of the employees were able to view the market situation with that mindset, so Peilert had to make sure he was allowing employees to voice their concerns.
“You can give company updates where you stand in front of 100 people, but the more effective way, while it takes a lot more time and effort, is to have those one-on-one interactions,” he says. “You get some good quality discussions and people talk about their concerns. They listen and they are not afraid to ask questions. That in my opinion is the best way to reach people. You’ve got to walk the plant.”
That kind of attention to individual employees greatly helped Peilert in the buy-in process. To get his management team on board, Peilert took them for an off-site strategy meeting at Fallingwater, a groundbreaking mansion that Frank Lloyd Wright built over a waterfall in the Allegheny Mountains.
“We took a tour of the building, and it became very obvious that the man had a phenomenal vision and an exceptional amount of focus on detail,” he says. “We said, ‘That’s how we want to approach our business and that’s how we want to develop strategy.’
“The second day we started mapping out our game plan going forward. People got a sense for how we wanted to tackle the business and certainly were inspired by the building and the thought behind it. If the management team has a can-do attitude and shows that ownership attitude, at some point, everyone else in the company will follow that lead.”
To truly rally your employees behind a new direction aside from company meetings, one-on-one discussions and strategy sessions, you have to celebrate your small wins.
“You show people you are hitting the milestones and when you hit those milestones, you’ve got to talk about them,” Peilert says. “You start building the confidence and building the momentum.”
To keep momentum going, Veka had to make several changes to account for what was happening in the industry. The company closed a location in Youngstown, Ohio, and converted its Canadian operation to a warehouse and logistics center to retain critical mass at key sites. It also made adjustments to personnel to help the company head in the right direction.
“Some of that was done, but there was quite a bit of work left to do in terms of looking at both cost and business development,” Peilert says. “At the end of the day, I made it clear to my management team that you can’t cut yourself to prosperity. With that being said, we said, ‘We can grow share and we can grow in bad times. We just have to have the right approach to the market and the right products.’”
Peilert started to break down the critical success factors in each area, one being cost management and the other being new business development.
“Once we had identified them in a fishbone diagram [which identifies many possible causes for an effect or problem], we started to break them down into further detail,” he says. “Once we had the detail, we started to put initiatives behind them. Once we had the initiatives, we attached them to a SMART execution plan.”
SMART is a big initiative for Peilert and the company. It’s an acronym that stands for specific, measurable, achievable, responsible and time-based.
“Once we started breaking this down into individual initiatives, people said, ‘That is achievable. That is realistic,’” he says. “Once we started to see traction on some of those projects and we had the additive nature of those initiatives, people started to gain confidence again.”
There wasn’t a magic trick or a rabbit that Peilert pulled out of his hat — it took rolling up his sleeves and clearly outlining performance expectations.
“I think that helped once people understood very specifically what they need to do to succeed in their job,” Peilert says. “In many cases, that’s not been properly defined. You typically see performance improving once you measure and once you set a target. So we spent quite a bit of time establishing metrics.”
The company focused on quality ratings, internal metrics and specific improvement targets aligned with the philosophy of SMART.
“We wanted to make sure that they were achievable, so we broke them down in quarters and showed a step-up improvement,” he says. “Those were key elements that people say, ‘I can do that over the next quarter. And if that’s possible, I can do it again the next quarter a little bit better.’”
Breaking objectives down into bite-size goals made a big difference. The key is being able to define your core business and put resources behind opportunities that will move the business forward.
“You start off by defining what your core is,” he says. “That’s always worthwhile revisiting and putting on a test vent. Once you’ve done that, you want to make sure you fund your biggest opportunities properly and put the right people behind it.
“It’s not always the biggest account that deserves the best person, but it will always be the biggest opportunity. Ultimately, you just have to spend time in the market and understand the leverage and the levers you have for success.”
Veka’s hard work paid off through a 56 percent reduction in quality claims, the signing of new business and a good growth return. So far, 2012 has been a good year.
“What we are seeing in 2012 is the beginning of a slow but steady recovery,” Peilert says. “People are starting to create households again and that’s how home construction benefits. It will not be a return to the 2 million unit residential homes, maybe we’ll never achieve that again, but it’s now a stabilized system that has experienced some slow and steady growth not based on government programs but based on recovering market strengths.
“For Veka, we are very excited about some of our partners that we have and our customers in the market that we’ve been able to work with on new designs for products that zero in on energy efficiency, sound insulation and impact resistance. Those are all big trends and big needs in applications that will help us grow faster than the market.” <<
How to reach: Veka Inc., (724) 452-1000 or www.vekainc.com
Evaluate and understand your business and stakeholders.
Develop a strategy and communicate expectations.
Implement your plan to head in the right direction.
The Peilert File
President and CEO
Born: Altena, Germany. I came to the U.S. in 1991.
Education: Has a Diplom Oekonom/MBA in business and economics from Ruhr-Universitat Bochum
What was your first job, and what did you take away from that experience?
I worked in my dad’s CPA office. I did classic, old-style accounting with a big journal where you had to write every entry in. That gave me a sense for the complexity of business, but also the need for accuracy and execution.
What advice would you give someone else stepping into a new CEO role?
For me personally, I’ve always strived for having the freedom to shape the direction of the business. There is a saying one of my mentors always said, which was, ‘It’s better to be the head of a mouse than the tail of a lion.’ It was always attractive to me to rather than work for a large organization to work in an organization where I can impact the structure and reach the people. I would recommend to a CEO to be the guardian of the company culture because that is a very precious asset.
Who is someone you admire in business or leadership?
I look up to George Washington. I have a painting of Washington crossing the Delaware in my office, and to me, that is the essence of leadership. If I look at my career, the founding CEO of Ardex, Herbert Goller, was a great mentor to me.
If you weren’t a president and CEO, what is something you have always wanted to do?
One day when I retire, I could see myself teaching.