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Michael Kramer led his team through a crisis at Kellwood Co. Featured

2:00pm EDT November 25, 2010

It was Friday afternoon and Michael Kramer was ready to hit the beach. The president and CEO of Kellwood Co. was taking his family and heading to Southern California for a weekend of sun and sand.

It was then that a phone call turned the life of Kramer and his 1,200-employee apparel marketing company completely upside down.

“It was the fact that $140 million in bonds were becoming due,” Kramer says. “We had been negotiating with our bondholders to extend those bonds for another five years at a very attractive rate, a rate higher than they had been getting.”

The uncertain economy was making everyone in the financial sector nervous, and so the negotiations had suddenly been brought to a stop. The lenders wanted their money — all of it — and they wanted it now.

“There was no emotion to it,” Kramer says. “They did it at the very last minute, which precluded us from going out and finding alternative measures. So I faced a tough challenge: Do I threaten these guys and say, ‘OK, I’m just going to go bankrupt and you get pennies on the dollar.’ There’s risk with that if we call their bluff. The risk was to do that, in order to make it effective, I had to go public. When you go public saying you could potentially go bankrupt, there’s so much risk.

“Particularly in my industry, you’ve got manufacturers out there that are buying raw products and raw materials to manufacture my goods. If they get wind of the fact that there is a financial crisis on the horizon, they just might say, ‘Oh, I’m not making any more for them.’ It could be a compounding problem.”

Suddenly, the beach was the furthest thing from Kramer’s mind. He was facing the very real possibility that his business, which is a portfolio company of Sun Capital Partners Inc., might have to shut its doors.

“I was stunned,” Kramer says. “I just sat here, and I said, ‘How do I tell my staff? How do I tell my people?’ In the last 12 months, I had brought in a lot of old colleagues and people were excited and invigorated about what we were doing having no anticipation that this liquidity crisis would ever happen. Why would a bank turn us down? We were profitable. We could more than cover our debt costs. There was no problem. Why would they do this?”

Somewhere in the back of his mind, Kramer knew he had to act. But it was still too fresh to think about that just yet.

Lead with your heart

Kramer endured a couple of hours of being in a haze of shock and disbelief over what was happening.

“I wasn’t really concerned about me,” Kramer says. “It was more about everybody else, because of the economy. Particularly in St. Louis, there were a lot of layoffs and a lot of people looking for jobs. It was really, ‘How do I tell these guys?’ I’m going to let them down just as I was let down. That was just my first thought.”

But as reality began to set in, Kramer knew he couldn’t just curl up in a ball in his office and hope it would all go away. If he was going to get through this and help those employees keep their jobs, he was going to have to step up and be the leader they expected him to be.

Kramer gathered the eight people on his leadership team who he most strongly believed in and laid it all out there for them, complete with the emotions that had been building up inside.

“You don’t always have to be the stoic CEO,” Kramer says. “You have to be human. People want to see that you are just like them. Whether you’re talking to your leadership group or a wider range of employees, people know if you believe what you are saying. It wasn’t a matter of me saying, ‘Guys, here’s our plan and we can do it.’ They would know if I was just talking the talk.”

Kramer let his emotions come through in his words. But as tough as it was, he knew he had to move past those feelings and find a way to project some optimism that the company could get through this challenge. Kramer and his team also had to begin to formulate a plan of action to solve this problem.

“You are setting the tone,” Kramer says. “Of any time for me to not get into the doldrums, it was that time. Even though internally, I felt that way, it was important that I not be. You have no choice. What could I do? Sit and watch the Titanic go down? I was not going to do that.”

As he began to move past his raw emotions, he wanted to start thinking more logically about what he and his team could do to fix the problem.

“We wanted to put together a game plan, and the eight, I had huge confidence in them,” Kramer says. “Plus I had four attorneys and four financial consultants in terms of the bankruptcy side. So we had a team of basically 16 people to go at this.”

It was a good group of people that brought enough expertise to the table without being too unwieldy. The conversation turned to going public with what the company was facing.

The plan was to contact the Wall Street Journal, the St. Louis Post-Dispatch, Women’s Wear Daily and other media outlets and let them know what was going on with the company.

When the attorneys questioned one aspect of this plan to bring the situation out in the open, Kramer once again let loose with his emotions.

“They were very lethargic about it,” Kramer says. “I was like, ‘Listen, I’m fighting for a company here. You’re on your fifth bankruptcy case this month. This is just a normal day for you. This is not a normal day for me. This is not a normal day for my team. I’m fighting for the livelihood of [my] people. I’m fighting for a cause of what we’ve accomplished over the past 12 months in turning this company around. This is serious.’

“The attorney was like, ‘You know what, you’re right. Let’s try it.’ And in hindsight, that particular thing was one of the most important aspects of our approach.”

A little emotion and a little fire can be just what your team needs to summon the energy to fight through a crisis.

“We have to carry the flag,” Kramer says. “I’m not surprised by this, but I was so pleased to see my leadership team. They were like, ‘Where’s my armor and my sword? I’m ready to go.’

“You try to limit the moments of extreme passion for those moments that warrant it. It’s a touch-and-go thing. But effective leaders figure that out.”

This was clearly one of those moments.

Prepare for battle

Kramer and his leadership team felt like they had a good chance to win the PR battle by going public with what the lenders were doing to them. But he didn’t want his employees to read about this crisis for the first time in the paper.

“I wanted it to come from us,” Kramer says. “So we put together talking points and I had a town-hall meeting and basically communicated to my team in L.A., here in St. Louis and in New York.”

He tried to project optimism, but he didn’t make it too rosy.

“I didn’t give people a sense that we were invincible, because I didn’t think that was the right thing to do,” Kramer says. “Without getting into a lot of detail, we were very open and honest.”

In this kind of situation, it’s not about providing every last detail about what your company is facing. It’s about giving them a broad sense of what’s happening and what you’re doing about it.

“I’d stay at a very 30,000-foot level,” Kramer says. “I think too much information can be negative too. I wanted to tell people what’s the potential in front of us. I wanted to focus on the potential outcome that we believed had the highest success rate for us. I wasn’t lying, because after the meeting with the attorneys, we did have a high probability of getting through this thing.”

Once again, emotion plays a role. When you’re talking to your employees, they are looking to you to figure out how they should behave.

“If you don’t have passion and you get thrown a curveball like this, I think it would be really difficult,” Kramer says. “My advice would be if you have somebody on your leadership team that is more passionate and they have also been speaking from a leadership position where it’s not the first time the organization would have heard from them, I would put them in as the point person in terms of communication. People feeling that they are being communicated to warmly, honestly and from the heart is more important than who is doing it.”

Kramer says if you’re the type of leader who can’t bring a strong message to your people, it truly is a time to set your ego aside.

“If you’re not passionate and you’re not raring for a fight, in some cases, I just don’t know if you’re going to win,” Kramer says.

With his employees in the loop, Kramer wanted to get in touch with all his key customers, suppliers and manufacturers to let them know what was happening.

“Basically, I got on the phone with them and told them, ‘Hey, there is going to be some press that is going to come out,” Kramer says. “This is what we’re fighting for.’ It was the same process. It was just stating the facts and showing them your heart. More importantly, I just wanted them to hear from me.”

Kramer spoke to his peers, the CEOs of customers, while his COO talked to the manufacturers Kellwood works with.

“Most of these people, we had long-standing relationships with,” Kramer says. “Everybody goes through ups and downs. If you stand by people when they are going through a down, they are going to stand by you when you are going through a down. ”

Apply what you’ve learned

It didn’t take long for Kellwood’s PR barrage to show results. And just like that, it was over almost as quickly as it had begun.

“Within 24 hours, I got a call basically saying that they are back at the table,” Kramer says. “We got back to the table, extended the bonds and won.”

The experience caused a lot of stress for everyone, but it also built a great deal of camaraderie on the leadership team.

“Some of my people said to me after it was over and we had renegotiated the extension of the bonds and everything was fine, it was almost like when you come off this euphoria,” Kramer says. “You go back to normal. You’re on this high and your energy levels are on an all-time high and you’re operating on adrenaline.

“We were bonded. We work closer together. We’ve gone through crises together. We know we can count on each other during the crises. We know people’s strengths and weaknesses better than we ever have.”

The ultimate lesson, of course, is that no matter how bleak things look, you should have trust in yourself and the way you run your company.

“There were many times during that four days where we thought we could be forced to go into bankruptcy,” Kramer says. “We just kept fighting. If you believe in your gut in terms of the momentum of your company and what you’re doing and you are financially sound, you’ve got to believe that the intellectual argument will always win.”

So with the battle won, what was the first thing Kramer did to celebrate?

“Once we got through it all, we got on a plane and went to L.A. and sat on a beach,” Kramer says.

How to reach: Kellwood Co., (314) 576-3100 or www.kellwood.com