The batteries made by Exide Technologies eventually run out of
power, and when Gordon A. Ulsh joined the company as president
and CEO in April 2005, the company had also lost its juice.
It emerged from bankruptcy in May 2004 and went through a nine-month, lame-duck period following the previous CEO’s retirement
announcement.
Management had no strategy and wasn’t making day-to-day decisions. The company, which produces and recycles lead-acid batteries, struggled to meet financial goals and had fallen short on
capital, so it lacked the ability to buy new technologies. Many managers saw the writing on the wall and moved on to greener pastures, and replacements were hard to come by.
Ulsh says the company was idling.
“The motor is running, but nothing’s going anywhere,” Ulsh says.
He looked deep into the heart of the organization to get a better
picture of what he had to work with.
“I saw … a very strong level of very capable and committed people that really kept the business moving through very difficult
times … that I would describe as generally very loyal but dealing
with classic low-level morale because of the public difficulties the
company had had,” Ulsh says.
He also looked closely at the market to see if he even stood a
chance. The big players, Exide included, were getting bigger
through consolidation, creating a huge entry barrier, so new players weren’t a threat. Despite new automotive technologies, all the
cars on the road still needed Exide’s products, so there was clearly long-term viability.
These factors gave him hope, so he developed a plan first to stabilize the organization and then to rebuild.
Extinguishing internal fires
Negativity from the outside world constantly hit Exide’s
employees, creating the biggest barrier that Ulsh had to overcome.
“You had to listen to your competitor forecast your demise,”
he says. “You had to listen to stories of the supplier who sold
you product and didn’t get paid, or the supplier who wouldn’t
sell you product because he was afraid he wouldn’t get paid.
You had to listen to all those things, and people can begin to
have an immense amount of self-doubt, and I believe the only
thing that erases self-doubt is success.”
To create success, Ulsh first recruited key managers he had
worked with in past turnarounds. He needed people who used
similar communication and problem-solving methodologies to
his to create unity. From there, he solicited employee input in
evaluating the company’s issues. He asked what they thought
Exide’s product strengths were, what they could do well within the market, and what challenges they were facing.
Participation creates buy-in and squashes resistance, but it
also helped Ulsh develop a plan.
“We developed the near-term strategy,” Ulsh says. “I’ve never
been a big vision sort of person because it seems to imply that
there’s an endgame.”
The first part of the strategy was clamping down on everything to get people’s attention.
“Until we knew what we had in the way of process and controls, we put the classic, somewhat onerous controls on everything,” Ulsh says. “If you’ve got a company that’s in trouble and
not controlling money very well, you tighten the purse strings
on everything.”
Ulsh issued a hiring freeze and became the sole person who
had the authority to approve travel and capital expenditures.
He also put controls on price quotes to ensure salespeople didn’t offer products and services at lower-than-necessary prices.
“Our theory was put a bunch of tight controls in place — the
equivalent of shooting up a flare — so at least you got everyone’s
attention and made them look up,” Ulsh says. “Then you could
begin to work on the real issue. It was about trying to make sure
they understood there was a different way of making decisions
about the business, and you must comply.”
While the tight controls seemed drastic, Ulsh made sure his
people knew the reasons behind the decisions.
“Part of what I believe in terms of communicating is the
whole issue of transparency,” he says. “Tell them what you
believe in, why you’re making the decision, and ask them to
cooperate.”
Certainly, some didn’t cooperate, so he worked with, debated
with and tried counseling them, but in the end, he changed the
players if they didn’t comply.
From there, Ulsh looked at processes already in place. He
relinquished some control if he thought a process could run
well as long as it had a capable manager. As he made these
changes, communication remained critical.
“Employees need to be told repeatedly because they have
their future, their livelihood, invested in you,” Ulsh says.
He used town-hall meetings, teleconferences and newsletters
to repeat his message and update employees on stability-creating initiatives. Even if people don’t buy in immediately, they
will develop trust to at least tell you why, and you can use that
trust to get participation.
“You start getting people to raise their hand and say, ‘I’ll work
on that. I’ll do this. I’ll lead that challenge,’” Ulsh says. “As they
get some wins, that’s what helps people to buy in.”
As leaders create positive momentum, they need to recognize
employees, too.
“While you challenge people, when you have people that
inevitably win or succeed or pass what you’re doing, you have
to take some time to praise them,” Ulsh says. “People call it
‘celebrate success.’ You really have to thank people and praise
them, and after just a little bit of celebration, you raise the bar
so that we keep trying to get better the next time.”
Positive experiences and success will also change people’s
attitudes.
“People see change like this and think, ‘Gee, it’s really drastic
and aggressive,’” Ulsh says. “Then they begin to see the right
decision-making methodology not only from myself but from
other people in the organization, and they say, ‘You know, this
is more like how a real company operates.’”
External relations
While the flames of bankruptcy and its aftermath left employees
with first-degree burns, many of Exide’s customers and suppliers
had suffered second- and third-degree burns, losing hundreds of
thousands, or even millions of dollars.
“They have every reason to doubt you,” Ulsh says. “It’s awfully
hard to just say to someone, ‘It’s going to be all right because I told
you so.’ These people have been damaged by this Chapter 11. You
need to tell them why you believe that the issues are the issues and
what steps you’re going to take, and then tell them how you’re
doing along the road.”
Ulsh talked to customers and suppliers, and he often got the
same question.
“This company is sort of in shambles,” they started. “What did
you see, Gordon, that led you to go take on this challenge and
move yourself from Texas to Georgia and jump into the pool?”
He explained the things he saw in the market and within the
organization that made him undertake the challenge, and sometimes, he poured his heart out.
“Look, I’ve been in these messes before,” he said to them. “Here’s
the things that we’ve done, and here are the weaknesses we’ve
seen, and here’s how guys like myself and other people that I’ve
worked with have fixed this in the past, and it works — at least
give us some time.”
While some chose to give him a chance, often the wounds
were too deep, and he didn’t win every battle. Despite the losses, he focused on communicating progress to the ones left
standing with him and making sure he was completely transparent in his dealings with them to win back their trust. He also
got consensus that he was working on the initiatives that mattered most to them, and then he repeated that process with
them.
“It was a matter of being certain we believed we had the right
story, getting people in place that believed in the story and
telling it over and over and over,” Ulsh says. “It’s repetition so
people get used to hearing it, and it’s repetition to the point
where they can judge how we behave with what we said that
was important. Employees are, in many ways, the best critics.
Employees, suppliers and customers — they’ll tell you whether
or not they believe you’re behaving in line with what you said
your priorities are.”
As suppliers and customers began to see improvements and
decided to stick with the business, it created a newfound confidence for employees, too.
“As we began to demonstrate that we could make the right
decisions, and we began to have some more wins in the marketplace, we began to solve some contractual relationships,
and we had begun to get some more and even better business,”
Ulsh says. “People began to get what I think is the miracle pill:
They began to get confidence in the fact that our business
could survive, that we could do well, that our customer could
need and want us.”
Rebuilding margins
With the flames extinguished and signs of life blooming, Ulsh has
been able to focus on rebuilding, but to do that, he needed to
improve Exide’s margin. So last year, he told employees they
wouldn’t be getting raises.
To offset that, management created an incentive program. It set
aside an amount equal to the average everyone would have
received in raises. If employees met goals for the year, they would
get that back, and if they exceeded those targets, they would get
more.
“We had to stand in front of people and say, ‘Gee, we have this
whiz-bang incentive program,’” Ulsh says. “‘You won’t know if it’s
good for you for another year. And on top of that, we’re not going
to give you a raise because we don’t have the cash, but trust us, this
will be good for you.’
“That means we’ve got to be transparent. People have to see the
way we behave, and we have to stand in front of people and take
their questions, take the challenges, take the people that just don’t
think it’s fair, listen to that and stand firm in our ground.”
After the first year, nearly everyone did better than they
would have with just earning a raise, and the program will stay
in place. On top of that, Exide will reinstate modest pay raises
this year to become more competitive in the market.
Ulsh was also able to raise more capital in September from
existing shareholders, which he then invested in long-overdue,
new technology. Exide also renewed many of its advertising
initiatives, including its work with NASCAR. This gives
employees something positive to talk about with people who
have only seen the negatives.
“People are beginning to say they are part of a company that
can survive and grow and be respected, and that puts that thing
I call confidence back into the business,” Ulsh says.
Wall Street has also gained some confidence, as Exide’s market cap went from about $72 million at the end of March 2006
to about $500 million a year later.
Since emerging from bankruptcy in May 2004, revenue has
grown more than 13 percent, to $2.82 billion in fiscal 2006.
From May 2004 through March 2005, the company posted a net
loss of $467 million; a year later, Ulsh had slashed that to $173
million.
With Exide building a stronger foundation every day, the
company is almost to the point where Ulsh can focus solely on
the next phase: growth.
“Our message all along is market share is not our first priority,”
he says. “Creating a viable business for our folks to have a long-term place to be is important. Creating stability with our suppliers
is important. Creating stability for our shareholders is important.
And when we can do that, we’ll worry about growing.”
HOW TO REACH: Exide Technologies, (678) 566-9000 or www.exide.com