Norman C. Chambers and his management team wanted to be ready for a rainy day at NCI Building Systems Inc. It was 2007, and the company had pretty much finished a successful growth strategy that began in 2003, and the company wanted to have plans in place just in case things went south.
“We developed and put together plans that would, first of all, try to give us some road signs about when we would start to see this and things we would try to do immediately,” says Chambers, chairman, president and CEO of the integrated manufacturers of metal products for the nonresidential building industry.
The group identified a mild recession as a 15 percent reduction in the level of activity in the marketplace, which is measured by square feet of new construction. A deeper recession would be a 30 percent reduction in such activity.
Chambers and his team could place the plans for each scenario on the shelf and dust them off if they ever needed them.
But why would they need the backup plans? In the third quarter of fiscal 2008, the company posted record numbers, and things looked good.
But that following quarter, signs started to creep in that things were going downhill. Net income and gross profit in the fourth quarter was less than the third quarter, which was very unusual.
“We hemmed and hawed as to the cause because other parts of our business were doing quite well,” he says. “It culminated with us really taking a step back by our fourth quarter of 2008, in that it was clear that while we are going to have a good (fourth) quarter, it was going to be less volume and less revenue and less profitability than our third quarter and that was the first time. So, we stepped back and said, ‘Why is this?’ and we started challenging some of our basic assumptions.”
Even though Chambers and his team prepared for the rainy day, they were met with a monsoon in the form of seeing most of the company’s business segments declining 62 percent. From November 2008 to April 2009, Chambers had to reduce NCI’s work force by nearly 40 percent and the number of plants in the United States was reduced by 25 percent.
“We went about that in part because we had planned for something that was bad and were facing something that was twice as bad,” he says. “While we had it about right, we had to totally re-engage in exactly looking at what we are doing.
“You then have a look and say the economy is falling off a cliff and your business is linked to economy. You can reduce costs and all those things, but it doesn’t ultimately change the bare facts that there’s going to be a whole lot less work for a period of time that seems to be quite extended.”
