When Art Holmes and his brother, Charles, founded Mayfield Heights-based Chart Industries in 1992 as a vehicle to take their six private companies public, the duo already had laid the groundwork for how to run the geographically scattered conglomerate from its Ohio headquarters.
Rather than retain a firm grip on each company’s day-to-day operations and force them to conform to one method of doing business, the brothers let the existing management of each subsidiary keep its autonomy.
“I’m a firm believer in the entrepreneurial spirit,” explains Art Holmes. “If you empower an entity to achieve its goal, they’ll go out and do the best job they can. Especially if you don’t micromanage.”
Some would call Holmes’ management style laissez-faire because he allows for seven different methods of management and accounting from seven different subsidiaries. But the softspoken CEO is quick to point out the company’s financial success and strong market position – 1998 third-quarter profits were up 46 percent over 1997 and sales continue to climb steadily. Chart controls about 26 percent of the world’s cryogenic equipment market with its product and services.
So how does Art Holmes manage a public company with seven subsidiaries scattered around the globe without stepping on anyone’s toes?
Enforce independence
The company’s success, Holmes maintains, is due in large part to giving the presidents of those subsidiaries plenty of breathing room. “As a holding company, we provide them with capital resources and benefits such as purchasing power,” says Holmes. “But we don’t have the controls that some large companies often have. Each business has its own balance sheet and plan.”
The freedom the subsidiaries enjoys is as much a function of the size of Chart’s staff as it is Holmes’ philosophy. The Mayfield Heights corporate staff is a lean, seven-person operation-two operating executives, three financial officers and two support staff members. Together, they loosely manage a total of 1,300 people around the world.
The system works because Holmes is fully committed to making it work. It’s not a system for the manager who can’t delegate. He carefully chooses the companies Chart buys, ensuring that its management staff-particularly the president-is someone who will flourish in an entrepreneurial-type environment.
Size is also a major driver.
“The size of any one plant impacts our ability for this to work and for Chart to grow,” Holmes says. “Each plant has no more than 250 people. When you get above that, you begin to lose the feeling of unity and the effectiveness of what we’re doing.”
Chart’s seven subsidiaries-Altec International (Wisconsin), CVI (Columbus), Chart-Marston (England), Cryenco (Denver), Greenville Tube Corp. (Pennsylvania), Process Engineering Inc. (New Hampshire) and Process Systems International (Massachusetts) – are run as separate companies. They share resources and buying power, but have separate management teams and financial books. Each president is responsible for his own company’s success.
“I don’t like a lot of second guessing so I don’t force it upon our subsidiary presidents,” explains Holmes. “If you have each entity in a self-contained autonomous state, you don’t need a big bureaucracy. Our philosophy is simple – we just pick good people and let them go.”
That’s allowed each subsidiary to grow at its own pace-despite the related product lines-while receiving whatever resources it needs from the parent company. Says Holmes, “That minimizes the costs that we’d have as a big corporation, both direct and indirect, by having fiefdoms within a headquarters. Our style requires true empowerment by corporate management and this has been our philosophy out of the chute.”
Watch, but don’t hover
Once a year, Holmes and his corporate staff assess and approve each of the seven subsidiaries’ business plans. Each quarter, the presidents report against the plan and give a rolling 12-month forecast on where their companies are expected to go.
“It allows us to recognize how each company is doing without standing over the presidents’ shoulders and watching them,” says Holmes.
If a subsidiary isn’t producing for an extended period of time, Holmes won’t just stand still and let it flounder. While each president is responsible for the success of his company, Holmes can step in and make decisions for the presidents if necessary. He hasn’t had to do so yet and would only consider it as a last resort. “I wouldn’t like someone standing over my shoulder,” he says.
Know when to ignore economies of scale
Unlike many companies its size-$171 million in sales through the third quarter of 1998-Chart doesn’t use a systemwide software package for its subsidiaries. While using the same accounting program at each company might make some aspects of his job easier, that conformity compromises their long term gain. Explains Holmes, “We could put in a software system for manufacturers that’s the same for each of our companies, but the problem is that some of our products are project-specific or order-oriented and others are widget-like. So one package won’t fit all.”
Nor does Chart use one uniform corporate report or financial system for all its companies. “We let each subsidiary put out monthly financial reports the way they always have,” says Holmes. “We’re not forcing anybody to change their management approach to meet Chart’s. Chart lets them use their best management technique and reporting methods and we simply adapt to it.”
Chart extracts the information it needs from each financial report and includes it in the corporate financial report for the stockholders.
Meeting of the minds
Chart’s corporate staff holds quarterly meetings with the company presidents and individual annual meetings with the financial officers and manufacturing executives of each subsidiary.
“It’s a chance to get together and talk about common issues and share ideas,” says Holmes. “Then we discuss what’s working for each business and the presidents can decide whether that’s something they’d like to pursue. We encourage interaction and joint activity, but everything’s done on an arm’s length basis.”
This has led to what Holmes considers a complex organizational structure made up of several flatter structures. “It’s a more interactive style of management,” says Holmes. “But it’s not micromanaging. What happens is that you’ve got small manageable subsidiaries, each of which has few layers between the workers on the assembly line and the president. Bottom line, we let the market forces rule.”