Make cuts with compassion
By the second quarter of fiscal 2009, the company had to implement a third action plan for a 50 percent reduction in square feet of new construction.
To stay afloat, the company had pay freezes from top to bottom, cut bonuses and temporarily stopped contributing to employees’ 401(k)s. But none of that hit as hard as the closing of plants and having to let people go.
“As you make those hard decisions — and frankly shutting down plants is a hell of a lot easier decision to make than letting people go — you are letting people go from top to bottom. It’s not just a bottom deal. You are letting people go that you have worked with for 20 years, who depend on a job, who depend on benefits and depend on all aspects of what a company can provide.
“There is nothing that is easy for anybody in our organization to effect those changes. The only way you can is from the perspective of those who remain will be able to earn a living and take care of their families.”
You have to announce the cuts as fast as you can so it’s not hanging over the company. You also have to be honest and as detailed as possible when explaining to everyone why the decisions were made.
“I think that to the extent that you can communicate those steps that you are taking, the processes that you
are going through to be as frank and as open with your constituency, which are customers and suppliers and employees, is very important,” he says. “While you cannot ultimately allay fears, the knowledge that you can share with them and the behavior that they can see in you as the CEO and those that make up your team is critically important.”
You also have to sincerely do everything you can to keep the company steady, and you have to communicate that you and your team are doing all that you can.
“There is no limit to the amount of time you will spend, the hours you will spend, the days you will spend in making sure that the company not just can survive but can prosper,” he says.
While you made cuts in order to keep the company steady, you don’t want to communicate that message of prospering soon after making them.
“I think I’d be fibbing a little bit that you could combine both those messages at the same time,” he says. “I’m not sure that they could be heard. So, when you are doing those cuts, it’s to survive. Then you are proving your survivability by getting back to profitability.”
Much like you don’t make the plan on how to survive alone, you can’t communicate the message by yourself either. Of course, if you are the top executive, your voice has to be heard, but your managers have to spread the message throughout the organization, as well.
“It’s interesting because one often thinks that the CEO or the chairman kind of comes forward and speaks to the troops and kind of gets the message out, and to some extent, that’s true,” he says. “But I’ll tell you, it’s really the case of your leadership team and them being part of understanding the problems and the issues, being part of and creating the solution, being part of and being responsible for the future of the company, and then taking that message out and sharing that with people.”
Employees will react better to many voices saying the same thing than just you preaching the message.
“In a company like ours, the personal types of communications are much more important than some voice from the top of the tower,” he says. “They want to know the voices are singing the same tune and are aligned, that’s for sure. But it’s very important for that structure to be in place and for that leadership and responsibility to be carried by a lot of folks.”
Though making the cuts was hard, the moves, along with capital from a private equity firm, helped the company return to profitability for the third quarter of fiscal 2009. In addition, sales for the fourth quarter of that year were $244.4 million, up 2.5 percent from sales of $238.4 million in the third quarter of the same year.
“Returning to profitability, while being somewhat shallow to those who have lost their jobs, resonated pretty powerfully with those who remained in jobs,” he says.
Though improvements have been made at the $968 million company, Chambers isn’t naive enough to think everything is fixed.
“We certainly believe that the cuts that we have made, the reduction in plants clearly with the refinancing and a significant reduction in our debt, puts us in a position to do well in the future,” he says. “We say that realizing that probably next year will be no better than this year.”
While the economy may not rebound completely anytime soon, Chambers and NCI are ready to take their share of the current marketplace.
“We have to make sure that we get more than our share of that marketplace,” he says.
“The cost reductions and the plant reductions are in service to going there and kicking ass. It’s in service to continuing to be the most successful company in our industry.”
How to reach: NCI Building Systems Inc., (888) 624-8677 or www.ncilp.com
