Stay accountable
As you begin executing the plan that you’ve
created, you have to find ways to hold you
and your team accountable.
“There’s a lot of follow-up to this,” Stropki
says. “The plan isn’t a document that can go
get tucked into a drawer and forgotten.”
He says that Lincoln previously did that,
so to avoid that pitfall again, Stropki and
his team created metrics.
“First, you’re going to have financial metrics,” he says. “We have shareholders who
demand return on their investment. It’s
pretty easy to look out over that three-year
horizon and identify what those expectations are.”
Lincoln Electric is in the S&P 400 MidCap
category, so he looks at available financial
data about what the expectations are for earnings growth as a baseline, but then he pushes
it a little bit because he wants to reward his
shareholders better than the baseline.
Beyond external data, creating a solid
financial metric starts with earnings per
share, which starts with sales growth.
“You get sales growth, and from that, you
want to get some operational efficiency within the margin expansion,” Stropki says. “So
you start with sales growth. You say, ‘OK, we
expect to grow our revenues 10 percent this
year. Where are we going to get that?’”
He says you may have to raise prices if
your costs have gone up or just to capture
more margin.
“You have got to look at your business and
say, ‘What are we doing that we should do
better?’” he says. “With that, ‘How are we
going to get some benefit from higher sales
through operational efficiencies and grow
margin expansion through that element of
the business?’”
With your financial metrics established, start establishing other measurements.
“Once you establish the financial metrics,
it’s pretty easy then to break those down into
increments that will drive those financial
metrics,” Stropki says.
For example, if his team talks about customer service, they look at their fill rates or
inventory levels and ask themselves if they’re
where they should be, and if they aren’t, what
needs to happen to get there.
“You can pretty well lock in those metrics
and then hold yourself accountable to them,”
he says.
“Financial metrics we look at every month.
Some of the other metrics are longer term
and are going to be looked at less frequently.
Customer service metrics are looked at
sometimes daily. There’s different elements
of the metrics depending on what the metric
is that you measure and how frequently that
you review it and how frequently you’re
measuring it.”
It can be challenging to hold yourself
responsible for looking at so many metrics,
so often you need someone else to be
accountable for achieving the results. Stropki
depends on his board of directors for this and
says whether you’re public or private, you
should have a group of people to hold you
accountable along the way. Each member
gets copies of the plan, and at least annually,
the members will hold Stropki and his team
to the metrics established.
“Be open and honest with your board,” he
says. “… You never want your board members to be surprised by something you had
imminent knowledge of and didn’t share. You
share the good, bad and ugly. Then you have
the responsibility of walking the board
through how you captured the success or
where you failed or how you’re going to
adjust your strategies to make up for any mistakes that you made or any challenges that
have been presented to the business that you
didn’t expect were going to be there.”
Providing them with accurate data is
crucial.
“If I don’t get them the data that they need
to be able to provide that advice that we
need, I’m wasting my shareholders money,
my board members’ and our management’s
time,” he says.
Stropki also says that you need to make
sure your board has the knowledge and
experience to actually help you.
“Find those areas where you as the chairman or your management team lacks experience and expertise, and bring in a board
member that can provide some experience
and expertise that would be valuable to you,”
he says.
Lastly, on top of having a board holding him
accountable, he also meets at least twice a
year for detailed meetings with his managers.
In some regions that might mean three times a year. In the Cleveland headquarters, that
means monthly because he’s here more. The
chief financial officer is always in on those
meetings for checking numbers, and Stropki
may bring in the heads of functional areas,
such as engineering or human resources, to
those meetings if there’s a particular issue he
wants to focus on.
While the board holds Stropki and his team
accountable, and he’s continuously meeting
with top managers to keep them going, there’s
still other people around the world that need
to keep working at making sure goals are
achieved. For Lincoln employees, it often
comes down to one simple thing — pay. For
example, with U.S. employees, 57 percent of
their 2007 wages were paid in profit-sharing.
Every employee in the company participates in a profit-sharing program, and last
year, the company’s gross bonus pool totaled
$82.4 million, which meant 3,000 Cleveland
employees received an average of nearly
$27,000 each.
“If you know that the success of the company is going to determine a big share of
what your overall compensation is going to
be, you want to know what you can do to
contribute successfully to that.”
