Keep an eye on cost
Myers’ costs were high going into the recession, because it was still running at full capacity. But as business started to wane and plants began running at less than maximum capacity, they took the opportunity to restructure, which meant closing facilities, laying off employees and investing in more efficient technology.
Depending on your industry, your cost analysis might be directed at people or the price of your product and, to no surprise, you need to constantly monitor whether reductions need to take place.
“When you get into a downturn, that has to be one of the top three items that just absolutely has to happen,” Orr says.
So when do you make a reduction or even an investment? Before the recession, Myers was analyzing making changes to its material handling and lawn and garden businesses, so management took a deeper look at the metrics and weighed the cost against the long-term benefits.
“First off, you have to look at an objective,” Orr says. “What is the goal? Is the goal cost, quality or what is the end all? Let’s take, for instance, cost. If you’re looking at cost and you decide we’re in a downturn situation, we have an excess capacity [and] we probably don’t need that capacity in years to come. If we do, we would buy new or better capacity or equipment. The analysis comes in around what is it going to take to make that change.
“All in all, there has to be a fundamental goal to why you go ahead and do it, because they’re not easy decisions and they’re not fun. Anytime you’re involving people in the situation where it might reduce your manning of your employment, that’s a very, very tough decision, and we certainly don’t take it lightly.”
While all of those steps are crucial in maintaining the strength of the company, you can’t forget the aspect of cluing employees in on your decisions or even involving them in the decision-making process. Clearly communicating an investment in technology is a plus compared to closing down a plant, but good or bad, conversation has to happen.
“It’s very important to communicate,” Orr says. “I’ve always found that people are more willing to cooperate if they understand why. Before we take on a project, we make sure in our businesses that we have communication, discussions whether they be meetings or whether they be one-on-one information-type meetings to explain to our people why we have to do what we have to do. In a lot of cases with those projects, we try to enlist ideas and thoughts from folks who are actually doing the job, because I think that’s where you actually get the biggest bang for your buck.”
In a time when you’re probably looking for more efficiency and making operational changes, directly ask your employees for ways to streamline processes and perhaps save money. You not only gain respect but also the cooperation needed from employees for the company to move forward and succeed.
During Orr’s years running manufacturing plants, he realized no one knows the job and knows how to do it better than the person actually in the position. Orr brought a process with him to Myers that analyzes work. Called “Block of Work,” the company even has a room dedicated to walking through the process.
“What’s interesting about it is that you actually get the people who are doing the work involved in it,” he says. “It’s a brainstorming session, and they put up on the wall little 3-by-5 cards that are each pieces of the work that they’re doing. What you find is that when people look at it that way they understand sometimes, ‘Gosh, I may be doing some things I don’t really need to do. It’s an extraneous step in the process, so we can eliminate that.’ One of the things we’ve found is we’ve improved the efficiency of our operations by using that particular Blocks of Work technology, which allows people to have input.”
In the end, your cost structure and employees’ ideas on how to make a process run smoother come back to the metrics by which you understand your business.
“You need something to drive your business,” Orr says. “If you don’t have objectives or goals, you’re certainly not going to get there. … You’ve got to have metrics and you’ve got to be able to analyze how the business is doing with those metrics and analyze the parts and pieces of it, whether it be people, whether it be equipment, whether it be safety. You have to have something to measure. If you measure it, you’ll move it.”
Watch the cash
One thing Orr is proud of is Myers’ balance sheet. While the board of directors pushed the focus, Orr and his team made sure they held on to the company’s cash in recent years. Holding on to your cash means making sure you’re collecting from people who owe you money and you’re making wise investment decisions.
“Sometimes people are out looking for acquisitions or they’re spending money on equipment and they haven’t necessarily thought it through,” Orr says. “When you’re in a downturn situation, there might be something that is appetizing, but we believe at Myers don’t go to the grocery story when you’re hungry because you end up buying a bunch of stuff you don’t need.”
Another decision, which has positioned the company to add shareholder value and reinvest in capital in the long term, is using the last few years to pay down debt.
“We’re cautiously optimistic that the economy will get better in 2011,” Orr says. “We feel we’ve gone through this recession and we’ve learned a lot about going through it. If it happens again, and usually the economy does cycle, we’ll be even more ready and prepared to defend ourselves.”
How to reach: Myers Industries Inc., (330) 253-5592 or www.myersindustries.com
