CEOs are often too close to their companies to get proper perspective on the problems facing the business.
That’s why consultants survive and thrive, and it’s the reason Stuart Thorn was brought in to manage Southwire Co., a manufacturer of cable and wire products. Thorn joined the company in 2001 as president and later added the title of CEO when Roy Richards Jr., son of founder Roy Sr., stepped out of that role. Thorn immediately began carving away the parts of the company that were outside its core competency and restructuring the remaining pieces, doing so as one of the few CEOs in the company’s 58-year history not named Richards.
“I’ve spent most of my career working with family companies,” Thorn says. “I’ve noticed they go through a similar evolutionary pattern. They start out with a very strong entrepreneur who expands the company exponentially into almost anything. If he can get some money from a bank, he’ll take it and find some other business to invest in.
“At some point, that results in the organization becoming unfocused —particularly when the mantle passes from the original entrepreneur to the next generation of management.”
Southwire was no different. Roy Jr. recognized the pattern and had started to correct it, Thorn says, but it required an outside influence to complete the task.
“They’re left with a situation where the company has become very far-flung and often has a lot of debt and financially is not as strong as it needs to be,” Thorn says. “So, as the company continues to grow, it has to go through a process of paring down, focusing on its strengths, and in the process, getting its balance sheet under control, reducing debt and getting back onto strong financial footing.”
While Southwire was not as troubled as many companies Thorn has seen, it displayed many of the problems common to family enterprises.
“The company had been through, particularly on the financial side, a lot of restructuring prior to me arriving,” says Thorn, who describes himself as opinionated yet collaborative.
When the company was turned over to Roy Jr. in 1985, the balance sheet was weak and the company had accumulated a lot of debt. Over the next several years, he improved the profitability of the business and paid down much of the debt, but while the financial situation was reasonably sound, the company was far from where it needed to be. Thorn was brought in to take it to the next level.
“What made it work so well was I was made to feel welcome by everybody involved – by the owners, by the board, by the management here, and particularly by Roy Jr.,” Thorn says. “And that’s really remarkable when you think about it, because Roy Jr. had been running the company for quite a while before I arrived and had grown up with it. I imagine it was difficult for him, but he made it look easy — (he gave) me authority to go along with my title.”
Thorn’s fresh perspective was free from emotional ties to products, divisions and even people, allowing him to focus on the company’s core competencies.
“When I came in, there was a lot of clay on the table, and it had been shaped into something quite beautiful,” Thorn says. “When I got here, I listened to the people who had the experience, and gradually pulled together a sense of how we could further pare down this clay on the table and make it into something truly beautiful.”
Company shuffle
Thorn’s first task was to critically review the company’s raw materials, take the assets that offered a competitive advantage and focus the company around those, even when that meant selling assets.
“My role was to help them go from having the vision to actually making the vision come true,” Thorn says. “There I had a couple of advantages. Because I was from the outside, it was easier for me to make some decisions on what was core and what wasn’t core.”
Thorn closed some residual businesses, such as an aluminum smelting operation in Kentucky, that were not well-positioned.
“Even though we were making money with it, and even though it had quite a bit of market value as a divestiture, it was something that I was uncomfortable with maintaining long term,” Thorn says. “The industry was consolidating, and we were unable to feel secure in that ultimate consolidation.”
The divestiture of the smelting plan gave Southwire an infusion of cash, which Thorn used to pay down debt and put the company in a position to reinvest in its core businesses, which had the market position and the scale to be a leader. Thorn also rid the company of a specialty products operation in Arkansas and a data-com cable division. And although he didn’t know it when he made the decision, the data-com market was about to collapse.
“We had been very late getting into that market, and by the time we got in, there were already 25 or 30 companies in that business,” he says. “We exited that business, sold off the equipment and got some cash rather than continue on in a business that was likely to become more and more vulnerable due to our weak market position.
“That turned out to be a particularly good move because that whole data-com market was a bubble that burst right after we sold those assets. We couldn’t have gotten out at a better time.”
People shuffle
Rearranging the company’s assets was only half the battle. With the benefit of his outsider’s perspective, Thorn also made changes to the management structure and how its members were utilized.
”When I got here, I reorganized how management was aligned around these core businesses,” he says. “We had wire and cable all in one bucket. I saw an opportunity, maybe drawing from my past experiences, to organize different business units and give each business unit its own management team.” That allowed different teams to manage different pieces of the company —electrical cable, energy cable, OEM rods and the Southwire continuous rod division — rather than have one group overseeing the entire company.
“There were several managers, leaders who had been with the company for quite some time, who’d done a great job making the company what it had become, who were ready to retire when I got here,” Thorn says. “That created opportunity for people to move up and really flourish.”
Of the company’s four divisions, three are run by company insiders. To head the fourth, Thorn brought in another outsider.
“That had the spinoff benefit of getting one other outside view into the mix, so it wasn’t just me,” he says. “It wasn’t something where I met much resistance at all. It was really obvious to me this made sense, and I think it was pretty obvious to the people internally.
“Building a consensus wasn’t that difficult; it was just more a matter of applying some rational thinking in terms of how to implement that refocusing process.
“With that reorganization, we got focus in the business units that we had never had before, and we also got another chance to get some new people moved up within the organization, and in one case, get somebody from the outside, which continued to energize things. That, more than anything, allowed the idea of focusing on our strengths to really turn something conceptual to something that was tangible, real.”
The result
Creating individual management teams allowed Thorn to adopt an approach he learned during his time as a marketing executive with consumer products maker S.C. Johnson & Son Inc.
“They had a rule there, when you were a product manager, that whatever product you were in charge of had to go through a major restage every two years, and at any given time, on a blind product-preference test against major competition, the Johnson brand had to be preferred. So, you’re responsibility as a product manager was to work with R&D and other segments of the company to make sure the product was preferred,” Thorn says. “That really got baked into me, so when I came into Southwire, those ideas, if implemented here, could create advantage for us that I had seen it create at S.C. Johnson.
“I was really eager to put that philosophy into play, and I was fortunate when I got here that there was a very well-developed R&D organization. And there was a lot of experience here, but maybe not enough of a marketing orientation in order to steer that R&D in a direction that could come up with game-changing new ideas.” Thorn encouraged the leaders of the new divisions to talk with consumers and contractors to learn about their needs and to conduct focus groups and surveys. They then took that information to the R&D people to help steer them toward game-changing ideas, not simply minor tweaks or technology-led innovations that might be exciting to the scientist but not so much to the end user.
“We took resources that were already here, but we turned them around,” Thorn says. “We got into a pull mode as opposed to a push mode. Instead of R&D pushing ideas onto sales and marketing, we got sales and marketing to go out there, find needs that need to be filled. That reversal of flow from push to pull has resulted in a lot of great new innovative ideas that are beginning to flow out of our company. We’ve seen that now really start to impact the marketplace. I only think we’re going to see more of that in the future.”
Thorn’s changes seem to be working; the company is forecasting $2.8 billion in sales this year.
“When I got here, even with the aluminum smelter, we were about half that,” Thorn says.
Despite the changes he’s made, Thorn credits the company’s employees with its success.
“People who work in factories, to me, are the real heroes in society,” he says. “I don’t think (professional sports stars) hold a candle to the person who comes in and works in a factory, 12-hour shift, day in and day out, year in and year out, in a plant that’s not air conditioned in the summer, it’s not heated in the winter. They’re doing tough physical labor, and they do that for 30, 40 years. “We’ve got people who’ve done that for 45 years. We’ve got one guy who, as of July, (went) 40 years with perfect attendance.”
Thorn believes so much that his employees deserve the credit that he wrote a song, “We Owe It All to You,” about them, with the help of his musician wife, and turned it into a video that can be found on the company’s Web site.
The song’s opening lyric says it all: “When I think of all the heroes that represent our country’s best, it’s the working men and women we should hold above the rest.” HOW TO REACH: Southwire Co., 770-832-4242 or http://www.southwire.com
