When Thomas Swidarski took over as president and CEO of
Diebold Inc. in late 2005, he was taking the helm of a company that
had been beat up pretty badly.
Its former CEO, Walden O’Dell, quit the company for unspecified
personal reasons. The resignation came after several years of controversy surrounding the security and reliability of Diebold’s
touch-screen voting machines and O’Dell’s ties to President
George W. Bush.
Diebold’s performance was also suffering. Its stock price was
down, and the company reported that ineffective supply chain
management, higher-than-expected manufacturing and production costs, and higher energy costs were affecting profitability.
Into this storm stepped Swidarski, who had previously been the
company’s chief operating officer. He knew the manufacturer of
ATMs, voting machines and security products had a lot of potential, it just needed to be unlocked.
On his first day as president and CEO, Swidarski asked himself what he would want from a new boss. The answer he came
up with was simple: honest, candid communication.
So he wrote an e-mail and sent it to his 14,500 employees. He
wrote about his background in banking and how Diebold’s
relentless drive to provide world-class customer service had
wavered over the last several years.
He listed five areas that needed to improve if Diebold was going
to overcome the challenges it faced: customer satisfaction, product quality, supply chain, communications and long-term profitability.
He conveyed his belief that Diebold’s employees were passionate about their work, and their passion would help turn
Diebold around. Most of all, he wrote the e-mail himself
because he wanted the words to come straight from him, without the company spin that accompanies so many corporate
communications.
The next day, he had several thousand responses.
“What it told me was our organization was craving that kind
of communication and candor and refocus,” says Swidarski.
Once that avenue of communication was opened, the real work
of rebuilding Diebold’s confidence began. He knew that if the
first four priorities could be fixed, the fifth — long-term profitability — would take care of itself.
Keep talking to employees
Sending out that first e-mail was just the beginning of a communications overhaul at Diebold.
Swidarski doesn’t get 2,000 responses to every e-mail he
sends these days, but his commitment to communication has
become a backbone of Diebold’s culture. He didn’t see any candid communication between employees and management in
his earlier days at Diebold, so when problems happened, they
didn’t get fixed. That is why when Swidarski became CEO, he
made communication one of his main priorities. He has kept
his word since that first e-mail that engendered such a flurry of
responses.
“There were a lot of folks who wrote back to say, ‘This is the first
time I ever got an e-mail from the CEO, and I appreciate it,’ or, ‘I’m
glad our first priority is customer service; I think that’s important,
too,’” he says.
The lack of communication from the top of the executive chain
trickled all the way down to the lowest levels of the company.
Not only were problems unnoticed by people with the power to
fix them, but employees had no idea of the big picture or how
they fit in. Swidarski says instilling a clear company mission is
essential, especially for a new CEO.
“You have to be straightforward,” he says. “You walk into a
position [like CEO] and you’ve got a lot of responsibility to the
shareholders, to your employees, to your suppliers. You’ve got a
responsibility to lay out very clearly what your expectations
are.”
Of course, Swidarski could get 2,000 e-mail messages every
day and it wouldn’t mean a thing if he didn’t use the collected
information to improve the company. Although some of the initial correspondence was simple well-wishing, many employees
had questions for Swidarski or wanted to inform him about
their daily challenges.
“I had other folks writing back, ‘Here’s five problems I want
you to solve,’” he says. “I had other folks writing, ‘I like getting
the e-mail, but we’ll see whether you’ll continue to do this two
months from now when you get busy.’”
For the communications system to work, the CEO needs to truly
listen and act on the information received. Swidarski says Diebold
has implemented many of the ideas that came from employees via
e-mail, including ideas that make Diebold’s automated teller
machines more intuitive and reliable.
Swidarski’s biweekly e-mails are also a reminder to his
employees that they work at a global company. He says this
communication becomes more vital as a company spreads out
globally and needs to keep a cohesive culture.
“People feel connected,” he says. “Because of the global company we’ve become, you fail to realize that someone in Canada
is interested in what’s going on in Australia and someone from
Chile is interested in what’s happening in France. Because I’m
able to communicate as I take these trips, people know that
while Canton is our world headquarters, it’s not the source of
all answers, and it’s not the source of all control.”
Listen to the customer
Another area that needed immediate attention was product
service and quality.
“It always appeared to me that Diebold was very good at
focusing on the customer,” he says. “Over the last several
years, that focus wasn’t as sharp as it needed to be.”
Getting that focus back was priority No. 1, and the key was
getting feedback from the customers to see their side of things,
and that meant getting in front of customers to hear what they
had to say about Diebold’s products.
Online feedback forms and customer satisfaction surveys are
a good start, but Swidarski prefers to get direct feedback in
person. He travels a lot, and he expects the other members of
senior management to travel, as well.
“Generally in those situations, [the customers] tell me what
they like about what we’re doing, where they think we’re coming up short, and that is really good direct feedback,” he says.
“We have more formal systems, but it’s also good to talk to
someone at the highest level of banks eye to eye.
“The fact that I’m physically going, as well as asking my folks
to make sure we visit our top customers in each region of the
world over time, has convinced people that this is not just
something you’re going to do for the next month — it’s a way
of doing business.”
Armed with firsthand information, his executives can create initiatives to solve problems or create new products and services to
meet a customer’s need. But these initiatives take the effort of
everyone.
Success through teamwork is one of the many new attitudes
to take root at Diebold since Swidarski took over. He says the
most important key to turning around a troubled company is
building a rock-solid team.
“Surround yourself with the right people and do it faster than
you can imagine,” he says. “While you need to be decisive in a
lot of things you do, getting the right team in place is the most
important decision you need to make.
“And do it quickly, because there’s not a lot of patience in
publicly traded companies — or any company anymore — to
wait on you. At one time, you might have had a little honeymoon period. It doesn’t seem like there’s a honeymoon anymore. You’d better get on with it. That’s the cold reality of business.”
Swidarski says the most important key to building the team
that is right for your company is identifying your strengths and
weaknesses.
“Just be yourself,” he says. “When the board asked me to take
this position, I told them, like anyone else, I’ve got strengths
and weaknesses. Here are my strengths, here are my weaknesses, and here’s what I need from the board. Here’s what I
need to surround myself with, in terms of competent folks. I’m
willing to take the job, but I need to surround myself with these
folks to get it done.
“Admitting your weaknesses or knowing what your weaknesses are and being able to make decisions by having people around you that can help you is important.”
Don’t wait to make tough decisions
Swidarski says when you’ve got a team in place that you can
trust, it frees you up to focus on other things. He was able to
change the way Diebold’s organizational changes happened.
He wanted to be more flexible, and soon he was enacting organizational changes very swiftly. Instead of spending months
agonizing over a decision, Swidarski acted on what he knew.
“I’ve got a bright person, let’s put him over here,” he says. “I’ve
got a hole here, let’s address that. I would rather go ahead and
make those changes, move down the path, and then tweak it,
than wait two months trying to get the perfect answer. I’d rather
make the decision now, and then perfect it as we move along.”
For example, the company was having trouble with a manufacturing facility in the south of France. Most of Diebold’s supply chain was in Eastern Europe, and the French plant wasn’t
in the best logistical location. A plant in Hungary was a better
place for production, but closing the French plant would cost
$20 million because of government regulations.
Swidarski closed the plant as one of his first moves. It cost
Diebold $20 million for paying workers and reindustrializing
the area, as specified through France’s social plan. Those initial
challenges made the decision easy to second-guess, but
Swidarski knew the move would help improve profitability in
the long term.
“In the grand scheme of things, it’s a decision we should have
made three, four years ago, but it wasn’t made,” he says. “Thus,
it was sitting there, and we knew we needed to be in a better
location. So we made that decision, yet we had the immediate
financial consequence of $20 million cost to shut the facility
down. And long term, that’s the right answer.”
By the fourth quarter of 2006, the Hungarian plant had
churned out 1,000 ATMs during that period, with quality levels
and on-time delivery meeting or exceeding those of other
Diebold facilities in Asia and North America.
The way Swidarski sees it, it’s a win-win situation, despite the
$20 million loss. Not only is the company making a smart business decision by moving closer to its suppliers, but it is showing
its shareholders that Diebold knows you have to crack a few
eggs to make an omelet.
“It’s taking difficult decisions and saying, ‘Yeah, we’re going
to do this’ — and letting the world know we’re going to do it —
that has really rejuvenated the stock from Wall Street’s standpoint,” he says. “They see, ‘When they have issues, they’re
going to address them.’”
A confident future
Throughout his many organizational changes and new initiatives, Swidarski stuck to his plan, and it has worked so far.
When the company’s management changed hands, the stock
price fell into the $35 range, but now it has rebounded to the
$50 range, which is cause for optimism. Revenue has grown
from $2.5 billion in 2005 to $2.9 billion in 2006. But that’s not
the point, Swidarski says.
“The point is, although our financial results aren’t saying
we’re shooting the lights out, the fact that we’ve put a strategy
in place, and we’re addressing some key issues,” he says.
By the end of 2008, Swidarski plans to knock $100 million off
the company’s cost structure. By the end of 2006, the company
had eliminated $12 million in expenses from its 2007 structure,
with another $23 million expected to be eliminated by the end
of the year. The ultimate goal is to achieve an operating margin
of 11 to 12 percent in 2009.
At the end of the first quarter this year, Swidarski said, “I am
pleased with our progress and feel our condition has improved
dramatically over the past year. While we still have much that
needs to be accomplished in all our key initiatives, I remain
confident we will reach the goals we have established.”
HOW TO REACH: Diebold Inc., (800) 999-3600 or www.diebold.com