Waltco Chapter from Upcoming Book, “Corporate Fantasies that Came True”

Waltco: Transforming a 55 Year-old Company into a World-Class Manufacturer

I.   Company History/Situation

Waltco Engineering is currently a world-class service oriented manufacturing company, specializing in precision machining and assembly for customers who demand only the best. Waltco has 56 years of experience and over 150 employees.  The company’s focus is machining small to medium size parts ranging from prototype quantities to high volume production.  They have extensive experience with a wide range of materials: magnesium, titanium, beryllium, aluminum and stainless steel.  They continue to add value for their customers with Ship-to-Stock Programs, Just-in-Time Delivery, complete Program Management experience and concurrent Engineering Expertise.  They have a Class 100 Clean Room, utilize Zeiss CMM capabilities, and have one of the best on-time delivery records in their industry.  They continue to invest in quality programs and have recently received ISO 9002 registration.  However, this picture of thriving success was not how it has always been.  Just four years ago, Waltco’s status seemed much less stellar.

The aerospace industry was bottoming out.  One customer supplied the major part of Waltco’s business, and that company was considering taking its business offshore.  The frequency of wins from quotes was less than 5%. The company was making only about 85% of its deliveries on time.  Scrap and rework were  about 5%.  Communication among departments was poor, with friction rather than teamwork. These factors provided the motivation for Jim Brannan, the CEO, to upgrade his organization and were the impetus for his desire to change.  The organization needed to transform itself in order to remain competitive in the marketplace.

Jim Brannan had been considering utilization of an outside consulting, strategic planning and training firm for more than five years.

Outcomes desired: The reasons this CEO decided to embark on an extensive, in-depth business process improvement program that included over 35,000 training hours and spanned an 18 month period, were three-fold:

He wanted to own a company that was a world leader in quality and on-time delivery.  He wanted to be the industry standard. 
    
He wanted a culture change within the company.

He wanted a well managed, well-run company that he could turn over to others in his organization when he retired, and he didn’t want the place to fall apart when he did.  He needed the organization in place to function well under new leadership.

II.   Challenges

Brannan had always had the vision of implementing a Total Quality Management (TQM) )program, but the actual process of implementation and the ramifications to him and his company seemed somewhat daunting.  He was on virgin territory when it came to implementing a massive training program that was designed to create a culture change and to develop his company into a world-class manufacturer.  He also was fairly resistant to the idea of teams and interdepartmental team meetings.

Surprisingly, the initial roadblock to the improvement program was in obtaining the final  “go ahead” decision by the CEO, to commit to the full implementation of the program.  The decision to go ahead was aided by the full support of the program by two key people in the management team: the CFO, Fred Pobanz, and the Director of HR, Mike Hammond, who became the program’s champions and the catalysts for action. They both completed extensive “legwork” to screen the potential management consulting firms being considered for delivery of the TQM program.

Fred Pobanz commented on the firm selected: “The NSG program was by far the most superior out there.  It wasn’t a hard choice.”

The next challenge lay in trying to get the rest of the management team on board, to get them really enthusiastic. “The whole program would have failed if we had not had a majority who really bought into this.  People have to see the value.  You have to get everybody’s attention,” stated Fred Pobanz, regarding the very real challenge of getting the management team to fully commit.  “We had a very tangible lack of teamwork in our organization.  I mean we had daily battles among departments,” stated General Manager Carl Rolfe.  This was an initial challenge that had to be recognized and handled effectively.

There was the very real dilemma of a pervasive mind-set among employees who had worked at the company for 20-25 years.  “The Old Guard” was of the mentality, ‘if it isn’t broken, why fix it’. Many were functioning in what is known as “Entitlement.”  In an entitlement environment, people are comfortable with “how things are.”  They avoid risk, assessment and any changes. They’re generally passive and complacent; they are not challenged by goals nor held accountable. These individuals felt they had done their job for long enough to “know how it should be done, and they didn’t need anyone from outside coming in with new ideas for improvement and change.”   The challenge was to create a paradigm shift in this mind-set, while not allowing it to affect others who were willing to learn and improve.

“When the training program was implemented, the company was the busiest it has been for 10 years” stated Dan Marshall, “so it was hard to schedule all the training.  But we did it and are very glad we did.” Added Claudio Buzzoni, Manufacturing Supervisor,  “In the beginning, people were skeptical and complaining about the whole process, but later on they were actually looking forward to participating.”

The final challenge lay in developing the organization to believe in itself and to believe that it would become greater than it was at the time.  “We had to raise individual expectations,” states Mike Hammond, “and that is always a challenge.  We needed to communicate the vision, mission and value to the organization.  We had to help people to understand they were not departments unto themselves, but part of a whole, interrelated team.”
 
Approaches Taken

Initially, a thorough assessment of the company revealed there was a complete lack of any vision, mission or values.  This fact and the need for an emotional event to bring the senior staff together prompted an off-site retreat that included Strategic Planning and Tactical Planning.  The goal was to focus the critical mass of the group, and get everybody moving in the same direction. In addition, the retreat was designed to provide parity of knowledge, build commitment and begin to develop a team spirit and lay the groundwork for the formation of teams and team building.  “It really worked!” states CFO Pobanz. “Those opening strategic and tactical planning sessions were key elements to the success of our program.  They were very productive as well as entertaining.  It really got the whole group involved.”

The Strategic Planning Retreat brought the critical mass together and developed the vision for where the company wanted to be in 3 - 5 years, what they would need to do to achieve it, what markets and products they would target and what their competitive edge needed be.  “Those were the best four days we’ve spent together” asserts controller Dennis Hagewood, “Before that, we were scattered and all going in different directions.”

A concept to get business with quick turnaround prototype orders surfaced from the Strategic Planning meeting.  Within one month, DEC became a customer!  This was an immediate win that yielded positive support of the process.   

The Critical Business Success Factors (CBSFs) were determined in Tactical Planning. Teams were formed to work on the key projects that would yield the greatest results.
During Leadership Training the critical mass, namely the senior managers, were taught how to become effective role models. They carried the message to the troops and truly demonstrated the Vision, Mission and Values to each department. They were key catalysts in the changes that occurred in the culture.

Extensive training was completed company-wide, at all levels of the organization.  It was jump-started with the Foundation Track and then launched company-wide.Training was conducted group by group. This training included SPC, Internal Customer Satisfaction System, Design of Experiments, Management Skills training, Problem Solving, Team Building, and Effective Communication skills.

The workforce slowly began to support the business process improvement program.  One by one they came to believe in the process, in the company and in themselves.  They became the ones to identify many problems and to become key factors in finding the solutions.

There were a few individuals who could not buy-in to the process, so they moved on or were replaced.

IV.   Performance Results Achieved

Increase in sales and profits: As a result of the Business Improvement Program and the subsequent ISO 9000 certification, the company was able to meet rigorous quality standards and land a very substantial customer—Hewlett Packard. This resulted in a 90% increase in sales over the two previous years.

New Customers: New customers who came on board included notable companies like Hewlett Packard, Quantum, DEC, Taylor Made, Hitachi and new IBM divisions.
Recognition: Waltco was awarded the prestigious ‘Hewlett Packard’s Most Improved Supplier’ Award for 1995.

Improved management: The company was now viewed by their key customers, IBM, Hewlett Packard and Digital, as being well managed, resourceful and innovative.  Carl Rolfe, General Manager, attributes the “well-managed part” to the TQM program and the systems that were put in place from the Business Improvement Program.  “We are now perceived as being a professional entity in our industry,” stated sales manager Al Budge.

Reduced costs/excellent ROI: The company dramatically reduced its scrap and rework rate.  It was more than 5% and is now about 2%. “The program had an excellent ROI,” states CFO Fred Pobanz. “The plan was to pay back all costs in two years. We actually did it in one. This not only included the consultant and training costs, but also the much more substantial cost of all wages paid while they were being trained.” 

ISO 9000 certification: Waltco obtained ISO 9002 registration with minimal effort. “We were able to get our ISO 9002 certification very easily.  Without the TQM program, I don’t think we would have gotten it,” stated CFO Pobanz.
   
Shortened sales cycles and increased RFQ’s: The Business Improvement Program and the ISO 9002 certification allowed Waltco to often bypass the need to be surveyed before they could receive an RFQ. “This definitely shortens the sales cycle and increased the number of RFQ’s we got,” stated Al Budge, Sales Manager. “We were very well-positioned for significant growth. This also allows us to get into companies we would have been excluded from before.”

The internal customer training helped to reduce the number of misinterpretations and the time wasted doing things over.  People are now very specific about internal customer requirements.  Feedback in the organization indicated that this program had a major impact company-wide. The ability to communicate more effectively and meet each other’s needs continues to sustain the program long after training has been completed.

Improved on-time delivery: “We now run at 90-95% on time; before the measurements and systems we put in place with this program, we were around 85% on time,” explained Dave Nielson, Materials Manager. 

Two other major developments yielding positive results from the consulting and training program were the development of a “direct ship-to-stock program” and the implementation of a quick-turn procedure for startups of new products.  Both impacted on-time delivery.

“Because of what we learned, we’re also measuring the on-time deliveries better now” explained Nielson.  “We look at more factors and report these every  week.”
 
Improved systems and measurements: Waltco received very extensive training in the Statistical Process Control and Design of Experiments. This training not only initiated new systems and measurements but also reduced the number of people required to do certain jobs, while saving time for others. We used SPC to monitor the line,” stated Claudio Buzzoni. “A huge benefit was that I didn’t have to supervise everything personally so much.  The main benefit was that the line ran by itself.  It helped give me more time to do what I needed to accomplish.  It also cut down on the number of people we needed to do certain things.”  “The best thing to come out of TQM was the SPC - everybody is using it.  It was really valuable” confirmed Bob Bocox, in quality control. Two of the operators completely concurred, “I really understood the importance of measuring things” stated Alfredo Rodriguez, “ and it helped me to focus on quality.”
Dramatically improved problem-solving abilities: “People now have a more professional respect for each other’s problems,” said Carl Rolfe, General Manager,  “not only do we solve problems faster, but we concentrate on root-cause solutions instead of nit-picking at details.  Problem solving is more thorough and results are faster.  We’re 80% better than we were.” “We’re using the tools we learned, like the Cause and Effect analysis, the Parieto Charts and the Comparison Decision Making Worksheet” said Dennis Hagewood, “we ‘re using step by step analysis and are more thorough.”

Improved communication and teamwork: There was a unanimously held opinion among all people interviewed that some of the key aspects of the program that have had  —major positive impacts on Waltco’s culture were the Internal Customer Satisfaction System training combined with Team Building and Communication Training.  “What we learned is how to understand each other’s problems and concerns. We learned about others responsibilities, and what they really needed and required from us. We began to depend on each other. We realized the impact we had on everyone’s success.  It really improved communication both inter- and intra-departmentally” explained Mike Hammond, Director of HR, Claudio Buzzoni, had an additional benefit, “I really started understanding people better…how to work with different people. For me it was very beneficial.” The training in ICSS and communication received high marks from other departments as well. Dan Marshall, Engineering, and Bob Bocox, Quality Control described the benefits for them.  “We had really bad communication problems prior to the program.  After the training we had open lines of communication between the floor and supervisors and supervisors and managers. We learned better listening skills and how to get more information before decisions.”  Fred Pobanz, CFO, agrees, “We absolutely have better working relationships between departmentst—there is more openness and less conflict.”  “What’s nice for me” said Dave Nielson, Materials, “is people tend to fix a lot more things themselves now. I don’t have to arbitrate conflict like I used to. I think the very best thing we got out of this is that the communication and teamwork improved dramatically.”

Minds open to change: Al Budge explained it well: “If we didn’t have the TQM training, we would not have changed.  We would have just continued to go with the status quo.  This type of training makes you open to change, and that’s critical in today’s market.  These days you have to go fast, be able to change, to adjust, because to go slow is deadly.  You must change to fit the market.” Dennis Hagewood agrees, “Our company used to move very slowly and take a long time to make decisions.  Now we are more commercial, fast paced, and move quickly.”

V.  Cultural Shifts and Improvements

The outcomes of the Business Improvement Program are summarized below. These organizational changes, as well as the information listed in the ‘results’ section will provide a complete description of the events that occurred at Waltco as a result of their decision to implement the consulting/training program.

The President moved the General Manager into the top position and then was able to retire. This fulfilled one of his goals for the training program.

Management Changes:

The Vice President of Sales retired. A replacement was promoted from within.
 The Manufacturing Manager was replaced.
 The Director of Operations was replaced.
 The Quality Manager was replaced.

It is important to note that whenever you want to radically change an environment, there are inevitably changes in the culture, processes and personnel that must be made.  Strong companies and strong leadership make these difficult but necessary decisions.

VI.  Learning Points

Lessons that executives and managers can take away from the Waltco experience:

In order for any endeavor of this nature to succeed, it is essential the CEO support the undertaking completely.  The CEO must support it financially and emotionally, as well as with time commitments and actions to demonstrate support of the process.  The CEO’s behaviors, not words or lip service, are essential.  The CEO is the key role model.

A second essential element is the buy-in from the critical mass.  The critical mass is defined as enough key individuals at the executive and managerial level committing to the execution of tasks, processes and changes.

Buy-in can occur when the critical mass is gathered together and involved in the Strategic Planning and Tactical Planning Processes.

Paradigms can change when people see true results being achieved, either financially, culturally or process-wise. Even the strongest skeptic will be swayed by results. When the critical mass is committed, many can be swayed because of the overwhelming pressure from peers.

Massive training can occur and be effective, even when the company is extremely busy. 

An effective management team is essential in order to establish change and then to sustain the accomplishments.  If any individual cannot contribute results and share the company’s values, that issue must be addressed and resolved.

A culture change can be created by emphasizing values and by role modeling.

An organization’s performance will be upgraded through concurrent training in both technical concepts and techniques, as well as training that improves interdepartmental communication and individual communication skills.

In order for any organization to have the maximum effect possible, it is essential to have the right match of background and behavior requirements of each position.

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