A Small Business Recovers from Lightning Strikes, Not Once but Twice

Posted by Dawn Marie Bailey

What do you do when lightning strikes your organization’s industry not once but twice–when revenues rapidly decline, banking/financial institutions pull back, and there’s a national workforce decline?

If you’re 2000 Malcolm Baldrige National Quality Award recipient KARLEE, you utilize the Baldrige Performance Excellence Criteria as part of your turnaround strategy. 

JoAnn Brumit, CEO of KARLEE, a contract manufacturer of precision machining and sheet metal, said that the organization’s performance excellence journey started in 1989, when a customer brought her the Baldrige Criteria. The customer said, “If I could build a company based on this, I would build a successful company,” she recounted.

The year 2000 was KARLEE’s most profitable year, with $80 million in revenue. In its 20-year history of 30%+ annual growth, KARLEE had never experienced a decline, never had a losing quarter, never needed investors as it grew from returned earnings, and never had a workforce reduction; however, 90% of its concentration was in the telecom industry.

In 2000, the telecom industry began collapsing. Wrote Paul Starr in 2002, “Out of the $7 trillion decline in the stock market since its peak, about $2 trillion have disappeared in the capitalization of telecom companies. Twenty-three telecom companies have gone bankrupt in a wave capped off by the July 21 collapse of WorldCom, the single largest bankruptcy in American history.”

Brumit said the Baldrige examiners who assessed KARLEE warned in its feedback report (a take-away from its application for the Baldrige Award) that the organization’s high telecom concentration was a weakness, but Brumit said she had pages of data as thick as a book that the telecom industry would remain strong. So, in 2001, Brumit said, “We decided to act like a turtle and simply let the storm blow over.”

Lightning Strikes Bar GraphIn 2008, the competitive market crisis again hit KARLEE. This time, the global, economic recession occurred across all industries, and banks/financial institutions were pulling back in order to mitigate their own risks. Suddenly, KARLEE, which didn’t even have a sales force, relying on business  from word of mouth, needed to develop a new business plan fast. This time, Brumit said, being a turtle was not going to work, the organization decided to be like a fox.

Slide: Performance Recovery Strategic Approach

With the help of the Criteria, KARLEE had a roadmap to improve its strategic planning process, adding risk analysis, stakeholder and market input, operational performance metrics, and communication action plans. Metrics and their alignment with the strategic plan became a major focus.

“I chose to take Baldrige as my business model,” Brumit said. “My team does not distinguish that Baldrige says to do this or to do that. We do Baldrige because it’s the best way to run a business. [The KARLEE team] look at Baldrige as the foundation of its business model.”

Brumit said KARLEE eliminated multiple continuous improvement projects to focus on the vital few, and this included a major update to its communication system. “When the company was falling, it became even more important to keep employees encouraged,” she said, and KARLEE emphasized state-of-the-union-type updates because what was happening to employees impacted families, too.

KARLEE stayed focused to weather the storm, Brumit said. “We kept senior leadership focused on where we’re going and the team focused on issues. You don’t want the pilot to leave the cockpit to fix the plane,” she said. Relationships with suppliers became a focus, and many extended terms to the organization; those same suppliers are still suppliers today. And, of course, a focus on customers was key. “When many companies are being torn up, overall performance falls, and customers hear this and fall off. We kept our customers intact,” Brumit added.

“Today, I can walk around and say, ‘I’m in manufacturing,’ and people say ‘I’m so glad you’re here. We need manufacturing in the U.S.,'” Brumit said. “We rode through [two economic crises] and came out a better company.”

As far as Baldrige, Brumit said, “It makes you think and assess different things.” In fact, many KARLEE leadership team members have received Texas Award for Performance Excellence training. Brumit said she even encouraged her son to complete the Baldrige-based training so that he can be exposed to the big picture of performance excellence.

Is your organization ready for a lightning strike in your industry?

Slide: Lessons Learned

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