The Power of Treating Employees Like Family

Everybody book

Everybody Matters coverParenting gave Bob Chapman, CEO of Barry-Wehmiller, a global supplier of manufacturing technology and services, an epiphany about leadership: “Parenting is the stewardship of the precious lives that come to you through birth, adoption or second marriages. Leadership is the stewardship of the precious lives that come to you by people walking through your door and agreeing to share their gifts with you.” This insight ultimately transformed how Chapman runs his company. In a new book Everybody Matters: The Extraordinary Power of Caring for Your People Like Family, Chapman and coauthor Raj Sisodia explain how any company can integrate this perspective into their organization.

Knowledge@Wharton recently had an opportunity to speak with Chapman and Sisodia about their book.

An edited transcript of the conversation follows.

Knowledge@Wharton: Bob and Raj, thank you so much for joining us. Bob, you write in part one of the book about your journey, “What could have broken me made me.” Could you tell us how this has been a recurring theme in your personal and business life at Barry-Wehmiller?

Bob Chapman: As I reflected upon my journey, [I realized] in my greatest moments of challenge came my greatest learnings….When I found out that my longtime girlfriend and I were going to have a baby, I went from a C student to a straight-A student. All of us are going to experience challenges in life. My experience is that it’s during those challenges where learning can and does occur, if our minds and hearts are open to it.

There’s no question that [during] these moments of dramatic personal and professional challenge, my mind went to, “How can I get through this?” My mind was open to new ideas. So many of the ideas, both in terms of our leadership model, in terms of our business model, were really born of an environment that was very challenging, where our minds sought new avenues.

Knowledge@Wharton: You took on the leadership of Barry-Wehmiller when you were in your 30s, after your father’s death. The company was in poor financial shape at that time. What decisions did you make to expand and grow your company? Given what you know now about managing people, what would you have done differently?

Chapman: First of all, I’ve learned that you can’t manage people. You can only inspire people. Leadership is a part of the process of inspiring people. When my father died, it was a 90-year-old company. Its innovation had ended with the death of Mr. Wehmiller in the early 1900s, and it had lived off that innovation. I took the experiences of my MBA program and the benefit of my education, and I said, “How can we grow? What opportunities can we have to grow?” [It was] a company that hadn’t grown in decades. It survived, barely, financially very weak. I brought to it new ideas of growth.

I basically said — and I think I learned this in my MBA program — you’re either growing or dying. I looked very purposefully for avenues for growth. That ended up being in the field of solar energy. That ended up being in the field of electronics. It ended up being new forms of packaging, filling technology…. I said, “We’re proud of our history. But our history is not our future.” It’s that responsibility we have in leadership to understand where we are, but more importantly, to understand where we can go to give our people a better future.

In hindsight, that’s what happened. The challenges we faced, the opportunity I was given, caused me to think about how I could create a future. Not just exist, but to create a future and to shape a future. That occurred in that period of time after my dad’s death. We began growing dramatically from 1976 to about 1981 or 1982. We grew from $18 to $72 million by moving into new fields and developing new technology. All still very fragile, financially, but many of those new initiatives were funded by customers and ideas.

“Management is about telling people what to do, and leadership is about allowing people to do what they’re capable of doing, toward a common vision.” –Bob Chapman

I only forgot one thing. I was so enamored with the growth, having had decades of no growth — and the notoriety of that growth — that I didn’t have financial discipline within my tool set. Therefore, we grew revenue dramatically, but we relied upon debt greatly to finance that, which our bankers were willing to do because they believed in these growth fundamentals. But that was one of my major mistakes: to not have better financial discipline….

Knowledge@Wharton: I was also very interested about the way you used acquisitions to build the company. One of the things you write in your book is that you made acquisitions where failure meant death. Could you talk a little bit about your acquisition philosophy, and how you used your acquisitions to build value, rather than extract value?

Chapman: Well, I have to go back a step. When I was a young man, in the area of St. Louis where we were, there was a very prominent company and a very successful company called Emerson Electric Company. Emerson Electric was built by Chuck Knight through many acquisitions. I was also influenced by a Harvard case study on how you grow mature companies in mature markets.

I saw Emerson Electric go from a relatively small company — I think $500 million — to $20 billion through an acquisition discipline of acquiring companies in more or less mature industries….

In my case, I had nothing other than an idea. I had no money. I had no experience and no advisors. All I knew is that Emerson Electric had grown through acquisitions. I had a financial background — not an engineering background, not a product development background. So maybe I could do that. I began doing acquisitions when, again, we were financed with asset-based lending. We had absolutely no room to be wrong. When I went to my very professional outside board in 1984 with the idea of this first acquisition, they looked at me seriously and said, “Bob, we agree with you that this small $3 million company fits and would be a good acquisition. But we want you to understand something. If you fail, it’s all over.”

That’s not because they were going to let me go. But because financially, the company was so fragile, it had no room for failures. In hindsight, that all worked out to our benefit, because the only thing I could buy were things that nobody else wanted. …If you were told that your life depended upon something, I would think you would bring incredible discipline and focus to that. So knowing in my first acquisition that I had no option but to succeed, I threw in an immense amount of dedication. Our very first acquisition became a massively successful acquisition of a company that nobody else wanted.

That is how I began that journey. Because I had no money, I had to do all my scouting and research and logic. I began buying companies that I thought fit our future, that nobody else wanted to touch. Therefore, I could buy them at a price that was, in hindsight, very reasonable. I brought incredible intensity to make sure that they were successful, because failure was death. The company had no room to be wrong. Even though today the company is massively more prosperous, financially rock solid, I still have in me that same discipline. You can’t fail at acquisitions. Statistically, 77% of all acquisitions fail. Having executed over 80 acquisitions, that’s not our situation.

Knowledge@Wharton: Is there a secret formula to making acquisitions work?

Chapman: Discipline…. Never get into deal momentum. Never get into bidding contests. You end up paying more than you can make work. From day one, because I couldn’t afford to do that, I developed discipline. There was no deal that I would ever get emotionally involved in, that I would do and be disappointed. [Make] sure that you know exactly how you’re going to make that company better and get your return. You don’t enter with hopes and dreams. You enter into it very disciplined. I know exactly what I’m going to do to make that company better….

Knowledge@Wharton: Talking about getting emotionally involved in acquisitions is a good segue to what I wanted to ask next. How did you realize there was a gap between you as a driven business owner, focused on growing profits and cutting costs, regardless of the human costs, and your commitment to being a good husband and father to the family? How did those two sides come together in your life?

Chapman: Cynthia and I … had both been married before, so we came together as one family with hers, mine, and then eventually ours. I don’t remember what motivated me, but I was very serious about being a good father of a blended family. I pursued classes and educational opportunities that would help me be a better steward of the lives of these children and my wife, so I could be a responsible parent and husband.

You learn a lot, in terms of how to raise a good family. At the same time, on the other side, I was applying what I’d learned in my MBA program, my education, my experience at PricewaterhouseCoopers, to try and develop a good business. But I thought they were totally separate. I thought family is family, and business is business.

“When you look at somebody as somebody’s precious child that you have a chance to impact, it profoundly changes the way you view people. They are no longer a function for your success.” –Bob Chapman

Over the 1980s and 1990s, as I continued my intellectual exploration of human behavior … all of a sudden I became aware that what I learned about parenting was about leadership. What I learned in business school was about management, and leadership trumps management. Management is about telling people what to do, and leadership is about allowing people to do what they’re capable of doing, toward a common vision.

It was a dramatic awakening for me. In my business education, I learned it’s all about me and my success. I was never taught nor made aware of the impact my journey to financial success would [have on] the lives of others. I thought, “Business is business, and people have their families, but they’re not related.” We were taught that to be successful, we would have organizations and we’d have accountants and secretaries and sales people and engineers. I was never taught to care about those people. I was indirectly taught to assume those people were functions. As long as I needed them, I might even be nice to them and care about their family and so forth. But it was always about me and my success. It was never about them….

Parenting is the stewardship of the precious lives that come to you through birth, adoption or second marriages. Leadership is the stewardship of the precious lives that come to you by people walking through your door and agreeing to share their gifts with you.

[Those who] worked for us are not accountants and secretaries and engineers and sales people; they are somebody’s precious child whom you are a steward of. How you exercise that stewardship will profoundly affect that life…. We have these people in our care for 40 hours a week. The way we treat them will profoundly affect the way they live their personal lives….

When you look at somebody as a receptionist, you don’t necessarily care about them. Again, you might be nice to them when you walk by. But when you look at somebody as somebody’s precious child that you have a chance to impact, it profoundly changes the way you view these people. They are no longer a function for your success. They are a precious, precious person who simply wants to know that who they are and what they do matters.

Knowledge@Wharton: Raj, in terms of learning from Barry-Wehmiller’s experience, how can companies apply some of the lessons that have been learned there over 40 years to drive their own success?

Raj Sisodia: There are a couple of ways in which Barry-Wehmiller thinks about business that are different…. First is the idea of purpose. You don’t have to have a cutting edge or so-called novel product to have a higher purpose. Your purpose doesn’t always have to be embedded in what you do for customers through your product or service.

In this case, you can think about your people as your purpose. If you really think about it, people are the ultimate purpose of business…. I think we’ve lost sight of that to a very large degree. This company puts that front and center. They say, “We measure success by the way we touch the lives of people.” That’s at the top of their guiding principles.

Another lesson is articulating exactly what you do believe in and what you stand for, and having that really mean something. It’s almost like the Declaration of Independence of a country: the guiding principle, the leadership checklist….

Third is what Bob has been touching on, which is that the definition of leadership extends beyond the work day or the work week; it impacts the way people live. It is the stewardship of the lives entrusted to us. That also goes beyond what in Conscious Capitalism [a book co-authored by Sisodia] we talk about as conscious leadership. That still was somewhat focused on how people are at work, and how fulfilled they are, and how much meaning and purpose they find. And all of that is great, but I think this goes beyond that.

So I think those are some. Any business, even in an old industrial setting in small towns, can aspire to do this. It starts by creating a vision of a better future.…

Knowledge@Wharton: My next question is for both of you. Talking about articulating what you stand for is very important. But almost every company says that it values its people above everything else. Why is this so easy to say, but so hard to do?

Sisodia: It’s always easy to say it, of course. It may well be easy to do it when times are good, when business is going well and the economy’s strong. There are really not any tough choices to be made.

“Leadership extends beyond the work day or the work week; it impacts the way people live.” –Raj Sisodia

Inevitably, when tough times do come, that is when your commitment to this truly gets tested. One of the most powerful aspects of this story is that what happened in 2008, when the great financial crisis hit, which impacted this industry, capital goods manufacturing, even more than most other industries because those are purchases that can be delayed by quite a bit by customers….

The normal response, which many of their competitors resorted to, was to bring their costs down 30%-40%, commensurate with their revenues going down, laying off many people and treating that as a routine response to tough times. The way that Bob and Barry-Wehmiller responded [was to] think deep and hard about the premise that … we measure success by the way we touch the lives of people. [They recognized] that this would have a devastating impact on so many lives, especially in small towns where there are no other employers or there are very few other jobs…. [They came up] with a very creative solution. [They asked] the question, “How would a caring family deal with hard times?”

[They came] up with the notion that everybody would share in the pain, so that nobody had to suffer too much, adopting furloughs instead of layoffs, where everybody got to take a month off to do other things. It turned out to be a very enriching thing in many people’s lives because they were able to use that time in very, very compelling ways.

It also removed the fear from the organization that there would be mass layoffs. It allowed the company to save a significant amount of money. That, along with reducing the retirement match, eliminating that for a year, allowed them to get through that. Then, when business started to recover, the company ended up reinstating the retirement funding that they had taken away, as a goodwill gesture. In fact, it recovered much faster in their case because their customer relationships were strong and their people capacities were still at full strength. So they recovered much faster, and they had a great advantage over other companies that were scrambling to rehire people….

Chapman: We said we measure success by the way we touch the lives of people. That was not an expression some advisor gave us. That came to me in the process of our marketing team developing a video to try and convey our company. That’s because our culture was just evolving at that stage. It’s more about our company. At the end of the video, they were trying to come up with some expression to articulate how successful we’ve been: growth in sales, growth in profits. This occurred at the time of the Enron scandal and the Monica Lewinsky political scandal, when the public image of CEOs, companies and politicians was very low.

I thought, “We measure success all wrong in this country. Many people have made millions, billions of dollars, who have incredibly broken personal lives. Would we view those people as successful?” So from that feeling about the political scandal, the corporate scandal and Arthur Andersen, I [said], “We are going to measure success by the way we touch the lives of people.”

 

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