An interview with Katherine M. Hudson, President and CEO of W.H. Brady Co.

Having made her mark at Eastman Kodak Co. by more than tripling the earnings of business units she managed and raising awareness of diversity and family/work balance, Katherine M. Hudson is positioning W.H. Brady Co. for global leadership in its markets.

W.H. Brady Co., a manufacturer of labels, signs, specialty tapes, adhesive parts for microfloppy disks, and printing systems, was an old-line industrial company for which Hudson's style of management offered a fresh approach to business operations.

As a prelude to her engagement as a featured speaker at the upcoming APICS International Conference and Exhibition, Hudson spoke with editor David Greenfield about her management style and why she believes it to be an effective way of doing business on the cusp of the millennium.

Q. One of the many things you're known for is raising corporate awareness on issues of diversity, women in the workplace and work/family balance. The importance of these issues in large corporations is becoming increasingly commonplace, but how can a mid-sized or small company maintain a desirable level of focus on these issues?

A. It's actually been easier in a way for smaller companies to do this, because with a smaller employee force you can at least get your arms around the issue. I think where the difficulty comes for both large and small companies is that globalization is putting a far greater degree of competitive pressure on everyone. How do you compete with countries such as Korea where the work week is six days, as opposed to the States where it's five days?

What we've done at Brady is tell our people that we've got to work smart. They are not judged by how many hours they work, but on what their output is. And that means that at times people do have to put in extra hours, but we also have flexibility. At Brady, people can flex their work schedule, whether it's for something as pleasant as a soccer game or as difficult as an illness in the family. While flexing is more difficult in multi-shift production areas, our teams find ways to do it there as well.

Q. You've said that you intend to recruit the most competent work force because you see that as guaranteeing the highest level of corporate performance. What are the initial concerns for a company to address in order to recruit such an effective work force?

A. The biggest concern at the moment is that in many places, especially in the locations we're in, unemployment is so low. It's a seller's market. There are good people out there, but everybody's going after them. In our case, what we're looking for is a combination of characteristics. First and foremost is attitude. I can forgive people who may not at the moment have all the current skills; but if they're a whiner, I don't want them. I think that having a can-do attitude is absolutely critical.

The second thing is the issue of flexibility and willingness to change.

The third is willingness to learn. We will look for that before we will look at exact skills. When it comes to skills, you need the basics; and for us, those skills are team skills, communication skills, and computer skills, in addition to technical skills such as screen printing or other specialized functions where we may have to seek out specialized folks. But in general we're looking for the personal attributes that show us a worker will fit in with what we're trying to achieve as a company.

Q. Much has been said about your walk-around management style and the importance you feel it has in facilitating adaptation to change within a company. Explain.

A. The most important thing in trying to have change occur is generating the feeling that we're all in this together. And if you have significant barriers between management and the people doing the work, I don't think you're going to get there from here. Maybe in the past you could have the all-knowing CEO who actually made decisions and affected what was going on in dramatic detail, but the world is too complex right now. My people, who actually do the work, know far more than I do about what they're doing. So the best thing I can do is set a direction and a tone for what we're trying to accomplish; but they're going to have to be the ones that drive the change. If they feel that I'm not with them, or that they can't approach me and actually make a comment — even a negative one — then I don't think we'll have the degree of team spirit and energy needed to go forward.

We all park at the back of the building. The visitors park in the front and all the workers park in the back. Having to walk through the factory and allow people to see you walk out to get to your car, that's important. I sometimes worry that we have a group of CEOs in the country who are so pampered that they wouldn't know how to get from an airport to a downtown hotel without assistance. Is that the kind of person you want running a major enterprise? I don't think so.

It's important for employees to see their boss as just a regular person. My door is always open and people can and do pop in to make regular suggestions.

Q. You've been quoted as saying, "Goals have to be set at the middle of the company and work outward, not come from the top down. If people don't like management's goal, they'll spit it out." How does a company effectively empower its people to reach a point where goals are forthcoming from the middle?

A. One of the things that we've been doing is to operate on the basis of value creation. And we place a great deal of importance on the value equation. We say that value is generated through growing your top line (revenue growth), cost control and using your assets wisely. We're teaching all of our employees this simple equation. We tell our employees that business is not that complicated, that it's not this big intellectual exercise for which you have to bring in heavy duty consultants and have them show you what to do. All you have to do is three things: grow the top line, control your costs and use your assets wisely.

In our case, the goals that we set for Brady are based around revenue growth; and even though we are sort of an old-line industrial company, we try to grow our top line at an annual compound growth rate basis of about 15 percent a year. And we want to grow our earnings at a rate greater than that. So our costs have to be growing at a rate that's less than our top-line growth for us to generate an expansion of earnings.

We had an example recently where one of our employees with 25 years of service was looking to semi-retire and move into a part-time position. Now, a particular part that he makes as part of his job requires a certain level of expertise to manufacture. Although this manufacturing procedure can be read about, there's a certain art to it. And if the part is made wrong, $200 worth of material must be thrown away. So the older worker has been teaching this younger worker how to make this part, and he was really proud when he got this younger worker to make his first set of these parts successfully.

Now, that's really cool. But it came out of that individual and his pride. It wasn't management who said, "Thou shalt not throw away $200 worth of material." It came out of educating people to understand that you can't throw stuff away.

Q. When you say that you are in pursuit of "value-creating global growth," what does that mean in terms of how you conduct business?

A. The first thing is having an understanding of what investments are required with regard to growth. You can see many companies over the past decade that have grown, but not necessarily in a good way. So you have to pick the growth that's going to generate the greatest potential returns to the shareowner over the long haul. The challenge for global growth is to figure out how to leverage your current infrastructure to allow you to move into new geographic areas and new markets, and still be improving returns to the shareholder.

Q. Speaking of value return to the shareholder, I know that you place a great deal of emphasis on Shareowner Value Enhancement (SVE) as part of the concept of Economic Value Added (EVA). How can this concept work for a privately held company?

A. I say that it works better for a private company because it's the owner's money. I think, intuitively, the owner is very much driven toward value; and owners actually take a better view of the process in terms of the long haul versus the short haul. Public companies are very much driven by the quarter mentality, and you have to be willing to tough it out if you're investing for the long term.

When Joel Stern (one of the founders of the EVA concept) speaks on the subject of EVA, he says he learned about it from a relative who ran a little retail store. Now, Joel went to one of these high-powered universities to get his MBA. After graduation, this relative asked him what he had learned, and Joel proceeded to tell him about all these business formulas. This relative stops him and says, "No Joel, you don't understand. Here's my cigar box where I put my cash receipts. At the end of the day, if the lid of the box is up, I had a good day."

That's what EVA is all about.

Q. Another issue you place a good deal of focus on is communications and the importance of keeping up a consistent message. One hears a lot of talk about this topic today, but how does a company achieve and perpetuate the practice of message consistency and effective communication?

A. According to one communications guru, people have to be told something seven times before they get it. This isn't an issue of intelligence; it's an issue of getting through the noise of today's world. So if that's the case, it says we have to have a message that we all believe in, and we have to keep repeating it so that everyone understands. In our particular management team, we've been at this for over two years.

For example, around the subject of revenue growth we have four strategies, and they've been the same for the last two-and-a-half years: geographic expansion; increasing market penetration; joint ventures and acquisitions; and new products and new markets.

But the effect of repeating this message over and over can be seen when you talk to anyone on our management team — they will repeat back to you the same items for focus: geographic expansion; increasing market penetration; joint ventures and acquisitions; and new products and new markets. It's all coming back to us from the staff, so you know it's getting through to them.

So are we there yet? Do all 2,500 employees have the message? No, not yet. But we are making a big dent and consistency is the key. But you have to have a flexible enough message so that when things change in the world — which they are going to do — the message carries forward. It has to be simple enough so that you can tick it off with no notes. And it has to be consistent across the management team and over time.

Q. Briefly explain your approach to flattening the standard corporate pyramid and why you believe it to be a more effective way of doing business within a company.

A. I think the issue here is one of communication and one of technology. The standard pyramid formula exists, in part, for information to get through and be understood. In the middle of the pyramid there are a lot of little nodes where people control the information flowing up from the bottom levels and oversee how it flows to the top. With information technology as it is today, I don't need all that stuff in the middle. What you want to be able to do is have an operation with a broad bandwidth and very few levels because you want to be able to make decisions more quickly. If you've got stuff that's got to go through six or eight levels before it gets to a decision maker, then it's going to take you forever to make a decision. So what you've got to do is flatten it out and push the decision-making down as far it can go.

People should be empowered enough to feel that they can go ahead and make a decision and even make a mistake. We celebrate mistakes around here. We even give awards for the really good mistakes. And that's in part to show that here's someone who made a mistake, and they're still here. They recognized they made a mistake, they told us they made a mistake, and that's important.

Q. Isn't there a certain level of embarrassment associated with that which could be detrimental?

A. There is some embarrassment. But we take a very lighthearted approach to it, and we look at the three or four things we've learned from making this mistake. And we spread that knowledge around. That's important.

Q. Brady has recently moved to use of an all-salaried staff and telecommuting. What benefits do you see coming from this as opposed to the downsides?

A. The question here is: What are the assumptions under which you operate with other human beings? I may be naïve, but my main belief is that 99 percent of people want to take pride in their work, make a contribution, and look back at the end of the day and say, "I did something to contribute to the success of this enterprise. I have a place here, and I'm recognized for doing a good job." If you believe that and trust that people really want to make a contribution, then the paradigm by which you manage changes dramatically. Instead of inspecting 100 percent of the people because you might have 1 percent bad apples, you trust 100 percent of the people, and you occasionally audit to find the 1 percent. If you believe in that trusting approach, you don't need time cards.

As an example, if we can keep the knowledge base of someone who's just had their second or third child and wants to stay at home and just work part time for a while, and we can have them do it via telecommuting, then I don't have to go recruit and hire someone and train them and take 18 months to get them productive. If I can keep the original worker over those 18 months, I'm still ahead and they've been able to telecommute.

So both of these issues are based on trusting people and maintaining your knowledge base.

The disadvantages: There is that one percent of people out there who cheat, and it makes the 99 percent perturbed. So what you have to do is train the 99 percent and have controls in place that will audit for the 1 percent who is cheating and tell them to shape up and follow the rules or they're out. The peer pressure is great in that particular environment, so management scrutiny is sometimes not required.

Q. What issues do you see as being most critical to the future viability of the manufacturing industry?

A. The first issue is education. We've got to be certain that we have an educated work force; and if you put the burden for that all on the private sector, it becomes prohibitive. If I go into an area like Germany — where its cost structure is too high but I know everybody who graduates high school there has had calculus — that's a whole lot different than being in a situation like here where a large portion of people aren't even graduating high school and oh, by the way, they were lucky to get through general math.

The second key, and it affects the education system, is balanced government policies. By that I mean government, for the most part, should stay out of business and out of education, too. We're spending a lot of money for mandated activities that come from the government that are not value creating. If we could get a focus on competitiveness and value creation as a nation, then we'd be better off.

Where smaller companies like Brady need the government's help is in two areas: 1) leveling the playing field with countries that essentially have extreme amounts of government support, Japan being one of those; and 2) in areas where a major structural change is taking place in industry, such as the shift from agricultural to manufacturing and now the shift from manufacturing to information-based activities. People get caught in these fluctuations, and I think there is an appropriate role for government to assist with retraining.

But, for the most part, if we can get some of the mandates, requirements and inefficiencies of government reduced, it will make us more competitive.

Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.

Web Site © Copyright 2020 by Lionheart Publishing, Inc.
All rights reserved.


Lionheart Publishing, Inc.
2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA
Phone: +44 23 8110 3411 | br> E-mail:
Web: www.lionheartpub.com


Web Design by Premier Web Designs
E-mail: [email protected]