Thought leaders and executives sequence the DNA of the best in the business.
In early 20th century manufacturing, leadership happened from the top down. It was not only dirty, dark and dangerous, it was paternalistic. Good paychecks and solid pensions meant the boss gave orders and everyone else took them. Henry Ford kept tabs on his employees on their off hours and bought out his investors when he didn’t like their advice. Forrest Mars, founder of Mars candy company, docked the pay of everyone, including executives, who arrived a minute late for work, and “was legendary for his extreme temper, and his fanatical behavior,” according to his New York Times obituary.
Sue Bingham, an organizational development consultant who’s coached manufacturing executives for 25 years, still comes across “the hero type, who comes in with arms crossed” now and again in her line of work. “We’ve worked with one company owner who signs every check, because he doesn’t trust his people to use good judgement.” She’s encountered company presidents “who are so in the weeds—down to ‘How manyshipments did we make today?’”
These leaders are dinosaurs. Today, autocracy might limp, or walk, or crawl, but it doesn’t fly. Manufacturers must vie for workers against tech companies who not only don’t dock their executives for late arrival; some don’t require them to come into the office at all. Barking out orders might get your products out the door on time this week, but not next, when everyone quits or the lack of new ideas finally catches up—and your customers defect for a company that can deliver a better product.
“Times have changed,” says Stephen Gold, president and CEO of MAPI, the nonprofit Manufacturers Alliance for Productivity and Innovation. “Strong leaders for the coming decades see human growth as essential to business growth.”
They also must navigate an increasingly sophisticated and fast-paced supply chain, keep the ship aright through the battering of tariffs and trade agreements, craft a savvy digital strategy that maximizes ROI, and anticipate technological transformation and develop products around it. Oh, and figure out millennials.
And if they lead a public company, great manufacturing leaders also face the uphill task of making short-term-obsessed, capital-intensive-averse Wall Street happy.
It’s not 1933, when a college education was out of reach and production demanded millions of workers perform repetitive tasks. It’s 2019, when shop-floor employees at Cambridge Engineering in Missouri make and share videos of their continuous improvement ideas, when high-skilled tool and die work is now done in China, when a U.S. president tweets out his disdain for specific companies to 57.9 million followers, when having the right data expert on staff (like Mike Eilers at GE Aviation) to develop a digital thread tool can increase supply chain visibility and save $4.4 million in a year.
In this fast-changing environment, we here at IndustryWeek have decided to try to pin down the previously unpinnable—what’s required of a great manufacturing leader now. We asked manufacturing executives and intelligent observers of the industry for their take on who’s got the magic dust—and who’s collecting dust.
Here’s what they said.
A great manufacturing leader:
1. Builds trust
Manufacturing leaders must put in some real roll-up-their-sleeves effort to regain the trust of their workforce, says Steven Blue, CEO of rail parts manufacturer Miller Ingenuity and a best-selling business author. Trust disappeared 30 years ago when companies eliminated the defined benefit pension plans that took care of loyal workers when they became too old to work (or had put in their time and just wanted to hit the road in an RV with their grandkids).
Trust does not come from declaring a company’s values and putting them up on professionally printed signs around the plant. It requires the real work of building a culture around teamwork, creativity and enthusiasm.
“United Airlines claims that customers are their No. 1 important thing, and they treat their customers badly,” says Blue. “Most companies have cultures by default, not design. A lot of CEOs, especially older ones, don’t believe in this culture stuff. It’s just too smooshy, human resource-y for them.”
Gold calls out two manufacturers for their trust-building virtuosity. EnPro, a California engineered components manufacturer, invests heavily in professional development for its workforce from the shop floor to the executive level. It also has each employee—including leaders—map their personal growth. These growth maps are shared with colleagues, who are encouraged to give constructive feedback and ask questions of leaders and team members in meetings, to keep them on track with their plan. And Kaman, an aerospace and industrial components supplier with 5,300 employees, has built in ongoing learning through tuition reimbursement, skills training and a leadership development program. In addition, employees set goals with managers and have regular dialogue with them on their progress.
2. Has high expectations for their people (and gives them the tools to meet those expectations)
Bingham left a traditional HR job at a large pharmaceutical company 25 years ago to build a consulting/HR firm around an unconventional idea: Create new plants without hourly workers. “Everybody had a key to the front door, everybody was on a salaried basis, everyone was a manager—except they were eligible for overtime if they were non-exempt.” They sought to fill plant manager positions with people “who recognized that everyone working there was an adult and should be treated with respect.”
Empowered to share ideas and have a role in decision-making, employees began to make real contributions. They also appreciated that they weren’t shackled to a time clock, that not just company leaders could leave early to catch their kid’s ballgame. A shop floor worker’s team could figure out on their own how to cover for the baseball parent.
Aerospace manufacturer Rohr was an early adopter of the approach. “The new plants started outperforming the older, traditional plants within the first six months,” Bingham says.
With a culture of empowerment and mutual respect, says Blue, employees will do great things. A couple of years ago, Blue invested a half million dollars in a “Creation Station” for his employees. With a pool table and lounge chairs surrounding a giant whiteboard, and multiple LCD screens, “it’s a smart room totally wired for and decorated and set off to stimulate thought.” To enter, employees have to walk through the shop floor. Blue says he deliberately didn’t put the room in the office area because he didn’t want it to be perceived as white-collar.
“Most places assign creativity to the engineers, but they should require and encourage creativity from every single employee in the place,” he says.
Loads of ideas, big and small, come out of that room. One of the biggest is a high-tech safety product called Zone Guard that alerts railroad work crews on their personal devices to the presence of incoming vehicles on the track. “Most manufacturing CEOs wouldn’t bat an eyelash spending a half million dollars to buy a CNC machine,” says Blue. “I do that, too, but the difference is a CNC machine depreciates and has to be replaced. My Creation Station and the culture of creativity never depreciates and arguably is an income-producing asset.”
3. Inspires passion
The ability of a leader to spark passion—in employees, in customers—was the most-mentioned desired quality in interviews for this story. Perhaps that’s because manufacturing has such a hard time shaking the trope of being repetitive and soul-killing. “There’s a lot of sense from people that manufacturing is not very exciting,” says Malcolm Thompson, executive director of NextFlex, Manufacturing USA’s flexible hybrid electronics institute. “It’s not sexy like research where you invent something that is totally revolutionary. The reality, though, is those inventions that take research only really have value when you create a product from them.”
Vic Keller, managing partner in Ancor Capital Partners and founder of several manufacturing companies, notes that traditionally, manufacturing leaders weren’t required to have passion. “They were required to be great engineers, they were required to be efficient. But today, if you’re going to have any kind of expansion and have success overall, you need to surround yourself with people who truly have passion for what they’re doing.” Passion drives people to think big, he says, to see how the individual element of the business they’re working in fits into the vision for the business as a whole.
Telsa CEO Elon Musk leads the passion contingent with “a super-cool product that emotionalizes electromobility, which no one else has done,” said Ardnt Ellinghorst, senior managing director and head of global automotive research at Evercore ISI, at Automotive News World Congress in Detroit in January. Jim Hackett, CEO of Ford, on the other hand has struggled with creating excitement around Ford’s lineup, and his message around tech seems convoluted.
Fortunately, there’s more pep in Hackett’s colleague, Ford COO Jim Farley. “Here’s a guy that seriously is a car guy who drove across the country [without a license] at 14½, and he sounds truly excited about the EV,” says Jonathan Smoke, chief economist of Cox Automotive, also at World Congress.
Pablo Isla, the CEO of Spanish apparel manufacturer and retailer Inditex (and the No. 1 ranked CEO by Harvard Business Review in 2017), has made motivating his people and “generating a sense of spirit” within the company his top priority, says Alberto Oca, a principal in the manufacturing space with A.T Kearney management consulting firm. “He said in managing a company you of course need to be rational. But he is learning to be less rational and more emotional.” Inditex has a flat structure and favors informal conversations and impromptu gatherings over formal meetings.
Oca also admires the style of Victoria Holt, CEO of 3D printing manufacturer Proto Labs. Holt is a CEO who walks the floor and makes a point to identify potential leaders early in their careers. “For her, the most important quality of a leader is how to keep people engaged,” says Oca. “Yes, there are all the different technologies you see in the market—computing power, analytics, human machine interface, digital transformation—but all that cannot be put in place without first connecting with your people. You need to make sure they’ve bought into your product and your service.”
4. Has a strong entrepreneurial spirit
Keller says that when he’s investing in a manufacturer, he looks for a leader “who has moon-shot ideas, who wants to be innovative, who understands their customers’ needs and focuses on the problems and opportunities in the industry and finds solutions for them.” A great widget can quickly become outdated, and if you don’t have another idea, you’re sunk.
Entrepreneurialism, he says, is legacy manufacturing’s lifeblood—it can catapult a company that already has capital, an established supply chain and a manufacturing footprint ahead of any startup.
But that spirit can’t stay at the top—it has to spread throughout the entire organization. “You can’t just drive results by giving people a policy and procedures manual,” says Keller. “That is not entrepreneurial. Entrepreneurial is giving them a job description that allows them to be innovative, to be efficient and to optimize the business.”
5. Is a change agent
Sometimes you want a status quo leader, a Pope Benedict to make sure everyone’s sufficiently bored into submission and the trains run on time before a Pope Francis steps in. Other times, you’ve already got a solid base to build on and you need a change agent who’s going to shake things up to get to the next level.
A rare breed, change agents have a vision and make big changes that are difficult for competitors to reproduce, says Paul Ericksen, a consultant, IndustryWeek contributor and former supply chain executive at John Deere. They look for team members whose skills and ambition fit the plan. They mentor employees, give them credit and advancement for successes, advance them in the organization and protect them from employees who resist change.
GM’s Mary Barra is a stellar example of a change agent, says Ericksen. She has a vision for the organization—move away from sedans, focus on electrification—communicates it clearly and simply and executes the big moves required (including shutterining five plants) to make it happen.
“Closing those factories—that wasn’t an easy decision,” says Ericksen. “To me, that’s not an incremental change. They’re making decisions that in the past General Motors would have a hard time doing because they didn’t want to upset the ship. They’re [historically] incremental-type guys.”
John Murphy, managing director of automotive equity research at Bank of America/Merrill Lynch, said at World Congress that what Barra is doing at GM “is pretty miraculous. Everything she’s doing now is very, very forward-looking, very proactive.”
Murphy also likes the vision of Don Walker at auto supplier Magna, who is showing that legacy suppliers can transform the auto industry with technology—in Magna’s case, lidar, radar and cameras for Level 2 autonomous vehicles. “He is bringing a lot to the table for automakers in a way that is much more holistic than the narrowly focused suppliers.”
6. Tells it like it is
It is the job of a CEO to tell the board that there’s trouble ahead, says Steven Blue. Unfortunately, he adds, boards “like to live in Happy Land.” For instance, when then-CEO Jeff Immelt left GE, his replacement, John Flannery, “let the board in on all the bad things that had been going on for years that they didn’t know about. And what did the board do as a result? Hey, they fired the guy.”
Blue recommends leaders inclined to share the raw story become practiced in the fine art of delivering bad news with good. “If you go to a board and say, ‘We’re in deep trouble—we’ve got to make major changes—if you just give them that story, they’re going to boot you right out of their office. You also have to give them the other side.”
7. Encourages cross-functional teams
There are so many possibilities with digital tools and the opening of markets and supply chains, great manufacturing leaders can’t just think in a straight line, says Katy George, a senior partner at McKinsey whose expertise includes manufacturing. In just the past two years, it’s become more important that a manufacturing leader—specifically an operations leader—” can work with marketing, with R&D, work with finance to really help shape a vision strategically for a company. Saying ‘Hey, if we simplified our product portfolio, we could cut costs by 30% and enter a market that used to be too expensive.’”
Take the opportunities opening up with 3D printing, for instance. A manufacturer could put a 3D printer for its product in Walmart and reach new markets, but first they’d need to bring together experts from across the organization to weigh in on the pros and cons of scale vs. customized manufacturing. The product development person would present product quality differences, the marketing person would figure out who the consumer market is, the supply chain expert would share supply chain differences. “You only figure that out if you’ve got that group together,” she says. “Otherwise, what you do with 3D printing is put it in your existing plant and make spare parts faster and improve your productivity, but otherwise, you don’t really change the business model.”
8. ‘Gets’ millennials and creates culture around them
Most manufacturing leaders are baby boomers, products of the “when I was 16, I worked my butt off” era when wages were higher and kids didn’t see everyone around them get laid off. “You need to understand Millennials; you need to work with their values and culture and create opportunities that resonate with them, as opposed to denying the fact that these people all want free pizza and beer for lunch,” says Blue.
MAPI’s Gold stresses that leaders must make it their mission to convey to teens and 20-somethings that “this is not simply you standing in an assembly line and you’re a cog in a greater works. You have a say in your career at this company.”
9. Sees the competitive advantage in tech
VW, says Ardnt Ellinghorst, has the right leader at the right time in Herbert Diess, the former BMW executive who’s revamping VW for an electric-vehicle future. “He’s someone who understands tech better than most auto executives,” says Ellinghorst. “Driving this transformation into auto tech for a company like Volkswagen is a huge opportunity. It’s the most global company; it’s a company that has brand equity that works in any region of the world at a material rate. It’s huge, so as a partner to work together with leading tech companies it has a lot to offer. So having that CEO in place is hugely important for Volkswagen.”
On a smaller scale, the speaker company Bose does a good job of developing high-performing teams that creatively apply technology, says Oca. Running with an employee idea, Bose introduced Sleepbuds on the crowdfunding site Indiegogo, raising $450,000 of a $50,000 goal to fund initial product development. Each donor received a set of Sleepbuds, and was encouraged to test the product and provide feedback on the site. Bose used the input to tweak the product before launching it widely. “From a digital perspective, people think labor is going to go away, but you bas,ically need people to make technology work,” Oca says. “You’ve got to make sure they have a career and instill passion.”
10. Is still an old-school, big-picture person
Some say the best manufacturing leaders come up through engineering; others are partial to finance folks or even people from outside the industry who provide a fresh perspective. Steve Maurer, an engineer and MBA who is head of Alix Partners’ manufacturing consulting division, says the distinctions don’t matter that much, so long as the leader has a vision and understands enough about the shop floor not to be B.S.’d. He once worked with a strong manufacturing leader who was a finance guy who liked hanging out on the shop floor, “trying to understand what’s driving the numbers and what’s really happening and what the reality was behind the numbers. He couldn’t tell you about feeds and speeds on a machine and all those gory details, but he understood at that next level how manufacturing works and how that is reflected in the numbers and how to use the data to make the numbers go where they needed to go.”
Ericksen says the primary job of the CEO is to bring in the right people, “make hard decisions and make things happen. I would say from what I’ve seen—who’s the CEO of GM? It’s that gal … I think she’s doing a pretty good job.”
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