Executive Word -- Focus, Communicate In Down Market

Markos I. Tambakeras, chairman, president and CEO of Kennametal Inc., talks with IndustryWeek about managing through a down economy.

Markos I. Tambakeras Chairman, President and CEO Kennametal Inc., Latrobe, Pa. Age: 51 Education: Bachelor's degree in industrial chemistry from the University of the Witwatersrand, Johannesburg, South Africa, and master's of business administration degree in marketing from Loyola Marymount University, Los Angeles. Career Highlights: 1980: Joined Honeywell Inc. and began a 19-year career with the company. During that time, he served at various times as president of operations in the Asia-Pacific region and president of Honeywell Industrial Automation and Control. Named president of Honeywell Industrial Control in January 1997. 1999: Named Kennametal Inc. president and CEO. 2002: Added chairman of the board to his Kennametal titles. Family: Wife, Pamela, and two children. Interests: Serves on the boards of ITT Industries, Saint Vincent College in Latrobe and the Allegheny Conference. Also is vice chairman of the board of trustees of the Manufacturers Alliance/MAPI.

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Markos I. Tambakeras, chairman, president and CEO of Kennametal Inc., -- a machine tools manufacturer and engineering services provider with annual sales of $1.6 billion -- spoke to IndustryWeek hours after the release of his company's fiscal year 2002 results. While earnings were down, Tambakeras said cash flow was "healthy," noted the company had reduced debt by nearly 50% in the last three years and described Kennametal as positioned for growth. IW: Are you seeing an upturn in your industry? Tambakeras: We are seeing a very slow recovery. It's modest. It is a recovery, but it is slower than we had anticipated or we had hoped. IW: When are you expecting your industry sector to return to more normal operations? Tambakeras: We serve virtually across the board in the manufacturing sector, so you could say the manufacturing sector is our sector. Our expectations, and the indicators we follow, point to a measurable recovery on a year-over-year basis in the fourth quarter of this calendar year. IW: How do you manage your business during slow times in preparation for an upturn in the economy? Tambakeras: The first thing you have to do is get your cost structures in line and make cuts at the earliest [moment] and as decisively as possible. You've got to do that quickly. You then add your temporary measures, in terms of your discretionary spending, things like travel, capital expenditures. The second thing is you really have to validate your strategy and then manage your strategy. Don't waver. Keep executing the strategy. The third thing you must absolutely continue to do is keep your focus on your customer. You can't afford to drop your service and your support of your customers -- particularly as you get to the upturn -- because they remember. The fourth element: As much as possible you have to keep your R&D and sales forces intact. The tendency to cut back in those areas is obviously very strong because you're trying to contain your costs. But as you're doing this you have to be thinking of the upturn. Although we cut in just about every other part of the business, we did not cut back either our sales force or R&D. That helps you very much with the upturn and very obviously with the ability to accelerate as things improve. The fifth element is cash. You have to constantly focus on cash generation. You cannot forget that. Cash has always been important, and I think industry at large sometimes forgets that. We don't. The final point is you have to keep your top performers engaged. As you're taking tough measures . . . it obviously has a negative impact on morale in general. You have to maintain your people focus, you have to communicate, you have to make sure your top performers know they're your top performers. IW: How important is the communication aspect? Tambakeras: You have to communicate frequently, you have to communicate to everybody and you have to be honest and direct with your organization. I happen to believe that's what you do no matter what, even when times are good. But particularly during difficult times you have to do that. Even when the news is not good. You'll score a lot of points with your employees and your shareholders when you are open and when you are frank. IW: You acquired a company earlier this year (Widia Group) -- seemingly a bold move given the poor economic conditions. How did those conditions impact your decision-making process? Tambakeras: It really didn't, and it shouldn't. If an acquisition is the right thing to do, and if the strategic and financial rationale make sense -- and you can afford it -- then I believe you do it. Fortuitously, buying something at the bottom of the cycle isn't such a bad thing. We're hoping as the economy picks up, we'll be able to leverage that and take advantage of it. E-mail nominations for Executive Word to Patricia Panchak at [email protected].
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