Manufacturing Success Starts at the Top

Manufacturing Success Starts at the Top

Manufacturers need strong leaders who can map out a strategic vision, communicate expectations and set a tone for success -- and that's exactly what John Stroup has done at Belden Inc.

When John Stroup was appointed president and CEO of Belden Inc. in October 2005, he had a stack of "significant" leadership challenges on his plate.

The St. Louis-based wire and cable manufacturer had merged with Cable Design Technologies Corp. (CDT) in July 2004, bringing together two disparate corporate cultures. Stroup was in for a bit of culture shock himself, as his new employer lacked "good, timely financial metrics," modern manufacturing processes and other creature comforts that he had grown accustomed to in his previous five years as an executive at Danaher Corp.

However, the biggest challenge, Stroup recalls, was that "it was pretty clear to me coming in that I was going to have to make quite a few people changes."

"People generally don't know all the things they can achieve unless they're given the expectation of what greatness looks like." -- John Stroup, president and CEO, Belden Inc.
"And that's always very difficult, because even if those changes are the right thing for the company in the long run, they're always disruptive in the short run," Stroup adds.

Stroup went to work quickly, restructuring Belden's operations, shedding non-strategic business units, shuttering plants, shifting some North American production to Mexico and expanding into new markets and product categories through strategic acquisitions.

In July 2006, the company unveiled a new marketing focus, emphasizing the flagship Belden brand and positioning the company as "a full-service provider of signal-transmission solutions," including cable, networking and connectivity products. The company's new slogan: "Sending All the Right Signals."

On the plant floor, Stroup pushed for implementation of lean manufacturing strategies.

"Belden and CDT were build-to-stock companies," Stroup says. "So everything was built in large batches and put into finished-goods inventory. Moving away from that concept to a real build-to-order mentality was a significant transition for the company."

It was a transition that paid off in short order. The company's lean initiatives helped boost gross margins, improve free cash flow and create other operational efficiencies "that really resonated with investors." When Stroup was appointed as CEO on Oct. 31, 2005, Belden's stock price stood at $19.93 per share. On Oct. 31, 2007, the stock had soared to $58.27 per share.

Managing Through Tough Times

The honeymoon with Wall Street was short-lived, as the recession became the next major challenge on Stroup's plate. In December 2008, the company announced plans to restructure its global operations and downsize 1,800 workers. Stroup in early 2009 said the measures would "provide us with the necessary cost structure to succeed during this period of weaker demand."

Since then, Belden's business has bounced back. On Feb. 3, the company reported full-year 2010 revenue of $1.62 billion, a 19% increase over 2009, and income from continuing operations per diluted share of $1.77, a 53% increase. The company also grew its cash flow by about $50 million to $358.7 million.

"I am encouraged by the fact that our superior performance was achieved without the benefit of a full recovery in all of our end markets," Stroup remarked in the company's Feb. 3 earnings release.

For 2011, the company revised its guidance upward, projecting revenue between $1.85 billion and $1.9 billion and income from continuing operations per diluted share between $2.05 and $2.25.

Looking back, Stroup believes that the decisions he made in his first few years at Belden are continuing to pay dividends. He notes that lean has helped the company improve its gross margins from 21% when he came on board to 29% today. The company's diversified portfolio has boosted margins as well. Whereas Belden in 2005 derived all of its revenue from cable products, today 25% of its revenue comes from higher-margin connectivity and networking products.

He notes that the free-cash flow and "balance-sheet power" driven by lean have given the company the financial muscle to make acquisitions, which in turn have helped fuel its growth. Thanks to acquisitions such as its 2007 purchase of Hong Kong-based LTK Wiring Co. Ltd., Belden went from having "almost no revenue in Asia" when Stroup joined the company to about 20% of its total revenue generated in Asia today.

'What Greatness Looks Like'

One of the key responsibilities of a leader, Stroup says, is "establishing appropriate expectations." That goes way beyond just setting the bare minimum standards for staying employed.

"I think most human beings are still not reaching their full potential," Stroup says. "And I think people generally don't really know all the things they can achieve unless they're given the expectation of what greatness looks like. So I think great leaders are really good about establishing high expectations on a consistent basis."

Shortly after Stroup came to Belden, he made it a priority to identify and codify the company's values. He and his management team came up with six, such as "Customers define our success," "Continuous improvement is our way of life" and "We reach for greatness."

In his efforts to shape a corporate culture that supported Belden's business objectives, Stroup felt that setting quantitative job expectations -- such as on-time delivery rates for operations personnel -- wasn't enough.

"If you're an operations guy and you're meeting all your metrics, and a customer calls in and says, Hey, I'd really like you to consider expediting this for me because it would really help me out,' and you say, We don't expedite,' I would say you don't fit into our culture."

Stroup has walked the talk, noting that Belden's 2007 acquisition of Hirschmann Automation and Control GmbH, a Neckartenzlingen, Germany-based manufacturer of industrial Ethernet switches, was driven by Belden's desire to "help our customers with their signal-transmission applications."

While Hirschmann "seemed to us to be a very logical fit," some analysts and investors questioned the pairing of Belden, which has roots dating back to 1902, and Hirschmann, which seemed "a lot more like Cisco than a cable company." But the acquisition has "blown away" Belden's expectations, Stroup says, delivering a return on invested capital "that has been almost two times what we thought it was going to be."

"I could have easily found 20 reasons why we shouldn't do it, and my board would've been perfectly happy if we didn't do it, because you never get in trouble for saying no," Stroup says. "But we did it for the right reasons, and I think we did a great job of executing."

What Makes a Leader?

In her more than 30 years as an executive coach and consultant, has observed some common traits among effective leaders.

Henman, author of the upcoming book "Landing in the Executive Chair: How to Excel in the Hot Seat," believes that all good leaders must possess these three characteristics:

• Cognitive ability -- "You have to have the intellectual horsepower to do what you're doing."

• A passion for achievement -- "You have to love success. And when you love success, you draw other people who also love success."

• Integrity -- "If you're willing to compromise your integrity, then you don't have any hope in leading other people, because you will model the behavior that others will expect to emulate."

She notes that these characteristics apply to any leadership context -- "whether you're leading a hospital, a manufacturing company or the Air Force."

By the way, if your dream is to lead a manufacturing company, Henman says she can't teach you these traits -- you're either born with them or you're not, according to Henman.

"Most of my revenue every year is from executive coaching. But if somebody doesn't have these three [traits], I don't even take on the assignment."

See Also:
IW's Blueprint for Manufacturing Success
Average Isn't Good Enough
Fight the War for Talent
Creating High-Value Supply Chains
What's Missing in Improvement Initiatives

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