Mike Lamach, chairman and CEO of Ingersoll Rand PLC (IW 1000/307), on Monday rang the closing bell at the New York Stock Exchange to celebrate the 100th and 75th anniversaries of the Trane and Thermo King brands, but not before sharing his insights on leadership with IW.
Lamach was named president and COO of Ingersoll Rand in February 2009 and CEO by the following February. He now is leading the company, a Dublin, Ireland-based diversified manufacturer, through a restructuring process that involves spinning off its home and commercial security operations into an independent public company.
Q: What is it like as a leader leading a company with such established brand history and how does that differ from leading another company?
When you look at Ingersoll Rand and its history and then think about the legacies of Thermo King, Trane, even Club Car – 60 years old – or Schlage - our security business, which is 100 years old - you quickly come to the reality that Ingersoll Rand is a family of brands and the power of the company really exists in the familial relationships between those brands and the company.
People inside the company take great pride in being part of the brand and part of the company, Ingersoll Rand. When you look at the power of that, it’s not to change that, it’s to enhance that, to make people feel there’s something unique about what they’re doing for these powerful brands.
The opportunity, whether it’s personal or whether from the shareholder’s perspective, around being able to utilize an investment vehicle that would have lots of different end markets, customers, etc., really is something to be proud of. So, I, as a leader, really promote it’s almost dual citizenship; you’re part of Ingersoll Rand and you’re still a part of a great brand in each of our businesses.
A lot of companies I know just try to overlay that brand almost ruthlessly on top of that and I just don’t think it works here. If you go into a commercial building, the most recognized name in a commercial building is actually the Trane brand. There’s no reason in changing that brand. If you look at, the inventor even of the golf cart is Club Car. People want to drive a Club Car, not an Ingersoll-Rand.
Q: What do you see as the natural progression of your brands and your company in the next 10 to 20 years?
The long-term trend that we see is in the area of sustainability, really energy efficiency and reliability of systems and how important that is to the environment, to our customers. We’re not seeing this from a cost savings perspective.
As an example, when you take a commercial office building, it’s going to consume, HVAC systems consume, 40% of the electrical demand of the building. In an industrial building, it’s even higher with process heating and process cooling.
We think we’re playing into a real long-term opportunity from a customer’s perspective to do a number of great things. I mean, certainly, we have a greater environment that we could do that in the most cost effective way, the most energy efficient way for our customers.
On a go forth basis, you’re probably aware that we’re going to spin our security business off at the end of this year…We’ll have a very integrated company based on a few key technologies that are important to us, playing into a couple market trends that we think are going to be long, long term in nature -- energy efficiency, sustainability, being two of the most primary.
Q: How are you managing handling both the responsibilities of running Ingersoll Rand and establishing the security business as an independent company?
In terms of its operating capabilities, the strength of the business, the strength of the brand, it’s a very well-run business with very good operating margins across the world for us. Anyway, it’s having the team on the ground, continuing to do its job, customer-focused, very focused on delivering for its customers.
With regards to the spinoff, we’ve had to sort of play as a fully dedicated team to be able to handle that. There’s probably, at this point in time, 30 people across the business that are fully dedicated to that, with many more people that have transitional roles to help support that.
From the time that we announced that to now is about 10 months and at the time we’ll be complete it will have been 15 to 16 months. It’s a fairly compact timeline, but the dedicated team has really been something that’s been important to us to make sure that we’re able to keep pace.
Q: What is your progress on the lean initiatives you’ve started?
It’s really been a passion for me. Part of when I became the COO and then the CEO a year later, this was in the 2009-10 timeframe when we were acquiring and integrating the Trane business, my goal was really to heavily integrate that business and was to put in place a common operating system across the business.
The best way to do that was really through the lean implementation that we’re putting in place. For me, lean is really all about growth. It’s all about the customer.
We were able to unify many of the fragmented programs across the company that were underway at that point in time. We completely unified the company under one lean implementation. We knew that we were trying to build that capability and make sure that was common across the company.
We didn’t want to go very wide and very thin, we wanted to go very, very deep and very narrow across the company and each year have expanded the penetration of lean across the company. At the end of this year, we’ll be about 40% across the value of the company after a three year period.
The results that we’ve had on the 40% lean we’re complete with have been truly remarkable, dramatic: cycle times to customers that are half of what the average is across the company; delivery times that are getting close to perfect; lower working capital and much higher operating margins. Our most matured business, like the Thermo King business, has had share expansion.
The wonderful thing, I think, about doing lean right is when you see that you actually grow and you can redeploy people toward growth versus redeploying people to exit the company basically is more powerful. We’ve been able to, at this point in time, really have the benefit to be able to show the best examples across the company of the growth occurring and people growing their careers inside the company at an hourly level and a salaried level.
We’re early into this. It’s something that I’m passionate about. Really, if I had 10 years to stay with it, I would be staying with it over that period of time.
Q: How did lean efforts start at Ingersoll Rand?
It was part of the strategy to integrate the Trane business into Ingersoll Rand. Then, as we were looking at the opportunity across the company there was the realization that we needed to integrate more of the whole company, not just the Trane business. It led us to the strategy that we have today.
Frankly, it was the benefit of lean activity that created the headroom for us to be able to invest in innovation across the company. Over that same period of time, we’ve actually more than doubled the amount of revenue that comes from new products and services, which is remarkable. We’ve gone now to almost 45% to the revenue of the company is from products and services that we’ve launched in a rolling 36-month period, more than twice what it was three years ago.
A theory by some people is that lean is all about productivity and sort of cost but the reality is it’s given us the headroom to invest in growth and it’s been a balance for us.
Bonus Q: In managing such a large company, how are you able to make an impact from the top down?
If you go to the three strategies across the company that I’ve had in place, we’ve talked about lean, we’ve talked about innovation, but what wraps all around that is the third, which is a view toward creating the right culture in the company, which we define as being progressive, diverse and inclusive.
It’s really about engagement and it’s the belief that high levels of employee engagement drive high levels of customer satisfaction and that’s what drives ultimate profitability.
We’ve worked to build the culture into the company not only by the people we’ve brought into the company but how we promote people into the company, how we evaluate their performance, now it’s a dimension not of what you did but how you did it, a formal review process. It’s around finding the competencies we expect of everybody as well as the competencies we expect from leaders, and then assessing people against those competencies.
This past year, as an example, we took every leader and manager inside the company and provided engagement feedback back to them directly, sorted that feedback by top quartile, third, second and bottom quartile, and went to work really recognizing the good things about the top quartile, but also recognizing where individual improvement needed to happen at the bottom. We aim to do a lot more personal development and training at that level to again increase engagement across the company.
It’s interesting to play that back into the lean discussion. One of the dimensions that we’re seeing with employee engagement is we get about 10 points greater engagement where we’ve implemented lean than where we have not implemented lean across the company, and that’s sustained engagement for multiple years. It’s not a flash in the pan.
Ten points is actually a very meaningful, statistically significant improvement in how people feel about the company. This is what drives extra effort, customer satisfaction and ultimately profitability of these businesses.
We’re moving as fast as we can across the entire company that those three strategies around innovation, engagement...and lean have really been the strategies for the company.
It’s where I spend all of my time. It’s how I think about my calendar. It’s how I think about spending the week. I spend a lot of my week and my month out in the lean events, doing reviews and assessments around the lean issue across the company and more and more time around the front end of the business as those value streams become wider and incorporate more product development, more engineering and technology, creates a venue for me to spend more time in the front end of the business with customers and with our engineers and commercial people.
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