When Lightning Strikes

What do you do when revenues rapidly decline, banking and financial institutions pull back, and there’s a national workforce decline? For many business owners, it’s as if lightning has struck their organizations’ industries not once, but twice.

For integrated manufacturing service provider KARLEE, the 2000 Malcolm Baldrige National Quality Award recipient, part of its turnaround strategy included using the Baldrige Performance Excellence Criteria.

JoAnn Brumit, CEO of KARLEE, said that the organization’s performance excellence journey started in 1989, when a customer brought her the Baldrige Criteria. The customer said, “If I could build a company based on this, I would build a successful company,” she recalls.

The year 2000 was KARLEE’s most profitable year, with $80 million in revenue. During its 20-year history of more than 30-percent annual growth, KARLEE had never experienced a decline, never had a losing quarter, never needed investors as it grew from returned earnings, and never had a workforce reduction. However, it concentrated 90 percent of its business in the telecom industry.

In 2000, the telecom industry began collapsing. “Out of the $7 trillion decline in the stock market since its peak, about $2 trillion have disappeared in the capitalization of telecom companies,” wrote Paul Starr in 2002. “Twenty-three telecom companies have gone bankrupt in a wave capped off by the July 21 collapse of WorldCom, the single largest bankruptcy in American history.”

Brumit said the Baldrige examiners who assessed KARLEE warned in its feedback report (a take-away from its application for the Baldrige Award) that the organization’s high telecom concentration was a weakness, but Brumit said she had pages of data as thick as a book that the telecom industry would remain strong. So, in 2001, Brumit said, “We decided to act like a turtle and simply let the storm blow over.”

In 2008, the competitive market crisis again hit KARLEE. This time, the global, economic recession occurred across all industries, and banks and financial institutions were pulling back to mitigate their own risks. Suddenly, KARLEE, which didn’t even have a sales force and relied on business from word of mouth, needed to develop a new business plan fast. This time, Brumit said, being a turtle was not going to work. The organization decided to act more like a fox.

With the help of the Baldrige Criteria, KARLEE had a roadmap to improve its strategic planning process, adding risk analysis, stakeholder and market input, operational performance metrics, and communication action plans. Metrics and their alignment with the strategic plan became a major focus.

“I chose to take Baldrige as my business model,” says Brumit. “My team does not distinguish that Baldrige says to do this or to do that. We do Baldrige because it’s the best way to run a business.”

Brumit said KARLEE eliminated multiple continuous improvement projects to focus on the vital few, and this included a major update to its communication system. “When the company was falling, it became even more important to keep employees encouraged,” she says, and KARLEE emphasized state-of-the-union-type updates because what was happening to employees affected families, too.

“We kept senior leadership focused on where we’re going, and the team focused on issues,” says Brumit. “You don’t want the pilot to leave the cockpit to fix the plane.” Relationships with suppliers became a focus, and many of them extended terms to the organization. Those same suppliers are still suppliers today. And, of course, a focus on customers was key. “When many companies are being torn up, overall performance falls, and customers hear this and fall off. We kept our customers intact,” Brumit adds.

“Today, I can walk around and say, ‘I’m in manufacturing,’ and people say, ‘I’m so glad you’re here. We need manufacturing in the U.S.,’” Brumit says. “We rode through and came out a better company.”

As far as Baldrige Performance Excellence is concerned, Brumit says, “It makes you think and assess different things.” In fact, many KARLEE leadership team members have received Texas Award for Performance Excellence training. Brumit says she even encouraged her son to complete the Baldrige-based training so that he can be exposed to the big picture of performance excellence.

Is your organization ready for a lightning strike in your industry?

This story first appeared May 8, 2013, on Blogrige. Reprinted with permission from the Baldrige Performance Excellence Program, Gaithersburg, MD.

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