Q: Mr. Beardsley, let's begin with what we were just discussing. How's the
company doing these days? How many more employees are here since you've
started working at Master Lock?
Beardsley: The company's doing very well. Our sales over the last five
years in this location are up in excess of thirty percent. We don't have that
many more employees. We've increased our employee count at this location from
approximately 1450 to 1475, but that's largely attributable to productivity
increases.
Q: People talk about productivity all the time. What does it mean?
Beardsley: Well, in our case it means locks per labor hour, but we also
measure dollar sales per employees. On the latter count we've seen our
situation here improve considerably.
Q: How do you get employees to make more locks per hour of work?
Beardsley: Well, by making it in their best interest to do so. I think
the employees know that they'll prosper if the company prospers. So we want
them thinking about how to do a better job for the company every day they're
here. And I think most of them do feel that way.
Q: Is productivity up because they feel better about the company -- their
participating makes the company more profitable -- or is it a lot of capital
investment? New technology?
Beardsley: Well, it's both. I think that we have to figure out how to
work smarter not harder and part of working smarter is investing in modern
equipment, investing in computer-driven machines, adopting modern processes.
But part of productivity improvement is listening to your employees and
responding to their suggestions, working with them and incorporating them in
the solutions that you're putting in place.
Q: To some people this venture sounds like apple pie and motherhood. Does
it really work?
Beardsley: Well, it does work. I mean, it's worked here. The key is
figuring out how to get everybody to work together toward a common objective,
as opposed to butting heads over what are perceived to be irreconcilable
differences.
Q: Did that happen in the past?
Beardsley: Well, we've had good labor relations in this plant for
fifteen years. Fifteen years ago was the last time we had a strike. But at
that time, after that strike, the Vice President of Manufacturing Earl Stincey
sat down with the President of the Union and they decided that if the company
was going to prosper in the long term and we were going to maintain jobs in
this location, they were going to have to figure out how to work together. And
they reduced labor relations at that point to two questions: What's the
problem and how do we solve it? And they decided that there wasn't any issue
that they couldn't discuss; that there wasn't any sort of discussions that
couldn't reach resolution; and that, in the process, the objective of that
resolution ought to be a win-win decision for everybody involved.
Q: Now you weren't here at that time, but could you give a specific example
of what kinds of decisions were resolved in a new way. Who took the initiative?
Was it the labor side or the management side?
Beardsley: I think they ought to both be credited with the initiative on
that. It was a realization on both their parts that the strike hadn't gained
anybody any advantage.
Q: A climate has been created, I think, in corporate America in the last
ten or fifteen years that it is okay to leave. It is okay to go to find the
cheapest labor you can find. Master Lock decided not to do that. Why?
Beardsley: When plants relocate they're generally in search of a more
cost-effective environment. We have a very cost-effective plant here. Our
manufacturing efficiencies are based on vertical integration and a skilled
labor force. We're vertically integrated because very few other manufacturers
in the U.S. make the parts necessary to assemble a padlock. So we do our own
dye casting and stamping and heat treating and plating. We even make the
plastic bumpers that are on the Master Lock padlocks. And in order to maintain
a plant like that you need a skilled labor force, and our labor force has grown
up with the company. The average age of the individual we have working here is
approximately forty-four years. They have approximately fourteen years of
seniority with the company. That level of skill is necessary in order to keep
this process going and keep it efficient. So it's maintaining good relations
with a skilled work force that's basically our competitive advantage at this
point.
Q: Did what you are talking about begin to happen in the early '80's?
Beardsley: Well, no, I think that a lot of Master Lock's advantage grew
up with the company. We're celebrating our 75th anniversary this year. The
laminated padlock was invented in 1921.
Q: It may make sense for a lot of companies to contract out some of the
operations within the process. In other words, they're not vertically
integrated. Was there some decision way back to stay vertically integrated,
that we can do better that way?
Beardsley: The laminated padlock is a unique product. No other
manufacturers in the United States make parts that are conducive to this. So
we were more or less forced into vertical integration by the design of the
product line.
Q: If you went down the road thirty miles, if you went to Indonesia to
manufacture, couldn't you reduce labor costs significantly?
Beardsley: I think you could, but at the same time you'd run the risk of
lowering the product quality. You'd run the risk of diluting the brand name.
And product quality and brand name and excellent customer service are three of
the things that really make us tick.
Q: So maybe a lot of people mistakenly call what Master Lock has done the
high road. A lot of management consultants and business school professors talk
about this kind of thing. Invest in your work force, invest in the best
technology, keep people happy. It's working for you?
Beardsley: It is working for us.
Q: Is that because you're good at it?
Beardsley: Yes, I think it's because we're good at it. And I think it's
because we've been able to retain the initiative in our market place. By
having a strong brand name, by being a leader in your market place, you can
have a major influence on how the rules of competition play out. In our case
it works because we have created a very high-volume, very cost-effective
manufacturing plant here, and we support it with good community relations, with
good relations with the work force, and with continuous innovation and new
products.
Q: Is it expensive? I mean does it take a lot of capital investment to keep
up the quality of your production process?
Beardsley: Well, you balance a lot of capital investment with a very
good maintenance organization. We have people here with the skills to tear
down and rebuild virtually every piece of equipment we have in here. And so
while some equipment is arriving and being unpacked today, there's other
equipment that's on the floor that's been working -- and working effectively --
for thirty-five, forty years.
Q: The way you manage, is it generalizable? Can other corporations do this?
Does it depend on the kind of product?
Beardsley: I think that you could make an analogy here. It's a little
bit like raising quality and lowering costs simultaneously. Those aren't
necessarily divergent strategies. But the conditions have to be right in order
to do those two things at one time. I think the same thing applies to
maintaining the location in one manufacturing city like this, versus
manufacturing overseas. The conditions have to be right for it. And when they
are right, you can create a powerful strategy, one that will benefit all the
players in this case.
Q: A lot of people might say that conditions are wrong here in Metcalfe
Park, high crime, bad housing, maybe a poor education system. Why not move and
get cheaper labor to boot?
Beardsley: Well, the conditions you're citing are just the immediate
neighborhood. In fact, the conditions here are really quite positive. We've
got a skilled work force. We've got a lot of people with a lot of seniority
with the company. The city government has been very supportive. So by and
large, we feel that this is a good, positive long-term environment. And
conditions in the inner city are either at the bottom of the cycle right now
or, in fact, seeing some early stages of reversal.
Q: There's a controversy around these days, as you well know. Some people
call it the "stake holder" philosophy. The Labor Party in Britain talks about
employees as stake holders --that it's not only corporate profits that the CEO
should worry about, but also employee loyalty, because they have a stake in the
company too. Is there something to that argument?
Beardsley: Well, for us there is, because the employees and the skills
they bring are part of our competitive advantage, and so loyalty is certainly
one of the things that we want to encourage. The thought process -- how can we
make Master Lock better each day? -- is something we want to encourage. And
running a successful business is a lot like maintaining an eight-cylinder
engine. It takes all sorts of different things. All eight cylinders have to
work simultaneously. And good work relations, good productivity, innovation,
customer service, product quality -- those are all the cylinders that are
necessary to balance out successfully here.
Q: Why are you so active in putting something back into the community?
Beardsley: Well, again, having a successful relationship with the
community, with the city, is part of maintaining a successful company. The
environment in which our people come to work, the environment in which they
work, in which they live, has a great effect on their attitudes, the
constructive approach that they bring to the job.
Q: It makes your employees feel better?
Beardsley: It makes them more productive.
Q: Is that a hard, tangible fact?
Beardsley: I think so. Sure. I mean, when they arrive at work in the
morning, they have to be thinking about that day's challenges at work, not that
day's challenges in getting to work or those challenges that they face at home.
We need supportive school systems. We need supportive transit systems. By and
large we find that here.
Q: I think a lot of Americans believe that not enough American CEOs,
corporate managers, believe this kind of thing; that they're too willing to say
let's go find the person who'll work for the lowest wage. That's how we'll
beat the foreign competition. Are they right and could more corporations adopt
this kind of attitude and succeed?
Beardsley: Well, Master Lock has been very fortunate in that its unique
products, the strength of its brand name, the overall product quality, the
relationship with its workers has led to a market share leadership position.
That's given us more latitude in controlling where we do business and how we do
business. Other CEOs are going to have to respond based on the competitive
conditions that face their particular business.
Q: China is one of your big competitors. Are they getting better, are they
getting tougher to beat in the market place?
Beardsley: China is getting better. I think the quality levels of what
we see coming out of China are better. They seem to be faster to imitate our
new products. We're in for a tough, long struggle. But we think good
competition makes for a good strong company and we look forward to it.
Q: But is there a time when the competition is going to be too tough, when
you might have to abandon what some people call the high road? A time when you
may have to reduce capital investment to a point where it can start to
jeopardize your productivity?
Beardsley: No, we don't think so. Our strategy is to make our product
as difficult to imitate as it possibly can be, and we do that by having
consistently high quality, by the breadth of our product line, by the
excellence of our customer service and, very importantly, through innovation.
We're constantly developing new processes for manufacturing and new products to
move the battle off the mature product into some of the new higher growth
areas. So for that reason we think we can work smarter and stay ahead of
competition.
Q: So you're not worried? You don't anticipate losing any market
share?
Beardsley: Oh sure. We're worried. I mean -- being worried is what
keeps you sharp. We worry about it every day.
Q: How is market share holding up?
Beardsley: Over the past fifteen years we've had consecutive sales
gains. Over that period of time our market share has increased, import market
share has increased, and other U.S. manufacturers have lost share. So now
we're at a point where it's principally Master Lock and the imports and that's
where we've attuned our strategy at this point.
Q: But these guys -- it's pretty tough competition.
Beardsley: It is tough competition. They make a low cost, albeit lower
quality, lock, but it's attractive to a segment of the customers.
Q: We've spoken to one of your assembly line workers, Sheila Caldwell. She
is delighted to have a job again. She's delighted to have her medical
benefits. But can the Sheila Caldwells of your company at last breathe
easy?
Beardsley: I don't think any of us can breathe easy. The imports
produce a low price product with low cost labor. We can't compete on those
bases. We have to figure out how to work smarter not harder. We have to
improve our productivity, improve our process designs, broaden our product
line, maintain higher product quality, develop high customer service
capabilities. To the extent that we can differentiate our product and our
business strategies on that basis, I think Sheila can maintain some confidence
in the security of her position here.
Q: So you have to beat the competition not through lower labor costs, not
through making people work longer hours or whatever happens overseas. You've
got to beat them by making a better product and by having better equipment and
better methods?
Beardsley: That's right. And better productivity.
Q: Can this advantage that you can get through better investment, through
smarter business practices, through better equipment -- will it last?
Beardsley: I can't predict the future. It may not last. But I can say
that as we have focused more and more on the import threat over the past three
years, we have amazed ourselves at how many improvement opportunities there are
in process design, how many new product ideas can come out of the research and
development area. So there isn't any evidence, at this point, that that gap is
going to narrow.
Q: Competition in general is much tougher than it was twenty years ago.
Will we ever be able to breathe easy the way we once did?
Beardsley: I think U.S. manufacturing, U.S. business has made terrific
strides over the last ten years. I think we probably hit our nadir as a
country in the late seventies or early eighties. I think on a world-wide basis
we're much more cost effective today than we were ten, fifteen years ago.
Q: But is the American worker going to be able to say hey, I've got a job,
I'm set, I'm going to have a pension, I'm going to have health benefits, I'm
going to be able to put my kids through college?
Beardsley: The American worker has to say I've got a skill, I've been
trained, I can do things that workers in other countries can't do. And the
worker needs to rely on that skill. I think to the extent that we put more
effort into training, more effort into differentiating our manufacturing
processes, I think the American worker can be confident of his future.
Q: So you think the Sheila Caldwells of the world can breathe a little
easier now?
Beardsley: I think that Sheila needs to work with us to figure out how
we make this a better place to work each day. And to the extent that she and
we are successful in doing that, she ought to be able to breathe easier, yes.
Q: Is there a role for government in this? Federal government, state,
community, to make it easier for corporations like you to do the things you're
talking about, to become more productive?
Beardsley: Well, speaking of local government, I think there is a role
that they have to provide the right environment for manufacturing to succeed
Police protection, in the case of the inner city, is very important. Improved
transit. We have to have safe, easy, convenient ways of getting our workers to
the plant. Many of our workers are the second employee in a family and they
can't all afford two automobiles, so transit is an issue. I think the biggest
issue we face today is education. The public school system is not turning out
skilled workers at the rate that we need them in order to sustain the work
force here.
Q: Why are some people surprised Master Lock stayed in Milwaukee?
Beardsley: Well, they shouldn't be surprised that Master Lock stays.
Actually we are among a group of companies -- A.O. Smith, Harley Davidson,
Johnson Controls, Miller Brewing -- that I think you'll find share the
attitudes, the approach to working in Milwaukee.
Q: But there were companies that left. There was something about the urban
center in old industrial cities that suggested, hey, there's a better place for
us to be.
Beardsley: Well, no owner, no manager makes a decision to move a plant
easily. It's a very difficult decision to make. All the pain of the human
factors is involved. There's a terrific amount of capital investment. There's
risk associated with starting up a new plant. There's interruption of customer
service. So those decisions are not taken easily. But the reason for doing
that, more often than not, is because a competitor has changed the rules of
engagement, because a business is losing market share, and because there's a
long-term survivability issue involved. A company that is facing a move is
facing a situation where they've got to get on a new experience curve that's
been established by a lower-cost competitor. And if they don't do that they
face a long-term survival issue.
Q: Do you think there's a role for the federal government in making it
easier for companies like yours to stay in urban centers?
Beardsley: Well, there may be, but it really is much more a question of
business conditions -- management and competitive environment type situations
-- than it is a federal government issue in my opinion.
Q: So do some of these recent proposals made by Senators Bingaman and
Kennedy and Secretary of Labor Reich is talking about -- tax incentives for
companies who retain workers, or who invested higher rates in their companies
and so forth and so on, does any of that make sense to you?
Beardsley: I think these problems have to be addressed on a company by
company, locality by locality basis. I think they're driven by the competitive
posture of the company, by the market share, by the success of the product
line. I have a little difficulty seeing how things like that are going to help
us directly.
Continue
