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A family affair
Solid values, long-term vision keys to staying competitive, says Linamar CEO
By Liz Bernier
By all accounts, Linamar is a beacon of success in a struggling economy. In the midst of Ontario’s turbulent manufacturing sector, the Guelph-based company has grown to become an international player in global auto parts manufacturing. With 19,000 employees, targets of at least 10 per cent growth per year and a recent $101-million government grant, the organization is planning to create 1,200 new jobs in the province at a time when layoffs are almost expected.
So how does Linamar do it? Its success is due in large measure to the long-term vision that comes with being a family business, said CEO Linda Hasenfratz during a Strategic Capability Network CEO Spotlight event in Toronto.
Linamar is a publicly traded company but the Hasenfratz family retains about one-third of the shares, she said.
“That’s an important part of our success because we have a very long-term viewpoint in terms of how we want to run the company and the strategy… you often see that in many family-influenced or family-controlled companies.”
In fact, it’s been statistically shown that the long-term returns of a family-run company are significantly higher — in the neighborhood of 30 to 40 per cent higher, said Hasenfratz.
“That really is because of that long-term viewpoint. I’m not managing the company for this quarter — although the quarter is important, for the shareholders in the room — but we’re also thinking a lot about five years, 10 years, 20 years, 50 years down the line, and what do we need to be doing today to ensure the long-term viability of the company?
“Long-term perspective is very key to creating that consistent, sustainable growth that we’re looking for in the long term,” she said. “Also very important to a company’s success is the culture that you create in the organization.”
Integrating culture, values
Linamar has invested a lot of time over the last 10 years into articulating its culture and values, said Hasenfratz. Balance is one value that is very important — particularly balancing the needs of customers, employees and shareholders, she said.
“We can’t manage just for the bottom line because if you’re managing just for the shareholders, then your employees will suffer and your customers will suffer. And, similarly, we can’t just manage for the customer — we need to think about our employees and think about our bottom line.”
Linamar has built that value into how it does business by creating a “balance” scorecard measuring system that every plant and group and the overall company is measured on every month. It also impacts how employees are bonused.
Being entrepreneurial is another key value, as are respect and responsiveness.
“A customer who feels that they can rely on you, they know you can move quickly — that kind of situation can bring all kinds of business down the road,” said Hasenfratz.
A strong work ethic is another critical value, along with innovation.
“We’re always looking to innovate in terms of product design, in terms of process design… And that innovation, to me, is a huge part of what makes us competitive,” she said.
Hasenfratz herself is a prime example of the thought, experience and care that goes into developing leaders and succession planning at Linamar.
Before taking the CEO reins from her father in 2002, Hasenfratz started at Linamar working on the shop floor as a machine operator. She spent about five years shifting through many different jobs to learn the business from different perspectives.
“I worked in every different department. I went from the shop floor to engineering, quality, material control, accounting, marketing, really trying to get just a very broad viewpoint of how the company was run, which was invaluable to me in terms of not just understanding how the company worked but exposing me to a lot of different people in the organization who I can call and ask for help, and who are my supporters within the organization as well,” she said.
Linamar recently created a management training program that is modelled on that experience and called LEAP or the Linamar Entrepreneurial Advancement Program.
“We pick up to five people each year to put into the (LEAP) program, which is designed to groom them to be a general manager of one of our facilities,” said Hasenfratz, adding that people shift from plant to plant, department to department to get experience in every area.
When it comes to choosing
potential leaders, Linamar considers many different personalities — not just those who appear aggressive or outgoing, she said.
“We’ve given a lot of thought to leadership at Linamar and what we think is important in terms of leadership traits, and we’ve tried to really instill that as part of our culture and let people know this is what we’re looking for in leadership at Linamar, and try to drive it into recruitment and into assessments and build it into how we train our leaders as well,” said Hasenfratz.
There are several leadership behaviours they look for in their people. The first is passion — people who are excited and motivated about what they’re doing. Another is planning and vision, she said.
“You can have a vision of where you want to go, but you have to be able to put a plan together of how you’re going to get there. And then, of course, you have to be able to execute on the plan,” said Hasenfratz.
Linamar also looks for edge and acumen in decision-making, good communicators and, finally, leaders who truly care about their people.
“We feel if your people feel you care about them and you care about what happens to them, then they’re going to follow you wherever you want them to go. If they feel like you don’t care about them, why would they follow you?” she said.
These values and leadership behaviours are also a big part of assessing people’s performance every year, said Hasenfratz.
“That assessment is equally weighted to their performance in terms of meeting goals,” she said — and it helps determine who the strongest candidates are for leadership roles.
“Succession is very key, I think — trying to balance people within the organization to allow us to continue to grow effectively is critical. We want to grow in the double digits, and we’re not going to be able to do that if we don’t have the right people with the right skills in the right places.”
In fact, Linamar is in the process of launching a rebranded succession program called “Each One Teach One.”
“Each person is teaching at least one other person to either do their job or develop within the role that they’re in, or develop for another position,” she said. “(So) you’re significantly enhancing the depth of capability.”
Employee development is top-of-mind for Linamar, she said.
“To me, there’s nothing more important as a leader than developing your successor. To me, if your successor isn’t as successful or hopefully more successful than you, then you’ve failed as a leader.”
Common sense, not magic
By Karen Gorsline
While Linamar has had spectacular success in the manufacturing sector under the leadership of CEO Linda Hasenfratz, there is no magic involved — just good old-fashioned common sense coupled with a deep understanding of the industry and its business climate. Linamar’s business model melds business discipline with entrepreneurial freedom to innovate.
Manufacturing is known for discipline both in precision standards and standardized processes. No doubt Linamar has needed to be a proficient manufacturer with staff highly skilled in their trades, exacting processes and quality control. However, Linamar’s discipline beyond these technical operating aspects demonstrates overall common sense about running a business that often gets lost in the conflicting demands of day-to-day operations and the expectations of shareholder returns.
When tough times hit, Linamar had good business practices as a solid foundation:
• Strong financials in terms of debt to capitalization and an accounts receivables contingency plan.
• Clarity that three stakeholders mattered — customers, employees, shareholders — and successfully balancing these interests formed its scorecard.
• Basic principles of continuous improvement in place.
• Maintaining a highly skilled workforce.
• Frank, frequent, personal communication about the business — for good and bad news alike.
• Acquired companies required to adopt Linamar’s values of respect, responsiveness, hard work and innovation.
• Identifying business-critical decisions and processes that apply across the company, such as capital equipment.
• Clear expectations that plants and employees are to demonstrate performance and accountability for decisions.
Freedom to innovate
Few manufacturing companies can sustain a freedom to innovate and move beyond entrenched processes. While similar manufacturing companies were exiting the market, Linamar was able to rely on its deep expertise, values and understanding of the market to seek out new opportunities and new ways of meeting needs. It became the “go to” source for those who need a fast solution to a sticky problem. When opportunities presented themselves, its entrepreneurial culture and innovative perspective on manufacturing supported growth.
A few examples:
• It looked beyond difficulties for opportunities to build market share through acquisition and to acquire customers from companies that did not survive.
• It secured the support of its three key stakeholders for longer term strategies and investment for the future rather than just short-term rewards.
• Linamar created a goal of six new implemented ideas per employee per year to both reinforce continuous improvement and to stimulate innovative, entrepreneurial ideas.
• It worked to reduce bureaucracy. Plants make decisions and tailor operation of corporate programs in ways that best suit their needs. They are held accountable for their scorecard and successful operation of the plant.
• Linamar worked on identifying how it is positioned for opportunities in various future scenarios and used that information to develop new or modified business directions.
In a business climate where companies are often mired in bureaucracy and enamoured with adopting the latest models and theories, it is refreshing to come across a business that is drawing upon good business practices and applying them in creative and innovative ways.
Karen Gorsline is SCNetwork’s lead commentator on strategic capability and leads HR Initiatives, a consulting practice focused on facilitation and tailored HR initiatives. Toronto-based, she has taught HR planning, held senior roles in strategy and policy, managed a large decentralized HR function and directed a small business. She can be reached at email@example.com.
A refreshing CEO
By Michael Clark
What is the role of the CEO in organizational effectiveness? Well, the CEO — the ultimate cross-over manager — is accountable for everything, with effectiveness being the overarching priority. That is an extraordinary expectation to rise to and only a select few have the skill, will and mental horsepower to do a decent job of it.
Linda Hasenfratz, CEO of Linamar, demonstrated she is capable of rising to that expectation. She has applied herself to the interweaving practices of an effective CEO: develop a strategy and ensure the structure to support it; define the work, including the roles, then integrate the work across functions; establish a talent growth system; and promote and model effective managerial leadership.
It was so refreshing to hear an executive talk about looking “five, 10, 20, 50 years down the line.” As a CEO of a global organization, Hasenfratz must have the capability to develop a strategy at least 10 years out. Many executives, overwhelmed by the work and lacking depth in their teams, drop down into shorter time spans — causing too many surprises by the slings and arrows of everyday fortune.
Clearly, Hasenfratz has thought through Linamar’s functional structure. The manufacturing facilities are the organizational spine of the company, with decision-making devolved to them. Head office and all its functions are support services for the plants, which in turn accept accountability for their goals.
In securing the functional structure, she clarifies the work to be done and the roles needed to execute that work. With the roles clarified, she then populates the structure with the right people.
“Double-digit growth is not possible without the right people,” she said. Hasenfratz has established a multi-channel talent development system at Linamar with an emphasis on management and leadership — the “Linamar Entrepreneur Advancement Program” and the “Each One Teach One” programs are examples.
Next, a talent development process must include a framework of expectations for the leadership behaviours being sought.
Hasenfratz certainly demonstrated the Linamar behaviours of passion, planning and follow-through execution, acumen as well as “soft” traits such as communicating and caring. As she said, “Why would people follow you if you don’t care?”
The presentation was a classic demonstration of the role of the CEO in organizational effectiveness.
Michael Clark is director of sales and marketing at Forrest & Company in Toronto and a commentator on organizational effectiveness for the Strategic Capability Network. Forrest is an organizational transformation firm, with more than 25 years’ experience in developing the organizational and leadership capacity in organizations.
Linamar treats people right
By Trish Maguire
In the last year, Linamar achieved above-earnings growth of more than 50 per cent and realized significant improvement on margins. It is targeting double-digit growth of at least 10 per cent for 2015.
It’s no surprise, then, to learn that Linda Hasenfratz, CEO, received the 2014 Ernst & Young’s Entrepreneur of the Year Award for Manufacturing. If you look at your own organization’s past and current results, would you be able to match the Linamar story?
Linamar’s success is built on a few fundamental principles that can be summarized under three core factors: purpose, people and process. All three are equally and consistently practised.
Purpose: Linamar is always looking five, 10 and more years ahead to determine long-term opportunities and viability. The leadership team never takes their eyes off the future, unlike other corporations that just look at the next quarter. They drive an entrepreneurial mindset and see the future marketplace as being highly competitive and a billion-dollar growth opportunity.
Unlike many publicly traded companies that predominantly focus on the bottom line, Linamar embodies an inclusive, equally balanced decision-making model concerning people, shareholders and customers. Collectively, this outlook reinforces a strong sense and understanding of purpose, vision and strategy.
People: Linamar’s people know they are appreciated and respected for being resourceful and having a strong work ethic. Their culture is central to their success where defined core values and principles are part of the way everyone accomplishes their day-to-day business versus being a list of promising words on a poster.
Double-digit growth means having the right people in the right position and is non-negotiable; consequently, leadership development is an essential commitment. Primary leadership qualities are infused to develop and reinforce competent behaviours and consistently incorporated with all recruitment activities, assessment practices and training initiatives.
Process: Continuous improvement is not just an exercise or process of compliance, it is a measurable annual goal where everyone is expected to do their part every single day to continuously improve the process or product. Every single person is expected to be totally devoted to helping maintain the competitive edge, bring forward innovative solutions (not just ideas), constantly raise the bar on efficiencies, and reduce costs and waste.
Linamar’s leadership approach reinforces the need to adopt a disciplined practice in taking a long-term view of business, execute a strong strategy for a targeted market, aggressively go after business, constantly devote everybody’s energies on driving efficiencies, purposefully invest in innovation and continually develop people.
Linamar is an exemplary model of how any manufacturing business in Ontario and Canada has every opportunity to be highly competitive, consistently achieve above-average earnings growth and realize greater margins together with attaining double digit growth.
The one fundamental differentiator in its success is the consistency with which the leadership team drives an all encompassing can-do mindset and culture — that’s leadership in action.
Trish Maguire is a commentator for SCNetwork on leadership in action and founding principal of Synergyx Solutions in Nobleton, Ont., focused on high-potential leadership development coaching. She has held senior leadership roles in HR and OD in education, manufacturing and entrepreneurial firms. She can be reached at firstname.lastname@example.org.
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