There is a way through. (CEO Journal).

Most everyone in the North American metalcasting industry should be scared stiff these days. We've been thrown into the global economy seemingly overnight, a major domestic capacity shakeout is well underway (with no end in sight) and even more and bigger changes are in store for us in 2003. But there is a way through this nightmarish process, a path which could ensure your company's near-term survival and go a long way toward guaranteeing its longer term prosperity.

A Tale of Two Foundries

Imagine observing two foundry companies being started up in the same region of the country (obviously this anecdote takes us back to a much more economically friendly time than the present). As these plants open for business, imagine that they have the same basic design, equipment and number of employees. Now fast forward several years and guess what we will find?

That's right, one foundry is very successful and highly profitable while the other is barely hanging on. What happened? Clearly this is not an isolated outcome, as we see evidence of essentially equivalent foundries performing at wildly different profitability levels all the time. It's an all-too-common outcome, and the explanation, by definition, has nothing to do with the foundry or production per se. The answer to this riddle is the key to surviving and thriving, and it can be summarized in one word: management.

If we were to view this rather obvious lesson from author Peter Drucker's perspective, he would tell us that the best CEOs and top managers are those that define their businesses in terms that are meaningful to a well-defined segment of the customer universe. They ensure that these customers and their needs and wants remain central to the operation of the business and invest continuously in the development of their management teams. These top management tasks, which have everything to do with leadership and nothing to do with manufacturing a product, are the ones Drucker tells us are the keys to ensuring the survival and prosperity of your business.

Management Keys

For foundries in these harsh economic times, some aspects of management are more important than others. For example, customer selection (those you've already selected, mainly) has never been more important. Your customers' freedom to and attitudes about offshore sourcing will play a major role in your foundry's future. As a result, CEOs should be thinking hard about which part numbers are "dumb metal," which are "value-added parts," which will stay in North America and which will go offshore. They also need to be strengthening their companies' positions with customers and for products that have "compatible" characteristics necessary to keep their products competitive.

It follows then that product selection also is key. CEOs need information about customers, products, and part number costs and profitability to understand if a particular product has a legitimate future with their business or not. Also, staffing remains critical, as CEOs need to resist the temptation to downsize to the point where their company can no longer keep its promises, especially on delivery. Of course, productivity remains a critical management issue as well, especially as it relates to the white collar work force.

Stated another way, the CEO's job is to ensure the long-term financial success of the business, and to do so by guiding company employees along a well thought out strategic path to that end. It is also appropriate for the CEO to force the management team--and the entire employee base for that matter--along such a path if need be. And it's important to note that the paths to success--differentiation and cost leadership--have not changed for North American foundries. What has changed is the nature of competition and the final erosion of our industry's "strategic slack--the cracks between competitive forces in which poorly managed foundries could survive despite operating well off these paths.

While identifying the right path for your foundry is critical, it is not the most difficult challenge; steering the business onto that path and managing to keep the business firmly on it is, And that brings us back to the centrality of management to foundry success. Foundries and their CEOs can no longer continue with "business as usual" and expect to survive and even succeed. Instead, CEOs need to embrace the craft of management in all its elements and use them to manage and lead well. A CEO's willingness and ability to do so will, as it always has, continue in the months and years ahead to characterize the survivors from those on our industry's ever lengthening list of business casualties.