Breaking down the walls

Three years ago, brothers Ned and Steve McGovern tore down the wall between their two offices. They had decided to try a new style of leadership for their company — Yanmar distributor Mack Boring & Parts Company — and what has been a much-debated concept among executives worldwide: co-presidency.

This experiment, by itself, has not been the primary driver of the many changes Mack Boring has undergone in the past 10 years. But it is emblematic of their willingness – despite 86 years of success – to break with traditional ways of doing business and embrace new ideas and strategies that make sense for their distributorship. The company may have grown from a small machine shop in 1922 to a $50-million business, but its executives understand that future growth requires taking Mack Boring to new levels.

“We can grow in a down market if we’re good at what we do,” explains Ned McGovern.

This quest for continuous improvement has led to the adoption of radio frequency warehousing, cellular assembly and a Dealer Advantage Network with e-commerce capability, among other things.

“Now, the tools are available for companies our size to mimic the improvements a lot of larger companies have been pursuing, like Six Sigma and Lean,” says Jon Henkin, Mack Boring director of business process development. “The playing field has been leveling quite a bit, even at the dealer and distributor levels.”

The key to Mack Boring’s success with its many recently launched initiatives leads back to its ability to determine what initiatives make sense for its business, to develop detailed plans for adopting each initiative and to build accountability into its plans.

So often, family businesses like Mack Boring create plans for the future based on executives’ field experience, and then execute those plans within whatever time frame their hectic schedules allow. While field experience can’t be underrated, strategic planning with measurable targets and built-in accountability measures is essential for those businesses that are serious about creating meaningful change. And change is necessary for companies that want to be players in an industry like boating, where consumer expectations and competition for discretionary dollars are on the rise.

“We tried to do strategic planning on our own,” acknowledges Ned McGovern. “But there was no accountability.”

Playing ball
That changed on Dec. 13, 2003.
That’s the day the engine distributor, with the help of a consultant, held its first strategic planning meeting during a retreat to Mohonk Mountain House in New Paltz, N.Y. Not only did the company form its mission statement, which can be found today on the walls of most offices and departments within the company’s Union, N.J., headquarters, but it also kicked off an annual goal-setting process.

Through that process, the company decides upon specific initiatives to pursue each year, and assigns each of them their own project management team with employees from different departments and levels. Those team members create a tactical plan in which each member is assigned tasks with milestones and deadlines. Their progress is tracked during monthly meetings.

Another feature of the planning process is a “three strikes and you’re out” policy. Each time a team member misses their goal, they get a “strike,” which requires them to write a letter to the rest of the company, apologizing. If they get three in a year, they’re removed from the strategic planning team and their position with the company is in jeopardy. The policy obviously works: Henkin says no one has ever received three strikes.

The fundamentals
The company’s change hasn’t come out of nowhere. Mack Boring had many fundamentals in place that served as fertile ground in which its strategic planning process could take root.
Perhaps most important is its workforce development strategy, which the McGoverns call one of their business’ core competencies. While HR has been an important focus for the company throughout its history, the hiring of a high-level director for this department in 2005 helped boost its efforts.

Not only does the company now conduct “a lot of testing” during the hiring process, they say they won’t compromise in finding the right person for the job — something that has translated into positions remaining open for as long as a year.

Once Mack Boring has found a good match for an open position and brought the candidate onboard, they don’t hesitate to invest in them. In fact, all employees are required to complete a minimum of 20 hours of training per year. The brothers believe in the process, which means employees are given a lot of leeway in their jobs.

“We’re very open with our financials at the management level,” say the brothers. “We trust our people. There’s very little around here that is hidden. Everybody shares in the pain, and everybody shares in the gain. Nobody can do it alone.”

The McGoverns back up this philosophy through a pay structure that offers bonuses and profit sharing. Added together, the company’s focus on finding the right people, growing them, trusting them and rewarding them has translated into low turnover and “by far the best team in the history of the company” say the brothers.

Henkin is one such example. He was invited onboard because of his IT skills. But during his first few years with the company, he pursued an MBA and, after graduating, was promoted from IT director to director of business process development.
In that position, Henkin has been able to maintain the strategic planning process created under the consultant’s guidance, and thereby help develop and steer many of Mack Boring’s
new initiatives.

New and improved
Mack Boring began pursuing radio frequency warehousing in 2006. Through the use of bar coding and hand-held scanners, the system allows product movement to be tracked within the company, allowing it to receive, replenish and ship its products faster and more reliably.
In the past, Mack Boring had to physically check each shipment it received to ensure it contained the goods promised and then manually enter the shipment information into the company’s computer system. The radio frequency warehousing allows the company to combine those two steps into one, and the results are dramatic.

The system went live in September, and immediately, there was a 47-percent reduction in stock receipt and put-away time. That reduction continues to grow as the company refines its process.

“In a price-competitive market, customers won’t pay for inefficiency in the supply chain,” comments Henkin. And as Internet usage continues to grow, price competition will only increase.

The company is responding to this spike in Internet usage in more than one way. Several years ago, Mack Boring created its Dealer Advantage Network, a self-service Web site on which it stored product and service information. In 2007, it reinvented the site, adding access to warranty claims, technical bulletins and boat tests, and giving dealers a secure site through which they can purchase Yanmar parts online. The network also allows dealers to check product availability, submit quotes, review their open and historical orders and determine the status of invoices.

“You wouldn’t believe the number of calls it has eliminated,” says Henkin.

The site was launched in January 2007, and as of November, 39 percent of Mack Boring’s Yanmar parts sales were being processed through e-commerce and 72 percent of its dealers had signed up. The company’s goal was to hit 100 percent by the end of the first quarter.

Finally, the company is in the midst of adopting a cellular assembly process through which it is reinventing the way it assembles engines in an effort to eliminate waste. Cellular assembly involves creating a “cell” around each work station in which the tools and parts needed to assemble the engine are readily available, making for a more efficient process.

As with many of its Lean projects, the company has used the DMAIC concept (define, measure, analyze, improve and control) to drive change in this part of its business. While this may sound complicated, Henkin says it doesn’t have to be. In fact, one of the first steps in refining its assembly process was for the project management team to watch the current assembly process and make notes as to potential areas for improvement. Using the company’s Enterprise Resource Planning system, Mack Boring can then track how those improvements impact metrics like number of units assembled per day, week or month.

To say the initial results are encouraging is an understatement. The company has been able to reduce its assembly order-fulfillment time by 65 percent when utilizing this cell, and as it refines the process, Mack Boring is shooting for 80 percent. In addition, product travel distance has been reduced by 92 percent.

“The hard part isn’t knowing what you should do, but doing it,”Henkin comments. “A lot of companies are not willing to push it to a logical extreme. They say, ‘If we get 20-percent improvement, that’s good enough. It’s better than before.’ But you really see the advantage if you push it to the logical extreme and get 50-percent to 80-percent improvement. That’s the difference between our approach and that of many others.”

That difference becomes meaningful when it translates into customer benefits, Henkin points out, including the flexibility to be more competitive, cost advantage and/or speedier fulfillment/delivery.

Fueled by passion
Another Mack Boring fundamental is the company’s passion for delivering customer satisfaction, an intense focus that drives the company to improve.

“We have real problems in this industry,” says Ned McGovern. “We’re losing customers because they’re leaving the industry. We need to push those who aren’t focused on customer satisfaction out. We’re really focused on delivering a good experience.”

That focus begins with things like the requirement that Mack Boring sign off on each new boat model that carries one of its engines before a boat builder sends it out for the first time. The McGovern brothers explain that this policy allows the dealer to concentrate on satisfying the customer rather than fixing problems with the product.

To deliver a good experience, Mack Boring also must understand its customers’ needs. The company gained new insight when it participated in five fishing tournaments in 2007.

“I captained a lot,” Ned explains. “And, boy, did I learn what boat owners go through.”

While Mack Boring does 70 percent of its marine business with OEMs and 30 percent with dealers, it also serves the boater directly. No, it’s not competing against its own retail network. Rather, its training services division offers engine maintenance and repair classes to more than 1,000 marine customers per year, including boaters, dealers and government workers, giving it yet another window into consumers’ experience with their products.

Mack Boring also considers how it can make its dealer and boat builder customers’ jobs easier. For example, it has an ability to service, repair and rebuild all of the engine components that it distributes.

“If a boater calls us [with a problem], we take care of it. That’s what more and more boat builders want,” explains Ned McGovern.

In addition, the engine distributor is out at the boat shows in force, attending as many as 34 shows per year.

“You’ll find a McGovern working nearly every boat show, along with various trade shows, dealer meetings, owner rendezvous, you name it,” says Patrick McGovern, marine sales manager and Ned’s son.

Finally, the company has a strong relationship with its manufacturer partner, Yanmar. It was a leader in developing the multi-tiered national Yanmar dealer program, for example.

Mack Boring is involved in the industry too. It’s a member of the American Boat & Yacht Council, participates in its local marine trade association activities and attends the American Boating Congress, for example.

The marine business isn’t the only industry the company is involved in. In fact, its industrial business is growing rapidly under the guidance of Ned’s other son, Ted. But boating still generates about 70 percent of its revenues.

From the top down
All of these initiatives translate into what appears to be a bright future for the company.

While Mack Boring’s revenues were down slightly in 2007, it expects modest growth in 2008 — a year in which many analysts predict the marine industry will be flat or down. One sign of the company’s confidence in its future is a new assembly and warehouse building in North Carolina it plans to break ground on this spring.

“We don’t think we have all the answers,” says Henkin. “We’re just trying to constantly improve. You can always get better.”

The McGovern brothers know that drive for improvement has to start at the top.

“If Steve and I didn’t believe in improving ourselves,” Ned McGovern says, “I don’t think everyone else would.”

Not only do the brothers create an environment in which employees are inspired to seek change and growth, they actively participate in groups like the Fairleigh-Dickinson University Family Business Forum and the Vistage CEO organization as a way to stretch themselves and their business, bringing in new ideas from other industries.

Their do-as-I-do philosophy is also why they decided to knock down the wall between their offices.

“We thought it would set a good example for the next generation about working together,” the brothers say. “If one person fails, we all fail.”