If you were to ask Bob Moran, Jim Orbik and Rick Gasaway what it’s like to operate a boat company in an average year, they may not be able to tell you.
These three executives, who have steered Nautic Global Group through the downturn and into today’s new market, have yet to experience the “normal” that so many in the boating business long to return to.
The reality that they have created for their boat building firm over the past several years, however, is one that is designed to lead Nautic Global Group into a brighter future, regardless of market conditions. It’s one that is based on significant changes in manufacturing, marketing, and employee, customer and dealer relations. And it’s one that has already begun proving itself as a foundation for growth and success.
While the company — one of the largest boat manufacturers in the country — has kept a low profile for many years, Nautic Global Group has been working hard reinventing itself behind the scenes. When a group of private equity investors – led by Code Henessey & Simmons LLC – purchased first Rinker Boat Co. in 2004, and then Godfrey Marine Group in 2005, the company received some attention. And it stepped into the spotlight again when its executives officially launched Nautic Global Group as the corporate brand name for the combined entity in early 2007. Since then, the boat builder has been pretty quiet.
“We hunkered down,” says CEO Bob Moran. “We have not been very active in the industry. We were taking care of our home first. But we’ve taken care of the basics now, and we’ve recently opened up.”
There are several reasons why now may be a particularly good time to open up to the industry. For one, what has been called Nautic Global Group is finally a legal entity of its own. Previously, it had simply served as a holding company for Godfrey Conveyor Co. dba Godfrey Marine and Rinker Boat Co.
Secondly, the company has just finalized an 18-month restructuring process. But unlike most of the restructurings in the news lately, it didn’t impact the company’s dealers, suppliers or strategies. In fact, now that the process is complete, the firm has even greater confidence in its future and is in a position to once again pursue marine industry acquisitions.
Finally, after years of internal focus during which Nautic Global Group has worked furiously to merge the two boat building operations into one efficient, international powerhouse, its executives are confident the company is ready to face whatever the new marketplace has to throw at them – and already have some impressive results to show for the effort. Here are the strategies the company has adopted to get there.
Putting its people first
At first glance, it may appear that the private equity investors’ approach to running Rinker and Godfrey was to bring in outsiders to lead the company in a new direction. After all, Moran, Chief Operating Officer Jim Orbik and Chief Sales Officer Rick Gasaway were recruited from other industries. But Orbik says that’s all wrong. Rather, their strategy has been one of “blending.”
“We want the best available person to perform a given function,” says Moran. “We’ve tried to keep as many of the existing employees as possible for their knowledge of the industry and boating, and then supplemented that with world-class talent from various industries and disciplines.”
“Both businesses were family operated firms that were highly successful,” adds Gasaway. “Once they were acquired, there is a different level of process, discipline and skills to manage the organization as a business that is owned by investors. A lot of what we’ve been able to do is have that good mixture of people that know how to do that, combined with people that understand the nitty gritty of the business.”
Of the 38 people on the Nautic Global Group management team today, 18 were onboard pre-acquisition. Together, they average 18.6 years of experience with the company. Among the 20 who have joined the team in the past six years, 13 came from the marine, RV or auto industries.
One example of an employee the group has retained is Tim Price, a pontoon plant manager who has been with the company for 27 years.
“He has brought a lot to the party in terms of ideas,” comments Orbik. “And he’s also learned things as we’ve implemented lean manufacturing.”
All told, Nautic Global Group employs about 500 people and operates 14 plants on three campuses. That number compares to a low during the recession of about 350 employees and a pre-recession high of about 1,500. And it continues to grow. The company, which was hiring when I visited in May, was operating at 30 to 40 percent capacity.
Achieving total alignment
The challenge has been to unite these disparate groups – employees from Godfrey and Rinker, from inside the industry and outside – and rally them around common strategies and processes. This challenge took on a new urgency when the downturn hit.
The key to Nautic Global Group’s success in this regard has been an increase in communication. Orbik points out that at most family-run businesses – like Rinker and Godfrey – financial information is closely held. However, in order for employees to be able to focus on their jobs during a downturn, they need confidence in their future and their company’s future. That’s why Orbik introduced quarterly meetings on the state of the business. He personally goes factory to factory each quarter, sharing the story of the company’s performance, reinforcing company-wide strategies like customer focus and answering employee questions.
Previously, the company held only one state-of-the-company meeting at Christmas. Now, that meeting has become an employee appreciation event during which awards are given out in areas like safety, CSI and attendance.
In addition, management now holds weekly meetings, and employees at every plant have a daily 5-minute, stand-up meeting to review metrics in regards to quality, safety and on-time delivery. Those metrics are actually another new development, one that has come out of Nautic Global Group’s adoption of lean manufacturing.
Because of these meetings, employees have started to see how what they do fits into the company’s goals and strategies. This has brought about a change in culture illustrated by the questions they ask during meetings, according to Orbik. While once their questions were largely personal, now they’re more likely to be department or company oriented.
Another way Nautic Global Group increased communication was by introducing performance-based annual employee reviews in 2006 and continuing them even through the recession, when workers weren’t eligible for salary increases.
Getting the word out
Boosting communication hasn’t just been a theme internally, however. It also has been a major part of the company’s new dealer and customer relations strategies.
“When I first came into the business, it was pretty clear we could improve how we communicated with dealers and the people that buy our boats,” says Gasaway.
The first step for the company was to consolidate the Godfrey and Rinker marketing departments, which was accomplished when they brought Grow Boating Director Steve Tadd onboard as their director of marketing.
Then, Nautic Global Group established dealer councils for each of the brands to get feedback on competitive issues, dealer programs, consumer trends, service issues and more.
In addition, the company has introduced a quarterly dealer newsletter and launched a dealer portal where dealers can order apparel, POP materials and literature, and view product information. Future plans for the site include giving dealers the ability to order boats, track where boats are in the production process, watch training videos, get certified on Nautic Global Group products and even track their own metrics with regards to customer satisfaction and prospect satisfaction.
But perhaps the most significant sign of its commitment to dealer communication was the company’s decision, when the recession was at its worst last year, to hold its annual dealer meeting. Not only did the company feel the networking opportunity was key to its dealers’ success, it gave Nautic Global Group an opportunity to talk to its dealers one-on-one and get their feedback on how it could be a better partner in tough times.
On the consumer side, the company is in the process of creating a boat owners loyalty program to be launched in conjunction with the 2011 model year, which will allow Nautic Global Group to better communicate with boat buyers, offering them perks and discounts as well as information on products and events.
In addition, each of its brand’s websites has been completely overhauled to make them more intuitive and enable consumers to gather information to make a more informed boat buying decision. The sites even feature boat selector tools.
“Three years ago, if you visited our websites, you would wonder if we were a boat company or a company that sold shirts,” says Gasaway.
For example, there used to be only one way for a consumer to generate a lead on Nautic Global Group’s boat brand sites: by requesting a brochure. Now, there are eight ways to do so, from requesting a DVD to requesting financing.
A new corporate site was also unveiled this spring, and several Nautic Global Group brands now have a social networking presence on Facebook, Twitter and YouTube.
Doing the analysis
While this dealer and consumer outreach is important in and of itself, perhaps the most significant benefit it offers is data to help the company make better decisions.
“We need to become more intimately familiar with who is buying our boats, their demographics and what they find appealing, not only so we can understand this ourselves, but also so that we can share that with our dealers,” explains Gasaway.
That’s the idea behind the company’s dealer councils and owners programs, as well as the new lead management system Nautic Global Group is creating to help fulfill this goal.
A secret shopping project the company conducted last summer revealed that 60 percent of the leads it was handing off to dealers weren’t being followed up on. Since then, the company has put a major emphasis on lead management in its communications with dealers. Not only are the dealers now aware that Nautic Global Group is measuring this metric, but the company also has shared best practices, research results, templates, scripts and a new tool with them.
The tool is the Bridge-It Live phone system, which turns leads that involve phone call requests into a call to the dealership. If a consumer who visits a Nautic Global Group website asks for a phone call about information on a specific boat model, for example, the closest dealer to that lead will receive a phone call within five minutes from an automated voice, which explains that they’re receiving a Nautic Global lead, shares the name of the lead and what information they are requesting and gives the dealership three options: to repeat the lead info, to call the lead or to reject the call.
If the dealership takes the second option, the phone system immediately calls the consumer.
Since putting this new focus on lead management, Nautic Global Group has seen some significant results. In a mystery shop of 35 dealers conducted in the spring of 2009 and also in 2010, for example, double the number of leads received responses in the second year, the vast majority of which were the result of phone calls. The real shocker, however, is the average response time. In 2009, it was 42 hours, while in 2010, it had been reduced to just 1.5 hours.
Another strategy Nautic Global Group is embracing to improve its lead management is the adoption of a lead nurturing process. In the past, when it received a lead, the boat builder would send an auto response and then pass the lead along to its dealer. Through the new process, while the company will still pass those leads to its dealers, Nautic Global Group will also stay in touch with the consumer.
“We were relying on auto responders to close a boat sale, which isn’t good enough,” says Gasaway. “Now, we’re building a 180-day lead nurture process that systematically shares info about brands and local dealers with calls to action along the way.”
Nautic Global Group will also be contacting customers to make sure their local dealers are following up with them. That will result in a prospect satisfaction index (PSI) score for each dealer, which will give the boat builder a coaching opportunity. If the dealer can’t be coached, Nautic Global Group can escalate the lead. Eventually, Nautic Global Group plans to tie dealer metrics like PSI and CSI into incentive or warranty programs.
The company’s new lead management system will be tied into the owner’s club, so that once that prospect makes a purchase, he or she is enrolled in the club until they identify themselves as a prospect once again, at which time they will be re-entered into the 180-day nurture process.
In addition, Nautic Global Group has begun tracking what happens to prospects who don’t buy one of its boat brands to help the company and its dealers understand their lost opportunities.
“When you look at how you get business as a dealer – whether that’s boat shows, advertising, etc. – determining the most fertile ground for boat buyers could be the most valuable information a dealer gets,” comments Gasaway. “Hopefully, over time, a Nautic Global Group rep will be able to walk into a dealership and have a conversation about what’s working for them in their area: leads, model years and types of people buying boats in the area. All of that will come from developing the databases we’re working on.”
With a limeted marketing budget, the company has chosen to spend its resources on projects that offer results it can measure vs. areas like boat shows. While it hasn’t stopped participating in shows altogether, it has reduced the size of its exhibit space in many cases and invested in fewer shows.
Another way Nautic Global Group has changed is by moving from a knowledge-based approach to a process-based method. Having worked for a variety of vehicle manufacturers, from cars and motorcycles to RVs and trucks, Orbik brought his experience in lean manufacturing to the company – an entirely new concept for both brands.
He used that experience to overhaul manufacturing, process mapping each step along the way and creating a continuously moving assembly line, thereby compressing the time from order to build while improving quality. For example, much of the assembly and manufacture of components that go into each boat on a Nautic Global Group assembly line now takes place at stations along that line, rather than in separate buildings, in order to make the process more efficient. That means less handling of the product, which improves both quality and productivity.
Lean manufacturing has also resulted in better quality control processes. During the manufacturing process, a check sheet follows the boat, and employees sign off as they complete each step in the process and inspect their own work. At the end of the assembly line, the team of workers that built the boat conducts their own quality check and fixes any concerns that arise. Then, the boat undergoes a third-party, pre-delivery inspection meant to replicate what the dealer would see upon receiving the boat. Finally, the company conducts product audits in which boats are randomly selected for quality inspection each day following the completion of the pre-delivery inspection.
As a result of this “quality at the source system” in which production team members check their own work, product quality as measured by Nautic Global Group’s internal system has improved by 25 percent per year since it was adopted in 2007.
In addition, because the same processes and values have been embraced in all its factories, employees can be moved back and forth between plants and brands to help the company adjust to changes in demand for different products.
Building to order
When Orbik first came onboard in 2005, Nautic Global Group was a build-to-stock company, one in which manufacturing decisions were made based on forecasted orders. In those early days with the company, he remembers looking out his office window and seeing row upon row of boats lined up outside the manufacturing facility, waiting to be shipped to dealers.
Now, most days, not a single boat sits in that space. That’s the result of Orbik’s move soon after accepting his new job to change the company’s manufacturing strategy to build-to-order.
Made in the first quarter of 2006, this change was key to Nautic Global Group’s ability to not only survive the downturn, but do so without any prolonged shutdowns. While many of its competitors closed for months at a time in 2009, Nautic Global Group was able to not only keep its employees building, but also be there to answer the phones when dealers and customers came calling.
Since first contemplating the new strategy, the company has begun measuring the number of days of transport wait time, which has been reduced drastically. Orbik says, half-jokingly, that in an ideal world, the boats would come off the line and go straight onto the truck. In fact, the company recently made significant progress on such an initiative by integrating its transportation system. Today, trucks leaving Nautic Global Group campuses typically carry multiple boat brands.
Not only has this made an impact internally, and with dealers and customers, the company’s ability to manage its inventory levels under the new system is a big part of what has sustained investors’ interest in Nautic Global Group, despite the challenging market conditions. While two years ago, Nautic Global Group had $12 million worth of boats in stock, today its stock level is as low as it has ever been, worth about $300,000.
Focusing on value
Not only has the way Nautic Global Group boats are made changed, so too have the boats the company makes. Moran explains that in 2004, consumers were demanding feature-rich boats, and both Godfrey and Rinker – which were originally focused on value – had responded by moving into higher price categories.
But when the recession hit, the combined company returned to its roots, building quality products at a value price point, a strategy that has also been key to its survival during the recession.
“We provided the products that let our dealers survive,” comments Moran. “They got the customers in the door, without which we would have been in much more difficult straits.”
He points out that a recent RBC study reported that one of dealers’ biggest concerns is consumers’ inability to afford the products they were selling.
Nautic Global Group has worked to overcome this challenge by looking at boat prices in a different way. First, the company calculates what the market can bear. This is determined by combining a number of data points, from boat registration data to feedback from its dealer council. Then, the manufacturer builds in a margin for the dealer and itself. And, finally, it determines, based on that cost, how to put the boat together.
“We identify the value price point we want to hit and drive the goals down into the operations,” explains Orbik. “With our lean manufacturing and rationalization of facilities, we’re able to create margin by pulling material and labor out of the equation.”
The company has set itself apart from many of its peers by researching, designing and building new boats during the downturn – boats that make sense for today’s boat buyer. For example, it has hired a designer to incorporate new features and colors that don’t add any cost to the boat.
The Nautic Global Group team is particularly proud of its Sweetwater Tuscany 2086. At the end of 2008, the company realized that it needed a price-point pontoon. Through its new processes, it was able to start building that model within 30 days so that the boats could be delivered in time for winter shows.
At a time when other plants were shutting down, our plant was running,” says Gasaway. “We sold 350 of those pontoons.”
Then, there is the company’s Rinker 310, a completely new model launched in model year 2010, for which it received an Excellence in Design Award for cockpit seating from Trailer Boats magazine and an NMMA Innovation Award Honorable Mention in the cruiser category.
In addition, the company’s Sweetwater and Aqua Patio pontoon boats have received a total cosmetic redesign for model year 2011. Polar Kraft fishing boats have received a facelift this year. And all of the company’s lines will feature new model introductions for 2011.
This focus on product development hasn’t escaped notice within the industry. In fact, Nautic Global Group received three Excellence in Design Awards this year -- more than any other company -- as well as the NMMA Innovation Award Honorable Mention.
As of the first of the year, Nautic Global Group took a further step to become more nimble, combining its Rinker and Godfrey sales teams into one.
Now, there is one Nautic Global Group rep in each territory that handles all the brands, explains Gasaway. Above the rep is a regional sales manager, each of whom is also a sales director. This person oversees three reps and a smaller territory of their own, in addition to serving as a product champion for one of the product lines. As part of their product champion role, they manage their brand’s dealer council and collect information from the field on new initiatives and models, serving as the central contact point regarding that brand for marketing and engineering.
“It’s great from the standpoint of having an individual representing each of the brands,” says Gasaway. “With a flatter organization, we can get information from the market a lot faster, disseminate it within the company and respond through product development.”
The combined impact of all of these changes has already begun to shine through. While Nautic Global Group – like most of its boat building peers – was not profitable last year, it has been profitable each month so far this year and is currently beating its year-to-date budget in both unit sales and earnings before interest, tax, depreciation and accruals (EBITDA).
Beyond that, its CSI scores have improved. Since the acquisitions, its average boat CSI score has increase 3.4 points, its average service CSI rating has increased 1.4 points, its dealer service CSI ratings have improved by 4.3 points and so far this year, the company is sporting the highest average CSI rating in its history.
And none of this takes into account the products and initiatives Nautic Global Group plans to launch during its upcoming dealer meeting.
“When the dealer network looks at our organization today, they see us as a strong company whose brands have been staples for 50 or 60 years, that has continued to operate in times when others have failed, gone into bankruptcy or closed their plants,” says Gasaway. “We’ve kept our plants open. We haven’t forced inventory on dealers. We let them carry what makes sense in their market.”
And now that the company has integrated Godfrey and Rinker, creating one company united around the same strategies, it’s ready for whatever is ahead.
“The bad economy presented an opportunity to complete the integration,” sums up Moran. “It’s almost like we hit the reset button. Now we have the foundation to really scale the business.”