That, obviously, is a question the CEO has been waiting for; he breaks into a rare grin. "This 'member company' idea is really hot. We've tested it; we've honed it. It works. And we're going to build on it."
Member company is Reflexite-speak for wholly owned subsidiary. The technique: find an entrepreneur in the host country who knows the industry. Set him (so far they're all men) up in business, providing capital, product, and technical expertise.
Then turn him loose. "You're running your own company!" says an ebullient Dave McDonald, managing director of Reflexite Canada. "To say there's an entrepreneurial opportunity here is an understatement." McDonald and his counterparts in the United Kingdom, Germany, and elsewhere are free to nose into any market that seems promising, even to set up specialized product-fabrication facilities if appropriate. (Reflexite U.K. already has its own.) All have P&L responsibility, their bonuses reflecting their bottom lines. All also hold equity, not in their subsidiaries but in the parent company, to make sure their long-term interests coincide with Reflexite's.
It's this entrepreneurial structure that's driving the skyrocketing sales. Reflexite U.K. alone racked up $5.7 million in sales after only three years of operation. Maybe more important, the structure provides the company with a ready-made model for expansion. Deals in Mexico and eastern Germany were recently consummated. The Far East beckons. "Five years ago business outside the United States constituted 19% of our total," says Ursprung. "Now it's half. In another five years it's probably going to be two-thirds."
What makes the aggressive entrepreneurial expansion work, though, is Reflexite's ownership culture. The far-flung marketers place huge demands, numerous and usually urgent, on the New Britain shop's R&D and production systems. McDonald, for example, was recently working with a customer to develop reflective pylons for helicopter landing pads in the Canadian wilderness. It was a potential $100,000 order, with sales of up to $1 million possible in the future. But there were critical engineering problems to solve. Could New Britain help? Could it do so right away, please?
In most companies such requests from distant salespeople wind up low on the home office's priority list. Who's McDonald anyway? Why should employees drop what they're doing to help him out? In other companies moving those requests along requires in-house politicking or a direct order from top management. At Reflexite the process is simpler. How much will the job contribute to the shared bottom line, either immediately or in the future? If a persuasive case can be made -- a million-dollar market, for instance -- everyone instantly sees an interest in pulling together, as happened in this case. "Gary Gauer [in product engineering] really made that pylon job fly," says McDonald.
Profitability. In ordinary times -- which for Reflexite means times of rapid growth -- employee ownership feeds profitability in a lot of little ways. A general willingness to run lean, since every new body dilutes the equity. Salespeople who cut sharper deals because (as one marketer puts it) "they're worried about return on investment, not just making this sale." Grass-roots efforts to rationalize systems and procedures. Dave Correa and Andy Smith, both shop-floor managers, take the initiative to reorganize packaging, eliminating bottlenecks and freeing up packers for other work. Chemicals handler Bob Frechette, on the job less than a year, figures out how the company can reuse solvent, thereby cutting the hazardous waste it must dispose of; he even works up a full cost-benefit analysis, mostly on his own time. Simple initiatives -- which most companies never see.
But even for Reflexite, the past year has hardly been ordinary. Because of the recession -- and particularly because of sharp cutbacks in state highway construction and maintenance -- domestic sales have been well below plan, and profitability has been threatened. Conventional companies respond to such a downturn in one of two ways. They ignore it and risk losing money. Or they lay people off, instantly shattering any illusions employees might have entertained about everyone being in the same boat. At Reflexite, indeed, a few of the managers figured layoffs were inevitable.
Ursprung was not among them. "I asked them, would they lay off one of our production machines? Tear it apart and put it in a warehouse and hope they could find all the parts and get it running again when business came back? Now let's talk about people! You want to take people's jobs away -- and maybe in six weeks or six months call them back and see if you can win their commitment again?"
He smiles, a little wanly. "I didn't want to try that. That's too tough a management assignment for me."
On the other hand, Ursprung realized, he had choices that other company heads didn't. Since everyone at Reflexite was more or less in the same boat, everyone might be willing to help out. That realization formed the core of an extraordinary layoff-averting strategy.
* In August the CEO announced a voluntary leave-of-absence plan. With the permission of their supervisors, employees could ask for up to a month (later two months) off, unpaid. Dave Edgar worked things out with the local unemployment office: the company would handle the paperwork, and the volunteers would be eligible for unemployment compensation. Employees on leave would continue to receive full benefits and would maintain their seniority and owner's bonus rights.
