Quality with Tears

Profile of the rapid growth growing pains of an industrial hardware components distributor.

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Building a world-class company -- one that not only leads in its market but provides a shining example of enlightened and effective management -- is exhilarating. Not to mention chaotic. And costly. And, sometimes, painful. Just ask Steve Braccini

Now and then we hear about some unusual companies here at Inc. Not your run-of-the-mill successful businesses; rather, the ones that are emerging as market leaders, as world-class competitors, as models for others to emulate and learn from. These companies boast incredibly innovative marketing, impossibly high quality levels, extensive employee involvement. Their growth and profitability mark them as a class apart.

Early last winter we began hearing glowing reports of a company called Pro Fasteners Inc., in San Jose, Calif. Pro is a 55-employee distributor of industrial hardware and components to the electronics industry, and it seemed to fit the mold.

Ever since its birth, a decade ago, Pro has been snapping up market share in a fiercely competitive business. Since 1989 -- what recession? -- its sales have risen a total of 20%; this year alone the figure could be as high as 33%. Pro has garnered numerous quality awards (more than 50 in the past two years) and has won acceptance as a prime vendor to A-list customers such as Applied Materials Inc., the big semiconductor-equipment manufacturer. "They're the best," one purchasing agent told us. "They're way out ahead of the curve."

Internally, management appeared to be making all the right moves. Pro mounts a continuous-improvement quality push and records near-perfect performance. Pro introduces a million-dollar, state-of-the-art computer system and plans to offer services virtually unheard of in its industry. Pro promotes communication and training; it utilizes cross-functional teams. The moves are especially striking because of Pro's size and resources -- no hundred-million-dollar company here. When the company set out to transform itself, it had only 25 employees and $5 million in sales. It's in an industry, moreover, that considers 3% a healthy net profit.

Anyway, we figure we'd better write an article. So one sunny day in early spring I show up at the company's sleek building on Old Oakland Road. I am ready to write about visionary executives, active and involved employees, a smoothly functioning operation capable of growing well into the 21st century.

Trouble is, not everything Pro's employees tell me fits easily into the well-formed picture in my mind.

Teams? Sure, we have teams. Yeah, they accomplished quite a lot -- but, uh, they haven't met for a while. The new computer? Hey, it'll be great -- one of these days. Communication? Well, let's see. Oh, we have a monthly newsletter. And you can always go and see Steve. A couple of us went to talk to him a few months ago, when morale was bad.

I sit in on the weekly companywide lunch meeting, itself a recent and significant innovation on the communication front. But today's discussion isn't about quality or customer service, it's about who should clean up the coffee area. Later I attend a meeting of the Continuous Improvement Council, the key employee group charged with overseeing the company's quality push; several people have mentioned its importance. But this meeting, lackadaisical at best, focuses on exactly how a training session should be structured.

My one-on-one interviews with Pro employees are distinctly upbeat: people are clearly excited about the company and its prospects. Yet in the hallways are ghosts and echoes. I hear references to the marketing manager who left last year, the controller who was let go in January. Pretty soon the boss, Steve, is confessing that he even had to ask his wife to leave the company -- "the hardest thing I ever had to do in business." Nor has it always been peaceful for those employees who stayed. There have been shouting matches and painful confrontations. "It was like a lynch mob," says one young man, recalling an episode when employees were psyching themselves up to challenge a manager.

What's going on here? During my stay at Pro, I see plenty that confirms the company's stellar reputation. Its indisputable accomplishments in the marketplace, attested to by several customers. The many examples of internal improvements that employees are quick to point out. But I also hear discordant notes, hints and suggestions that the road has been rocky and that some aren't sure where they're headed. Frankly, it isn't until several days later, when I try to piece it all together, that I understand what I have seen.

Think about it. Every Motorola and Nucor and Springfield Remanufacturing, every market leader that is not a brand-new start-up, had at some point to reinvent itself, to put itself through a wrenching metamorphosis of thought and action. We read about these companies only when their transformations are complete, when the butterfly has emerged from the cocoon. At that point, paradoxically, the change seems both obvious (Of course -- that's what a world-class business looks like) and unattainable (How on earth does our little company sprout those wings?).

But what would it be like in the middle of such a change? Particularly in a small, everyday type of company, without a big bank balance or a proprietary product or deep reserves of managerial talent? Chances are, you'd see a good deal of groping and experimentation. Chances are, too, that the excitement would be tempered with skepticism, anxiety, bickering. No company setting out on such a journey, after all, gets a road map.

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