The Decade-Long Overnight Success

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Allen Cooke, now a key sales manager at Behlen, developed national accounts by pushing direct, efficient shipping. BMC Transportation Co., Behlen's trucking company, was a key asset in the sales pitch because it could save money for Behlen's retail customers. "Really, they're warehousing for us," says customer Dan Schoening, a buyer for ConAgra's 107 Country General Stores. "There was always a commitment to customer service. Even at the level of the truck driver, they work with you."

Raimondo's revamping of the factory floor proceeded with dreadful delays. He applied and reapplied for grants. One federal grant for $1 million came with a catch-22 requirement: for every $1 of federal largesse, Behlen was obliged to raise $3. "We got squeezed from both sides: bank covenants and grant restrictions. The grant money was tied to what the bank would give us," Raimondo explains, "and the bank wanted to see performance first."

Over five years he was able to extract about $4 million, which he applied to the purchase of such urgently needed equipment as a Swiss-made steel welder, called the Schlatter. Since its arrival in the factory, a decade ago, the Schlatter has run 24 hours a day, every day.

In spite of the new machinery, the margins in the livestock-equipment business stayed narrow. "How in the hell can anyone make a profit in gates?" Raimondo remembers grousing. "So we kept searching. Every product customers asked for, we said, 'Can we make it? Can we buy it?"But extending the product line was just a part of the solution.

The company worked to whittle down production costs and improve quality. "We were losing substantial money, and people knew we would not be profitable until we reached 15% gross margins. In 1986 we were at less than 8%. That trend in gross margins is what we educated and educated them on." A program the employees named Awareness Is Money solicited savings ideas. "People were reluctant at first. They were so surprised to be given authority out on the floor," says Gayle Gerber, a team leader. In spite of Raimondo's determination to avoid the typical suggestion-box syndrome, workers submitted so many ideas that a backlog developed. "We had to learn how to handle the flood of ideas. It was overwhelming," Sheryl Cattau, a nine-year employee, recalls.

Cynicism was the inevitable response to every Raimondo initiative. Early attempts at profit sharing and an employee stock ownership plan had to be put on hold. And the gain-sharing goal was painfully elusive. But Raimondo's efforts were not in vain. Slowly, people got the message: Raimondo was determined to prevail. He would try anything. He even, for a time, applied Behlen's steel-bending know-how to turning out patio furniture. It was imperative to keep the huge factory active. More than once, when deadlines loomed too close, office workers joined their coworkers on the plant floor. Looking back, Behlen veterans say that when they saw employees pulling together that way, they knew the company was out of danger.

But that's not what the numbers said.

No matter how skillfully a CEO rallies the troops, the success of a turnaround depends on cash flow. Behlen was making its interest payments but was still staring down the wrong end of the profit-and-loss statement. "When you start from $7 million in losses, you're not going to get profitable in a year, but we didn't think it would take five years," Raimondo says. Accounting firm Arthur Andersen didn't wait that long to issue its dour opinion: Behlen was not a "going concern," it said in 1986. Raimondo's eyes turn steely at the memory, and his handball opponents from those days can attest to his mounting frustration. Even though 1987 revenues took a leap up, the "going concern" opinion made the lenders skittish, and Raimondo found himself scurrying for capital.

Before the Behlen LBO, Raimondo had never worked with bankers. His finance education was quick and rude: "If you don't do this, you're in deep shit, and if you don't do that, you're in deep shit. We were always in a demand situation."

The local banks had turned their backs on Behlen. Then, early in 1988, Raimondo called on a financier who had been involved in the original buyout. Now at a different bank -- Washington Square, in Minneapolis -- that banker could easily recognize the improvements in Behlen's gross margins. Raimondo won a financial reprieve.

There was no better evidence of progress than in the gain-sharing plan, which doubled its payout in 1988. Everyone in the plant was learning to understand how gain sharing affected labor and materials costs. "When you make gain sharing work," Raimondo told employees, "gross margins improve." And the variety of new work was making Behlen a fun place to work again.

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