Wahlstedt concedes that Reell put too much emphasis on its identity as a great place to work and not enough on paying attention to the financial needs of the business. "Whether or not we'd changed leadership, we would have lost both the value and the financial stability of the business without getting more intentional about those things," he says.
These days, Reell certainly feels like a company that has gotten intentional about those things. Wherever you go, you see graphs, charts, logs, and diagrams. The walls of the production area, in particular, are plastered with scoreboards and Kaizen trees, reflecting the company's relatively recent embrace of lean manufacturing. "These are all little factories," says Donaldson, motioning to the clusters of people at work. He points to one of the charts. "They can track their profitability and their scrap daily. They manage it like a small business."
Although Reell had dabbled for years in programs to improve efficiency, it did not begin to implement lean manufacturing companywide until late 2004, during the last round of pay cuts, when Wikstrom and Carlson were still co-CEOs. Donaldson has continued to support the effort, even taking early-morning shifts on the shop floor. At the moment, in fact, he has just come off working on hinge assembly from 4 a.m. to 7:30 a.m. "It's so important," he says. He motions again to the workers. "These people are the surgeons. We are the nurses."
It feels like a sales pitch, and what Donaldson seems to be selling is himself, which is understandable. After all, he is still trying to win the confidence and trust of Reell's employees, and he does not appear to be having much success. People aren't very receptive to sales pitches when they have gone without raises for four years and when every prediction of better times ahead has gone unfulfilled.
The way Donaldson was introduced to Reell didn't help. It is hard to imagine a messier change of leadership than the one orchestrated by Reell's board in the spring and summer of 2005. "The way we handled the transition was an abomination, a horror; just a massive failure on our part," says Carlson. He and Wikstrom had recruited Donaldson, who joined as vice president of engineering in January 2007. People were just getting to know him when--all at once--Wikstrom, Carlson, and the idea of shared leadership were gone and Donaldson was the sole CEO. Particularly shocking was the sudden and complete disappearance of Wikstrom, who had been with Reell for 24 years, had many friends there, and was closely identified with everything the co-workers valued in its culture. And why had the board ditched the concept of multiple CEOs, anyway?
On the other hand, many of the changes Donaldson has made no doubt were necessary, given the challenges he faced when he started and continues to face. In effect, he and Smith, Reell's president, are trying to take a once-profitable small company and build it into an again-profitable large company, and the systems they have introduced are those that a large company will need. Even so, the obstacles are daunting. Selling laptop hinges is increasingly a commodity business, and Reell still hasn't figured out how to earn a profit from it. For several months in 2007, for example, hinge sales at Reell hit their highest level ever, but the company still lost money. Meanwhile, the engineering staff has experienced significant attrition, including some of the most talented members of the old guard. What's more, Donaldson may need outside capital to complete the transition, and Reell is not well positioned to raise it. Aside from the company's recent financial troubles, the presence of the ESOP--with its 43 percent ownership stake--makes bringing in equity partners extremely complicated.
The three founders, who have agreed to return to the board for a limited time, are well aware of the challenges. Merrick, now 82, says he feels "pretty inadequate relative to the current state of things." Wahlstedt feels the same way. "If I was 20 or 30 years younger and found myself in Eric's position, I just hope I'd have the wisdom to say, 'I don't belong here,' " he says. "What the company needs now is something I'm not good at or even something I want to be good at. I don't like structure. I hated the quarterly reporting at 3M. That's part of the reason we got as big as we did without much structure. But now the company needs it." "We had our season," adds Johnson, 73. "Now Reell needs new skills to take it where it's going."
But along the way, something has been lost, and most old-timers realize that whatever it was is probably not coming back. "You had to be there to understand," says Arnold. "The new people don't know the difference, and the rest of us can't explain it. I finally realized I had to leave. I was getting so worked up at home. I was too angry. It wasn't good for me or my family or the company."
As for Wahlstedt, he continues to wonder about the decisions that he and his colleagues made back in the late 1990s. He's still anguished about his former colleague Wikstrom. They haven't spoken since Wikstrom filed his lawsuit. Last year, the judge dismissed some counts for lack of evidence and ruled in favor of Reell on the others. Nonetheless, Wahlstedt believes that maybe, just maybe, there's a chance that he and Wikstrom will be able to reconcile someday. And he insists he is optimistic about Reell. "This is a tough time, but it's a necessary time," he says, "and I believe we're going to come through it. I think there's going to be a better story down the road."
