Bob Chapman is CEO of a crucial capital equipment maker you’ve never heard of: Barry-Wehmiller Cos., based in St. Louis. Walk into any supermarket and pick up any product, and odds are one of Chapman’s machines made the packaging or filled it.
When Chapman talks about his people-centric leadership philosophy, you see why Barry-Wehmiller has delivered. Since 1987, the packaging automation giant has had a 15.6% compound annual return for investors in this privately held company, which compares with 5.4% average private company growth in 2013, according to Forbes.
Its 2014 sales stood at $2 billion.
Last year, Inc. magazine put it on its list of the 25 Most Audacious Companies for its culture.
“We like to say that our economic engine is that we build great people who do extraordinary things,” Chapman, co-author with Raj Sisodia of the forthcoming book “Everybody Matters,” told IBD. “If you look at surveys, 88% of workers don’t feel their companies care about them, and the result is poor morale, stress and low engagement. It took me a long time to realize that if you stop managing people like objects and instead treat them like family, they will be motivated to create much greater value.”
The Show Me Kid
Chapman, 68, grew up in Ferguson, Mo. He attended Indiana University, where he was an average student until his girlfriend, Liz, became pregnant his sophomore year. They married and moved into a trailer.
The responsibility of becoming a father motivated him, and he graduated with honors in accounting in 1967. He landed an MBA at the University of Michigan the next year.
After he audited companies for Price Waterhouse for two years, his father invited him to his company, Barry-Wehmiller.
Founded in 1885 by the Barry and Wehmiller families to provide equipment to produce malt from grain for beer, it turned to making machines that washed bottles for beverage manufacturers.
With the firm struggling, Chapman worked on improving units.
Then in 1975, his father died of a heart attack and Bob, 30, took over as chairman and chief executive.
The prior year, sales were $18 million and it lost $477,000. The company also had $3 million in debt, and the bank called its loan. “I vowed not to go down and brought an intensity to bear I hadn’t had before,” he recalled. “We were three months into the fiscal year when I started, and nine months later we had our best year, $22 million in sales and a profit of $2.2 million.”
The market improved, and banks supported investing in technology to let beverage makers do quality control inspections of bottles electronically and to pasteurize beverages with solar heat.
New government legislation encouraged returnable bottles, which had to be cleaned, driving demand for the firm’s washing equipment. Within five years, sales rocketed to $71 million, but Chapman says success made him overconfident. In 1983, rising warranty costs, inventory write-downs and reduced orders for new equipment due to brewer mergers hit all at once.
The year simply looked bleak, with a looming loss of $5 million. Suddenly B-W’s line of credit was frozen and loans were called.
Chapman rolled the dice, betting his company on an asset-based loan. If he missed a payment, the bank would own everything.
He decided that the only way to win was to acquire struggling firms he believed had products with a better future if managed right.
He had no financial resources or experience making acquisitions, so he became creative in proposals.
In one case, he took an underperforming electronics unit that had $3 million in sales and merged it with a similarly sized firm — and within three years the combo was bringing in $37 million.
Another gamble came in 1987, when he spun off all the acquisitions as an IPO on the London Stock Exchange.
Chapman hoped this would let him pay off the bottle business’ debt and put $2 million in the bank.
The jackpot was even more lucrative. Demand was so great, Barry-Wehmiller banked $28 million.
“I told everyone that our history was not our future and we needed to think about how we could apply the lessons we had learned to now build an ideal packaging company, with a balanced set of customers, markets and technologies,” said Chapman. “We realized there were plenty of opportunities in capital equipment because of cyclicality and global competition. We were going to think outside the steel box of the industries we had operated in.”
Stick With Them
Since then, Barry-Wehmiller has made 75 acquisitions and sold none of them. This in an environment where half of all corporate takeovers fail to pay for themselves.
Chapman’s company has looked at 500 other prospects and is in discussions with 40.
“The dialogue sometimes has taken 20 years because we’re not in a rush; we’re very disciplined,” he said. “We look for opportunities where we’re confident we can help. I’m not going to do surgery on someone whose life I can’t save.”
Barry-Wehmiller has become the manufacturer of equipment that consumer product companies depend on. Its 120 locations and over 8,000 employees are in 28 countries but concentrated in America and Europe. They are grouped into 10 interactive but independent subsidiaries, with the goal of optimal use of capital equipment in processing and packaging products.
Its firms provide engineering consulting, design services and machines to a wide range of industries:
Robotic technology for manufacturing lines and conveyor systems.
Corrugated boxes and bags, plus equipment to turn rolls of paper into tissue and packages.
Machinery to fill bottles and seal cans.
Equipment that can put together pallets of products to ship and take them apart on arrival.
“About 90% of the corrugated boxes in the U.S. are touched by one of our machines,” said Matt Whiat of the Barry-Wehmiller Leadership Institute, which teaches what it calls Truly Human Leadership to other companies. “In a typical supermarket, a majority of the products have interacted with our equipment or technology in one way or another in the manufacturing and packaging process, whether it’s Purina pet food or Kraft cheese.”
In 1976, Chapman divorced, and his three children joined with the three kids of his new wife, Cynthia; they would also have one child together. “Learning parenting skills in a blended family caused me to rethink what I’d been taught at business school,” he said.
In the late 1990s, he had several other related epiphanies:
An inspiring sermon by his pastor made him think, “He only influences us for an hour a week, but think of the impact a business could have in 40 hours.”
During a wedding, he said to himself, “The parents of the bride are asking the groom to take care of their child and help her become what she is meant to be. I have that same responsibility with everyone in my care as a leader.”
While visiting a new acquisition in South Carolina, he saw how everyone was energized before work, but as soon as they started, that excitement disappeared. He set up fun contests that would incentivize everyone to be team players in sales, with spectacular results.
“The game of business is played at the highest level when you can do both organic and acquisition growth together,” said Chapman. “A key to our leadership practices is to ask our team to articulate where you want to go, why you want to go there and when you get there, will you have taken your people to a better place? This creates buy-in and direction.”
After surpassing $1 billion in sales for the first time in 2008, the recession hit Barry-Wehmiller with a 40% drop in new equipment orders the next year.
Chapman wondered, “What would a caring family do in such a crisis?” The answer was shared sacrifice. No one was fired, everyone took pay cuts and some took a voluntary unpaid furlough.
The company bounced back with record results in fiscal 2010 and has found that its culture translates to other countries.
Fred Kiel, chairman of leadership consultancy KRW International and author of “Return on Character: The Real Reason Leaders and Their Companies Win,” said, “Barry-Wehmiller has been pushing its ‘people first’ concepts down to every level, but it does take constant learning and innovation. We found that companies with strong character leadership teams bring home nearly five times the amount to the bottom line compared with teams that just focus on getting the job done.”
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