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|Articles - June 2011|
|Wednesday, May 18, 2011|
Page 3 of 3
So the question arises: Why go through all this? All of Leatherman’s major competitors have moved at least part of their multi-tool production overseas, where labor costs are considerably less. Rather than spending the time and effort to re-jig the way the company runs its business, why not contract the work — or part of it, anyway — to a facility on the other side of the Pacific?
The answer is simple: Six years go, Jake Nichol made a promise, and a gambit.
In 2004, the company’s venerable founder and chairman, Tim Leatherman, came to a realization: He wasn’t very good at strategic planning. Leatherman had done a lot for his company. He invented the first multi-tool — first called “Mr. Crunch” and later “Pocket Survival Tool” — after a disastrous experience in a Fiat during a 1975 trip to Europe showed him that a simple pocketknife was not enough.
He and co-founder Steve Berliner filled the company’s first order in 1983, for 500 multi-tools to be sold in a Cabela’s catalog. He led the company through its exponential expansion, from those first 500 tools, to a company with 36 products selling millions of units annually in more than 85 countries around the world. The company now reports more than $80 million annually in gross revenues. It says that after a difficult 2008, revenue grew 18% during the past fiscal year.
But strategic planning was not his forte, Leatherman, 62, says now. “I thought we had a strategic plan, but the employees couldn’t recall the meetings,” he says. “Because there weren’t any.”
In 2004, at the company’s first strategic planning session, Leatherman was on the verge of stepping down from full-time duties at the company. He included in the plan a list of what he called the company’s “guiding principles.” Chief among them was a pledge to keep the company, and its manufacturing plant, in Portland for as long as possible.
Those principles became a kind of contract for the company’s next chief executive. If a candidate agreed to adhere to the plan, they’d talk. If not, there was nothing more to discuss.
Leatherman set up an interview with Nichol, who brought with him a quarter-century’s worth of experience of the tool industry, both at Stanley and at Danaher, the Washington, D.C.-based group that makes tools for Sears under the Craftsman brand. At Danaher, Leatherman says, Nichol was in much the same position, having to devise ways to make hand tools in the U.S. when many rivals had moved production elsewhere.
Nichol agreed to follow Leatherman’s principles — and to take the job. That agreement has shaped the way the company has operated ever since.
So the company’s disadvantage is a permanent one, at least as permanent as such things get. Nichol and Leatherman both say that the pledge to remain in Portland presents obvious challenges — balancing quality and cost, always fending off competitors that offer good concepts at often-lower prices.
But Nichol says the pledge has been a kind of blessing as well. The jobs the company provides in Portland are, in a way, its promise to the area, something Leatherman, a native Oregonian, cherishes. With the agreement between Leatherman and Nichol in place, those promises can be kept. Company executives tell employees, government leaders and suppliers that it’s going to stay here. It’s empowering, Nichol says.
“The empowering part of that is that there are no off-ramps,” he says. “There’s no ‘If this doesn’t work we’ll go do such and such.’ It’s really helped us build a clear business strategy.”
The endless battle against costs and inefficiencies continues. Two years ago, it was a plan to make a $30 multi-tool. That plan has come to fruition. But Nichol says every year comes with new plans, and with them, new ideas about how to squeeze waste from the company and new, faster, more efficient work habits to embrace. From Nichol down to the workers on the factory floor, it’s again time to stretch.
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