How a Clayton manufacturer shared sacrifice to avoid layoffs during the Great Recession
Barry-Wehmiller’s leadership philosophy is spelled out on a wall outside the company’s parking garage in Clayton. Employees and visitors see it, coming and going:
“We imagine a society in which people care about each other first.”
CEO Bob Chapman believes so deeply in his “Everybody Matters” philosophy that it’s also framed and hangs like artwork inside the company’s home office at Forsyth and South Brentwood boulevards. The manufacturer of packaging equipment has locations around the world.
Ten years ago, Chapman test-drove his people-first business model through the Great Recession. After 40 percent of the company’s product orders evaporated in early 2009, he insisted that no one would be laid off.
Downsizing is the standard business approach to an economic downturn, Chapman said. Instead, he devised a plan that required all employees — whether they worked on a factory floor or in a corporate office — to take unpaid furloughs of up to four weeks.
“I said to myself, ‘What would a caring family do if a member of a family had a problem? We'd all pitch in together to help,’ ’’ he said. “We wouldn't take it out on any one person.”
Barry-Wehmiller bounced back quickly after the recession, Chapman noted. It set an earnings record in 2010, and it continues to grow — proof that a company can value its employees and make a profit.
In February, Barry-Wehmiller acquired a German manufacturer and now owns more than 100 companies in 28 countries, with nearly 12,000 employees.
“If you want to determine how good your business model is, drive it through the 2008-2009 downturn,’’ he said. “We had a lot of flat tires and broken chassis. Bank of America collapsed. General Electric has never recovered. Many of the premiere companies in this country went through a tremendous validation of their business model, and not many did well. Because of the way we designed it, ours went through that period of time dramatically different.’’
The company no longer operates a manufacturing plant in St. Louis, but 350 people work in its Clayton offices. The company is ranked No. 9 on the St. Louis Business Journal’s list of the city’s Top 150 Privately Held Companies.
The view from the top
From what she describes as her “catbird” seat, Chapman’s assistant, Diane Osterholt, watched the goings-on at corporate headquarters as the recession deepened in 2008 and stormed into the winter of 2009.
“When our customers don't get loans to buy big equipment, it's going to affect everybody,’’ she said. “So when they announced this program of furloughs, it was kind of shock and disbelief and a bit scary. And I thought, ‘For sure this doesn't apply to me — I work for the CEO; it's not going to hit my level.’ But I'll tell you, when the business world slows down, the emails stop and the phone calls stop, it gets pretty quiet.”
Osterholt said her husband was in between jobs at the time, so losing weeks of her income required belt-tightening. But she believes the company’s furlough policy was the right thing to do.
“Because I think it’s fair,’’ she said. “And it shows compassion.”
When Osterholt joined Barry-Wehmiller in 1990, the company was still headquartered at its old plant on West Florissant at Interstate 70, she said.
She has watched it grow from a small financially strapped company to its current status as a global manufacturer with $3 billion in revenue. The plants produce packaging equipment and supplies for companies like Coca-Cola and Procter & Gamble.
Chapman has changed, too, she said.
“I think Mr. Chapman kind of had an epiphany about 12 years ago about the business world and his leadership and how it could really affect people's lives every day,’’ she said.
"It's always been a cyclical business''
Chapman, 73, describes the evolution of his ideas on leadership as a “journey” that started in 1976, when he took the reigns of Barry-Wehmiller after his father died. The company was founded by Thomas J. Barry and his brother-in-law Alfred Wehmiller in 1885 to make equipment for the brewing industry. Chapman’s father bought it in 1963.
In the 1980s, the company began buying small manufacturing plants that were struggling and turning them around.
“When I graduated from business school and came into Barry-Wehmiller, it was a very broken $20-million company,’’ Chapman said. “So, I tried to take what I learned in business school and fix this 100-year-old business because the banks were pulling on us. So I laid off people — downsize, rightsize — because we were about ready to die.’’
Manufacturing has always meant dealing with economic peaks and valleys, with no regard for human dignity and success, he said.
“Interest rates go up, people spend less money. Interest rates go down, the economy improves, people spend more money,” Chapman said.“So it's always been a cyclical business and, like most companies in cyclical businesses, that means that you hire people in good times, and you rightsize, downsize and lay off people in the not-so-good times.’’
Chapman started rethinking those practices after the company tried some motivation programs that boosted productivity. In 2002, the company adopted a cultural vision statement called “Guiding Principles of Leadership” that stresses people, purpose and performance.
“It's our fundamental responsibility for the people whose lives we invite to join our company around a purpose that inspires them to share their gifts,’’ he said. “And then we have to create human value and economic value, in harmony.’’
In 2015, Chapman published “Everybody Matters,” a book that details Barry-Wehmiller’s people-first culture. He has made speeches about it at business conferences, and he founded a leadership institute to teach it. His TEDx Talk on the subject has had 165,000 views on YouTube.
“When the economy turns down, you lay off people”
Despite the company’s professed culture of caring, said there was talk of layoffs when the Barry-Wehmiller board of directors met in January 2009.
“I walked into the boardroom and before anything else was said, one of our board members says, ‘Don't you need to lay off people?’ Because when the economy turns down, you lay off people,’ ’’ Chapman said. “That's just what we do. It's a normal accepted behavior.’’
But because the company had a backlog of orders, Chapman thought it could ride out the downturn. Three weeks later, Chapman was on a trip to Italy when he learned that customers had canceled a large portion of those orders. He came up with the furlough plan while sitting alone in his hotel room and emailed his team to figure out the logistics.
For the most part, employees reacted positively to the plan because the economy was in such a bad state they were worried about losing their jobs, Chapman said. Some, who could afford it, volunteered to take an additional unpaid week off cutting the leave time for colleagues who were in financial need.
“It was amazing act of charity because people felt cared for themselves,’’ he said. “They felt they wanted to help other people if they were in a position to do it. It was actually a tremendous boost in morale.’’
Chapman said employees kept their medical insurance and were allowed to schedule their own furloughs. Many took their time off during the summer of 2009. The company temporarily suspended its 401k program but eventually made up the missed payments.
“I can’t see myself ever leaving this place”
Ten years after the recession, Ken Hoff, 47, said the furlough plan has begun to fade into Barry-Wehmiller’s institutional memory. Hoff, who oversees the company’s websites, set up an intranet channel so employees could share stories of what they did while on furlough.
Younger employees took backpacking trips, he said. One woman got married. Most people just spent more time with their families.
Hoff said the furlough program was a game-changer for some employees who hadn’t bought into the company’s “Everybody Matters” philosophy before the recession.
“We were used to being a typical manufacturing company,’’ Hoff said. “People asking your opinion and genuinely caring for you really kind of put people off a bit. And so you had folks in small groups grumbling and saying, ‘Don’t drink the Kool-Aid.' This furlough program was really the first time that I saw people begin to change their attitude toward everything Bob was doing in regard to leadership. Because, you know, it's kind of like the rubber hitting the road.’’
He still recalls how positive his colleagues were.
"People may have had to go on furlough. They may have lost pay for four weeks, or whatever, but they still had a job when they came back,'' Hoff said. "And the attitude that I saw of some of my co-workers was really great."
Hoff has worked for Barry-Wehmiller for 18 years and hopes to retire from the company.
“I think of one of the reasons why people stay here so long is because it's more of a family than it is a normal job,’’ he said. “You know, I can't see myself ever leaving this place or these people.’’
Follow Mary Delach on Twitter: @marydleonard