Sometimes, pruning is the catalyst to profitable growth.
Wellington Security Systems is a family-owned and operated business with a 30+ year history. Over the years the company grew, but had never been able to achieve sustainable profitability. According to the company’s president, Gene Earhart,
“We had experienced a growth spurt based on a couple of very large accounts, and had come to define success in terms of revenue growth rather than profitability.”
But, with the loss of those accounts and a couple of key people, the close-knit company was struggling. As the economy faltered so did employee morale at Wellington. Confidence eroded. Something had to be done to turn the tide.
Brian Davis, Leadership Catalyst, was retained by the Wellington principals as a coach to help them navigate their business challenges. Recalled Earhart,
“We were convinced that the only way to succeed was to grow revenues by 50 percent, to where we had once been. We wanted advice on how to dramatically increase sales and were looking for a silver bullet—a new strategy, innovative methods to motivate our people, or coaching on what we perceived to be some of our people problems.”
Davis met with Gene Earhart and his partner, Bill Rosener for 2 hours, every other week for 3 months. He literally started at the beginning—asking about the owners’ values, frustrations and aspirations. What kind of firm did they want to be? Based on that information along with a thorough examination of the company’s financials, Davis helped the owners see that before Wellington could grow, they had to become profitable. Earhart:
“Brian kept pushing us to understand our fixed costs and to come up with a single metric that could be easily tracked and would be the best predictor of profitable growth. We reviewed a number of scenarios such as salary cuts, furloughs and staff reductions, without losing critical skills. He coached us on how to communicate the cuts and changes in a way that would be respectful to those leaving and energizing to those remaining. We eliminated the general manager role, redeployed staff to the field, and reduced our headcount by 30 percent. Had we not made those changes when we did, the business would have been in serious trouble.”
Within 30 days of making the changes recommended by the Leadership Catalyst, Wellington returned to profitability. Indeed, for the first quarter of 2010 (typically Wellington’s weakest quarter), net income was more than triple their best performance in recent years.
Their employees are stretched more than they have been in years, but they are engaged and optimistic about the company’s future. Despite the dramatic downsizing, customers continue to be delighted with Wellington’s responsiveness and quality, two critical success factors for the company.
“As owners, it feels like a weight has been lifted from our shoulders. Our entrepreneurial spirit has been renewed, and we are having fun again. We are committed to profitable growth and creating a workplace that provides fulfillment for our people, and one that better serves our customers.”