If the COVID-19 experience has taught industrial operators anything it’s that some things previously thought to require in-person management can be handled remotely. At the same time, it’s reaffirmed that other things are still better done in person. To understand the best ways to merge the two methods and to discuss the emerging best practices for this blended way of working, especially in the area of operational improvement, Industrial Exchange assembled a team of experts with the assistance of Alix Partners, a New York-based management consulting firm.
Participants at the roundtable, moderated by Industrial Exchange CEO Jon Cooper, were:
- Parmesh Bhaskaran, an Alix Partners Managing Partner in Chicago with expertise in areas including procurement, operations improvement and supply chain optimization.
- Tim Drinnon, a Managing Director at Ferrotec, an advanced technology solutions provider based in San Jose, California.
- Marc Iampieri, a Managing Director at Alix Partners in New York specializing in manufacturing supply chains and distribution.
- Dave Leathers, Executive Vice President, Service at Limbach Holdings, a building systems solutions firm based in Pittsburgh, Pennsylvania.
- Andy Pickens, Principal-Technology Transformation Group at Apollo Global Management in New York.
- David Proctor, Partner, Milestone Partners, a private equity firm specializing in the lower middle market based in Radnor, Pennsylvania.
- Brian Shiau, Senior Vice President at American Industrial Acquisition Corporation in New York.
- David Venker, Vice President of Portfolio Operations at HCI Equity Partners in Washington, D.C.
Their comments, edited for clarity and brevity, follow.
Jon Cooper: Let’s start with some examples of where operational improvements have been achieved remotely.
David Proctor: So, coinciding with the beginning of the COVID lockdown, we brought in a new CEO to one of our businesses. It’s been more than a year, but because of COVID he has not yet been able to meet anyone in the company in person. Still, we think he’s done a remarkably effective job of managing the company remotely. He has taken a very direct approach, spending his days on Zoom, and he has been able to break down the barriers separating the firm’s locations and getting everybody moving forward and developing a new product that we’re about to launch.
David Venker: We found a lot of a lot of value in using chat functionality in tools such as MS Teams to increase the velocity of communications, and we’ve been encouraging our teams to use it. We also use Basecamp to help collaborate with our portfolio companies and we’ve really leaned in on our data analytics initiatives. We’ve tried to democratize access to data and analytics, which allows us to do a better job of monitoring and contributing while being remote, because we’ve all got access to the same stuff.
While our remote tools have been very impactful, I have found that they’re much more effective in my own engagements if I have an already established relationship and I have been on site before. That experience helps me to picture the problem, particularly when it involves a manufacturing environment. It’s difficult to help with a manufacturing problem if you haven’t been in the plant.
Developing relationships with new portfolio company leaders is also difficult if you don’t have the chance to have those informal interactions that would normally happen during lunch or dinner together. A lot of valuable conversations tend to happen when you’re in a relaxed environment and everyone’s guard is down. So remote, I think, makes the influencing side of the job a little bit more difficult and challenging.
Dave Leathers: My company, which serves building owners, has been doing all the remote things that have been discussed. I think they’ve worked well as they relate to internal company management and in dealing with customers. We’ve implemented a technology where we can triage building issues remotely using video technology. We can interact via video and provide analytics-driven solutions. What we’ve seen, though, is that human interaction is still needed and very much wanted. In our business, some complex project development things and even some complex administrative things simply can’t be addressed effectively through technology; they’re better done by people coming together.
Surprisingly, we’ve found that in trying to start new relationships, prospects actually seem to be more open and willing to meet with us because they’re hungry for human interaction. We’ll sometimes set up meetings in parking lots if that makes people feel comfortable, or in their building with a limited number of people, just to have some sort of interaction. It’s an interest dynamic in what typically is a tough relationship to build.
Marc Iampieri: Dave’s hit on a few really key points. We’ve found that if we have done work previously with a private equity investor or an infrastructure fund, using remote tools has worked out to be efficient, because we can get right into doing what we do. But with a new relationship, we have to devote extra time to making a connection.
Where the remote tools have worked well is in the ability to leverage the time of our SMEs. I focus on transportation, logistics and distribution in manufacturing, for example, and now people like me and those in our central analytics team don’t have to travel to be with the team onsite. It’s a much more efficient use of everyone’s time.
One troubling thing about not being able to work as a team in the physical world, however, is that sharing and mentoring among senior and junior members becomes more difficult. Working remotely from home doesn’t provide the opportunities for learning and development or mentorship that a team-room environment encourages. As things go back to normal, we’ll start returning to live interaction on projects, and we’ll focus on more social interaction in our company wide meetings rather than on formal sessions, which can be done remotely. But in our dealings with manufacturing clients, especially those with very labor-intensive operations, whether it’s a distribution center or a production facility, it’s essential to understand how the business currently works, and it’s really hard to do that through a video.
Andy Pickens: I lead our day-to-day analytics efforts within the private equity group, and I can think of two specific things we’ve done in connection with remote operations. First, and a quick one, we’re using Asana for project management across the portfolio companies. There’s tons of chat functionality built into it, and it helps us drive understanding and alignment with different stakeholders around the firm.
The other area is data and analytics. We own many different kinds of companies, but the common thread in those companies is a huge underinvestment in data, analytics and technology. It leaves them struggling to understand what’s driving their business. For example, they might have a great cash flow profile and make a ton of money, but not really understand their customers. As you move closer to closing on a company like that, you usually start getting increasing access to their operations so you can refine your value-creation plan. But now that it’s become impossible to meet with them in person, learning about the business becomes a lot more challenging — especially when the data isn’t there. Fortunately, COVID has increased the pace of digital transformation. But I think data analytics is the area that’s really exciting.
Parmesh Bhaskaran: One of the tools that has worked well for us has been the action cameras from GoPro. We use them to take the place of walking around a plant. When we go through a plant virtually with them we can ask the manager to stop and show us an extruder, for example, or show us a machine’s settings. But one thing that COVID highlighted is the importance of having a strong plant leader. If you have a weak leader, it takes even longer to turn things around. Also, if you have a strong leader, we don’t need to be at the plant all the time. You can start a project with some face-to-face interaction and then afterwards do a lot of the analytics in the background.
Jon Cooper: Brian, I’m curious to get your take on live versus remote. Your firm generally buys industrial manufacturers that are in some sort of distress, so can remote take the place being on the ground to assess conditions?
Brian Shiau: My role starts with acquisitions and leads into overseeing some of the 70 companies in 24 countries in our portfolio. On the acquisition side, I would say that we’re able to do most of what we need remotely. Like Parmesh noted, we can have the plant manager run through the plant with their iPhone on FaceTime and show us what we want to see. For the most part, that suits our needs. The issue is more that they don’t volunteer to show you the things that aren’t good. And a lot of those things you only notice when you visit.
I remember going to visit a paper mill once. The data on the company looked great, and I even started to think that it might not be distressed. But when I went into the plant, the first thing I noticed was that my feet were getting wet. There was water all over the place and I asked the manager what was going on. He said the boilers broke, but it was OK because there were “Wet Floor” signs throughout the plant — which also had lots of holes in its floor that you couldn’t see in any of the photos of the place.
Also, the process for acquisitions has become worse during COVID because so much is done via Zoom. But since everyone is subject to the same disadvantages, it’s likely that the lack of information is being priced in. On the turnaround side, remote poses problems too, because many problems, even ones related to data, can be identified faster in person. In one company we bought, for example, we learned through data collection that their product inspections were taking too long. But we could have found that out sooner if we had been able to be there and see what they were doing and how they were doing it.
It’s also hard to identify cultural problems through Zoom. On Zoom, people are on their best behavior. When you’re there, you see the kind of tensions that exist between the people within the business and you see how people behave when they’re just being themselves and working normally. Having that information is important in a turnaround situation.
Jon Cooper: Tim, is your service team able to troubleshoot remotely? And what’s the impact on customer satisfaction?
Tim Drinnon: This is an issue we were struggling with before the pandemic as we tried to move people toward online and phone support. With COVID, we gave customers goggles with the heads-up technology so they could show us what the problems are. We’ve been finding that our service levels have actually improved since we’ve done this and our customer feedback has been positive. In the end, COVID drove them to use a technology that we hadn’t been able to get them to use before, and it’s resulted in better service. It’s not perfect, but it is definitely working. The big question is whether customers will continue to use the tools after the pandemic lifts or will they go back to wanting people onsite.
Jon Cooper: Let’s switch gears and talk about personnel. Have you made any workforce changes to adapt to remote work? More hiring in the data or analytics area?
Tim Drinnon: The meeting technology and other tools we’ve used came with a lot of training, so we haven’t had to hire any additional people, but there was a learning curve.
Dave Leathers: I think COVID has accelerated our transition to a more data-driven business. Our Number One hire is an analytics project manager. That would have happened without COVID, but the pandemic probably pushed it ahead a year. We also hired a technology leader, which was in our strategic plan for the future. So you can say that our strategy hasn’t changed, just the pace of implementation has.
David Venker: We’ve also accelerated the plans we had in place. But one interesting outcome of the COVID experience has been a push to focus more on local resources than on the corporate team. We may go back to that at some point, but for the foreseeable future we’ve made specific hires locally because I care more about this person being local since I can’t fly in centralized resources as easily.
Parmesh Bhaskaran: We’re seeing the same premium being placed on data and analytics, and it’s the area where we often come in and help clients because we have many data analytics people, so we can get to the root issues quickly. I think the data and analytics emphasis will continue to be a driving force in the coming months and years.
Jon Cooper: Let me follow up on that. Based on your engagements over the past year, Parmesh and Marc, where does Alix Partners see the biggest opportunity for industrials and the energy industry? Where are the biggest deficits in terms of operating talent? Where are you filling the need? What is the skill set most missing from the companies you’ve been working with lately?
Marc Iampieri: Obviously, the specific answers depend on the nature of the company. But I want to key off something that Dave Venker mentioned about embedding capability into the operation. I think, under any circumstance, that’s ideal. I’d love to have a self-directed workforce and no supervisors, I’d love to have a warehouse manager or a plant manager whom I could trust to run the operation and also read financials and make smart decisions. But that’s usually not the team that you start with. Usually, you’re trying to get there. And so where we’re seeing big deficits is at that local management level where you have a large hourly workforce. That’ why we have to be there, and maybe even have a regional vice president covering three or four locations. That’s where you get a ton of value.
I do a lot of work with companies whose base, whether in production or distribution, is decentralized, sometimes over 100-plus locations. They try to get coverage from the center, and it’s challenging. We find ourselves dropping into play that centralized data analytics role in the short term, so they have the information to make smart decisions. But somebody has to have the confidence to make those decisions.
We also play a key role in getting job descriptions and job titles right and helping in recruiting to get the right talent in place. That’s because any change we recommend won’t be sustainable unless the right talent is there to run it. So, even though we’re not a headhunter or a staffing agency by any stretch, we’re finding ourselves kind of working to stabilize an operation and then helping management find a strong regional person for the next few years who can oversee the changes.
For one client who’s doing a continuous improvement process, for example, I recommended that they hire two or three really strong people for the next few years to roll this out. That’s because, if they didn’t have the strength locally, they wouldn’t be able to make the necessary changes. I can’t stress this enough: If you’ve got a large hourly workforce and you don’t have a strong local presence, you can analyze your problems to death and come up with plans, but the local people just don’t execute.
Jon Cooper: Let me throw out some general questions. First, how are you going to handle business travel once it opens up? Are there legal liabilities?
David Proctor: I think a lot of people are struggling with that issue because there’s so much uncertainty. Maybe only those who travel will be volunteers who sign a waiver. But even then there could be repercussions. In the companies I’m involved with, that issue hasn’t come up yet, but I imagine it could.
Dave Leathers: We have operations in the Northeast, the Midwest, Florida, and Southern California, and each situation is very different. We set targets for getting people back in the middle of the second quarter, but we’ll have to evaluate that on a market-by-market basis. And I don’t have the answer.
Tim Drinnon: Our factories in the Midwest, Asia and Europe have people in them, but we haven’t set a date for office staff to return.
Brian Shiau: The Florida manufacturing company we oversee has stayed open the entire time, and everyone has been coming to work, despite one employee being diagnosed with COVID. Maybe that’s due to the area’s culture and political views.
David Venker: For us, it’s been a mixed bag. Our firm has been optionally open for a while now, with some people coming in and some not. There’s no plan to change that in the near future. Our manufacturing, distribution and logistics companies have been operating all the way through, and we’re starting to see fewer office staff working remotely than we did. In the last month or so, I’ve also started to hear senior leaders start to talk about how they’re going to make those remote workers feel safer in order to encourage a return.
David Proctor: At one of our operating companies, we made it a policy with hourly employees that they tell us if they had any symptoms before coming into work. To encourage that, we said we would pay them to stay home if they felt as if they had symptoms, but only if they got a COVID test and showed us the results. That seems to have worked quite well. We had a few scares, but very few cases. Our biggest fears come from what people are doing in their personal lives.
Another interesting thing I’d like to share is that Zoom can be used as a management and measurement tool. One of our CEOs, who noted a dip in productivity, analyzed people’s time on Zoom and found that the sales people were speaking less on Zoom than other company employees, when it should have been the other way around.
Jon Cooper: That’s slightly Orwellian, but probably necessary given potential at-home distractions. Thanks for your insights, everyone.