National Post (National Edition)
A 100-YEAR PLAN
LINAMAR MIGHT BE A BIG PUBLIC AUTO PARTS MAKER, BUT ITS ENTREPRENEURIAL VISION IS WHAT’S DRIVING ITS SUCCESS
Give or take a few zeros on your financial statements, Linda Hasenfratz faces the same problems in her business as you do. As chief executive of Linamar Corp., Canada’s second-largest auto-parts company, Hasenfratz fights to reduce production costs every day, while also ensuring the company has the right stuff to survive growing competition and technological disruption.
She also faces the pressure of running a public company that’s the biggest employer in its hometown of Guelph, Ont. In addition, she wants to continue the remarkable growth begun by her father Frank, who founded Linamar in 1964 in his basement before turning it into a global leader in casting and machining.
Named for Linda and her sister Nancy, as well as their late mother Margaret, Linamar last year generated revenue of $5.2 billion, up 23 per cent from a year earlier, with more than 23,000 employees in 56 plants and six research and development centres around the world.
You might be surprised to see such high growth at a big, established company — especially a Canadian manufacturer — but Hasenfratz said it’s quite nat- ural. “I think we’re in a fantastic place. And I feel very good about where we’re going in the future,” she said.
Part of that is due to two specific initiatives she implemented that just might work in your business, too.
First, some background. I don’t normally write about big public companies, but it’s the nimble pace and entrepreneurial vision that Frank began — and Linda continues — that have helped Linamar thrive. The company specializes in the powertrain, the complex engine and transmission components that power your car’s performance. But it has branched out to supply parts and modules for commercial trucks and off-road vehicles, as well as key components for wind turbines and solar-powered generators.
The key to Linamar’s growth is the unique nature of the powertrain business: big automakers still produce 70 per cent of their engine driveline systems.
“The primary driver of our growth is raising market share by increasing outsourcing by our customers,” Hasenfratz said. “It’s a massive market that’s slowly being outsourced. And that gives us an extended period in which we can be growing faster than the industry as a whole.”
That process is complicated by the auto industry’s notorious drive for efficiency, with the big automakers demanding annual price cuts from suppliers. Hasenfratz said customers expect Linamar to reduce costs 1 per cent to 2 per cent a year. “A key part of our culture is a real devotion to cutting costs,” she said. “We’re looking every day for ways to be more competitive. And everybody’s involved.”
Which leads to one of Linamar’s most simple yet powerful innovations: Every employee is expected to implement six new ideas a year. Whether they work in production, administration or housekeeping, every employee must continue to find new ways to cut costs and boost efficiency. “It really helps to create a culture that’s always asking, ‘how can we improve?’” Hasenfratz said.
Why six ideas? “We are big believers that if you want to make a difference in something, you have to measure it,” Hasenfratz said. Although she admits Linamar managers don’t actually track the number of ideas each employee generates: “We’re trying not to make it too bureaucratic.”
Still, Linamar resolutely measures each plant’s output, efficiency and customer satisfaction, and links employees’ compensation to their group’s success in meeting specific objectives, which include implementing new ideas.
“There’s a bonus for every employee on how well they achieve those metrics,” Hasenfratz said. “You have to make sure people feel they can move the dial themselves.”
To strengthen Linamar long term, Hasenfratz believes in strategic planning. At a time when many business leaders say five-year plans aren’t worth the electrons they’re written on, Linamar has embraced a daring concept: the 100-year plan. “We’re asking ourselves, ‘ what are the issues we are grappling with as a planet that will direct what we do over the next 100 years?’” she said. The next question for Linamar’s senior executive team: what are the opportunities in those issues that would require the help of a world-class producer of precision components?
The goal of the 100-year plan is not to forecast the future, but to help Linamar understand which broad markets to focus on. That exercise has helped Linamar pick six key verticals as its most likely sources of future growth: transportation, infrastructure (especially in developing countries), food and agriculture, power, water, and aging population.
While that sixth market might make you scratch your head, Hasenfratz is excited by its potential: “We’re going to see waves of new medical devices, and we’re trying to figure out what part we want to play in that.”
After just two or three years of 100-year planning, Hasenfratz said the company has already made strategic investments in transportation, such as its 2015 decision to build a US$100-million aluminum-casting plant in North Carolina.
“The need for light-weighting of vehicles as we try to improve fuel economy and reduce emissions is absolutely something that came out of this planning process,” she said.
Over time, “we think we will be in all six of these markets. We’re gathering information on what are the problems to be solved, and what makes the most sense for us and the products we produce.”
WE’RE ASKING OURSELVES, ‘WHAT ARE THE ISSUES WE ARE GRAPPLING WITH AS A PLANET THAT WILL DIRECT WHAT WE DO OVER THE NEXT 100 YEARS?’ (AND) … WOULD REQUIRE A WORLD-CLASS PRODUCER OF PRECISION COMPONENTS? — LINDA HASENFRATZ, LINAMAR CEO WE’RE GATHERING INFORMATION ON WHAT ARE THE PROBLEMS TO BE SOLVED.