Regulars / Continuous improvement | 43Continuous improvement: the great equalizerThe cultural emphasis on improvement has never been more important for converters, writes Paul Brauss onverters ended last year with more market dynamics in function to the industry. That is not to say the private equity path play than I’ve witnessed in over 20 years in the industry. does not have its problems. We know the path usually requires A mix of positive news about market growth and negative fnancial-based restructuring and capacity consolidation that can be Cnews about raw material availability made industry leaders’ heads traumatic to the employees. Industry experts do not yet know how spin as new barriers to business success seemed to be popping up the large mergers will impact the market overall and, in the end, if weekly. Extended supplier lead times and labor shortages added the impact is positive or negative. frustration. Every step of the supply chain required management We know from our learning with Peter Drucker, the most attention. Sales teams’ productivity was impacted as sales important path to a company’s success, regardless of ownership, resources turned into logistics reporters, talking to their customers includes a culture that is managed for the long run. A company’s about planned deliveries instead of new opportunities. The industry governance needs to focus on long-term performance rather also had a lot of buzz around the number of mergers occurring than short-term value fuctuations. Flipping a company for the just before year-end and a robust beginning to the new year with short-term gain adds no value to the market or to that company’s seven converter acquisitions announced in January alone. While all future. Organizations that delight customers today and into the of these supply chain issues were being discussed, the back noise future will fourish in the long term. Companies that engage their in the industry included reports of 10 percent growth domestically employees and build a culture of sustained improvement focus in 2020 and 4 percent growth reported in 2021 with an outlook will outperform the short-term thinking companies that lack the through 2023 that provides even more opportunity ahead. commitment to enhance the culture. Culture “The label industry has seen Leaders that have developed their company’s culture based on continuous improvement have harvested tremendous opportunity growth in 27 of the last 29 years regardless of their current revenue size today. For the last 15 years, there have been 25 to 35 converter acquisitions per year and and has recorded growth for 14 several supplier acquisitions as well. Not all of these acquisitions have been smooth. Issues within recently acquired companies, uninterrupted years straight”or in any other hesitant company, generally start with a lack of I heard how the large roll-up of private-equity-backed converters understanding about sustained improvement focus as a company’s placed burdens on competitiveness. Small and mid-sized converters cultural building block. Most intellectual acquisition frms believe felt squeezed as material allocations hindered their response to they have the expertise to implement rapid improvement by growth opportunities. All converters continue to be put to task, and camoufaging it as ‘autocratic lean’ to push fnancial-based the complaints were the same whether you were large or small. The objectives quickly. When I heard this term the frst time and saw label industry has seen growth in 27 of the last 29 years and has how it was forcing wrong organizational behavior, I recognized that recorded growth for 14 uninterrupted years straight. The growth the cultural emphasis on improvement for converters has never phenomenon and an aging owner demographic have provided an been more important.opportunity for private equity to take advantage of the market. Just as illogical is the individual or corporate-owned converter The availability of investment capital provides an effcient infusion that hesitates to accept cultural development as part of their that may afford a high return for their large institutional investors. primary strategic investment. I fnd today that the end customers Many of the acquired converters enjoyed years of prosperity. The are always willing to speak to the needs they value with their business comfort levels went unchecked and often plateaued. Many converters, but it is up to the converters to take the information did not stay current with their investments in technology and and act. To do this effectively, the converter has to develop equipment and were ill-prepared for any competitive challenge. a capacity to listen and then translate what they learn into Without succession that included handoff to the next generation, actionable strategic imperatives. As more owners (private equity, their choice was limited to harvesting their assets, preserving value corporate or individual) recognize this opportunity and build their for their families. organizations to respond, they will fnd their old equipment with Years ago, Peter Drucker, the father of modern business a new focus on continuous improvement will help them earn management, identifed the consolidation period in a market enough to invest in new equipment and help them build back their segment by describing the buyout frms as providing a needed competitive strength. Jan - Mar 2022