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Growing in a low-growth industry
September 23, 1996
5 Min Read
Southwood J. Morcott. Chairman and CEO, Dana Corporation, Toledo, OH
Determined people and good leadership produce corporate success, says Morcott.
Design News: How important is management leadership to corporate success?
Morcott: Certainly if you have good leadership in a firm, you have a much better chance of success than with the alternative. There are a number of functions a leader has to perform: Most importantly, you have to know where you're going to be able to inspire people to get there. You have to have a view of what it is you're trying to accomplish. A leader can't do much in the short term, other than excite and stimulate. His real function is to look out three or five years and be able to clearly enunciate goals. If you shift your view once a year as to what the future is, and what the objective is, it's very difficult to sustain a coherent attack.
Q: How can a huge company like Dana function with a policy manual consisting of three pieces of paper?
A: Actually, you're a little bit wrong. We have a policy manual that consists of one piece of paper. The policy and philosophy is on one page. That piece of paper is essentially all one of our business unit managers gets to run his business. We've bought 23 companies since January 1, 1993. What the managers get when we buy a company is that piece of paper. We go through it with them word by word. That piece of paper deals 90% with people and 10% with money. The top line basically says the purpose of a company is to make money for the shareholders. That's the 10% that deals with money. Everything else deals with people.
Q: How did Dana, a company with core products that employ mature technologies, become a growth company?
A:We don't feel there's such a thing as a mature product. We're in business to get power from the power source back to the rubber. For a long time to come, there's going to have to be some mechanism that goes from the source of power to the road, even if the road is a cushion of air. In its very simplest form, that's our business. And it gives us great opportunities for growth. Dana has grown three ways: by acquisition, which historically has accounted for 25% of our growth; by picking markets that are growth markets, oftentimes within a flat industry; and by new product development. We have some divisions committed to have at least 20% of their sales in any given year from a product that we didn't offer for sale three years ago.
Q: How will the move to outsourcing in the automotive field affect your company and your engineers?
A: It's putting tremendous emphasis on the product engineering function as we move from a pure component or product engineering focus to a systems or module focus. In the old days the customer wanted to buy assemblies as pieces from perhaps 25 or 30 suppliers, and put them together himself. Now the customer wants to buy the whole thing from one supplier. We aim to be that supplier. And that takes a lot of engineering work. We're really going to be increasing our engineering staffing to do this job.
Q: How do you feel about the assertion that long careers at large companies are a thing of the past?
A: I don't happen to believe that about our company. Now, unfortunately, some of the new people we hire come in from a university with the belief that they've got to change companies three, four times by the time they're 30 or they aren't doing anything. So you've got an initial challenge to show the individual how they can have a very satisfying, interesting, fascinating, rewarding career with one company. If your company offers upward mobility, offers fair pay and judgment for performance, and moves people around and gives them the opportunity to go up, they'll stay. If they don't see a future, if they don't see that the company has a future, they'll leave.
Q: Some would say the employees don't matter that much.
A: Oh baloney! They're everything! Business is 90% people and 10% finance. Anybody can buy the factories we buy. Without the people they've got zero--absolutely nothing. Your most important asset is people. It's a strange thing in financial accounting that there's all of this work done on accounting for your hard assets and no work done, nothing written in the financial statements, about the only thing that matters, which is the people. Without the people, hard assets are worthless. I can give you a plant like we just built down in Kentucky, and if you don't hire and train the right people, the plant is a waste.
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