SRC integrates newly acquired Lexington plant

Allen Duggins just wrapped up three years as a transmission tester at Komatsu America Corp.’s Lexington, Ky., remanufacturing plant, when he found out he was going to be a father – and then he learned the plant was closing.

“We had no idea if anyone was going to buy us out or if we were going to be left on the streets,” he said.

Then Springfield-based SRC Holdings Corp. entered the picture.

Duggins and 63 of his co-workers kept their jobs after two Komatsu managers approached SRC Holdings about purchasing the plant. The facility shut its doors as Komatsu on Sept. 24 and reopened the next day as SRC of Lexington.

At the time, Komatsu America was SRC of Lexington’s only customer, and now, it’s the plant’s largest client.

Opening the books
Seven months into teaching the open-book management ropes to the company’s newest employees, SRC veterans are feeling like they’ve been here before.

“Here’s a company (with jobs) at risk, which is very similar to 1983 when International Harvester was in bankruptcy,” said Rich Armstrong, president of SRC offshoot Great Game of Business, referring to the Jack Stack-led employee buyout that started Springfield Remanufacturing Corp. “Both had management that said, ‘What are our options?’ For SRC, the option was for the employees to buy and run the company. (Komatsu’s) option was to get a partner like SRC.”

The Lexington plant -– which specializes in remanufacturing components for mining and large construction equipment – had some history with SRC, since the two had exchanged plant tours in the past, said Rob Shear, Lexington general manager. Its expertise in mining equipment and hydraulics was attractive to SRC, but so was its staff, said Ron Guinn, executive vice president of SRC Holdings.

The Lexington operation now falls under Guinn’s hat, and he knows first-hand what it’s like to be in the shows of a new employee. Similar to Duggins, Guinn was working in the transmission and hydraulics division at International Harvester’s Springfield remanufacturing plant when Stack and 12 managers bought the company for $9 million, with $100,000 down.

“We probably would have been game to try anything to save our jobs,” Guinn said.

What SRC tried was an open-book management philosophy intended to give employees the tools to think and act like owners. That philosophy has turned into the Great Game of Business, which entered the national spotlight in a 1986 Inc. magazine article.

“Right after the first Inc. magazine article,” Guinn recalled, “we couldn’t have a meeting without guests.”

Two books co-written by CEO Stack, “The Great Game of Business” and “A Stake in the Outcome,” followed, and now, Great Game is a business of its own, with Armstrong and his team teaching the strategy and selling franchises.

Duggins said it didn’t take long before he could see a difference in the SRC way of doing things.

“I don’t have it completely figured out yet, but I’m learning it. I like it,” he said. “I get to know that what I do at my job every day affects the company and the numbers we put out.”

Duggins and other SRC staff can get inside their boss’ head by following Stack’s “Open the Books” blog published by the New York Times, www.boss.blogs.nytimes.com.
Stack is chronicling the transition in Lexington, which he describes as “turning the plant on its head,” and after a recent visit, observed, “People in the plant – not the management team – were making the biggest difference. … The associates were completely rethinking how they went about their jobs on a daily basis. They kept coming up with new ways to save and reuse materials – a savings that goes right to their bottom line.”

Huddle up
Part of the Great Game involves a weekly huddle, where the entire staff gets together to forecast company financials. Every week, employees also get a lesson in finances, Shear said.

“One of the lessons may be in how purchasing prices can change because of the fluctuations between the U.S. dollar and the yen,” Armstrong said. “That gives the employees that much more education on how the business works.”

Staffers also focus on critical numbers while playing the game, and for Lexington, that’s profitability. The plant was profitable already, Shear said, but Komatsu moved a good portion of its remanufacturing to Indonesia. The SRC plant remanufactures the remaining products for Komatsu, which is about half of the products it was handling before Lexington changed hands, Shear said. In the next 36 months – the length of the contract SRC of Lexington has with Komatsu – the plant’s goal is to increase its profitability and diversify its customer base.

Early results are the two small customers the plant has landed, Guinn said, and an environment where employees learn to preserve their jobs by maintaining the business.

“We know we have to work together to make our numbers,” Guinn said.[[In-content Ad]]