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IMPO Best Practices: Texas Nameplate's Texas-Sized Turnaround

Mon, 05/07/2001 - 10:04am

Once plagued by error-prone production, worker apathy and dwindling profits, this Dallas-based label maker turned around with a vengeance after almost losing its largest customer a decade ago. Here's how the company went on to win multiple awards, including the Malcolm Baldrige in 1998, and continues to raise the bar for itself.

Rick Carter, Editor-in-Chief

Scan a list of Baldrige Award winners and you'll see familiar names: Boeing, AT&T, Armstrong, 3M, Xerox and others. You'll see many more that aren't familiar. Typically, these are smaller companies that have met the same rigorous Baldrige standards as the giants, but lack their deep pockets and pools of talent.

Texas Nameplate Co., Inc. (TNC), was one of the unknowns when it won the 1998 Baldrige in the small business category. Dallas-based, family-owned TNC makes some 6 million labels a year from metal and plastic that are used to display serial and model numbers, pressure limits and other types of information on a variety of goods, from appliances and valves to computer equipment. The $4 million company is one of some 900 nameplate makers in the U.S., but is one of only a few that offers chemical etching, an environmentally sensitive process that produces plates of high durability. TNC specializes in small orders (less than 600 units on average) for more than 1,000 customers in the U.S. and abroad.

The TNC story is not unlike those of others who have been recognized for substantial improvement. It stands out, however, certainly because of the significant strides made by a small (55-employee) company, but also because president and CEO Dale Crownover has become something of a Baldrige celebrity by retelling his company's story at speaking engagements across the country. In 1999 alone, he spoke 60 times. Crownover has lunched with - and advised - Fortune 500 executives who, five years ago, had no idea little TNC existed. He has spoken to schools and hospitals, too, about the advantages of building a quality-based organization. Why? "Because I like telling it," says the quiet 49-year-old. "It's not for the ego. It's motivational."

Crownover wrote the story, too. His 1999 book Take it to the Next Level, named after one of Crownover's favorite phrases, offers a very human perspective on meeting the difficult challenges of turning a proud and respected but seriously outdated company into an award winner. Early on in the book, he addresses a pivotal event that led him to the Baldrige. He had just assumed operational control of TNC from his father, and quickly found himself running a company at a crossroads. It faced lawsuits from the city of Dallas over wastewater discharges. It faced an EEOC lawsuit. But most threatening to the new president was a 1991 requirement from General Dynamics, one of TNC's largest customers, that all of its vendors become certified under a quality program it called Statistical Process Control (SPC). In a series of letters, General Dynamics (now Lockheed Martin) notified TNC of the SPC requirements and that certification in the program was mandatory to remain a vendor. It threatened to cut off the company if it failed to respond. "Wouldn't you know it," Crownover wrote, "I remember throwing those in the trash can." His attitude reflected that of a company that was convinced it knew its own business, was doing things in the best manner possible and needed no guidance from others.

Crownover relates that the inevitable meeting with General Dynamics in nearby Fort Worth changed all that. Despite the two companies' longstanding relationship, TNC was, indeed, cut off for not complying with the SPC directive. Crownover left the meeting in shock. But the shock proved therapeutic. When he realized too much was at stake to brush off the loss, Crownover swallowed pride and asked General Dynamics for another chance. When the company agreed, Crownover was relieved, though all he could see at the time was the extra effort that would be needed to simply get the company back where it had been. Only later did he realize he had just taken the first step on the path of continuous improvement.

Reality versus perception

Had it not been for General Dynamics' request, Crownover and most others at TNC now believe the company would either be out of business or barely hanging on today. "Our company did not have any real guidance," wrote Crownover in Take it to the Next Level. "It seemed like Dad just kind of let it run itself." That approach obviously worked well enough to establish the company, but it eventually began to eat it away.

"When I started here in 1976 it was awful," says Preston Smith, production supervisor. "Nobody cared for anybody. There were no benefits, there was very high turnover, and the pay was as low as it could absolutely be. There were so many people turning over, there was always a new face in here. They'd hire anybody off the street."

High numbers of non-conformances - product that fails to meet specifications - were a fact of life at the company.

"Non-conformances didn't matter," says Ken Howard, customer service manager and 23-year TNC veteran. "If it wasn't a good nameplate, so what? We made 50% more than what we should have just to make sure we had enough. Our upstairs was three-quarters full of extra nameplates."

During this period, Crownover says defects cost the company about $20,000 per month, more than 10% of its annual sales of $2 million at the time. According to press department supervisor Robert Hodge Jr., a 20-year company veteran, anything that could go wrong with the nameplates did. "Things were cut wrong, they were the wrong size, the hole dimension was off, information was cut off, everything," he says. "We had a lot of people, but we didn't have time to train them. And if you don't train them, they never get it right."

That was precisely the work ethic that General Dynamics hoped to change with its SPC program. It was an uphill task. Crownover relates how the original quality procedure plan he submitted to General Dynamics was less than one page long. The version General Dynamics approved three months later covered 45 pages. And that was followed by a 30-lesson course on SPC that Crownover took personally on his computer. The changes in production and quality-control required by the program, however, produced welcomed results.

"We saw some real good things come out of that," says Smith. "People started caring about what they were doing and things started looking better. Then it progressed from one thing to another."

Chief early gains were the reduction of non-conformances, the reduction of scrap and, says Howard, "the increase of input from people on the floor. We had never had that before. When you were on the shop floor, you just did what you were told. SPC turned it around to where the people were able to give suggestions, maybe not like it is today, but it got better."

Within two years, things had improved enough that Crownover thought it important to publicly acknowledge the company's progress. In 1993, he held a Zero Defects Day celebration at the TNC facility, which included a luncheon for employees and key customers. He likens the event, now held each year, to a man's proclamation of love for his wife on their wedding day. In his mind, TNC "wedded" the belief that it was ready to pursue a zero-defects approach in all departments.

The path to recognition

Crownover and his team - which included his father Roy, who remained active with the company, director of administration Scott Weber, and sales manager Bob Mantle, among others - recognized the need to vigorously maintain the momentum begun by the SPC requirements. "It was tough to follow the vision I thought I had," he says, "to get everyone to understand what we could accomplish and try to continue to be upbeat. I knew if I ever slowed down, they'd stop, so I had to continuously push myself. Every day, always upbeat, always optimistic. I had to be persistent."

Crownover's next step was to enroll in a five-day Total Quality Management course. He sent three other management members to the same course to gain consensus that TQM could work at the company. All agreed it was right for TNC, and they formed a Quality Improvement Team to enact what they had learned. At the same time, Crownover worked hard to help the TNC workforce connect with the full scope of the quality initiatives.

"Dale started a lot of things to get people to buy in," says Hodge. "He recognized people. He'd have an employee of the month, dinners, birthdays off. He got people to participate, and he got them recognized. Once he did that, and he started letting people have a say in what they do, they started feeling more a part of the company." He also started two operational teams that meet every two weeks, and began monthly company-wide meetings.

This was new territory for Crownover, who admits he was not naturally inclined to be so directly involved. "The workers didn't know me well until we made this [quality] commitment," he says. "There would always be a barrier. It was up to me to minimize this. The workers always kind of wonder what you're up to, so you have to make sure you're consistent, honest and sincere. I tried my best to do that, to mingle with them, to listen. A lot of people think that going through the shop and saying 'Hi, how are you?' is communicating," he says. "But communicating is listening and finding out what's going on in their lives. It took a long time, but I really felt we could do something extraordinary. I knew we had a lot of room for improvement, but I was patient with them and that worked out well."

He was also generous. A gainsharing program he instituted in 1996 that returned a percentage of profits to employees was the most effective quality effort to date, not to mention the most popular. "We were making more money than we knew what to do with," says Crownover. "And we didn't want to pay tax on it, so we came up with this plan" to give it back.

The gainsharing plan rewards error-free production by allotting a percentage of job profits back to employees. The percentage varies by non-conformances. As non-conformances rise, gainsharing amounts drop. All eligible employees receive gainsharing checks quarterly, which can top $1,000 each. Eligibility is based on hours worked, cost of rejects attributed to that employee, and other criteria, such as employee adherence to safety rules and prescribed production techniques. Daily cumulative gainsharing amounts are posted on a company bulletin board, with non-conformances highlighted so employees see what has impacted their checks.

Crownover mentions a recent example of a worker who broke from procedure and used a non-specified coating on a label, causing the batch of labels he was working on to be non-conformances. "It used to be me who would go tell him not to do that," says Crownover. "Now, because it cost everybody $13 a day for him to do that, everyone's watching." With the entire workforce directly committed to and affected by quality control, says Crownover, his next decision was easy. "When we started gainsharing we eliminated our quality-control department. It was the best move we ever made."

Gainsharing helped TNC focus on quality principles. So did the pursuit of awards, a process that Crownover encouraged in order to keep workers goal-oriented and to obtain critical feedback about the company's progress. In 1996 the company applied for and won the Texas Quality Award, and it achieved ISO 9000 certification. In 1997, it won the Texas Association of Business and Chambers of Commerce Award, and the Arthur Andersen Best Practice Award. It also received a site visit for the Malcolm Baldrige Award, which proved a daunting moment for the company, despite its successes. "It was scary to think that we could actually be that good," says production manager Smith.

The company got to be that good by making impressive strides in all key areas (from 1994 to 1997), including:

     • Market share - up from 2.7% to 5.1%

     • Sales growth - up from 13% to 27%

     • Employee turnover - down from 45% to 8%

     • Cycle time (time required to produce and deliver one job order) - down from 28 days (in 1990) to 11.

• Total non-conformances (those discovered both before delivery and by the customer) - down from 3.65% to 1.25%.

     • Production per labor hour - up from 44 units to 78

     • Gross profits - up from 50.5% to 59.4%

     • Cost of sales - down from 49.6% to 40.6%

The quality initiatives the company began with its SPC and TQM programs were improved and tested in a number of ways. The company began a mystery shopper program, for example, to obtain comparative feedback about its pricing, customer response time and job turnaround time. It also hired outside consultants, but always with a dose of caution and frugality.

"We had specialists come in and, and I'm not going to say we picked their brains," says Crownover, "but they'd tell us what they thought, and when they'd leave, we'd all get together and discuss it. Then we'd bring in another specialist and do the same. We did a lot of that, and we'd pay them hourly. But instead of getting a big gun to come and do everything, we went with the little specialists.

"The good part of the Baldrige," he continues, "is that it's a structured approach that's recognized all over the world. There are lots of examiners out there who can help you. And you can call Washington and get the [Baldrige information] book free. It amazes me what people pay a consultant for this type of information."

Validation of the company's efforts came in 1998, when Texas Nameplate joined the select ranks of Baldrige award winners. One of only three winners that year, Crownover found himself in demand as an engaging speaker who could tell his company's story in a way that was both instructive and inspiring.

The next level

In typical fashion, the Baldrige win was not an end for Crownover and TNC, but a stepping stone. TNC has continued to pursue "the next level" by restructuring as a lean manufacturing operation, using Kanban production techniques for regular customers, applying for ISO 14001 certification and, to no one's surprise at TNC, planning to apply for a second Baldrige in 2004, when it is again eligible to do so. Crownover says that while winning the award once was one of his greatest achievements, it's the process of going for the win that is most satisfying.

"I wanted to win last time," he says. "This time, I want to be shooting for it. It's the process that I love. I'm not trying to prove anything, except that if you try anything with real dedication, you have a pretty good chance. Who would have ever thought, eight years ago, that we'd ever be a Baldrige recipient? I still have a hard time believing it."

Much of the company's current focus is on its lean initiative. By redesigning workstations and cross-training workers, work flows more smoothly than it ever has. "Now everything is organized by department," says Preston Smith. "Everybody works closer to their machines, so they don't have to move around."

Employees are also cross-trained. "Under the lean concept," says press department supervisor Hodge, "if we have a back-log or something else happens, we can take people from another department and put them in mine to push the work on through." Workers see the cross-training as a career strength, he adds, and are eager to take advantage of the opportunity to learn new skills.

The result so far has been a continued reduction in nonconformance, though, to Crownover's frustration, the percentage remains higher than he'd like. The reason, however, now often seems to have more to do with the customer than with Texas Nameplate.

"Most of what we see now is that when customers order a nameplate, they don't know how a nameplate is made," says Smith. "In turn, they don't know what they want on it. They'll tell us what they think they want, and we'll manufacture it, and then they'll say, 'Well I really wanted it this way,' once they see it. We do give them a proof once we get it laid out, but sometimes that's not enough." Smith says the company usually makes new ones for the customer and chalks the loss up to customer service.

And it's this type of superior service, says Crownover, that will help TNC distinguish itself from now on. The company has reached a point, he says, where the production of error-free product in a timely fashion is no longer extraordinary. "We've entered the phase where we ask what can we do that is extraordinary. We think it's service. We think it's delivery of goods, not in 15 days or 10, but in seven or five. We think it's not having voice mail. If you call us, we talk to you. If you order a nameplate, we're going to respond that same day. That's how we get a lot of business. This is how you get better. This is how you make more money. It's all these little things. It's not just making quality nameplates. And this is where we're ahead of our competitors," he says. "They can't start looking at the service end because they're still trying to make the perfect part."

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