Malden MillsA Study in Leadership

From the October 1996 Quality Monitor Newsletter

On December 11, 1995 a fire burned most of Malden Mills to the ground and put 3,000 people out of work. Most of the 3,000 thought they were out of work permanently. A few employees were with the CEO in the parking lot during the fire and heard him say “This is not the end.” With these words began a saga that has made Aaron Feuerstein a legend among American leaders and a hero to his employees. Quotes are from Parade Magazine 9/8/96, pp. 4-5.

Conviction. The story of Malden Mills and Aaron Feuerstein is the story of leadership. Business proceeds in cycles and the most recent cycle is one in which extremely highly paid CEOs are celebrated for cutting costs, downsizing, moving plant to venues of cheap labor and delivering maximum worth to stockholders. Leadership would appear to be synonymous with profit maker.

Aaron Feuerstein spent millions keeping all 3,000 employees on the payroll with full benefits for 3 months. Why? What did he get for his money? Is he a fool? Did he have some dark motive? Here is Aaron Feuerstein’s answer: “‘The fundamental difference is that I consider our workers an asset, not an expense.’ Indeed, he believes his job goes beyond just making money for shareholders, even though the only shareholders of Malden Mills are Feuerstein and his family. ‘I have a responsibility to the worker, both blue-collar and white-collar,’ Feuerstein added, his voice taking an edge of steely conviction. ‘I have an equal responsibility to the community. It would have been unconscionable to put 3,000 people on the streets and deliver a death blow to the cities of Lawrence and Methuen. Maybe on paper our company is worth less to Wall Street, but I can tell you it’s worth more. We’re doing fine.’"

Feuerstein did not throw his money away. It was not largesse. It was a well reasoned and sound leadership decision to invest millions in Malden Mills’ most critical asset, its workers. The contrast between this CEO and the currently celebrated CEOs making 30, 60 or 100 million dollars a year by eliminating jobs and moving plants is simply astounding. How much are you willing to wager that every company that closed a plant in recent years to boost stock prices has a vision statement with words like …we value and respect our employees as our most important asset? How many of the laid off employees do you suppose believe that?

To a leader that has the conviction of his beliefs, words like value and respect must be backed up with hard decisions and actions. The real test of leadership is maintaining those convictions during change and upheaval.

Communication. What sets Aaron Feuerstein apart from the CEOs of AT&T (44,000 layoffs), IBM (over 100,000 layoffs) is that he is a leader. He has a conviction that employees are his most critical asset and lives by it.

The most important communication is not what you say but what you do. The first major test of Feuerstein’s convictions as a leader came during the bankruptcy. Many

of us might conclude that a bankrupt textile mill in a 300 year old mill town in 1981 was the end of the road. Not Aaron Feuerstein. He spent millions to develop a new product and re-opened the mill in Massachusetts with all the high paid workers (by global standards). His firm created Polartec® and Polarfleece®, revolutionary new products. As a result "Aaron [Feuerstein] came out [of the bankruptcy] stronger than he went in."

The fire was the second test, and again Feuerstein vowed to stay in business. These two actions were the most powerful communications he could have made to his workers that he had the courage of his convictions. He was willing to put his money, reputation and business on the line to move the company forward in an ever changing business climate and ever present risk. When the management gurus write books, articles and speeches about leadership and organization development they always talk about the need to balance the needs of all stakeholders: employees, customers, stockholders, vendors, community and so on. It is not irrational to invest millions in your employees, but today most workers see that the stockholder is the only stakeholder that counts.

When I ask senior managers about communication within their organizations, I often hear about newsletter articles, speeches at the annual meeting and official memos. There are other and more powerful ways to communicate. Day-to-day decisions and actions communicate volumes about actual positions on key issues, e.g., talking about productivity and performance but keeping an old friend on the payroll who is notoriously ineffective, or talking about cost control while the company picks up the lease on the executive’s new Jaguar.

Courage. What distinguishes Aaron Feuerstein and other leaders like him is courage. Feuerstein has the courage to stand by his convictions and take the appropriate actions. If Feuerstein showed courage by committing his wealth and good name in rebuilding Malden Mills—he only has done what leaders through the centuries have done. He lead the way, blazed the trail, so that his followers could do the impossible. "‘Before the fire, that plant produced 130,000 yards a week’, Feuerstein said. ‘A few weeks after the fire, it was up to 230,000 yards. Our people became very creative. They were willing to work 25 hours a day.’"

How many corporate CEOs in the downsize-crazed companies today could ask their employees to double production in a few weeks given no changes in the current plant—much less given temporary plants set up in old warehouses? How many of your employees would come through for you if your company needed their help? They might work 25 hours a day for you if they thought they were valued as important assets. If the communication has been that employees are movable and expendable, they may abandoned ship for a more pleasant work place given the extra demands.

Conclusion: Conviction, Communication and Courage. The message from Malden Mills is that Aaron Feuerstein did what any rational person might do given time to reflect and with her priorities in perspective. Reconsider the priorities of your company. Rethink the values you communicate and how you communicate them to your employees, customers, stockholders and community. What are

your convictions as a leader, how do you communicate them and do you have the courage to stand by those convictions under any circumstances?

Answer these questions in a quiet moment of self reflection. Most companies will not have to face a fire to find out what their leaders are made of, ask your employees and customers what they notice every day. Ask them what happens:

• When the stock prices slips,

• When orders evaporate,

• During seasonal adjustments,

• At wage negotiation time,

• When a key piece of equipment goes off line,

• When a customer balks at low quality,

• When someone tries a new idea and it fails,

• When managers do not deal with a poor performing employee,

• When the community wants to know about your environmental practices,

• When stockholders demand higher short term returns.

How you respond to these everyday issues communicates your leadership convictions. Your convictions drive employee loyalty to you, your products and your customers. Your courage to honor your convictions through changes both small and large is a measure of your leadership. ¨