When Fred Warmbier Wanted to Quit, Deming Brought Him Back

Introduction:

This week, we have a special guest, Fred Warmbier, owner of a metal-finishing business he founded in Cincinnati in 1998. About 10 years ago, Warmbier was ready to walk away from that business. “It just never seemed like I could have the type of business that I wanted,” he says, “where things worked properly and our employees were happy and our customers were happy.”

That changed when he discovered the Deming Management Method through a consultant, Kelly Allan, who helped him tame the chaos and even find joy in his work. Where does one start with Deming? “You start,” says Allan, who is chairman of the Advisory Council of the W. Edwards Deming Institute, “where the pain is.” As it happens, and as we discuss in this conversation, Fred Warmbier has experienced more than his share of pain.

— Loren Feldman

Producer:

Jess Thoubboron is founder of Blank Word Productions.

Full Episode Transcript:

Loren Feldman:
Welcome, Fred and Kelly. Thank you so much for being here. I really appreciate it. Fred, let’s start with you. Why don’t you tell us about Finishing Technology—what does your business do?

Fred Warmbier:
Sure. I own a metal finishing company, Finishing Technology, Inc. Our main business would be anodizing of aluminum. The industries we serve are—

Loren Feldman:
What does that mean?

Fred Warmbier:
Anodizing of aluminum.

Loren Feldman:
Yeah, for civilians like me?

Fred Warmbier:
Sure. Well, Kelly’s an expert on this. Tell us, Kelly. I’m just kidding. [Laughter] So aluminum anodizing, it’s actually a fascinating process. It’s a conversion coating, where you take the molecular structure of a plain piece of aluminum, which would—we’ll call it random shapes of molecules—and when you put it through the anodizing process, which would be you put the parts that you want to anodize into a bath of an electrode light. The part becomes the anode, and there’s a cathode in it. You apply electrical current to it, and it changes the structure of the metal, actually, so it converts it.

The new structure would be more similar to a honeycomb look, and it builds it up very strong. It’s very cool, because it’s not like paint where you’re building it up, and it can chip off. It’s actually part of the structure. So who uses this would be—the obvious ones that you’ll understand the name of is—NASA, aviation, transportation, headlight lamps. The back ends of those would be anodized. Lots of parts in cars, food equipment, popcorn machines—the frames for the popcorn makers—the pizza pans in Pizza Hut. That would be your food equipment. And then firearms would be military weapons, AR-15s.

Loren Feldman:
What a range! What is the purpose of the process?

Fred Warmbier:
I like to say it’s a tough, durable coating.

Loren Feldman:
And why do you need it in a popcorn maker?

Fred Warmbier:
Well, so that it doesn’t get white rust on it, so it maintains its appearance. It’s cosmetic, and it’s functional. There are measurements of this. And in the automotive world, you may or may not have heard of a process called “salt-spray testing,” and that’s where they’ll actually take a body frame, and they’ll put it into a chamber that’s 95 degrees, 95 percent humidity, and 5 percent salt. And they’ll run it in there, and they’ll scratch the paint, and they’ll see if it rusts underneath it. In the old days, when cars rusted out, they might last 50 hours. So now today, they would range from a hundred hours to a thousand hours, depending on the application. For the type of anodizing that we do, we always get a thousand hours. It’s easy. It’s a very durable coating.

Loren Feldman:
How did you get into this? Did you start the business?

Fred Warmbier:
I did. I started a metal-finishing business in 1998. I was introduced to industry through my dad, who was a distributor of equipment to industry. And I worked there for a while. I didn’t like it. But when I was out making calls, people would ask me, “Would you like to run parts for me? Would you like to clean these coils in our washers at the Ford Motor Company plant?” And in that case, there were 100 washers, and they had 20 coils per washer, and I got 100 bucks per coil. So I realized there’s money in this.

And so the evolution was, I started doing that type of work, which I would call “grunt work, low entry,” meaning anybody with a pickup truck and a pressure washer can do it. And then we escalated into other offerings over time. We then started a gun-bluing business, which is black oxide, and then that wasn’t very big. And the customers there said, “You know, if you put in an anodizing line, I’d bring you my work.” That was the extent of my market analysis. And then what I found out was: These customers weren’t picky at all. But I invested money, and I put in an anodized line. And it really triggered a lot of things.

Loren Feldman:
Let’s bring Kelly Allan into this conversation. How did you first connect with Kelly? And tell us, where was your business at the time that you thought you might be able to use his services?

Fred Warmbier:
At that time, I was ready to retire. I couldn’t afford it financially.

Loren Feldman:
And you were certainly too young.

Fred Warmbier:
Oh, yeah. But it was such a mess that I was ready to give up.

Loren Feldman:
Why?

Fred Warmbier:
We were crisis managing. There was too much drama. There was too much crisis. And it just never seemed like I could have the type of business that I wanted, where things worked properly and our employees were happy and our customers were happy. I mean, you’re gonna always have a little bit of drama, but there would be less drama. And so, I just didn’t feel like I was capable of creating that type of company.

So I’m resourceful. I would have stopped doing that and went and found something else to do. And my wife signed me up for the Course for Presidents at Aileron, and I really enjoyed that.

Loren Feldman:
Aileron is a really interesting organization that all three of us are familiar with in Dayton, Ohio, that supports businesses in all kinds of ways.

Fred Warmbier:
I took the Course for Presidents there, and that was good, and I learned a lot, but it was a little bit higher-level than I was ready to take on. And then I saw that they were offering a Deming Management Methods seminar there, and I do work for Toyota—I still do—and I thought, “Well, I’ve always associated Deming with Toyota.” So I signed up for the class, and Kelly taught it, and it completely resonated for me. It just made sense, because I was basically in the weeds, trying to run a manufacturing company with very little help or guidance. None, I would say. There are no books for this.

Loren Feldman:
Trial and error.

Fred Warmbier:
Yeah, you’re finding that out, Loren. Kelly, we’ll pepper Loren.

Loren Feldman:
I’m asking the questions here. Kelly, give us a little background. First of all, you run a management consulting business. Tell us a little bit about that.

Kelly Allan:
Yes, I have a number of associates, and we work with companies large and small. We met Fred in fall of 2013, when we did the Deming seminar at Aileron. And you never know who’s going to be showing up at the seminar, what kind of leaders. But Fred, being Fred, also came with four or five of his people, some of them from the line, because he’s a lifelong learner. And that’s a good clue for any entrepreneur, because you have to be a lifelong learner. You have to enjoy being a lifelong learner. So I wear that small consulting firm hat. It’s management consulting, also marketing-related things, some IT, spread across 24 associates.

And then the other hat I wear is, I’m chairman of the Advisory Council for the W. Edwards Deming Institute, and I helped design the seminar that Fred attended. And I remember we had a speaker there—a great guy who had been a turnaround who we had worked with—and he spoke very eloquently about the struggles of that. And Fred came up at the end, and he said, “I talked to my guys, and we’d like to work with you. And you don’t have to worry about getting paid, but we need to start soon because I’m really tired of this business. I’m really tired of what’s going on. We need to get this taken care of.” Right?

Fred Warmbier:
Absolutely. Yeah, I like that: “You’re going to get paid.” And I think part of being in a small business is being willing to reach out and ask for help. And so, for example—you’ll appreciate this, Kelly—I’m now at a place where I want to create a board of advisors. So I’ve contacted Aileron, and I’m working with them to create a board of advisors for the next phase of my business, and that’s all part of this. That’s why we’re here. It’s so important to let people know that I’m not gonna have the answers. I’ve got a successful company, but there are certain things that I don’t know, and I’m going to take advice from others.

Loren Feldman:
I want to talk a little bit about what you found, Kelly, when you connected with Fred and started working with him. But first, we’re all familiar with the Deming name, but give us a quick refresher: Who was Deming? And what’s his method?

Kelly Allan:
Sure. W. Edwards Deming, born in 1900, died in 1993, was asked by General MacArthur after the Second World War to go to Japan to do a number of things. Unbeknownst to him, a lot of Japanese engineers and professors had translated his work—his research and writings about quality, especially—into Japanese. So when they found he was coming, there was a big effort to get him to stay for a while and speak, which he did. And he told them, I think in the late 40’s, early 50’s, that if they would follow what he was teaching, that within five years, they would be exporting quality products to the world, and there would be screams for protection from the countries that were adding imports, because the quality would be so high.

It’s the only time I know when he was wrong. It only took three years for companies, because they were really desperate. I mean, it was a war. They were rebuilding after the war, and this approach offered hope. So most people knew about Deming from a quality standpoint, but that’s really about 20 percent of his body of work. With Fred, for example, we’re also working on the 80 percent, which is the management method around how you organize an operator, an organization. And it’s really four big things, and that’s what Fred was hearing at the seminar, the two-and-a-half day Deming Institute seminar.

There are like 65 quality tools. We teach a few of those in the seminar, but it’s really about: How will you see the system—your organization as a system—and how will you run it for productivity, profitability, joy in work, creativity, and innovation, etc.? And that’s what Fred’s really latching on to.

Loren Feldman:
Those are all very positive things that everybody would want. Can you give us a sense of how Demming gets you there? And I know, that’s way too broad a question for one quick answer.

Fred Warmbier:
No, I think that’s a fair question.

Kelly Allan:
Get some of Fred’s examples. So for example, one of the things that you’re talking about, one of the things he mentioned to me early was, “We have chaos. We have chaos.” So we just started with some simple things, because when Deming works, quality goes up and costs go down. So that’s pretty powerful. And time after time after time, Fred found that to be true, whether it was about the intake of parts, the process for cleaning parts—pre-anodizing—the process for anodizing—so there were flowcharts and fishbone charts—and discussions with people that he would have about how to test a theory of how to fix a problem.

That’s often called the Deming Cycle—the plan, do, study, act cycle—and Fred would just engage everybody and say, “Hey, we’re getting spots on parts. Where are they coming from? What do we do about it? Are they coming in that way? Is it something they’re coming in with that we’re not catching?” To the other end, after all this work is done, how do you make sure that parts get shipped on time and don’t get damaged before they get shipped after they’ve been cleaned and anodized? And how do you do that efficiently and effectively without killing your people, wearing out your people, so they have joy in work and so they’re engaged in the process of improvement?

Fred Warmbier:
I think most small businesses, they nail a couple things really well, and the first thing is going to be sales. And that’s usually the guy who starts the company, and then they’re comfortable with everything that they do, and they know how to bring home the business. And over time, what management encompasses is, it’s so much broader that it’s overwhelming.

What Deming did for me was they broke it down. So he’s mentioned 62 things, and I say, “No, there are only four.” And if you think about the four—and you don’t have to do any of them, it’s just out there—and that’s what I really related to. The four things were: You have to have an appreciation of a system. And again, it’s one thing to think that there is a system, but then there’s another thing to actually have a system that’s functional, that’s somewhat scalable.

So the first thing is, you appreciate that, “If I put together a robust system, then my employees will not be able to run the company without it.” Because with the lack of a system, there’s chaos. Everybody’s going and doing everything, and they’re trying to do their best, but if there’s not really a method and a system, then you get chaos, typically. And that’s just the way it is. It was that way for me and it’s that way for everyone. So that was the first thing, you have to have a system, and you have to appreciate it.

And then, you have to have a theory of knowledge, and that was an interesting concept to me. “Okay, well, you’ve got people around you, you’ve got to impart information. But it’s not information, it’s knowledge. It’s information put to work. And how do we do that?” So I had to learn a theory of knowledge. How am I going to teach my employees to appreciate the system and work within it? Okay, I have to have a theory of teaching, a theory of knowledge. That’s the second thing.

The third thing is, I have to understand variation. And what is variation? It’s, simply put, things don’t run in a straight line. They kind of do this. And we have to understand, where do we fit in with this? Are we here? Are we here? And what can we do to manage our system to bring it in within acceptable limits that we want to run our system with? So we have to understand that. Most people think you have to be perfect. We aren’t. So I had to learn about that and understand that.

And then the last thing, which I think was really one of the most important things to me, was psychology. And that was a huge component, because it’s simply never ever considered. What is the psychological component of running a business? And it’s huge. What are the employees thinking when they walk in the door? How do they feel when they’re here? Are their needs being met? What are their motivations? Think about it. These are cool concepts that—they don’t have a lot to do with business, but guess what happens when you understand these concepts, and you’re able to apply them to your business? You create a great culture. And you can’t fake it.

Loren Feldman:
I talk to business owners, entrepreneurs, all the time. I’ve been doing this for 20 years, and what you’ve just laid out there is a very different conversation than I typically have. It’s bordering on academic, which is something that, from my experience, a lot of entrepreneurs and business owners run away from. That’s not their comfort zone.

Kelly, I’m curious, it strikes me that you need a special kind of person, like Fred, who is open to this. How unusual is it for you to run into somebody who is willing to engage the way he obviously did?

Kelly Allan:
Two things: one is what Fred described as Deming’s system of profound knowledge. And he named it that in part because he said, “If you understand these four elements—and you do not have to be expert in all four—if you understand all four elements and how they interact, you will have profound insight. You will gain profound knowledge. And that’s a competitive advantage.”

So we work with lots of organizations, and sometimes when they come to us, we don’t start talking to them about the system of profound knowledge. Fred was an exception, in that regard. But we have many others who, what they want to do is to solve the kinds of issues that Fred describes. So once you start to apply the methods around those four areas of psychology, variation, theory of knowledge, and appreciation for a system—when you start to apply the methods around those to their problems, they get hooked, because they start to see the results. They start to see the magic.

Loren Feldman:
Could you give us an example? I mean, you’ve given us the framework. What happened when you guys decided to engage with each other and work together on this? What’s that process look like? How did you get started? Kelly, did you go down to Cincinnati?

Kelly Allan:
We did it all virtually, in fact.

Fred Warmbier:
He’s never been to my factory.

Kelly Allan:
I’ve never been to his plant—in all these years.

Loren Feldman:
That’s amazing. You’re not that far away.

Fred Warmbier:
He didn’t need to go. So let’s back up, because I think it is important when you say that the entrepreneurs you’ve worked with, this would be—we’ll call it an “esoteric approach.” I’ll call it the “hippy approach.” You don’t want to do it, you don’t do it.

But the reality is, here’s the problem when you don’t have this concept and this understanding. Generally, you get worn out in business. There’s no joy in work, and you miss so much. I’m at the age now where a lot of my buddies are retiring, and it’s sad, because they’re beat up. They’ve made lots of money. It has nothing to do with that. But it’s just reached a point where they’re tired of fighting the bucking bronco, and that’s not the way to run a business.

And so I would challenge you that, it may sound overwhelming to you, but I didn’t say, “So, tell me about psychology, Kelly.” It was basically, “My God, I’ve got a customer from New York. We’re burning their parts, and they’re trying to sue me.” And so I mean, let’s be honest. That’s how you get here. It’s almost like you want to go to a psychiatrist. You’re not going to go there when you’re rolling sevens, and everything’s great. You’re gonna go there when you’ve got issues.

Loren Feldman:
You’re motivated to solve them.

Fred Warmbier:
And you’re motivated to solve them. But the reality is, if you bring it back, and you say, “What’s my number one reason for being here?” It’s really to have joy in work. And if you can hold on to that theme, you can say, “Well, I’m here to make money.” Well, okay, great. Here’s the challenge with that: You’ve been around, and you’ve been an entrepreneur for a long enough time, and you’ve been successful. Money’s not on the table anymore. All right? You’ve made it.

So okay, all right, well, that’s not my reason for being here. I want to be productive. I want to be fruitful. But I also want to enjoy what I’m doing. And then I can look for a greater purpose. And that’s, to me, the beauty of being a successful entrepreneur. You’re able to look for a greater purpose. And so today, for me, it would be a little different than it was when I met Kelly. But in the beginning, it was all crisis management.

Loren Feldman:
Give me an example. What kind of problem did you first throw at him? And how did you move toward solving it?

Fred Warmbier:
Sure. Well, I think it would have been the spots on the parts. I mean, okay, so I have spots on the parts. Now keep in mind, an anodizing operation has 15 stages in the tank, and they’re all chemically sensitive. And if you get spots after the parts are run, it’s a guessing game as to where the spots are. And so, just by having someone back there to say, “Well, let’s just evaluate your process and make sure. How is each tank? And can you confirm it?” And with this calm approach that says, “No, no, no, no, we can’t rush into this, because we don’t really know what it is.” And this is understanding variation. He would ask me, “What’s the variation?” “I don’t know.” Well, Fred, is it special variation? Or is it common?” This is so good to know.

Loren Feldman:
What’s the difference between special and common variation?

Fred Warmbier:
Talk, Kelly, on this, because you’re going to do a better job than me.

Kelly Allan:
Yes, well, if you have common cause variation—and most variation is common cause—the way you fix the issue, whether it’s not enough sales, or you’ve got accounting problems, or your financial reporting is off you have to work on the overall system and process. If you have a special cause variation that’s a surprise to you—like suddenly we have 10 times or 20 times the number of spots on parts—that means something special probably happened. Because it’s out of the ordinary. It is special.

If you’re driving to work, and your commute usually takes you 15-20 minutes, and one day there’s a jackknifed 18-wheeler on the highway, that’s special cause. You wouldn’t change your route because of that one day. But you might want to say, “Hmm, I could probably get to work in 12 minutes if I tried some other routes.” That could be a process improvement. Over time, I can analyze how I get it down from 20 minutes to 15 minutes. To know the difference between special cause and common cause is to know what type of action to take, and spreadsheets don’t tell you that. Spreadsheets just show you what the numbers are.

So when I was talking to Fred about the type of variation, I was trying to get a handle on how much variation he was used to having and how much re-work was being done. So there’s re-work in IT development. There’s rework in anodizing parts. There’s rework in sales. There’s rework almost everywhere. If I can reduce the rework, that’s profit.

Fred Warmbier:
That’s so key, because what happens is, we confuse it, and we say, “Oh, wow…” So in my system, if I have a dirty tank, it’s going to produce spotty parts. That’s common. That’s not special. But if you treat it special, you throw the bathwater out. It just ends up being—

Kelly Allan:
You start blaming people.

Fred Warmbier:
Yeah, and so you must identify the variation. Are they acting like they normally would act? Yes. Okay, then that’s their common behavior, and you either change your system to change it, or that behavior is never going to stop. And you say, “Well, if you titrate the tanks every four hours and make sure they always stay within this range, you don’t get that variation.” Oh, then that’s the solution, and you change the system.

Kelly Allan:
Costs go down. The quality goes up.

Fred Warmbier:
Absolutely. Yeah, they do. And the beautiful thing is, then you can move on to the more important things.

Loren Feldman:
What are you referring to?

Fred Warmbier:
I’m referring to sales, growth, joy in work, safety, health.

Loren Feldman:
So how long did it take you to go from chaos to finding joy in work?

Fred Warmbier:
Well, I’ve always been a happy guy, so I never give up, but I’m pragmatic as well. I would say, it was probably 18 months. But we were working in that time period, and one of the key things that I really appreciated was we were doing 200 to 300 orders a week then—orders for customers—and it seems like we have to get the parts in, we have to log them in, we have to process them, and we have to ship them. There are many different components to that. And early on, we had these recipe sheets that we would put into running the parts, and no two were alike. And it was, “Oh my gosh.” And it was overwhelming to me because I’ve got all these processes, and we built a system. And so literally, I had to take a deep breath, and I had to work nights. And I had to say, “Oh my God, how can I expect the employees to get it right when I can’t even give them the right information?” And so then that’s frustrating.

So you take a deep breath, and then thankfully, we had somebody like Kelly around who would say, “No, no, no, we want one good transaction. We don’t need to do all 200 of them. Let’s just get one right.” And even today, I call it the “perfect transaction.” And I think, “Yeah, I’ve heard that term from Kelly.” And so it took 18 months, and then we were only able to begin to say, “All right, it’s better than it was. It’s a lot better.”

But you don’t turn it on overnight. Because guess what’s happened? You’ve missed tremendous opportunities from the years ago when you were running chaotically. The people who had showed up who you really didn’t gauge how much business they did, and then over time, we’ve gotten to meet some of those people, and we realized they weren’t spending $50,000 a year on anodizing. They were spending $2 million. That’s a huge difference. And now we’re in a position where we can talk to those people, and we can get their business and make them happy.

Kelly Allan:
I want to just jump in for a second. You asked Fred about how long it took to get joy in work, and I would agree it was about 18 months. But he started seeing results of the process within weeks. It started getting better, the chaos started to go down, as he started to get momentum in that. And I think, Fred, you talk about it very poignantly when you talk about, one day, you sort of woke up at about 18 months, and you said, “I realized that my employees now also had joy in work. And that’s why I’m here.”

Fred Warmbier:
And that is such a key point. You know what’s really tough as an entrepreneur? When you’re sweating alone, and you think the weight of the world is on your shoulders, and your employees have joy in work. There’s a problem there, and that’s what the average entrepreneur does. The average guy who’s going to work for you, he wants to be happy, and he wants to be secure, and he wants to have a nice job and get paid fairly, go home and do his hobbies, and raise his family and things like that.

So I saw that happening around me, and yet—this is, I think, typical for entrepreneurs—the weight of the world was on my shoulders, because, “Oh, I’ve got to do all this. And I’ve got to do all that.” And you’d say, “Well, isn’t that the case today?” Well, yeah, but, I don’t know. Maybe you just get comfortable with it. And you realize that, “No, I have to have the same results as them, as the employees.”

Loren Feldman:
Did you see financial results in 18 months as well?

Fred Warmbier:
Yeah, and one of the interesting things that Kelly brought to my attention was, when he got to know me in my business, he said, “You’re leaving a lot of money on the table.” And so I didn’t know what that meant. Back then we were doing maybe a million and a half in sales, and now we might be at 7 million in sales. We’re in a pretty good space with this. We think we can double this, and that’s why I talked about the board of advisors. We’ve finally built an infrastructure that we’re not intimidated by a lot of work, and we’re making great incomes. This is a very good business. But I just feel like I can do more. I’ve gotten to the point in my life where, if it’s not fun, then I don’t want to do it.

And so I think I can have fun growing this business, but also doing it in a way that doesn’t punish people, but that creates an infrastructure that when I do leave the company, then I can have a legacy—a legacy with a company that says, “Hey, this was better than when he left it—and not selling it.”

I just met a guy today. He had just sold his companies: “Oh, I’m so glad to be away from that.” And it’s like, “Well, if it was that bad, then why didn’t you leave 20 years ago?” Seriously. I said, “What are you going to do”? He goes, “I want your life.” Because when you get management down well, you don’t work hard. You don’t work hard. You shouldn’t work hard. You should enjoy what you’re doing. You should be good at what you’re doing. You should tackle the difficult things. And you should be able to oversee a fun operation.

Kelly Allan:
Loren, I want to jump in, because there’s a piece here I think a lot of entrepreneurs would really appreciate hearing Fred talk about, and that is how he changed the culture. I don’t think it was a bad culture to begin with, right? He’s not beating up on people. But he didn’t have a culture yet, at that point, which was really all hands on deck to try to figure stuff out. The organization was not a true system, in terms of people understanding upstream, downstream, their role in it, and how they’re all in it together. So, if you think it’d be useful, maybe Fred can talk about—

Fred Warmbier:
Okay, but before we go there, I’d like Loren to tell me what culture is in a company. What do you think? I just find it difficult to put a nail on.

Loren Feldman:
I think it has a lot to do with how you treat each other, how colleagues treat colleagues. And your commitment to serving your customers. How far will you go to make sure that your customers get what they need? I think those are the most important elements of culture in my mind. What’s your answer?

Fred Warmbier:
Well, I kind of look at it a little differently, because I did have to think about it, and I think inputs equal outputs here. So if you have the proper inputs, then you create the culture that you want. Culture is what you feel when you walk into the plant. It’s that simple. And so you can’t talk about it. You can’t say, “We’re gonna change the culture, and you know what? We’re all buddies. Now, let’s be like Dog the Bounty Hunter and put our arms around each other and say a prayer.” But you can feel it.

Loren Feldman:
Did you try that?

Fred Warmbier:
I would. Yeah, I would. So okay, I had a friend come over today who wanted me to do a little project yesterday, actually, for him. And he was in business, and he started talking about, “Wow, you guys, you’ve got a lot going on. I didn’t realize you have this many machines and all this.” I said, “Yeah, yeah, we’re pretty active.” And then he said, “I mean, you’ve got safety issues, how’s your safety record?” And I said, “Oh, it’s pretty good. You know, I probably had a few safety incidents over the last decade, but they would be very minor and not a whole lot.” “Okay. Do you have safety meetings and tell them the way it’s gonna be?” And he’s going back to this command and control, where you say, “If you don’t wear your safety glasses, you’re fired. If you don’t do this, you’re fired.” And so that’s where the fun begins when you’re running a company.

Now, I only have 25 employees, and you know, somebody who’s got 500 employees may say, “Well, I could never do this.” Well, Kelly could help them with that. but I can only speak from my experience. What I realized is, “Well, okay, so we’re gonna treat a human being like shit, because they don’t understand the benefit of wearing their safety glasses.” That’s my problem, not theirs. I haven’t created an environment that they understand the need for safety glasses, unless they are incapable of understanding. And there’s a certain element that is, but they’re rare. But I hear it all the time, where it’s like, “You’re going to do this, and you’re going to do that.” And it’s like, “Whoa, no, no, we have to have an understanding here.”

So in our plant, you have to wear safety glasses. Well, first of all, you’re not allowed on the anodizing line unless you’re an operator or somebody with authorization, because it’s a safety issue. But if you’re up there, you always want safety glasses, because there’s chemistry up there, and everybody does, because, well, they have to because we would have to take action if they didn’t. That’s kind of part of the culture, to get people to understand why you’re doing things, to take the time to invest in them. And when you do that, then the culture starts evolving. Like, “Oh, I understand the reason that he cares.”

So today, we just hired a few new people. And I hadn’t done this in a while, Kelly, the PDSA, and so I thought, “I’ve got to get these people to know me.” I’m not around much. I don’t show up a lot. So I said, “All right, Alex, grab the three new hires in here. They’ve been here a few months and bring them in here.” So I did a PDSA on it.

Loren Feldman:
Kelly, what’s a PDSA?

Kelly Allan:
Plan, Do, Study, Act. It’s a continual improvement cycle. Very simple.

Fred Warmbier:
But it’s more than that. So let’s talk about the method of doing a PDSA. You get a blackboard, I stand up there. I’m the teacher, I’m writing it down, and I’m involving them in the PDSA, meaning I’m engaging them in critical thinking skills. It’s time, and I say, “Time is love.” So when you get a guy who owns a company, and he’s sitting up there talking to these people, and they’re in their 20’s, and I’m an old guy, but I’m taking the time to teach them about anodizing, then I’m getting these great questions. “Well, how long does it have to stay in there?”

Well, they’ve been working on that line for the last six months, three months, whatever. But now I’m building their knowledge base for what they do, and that’s invaluable. That’s, to me, Kelly, the heart of Deming—to say, “I’m going to take the time to do this with you.” They see my commitment to teaching them and my commitment to the company, and that builds the culture that I want to have. Meaning I’m not afraid of them, they’re not afraid of me, and we can come in and we can have a basis for discussion. Because we work from the bottom up. We’re a manufacturing company. It’s not from the top down. You don’t succeed that way.

Loren Feldman:
You’re so obviously, thoroughly engaged in your business, so far from when you were once thinking years ago that you might need to retire. I hate to have to ask you this, Fred, but I feel I need to. A lot of people listening to this, I think, will recognize your name and realize that you are, of course, the father of Otto, who was imprisoned in North Korea and died so tragically. It was such an extreme and profound tragedy. I think most of us just cannot even imagine.

But business owners do go through tragedy, and I think some people listening to this might benefit from hearing from you on this, if you’re comfortable talking about it. Can you talk at all about how you managed to go from that to regain the joy of work that you’re obviously demonstrating here?

Fred Warmbier:
Yeah, there’s his picture back there, actually. Sure. First of all, you don’t have a choice. You don’t have a choice when these things happen. He was invited over there by the government of North Korea, encouraged to go by a university professor. He was kidnapped. It was, you know, all the stuff that made it into the news. We sued the government, and we won this big award. When this happened, I got my family together, and I said, “This isn’t a reason to fail. And so, are we going to be defined by North Korea? Or are we going to define North Korea? And are we going to define Otto’s life based on the last week of his life? Or are we going to define Otto’s life on the successful, beautiful son, the fine son that he was?”

So we got to ask those questions of ourselves. And then, thankfully, I have great children who are really doing well. One is probably going to be a doctor. The other is going to be anything she wants. And so we were able to kind of pull back and focus and say, “Okay, all right.” And that at least got us through the day to day. And then over time, what I’ve realized—and this has just been in the last, probably, six months—is that I was completely in shock. And I don’t even know how I functioned back then.

But you say, “My customers, they like me, but they can’t get shitty parts.” All right, and I’m running a company. So by all rights—and I’ve been told this by presidents, prime ministers, and everything in between—I wouldn’t blame you if you locked yourself in a room and just drank all the time, after what you’ve been through. Okay, that’s Option A.

Option B is, “All right, well, that’s not an option.” So think about this: For people who have been in this situation… And adversity is not unique. We’re all going to go through some sort of hell through our lives. It may not be an international incident that’s published all over the world, that sort of thing, which is goofy and all that. But we’re gonna have it.

And then what I found is, I have two other children. And so what example am I setting for them if I lock myself in a room and drink all the time? Or what if I mope around, and what if I let my business go to hell? And so I found that it was liberating to develop some good habits—I work out regularly—and just be the person that I always was.

You know, I loved Otto. I miss Otto. He’s a wonderful guy. And there are issues that I have to work through for him. But then I also have to live my life. And my message to anybody that’s been through this is, “You have a decision to make. And my thought is, if you were a happy, positive person before this happened, you might want to think about continuing to be that happy, positive person. You have a choice,” and I do. And so my business grew a lot through that time, simply because the industry did, and that was good.

Loren Feldman:
Were you running the business through that period? Or did you step away? How did you handle it?

Fred Warmbier:
No, no, no, I mean, when you’re an entrepreneur—okay, this is the beauty of professional management. You don’t have to be there all the time. You put into place systems and processes, and you create a culture that you define the management. And in our case, it’s a horizontal type of management. I don’t want any guy, any one guy, who everybody looks to for the answers. That’s hero worshipping. I don’t want that. You can’t run a company that way and be successful. It’s not sustaining. So in my case, because I was working intensely on professional management—that’s what the Deming Management Method brings: the Ailerons of the world, there are others. But we have professional management.

So no, I mean, I’ve literally traveled all over the world. I’m going to D.C. Saturday, as a matter of fact, and I’m not going to be at work tomorrow. So no, I didn’t work any harder. I didn’t work any less hard. I managed things the way I always did, and I engaged. And it was interesting, because I did have a PDSA when Otto was taken there and said, “All right, guys, I feel horrible.” And we just talked about it as a company. And I said, “We’re going to do what we always do, and we’re going to focus, and the rest of this stuff will take care of itself.”

And thankfully, the media stuff kind of died down. But I mean, we would get calls every day at work. You know, “Does he want to speak on this show? Does he want to speak on this show?” That stuff’s kind of died down. But that’s the beauty of the Deming Management Method and lifelong learning. When you have that, you say, “Okay, so the business is a function of what we do. Okay. But also we have Otto. So what do we do with Otto? What is our goal with Otto?” Well, you apply the same principles to that. Okay. Does it make me happy? If it makes me sad, the efforts that I put in, is there a payback that makes it worthwhile? What am I looking for? Just like in business, “Well, what are you looking for?”

So you say, in business, “What are you looking for?” Well, I told you I’d like to grow the business another, let’s just say, a couple hundred percent. I’d like to build a bigger platform, maybe have a wider variety of customers. Then you say, “Okay, well, what’s the Otto work? What’s the platform there?” And that would be personal. But we evaluate that the exact same way. And we say, “Okay, are we motivated by hate and revenge? All right, that’s not healthy. We can’t do that. Okay.” So if we’re not, then what spaces do we want to be in that we can have joy in and still be effective? We have to be effective.

Loren Feldman:
We only have a little bit of time left. I’m wondering, Fred, what’s running the company like for you today? Are there still special cause problems that crop up and turn into crises? Or is it running fairly smoothly, and you get to focus on building the business?

Fred Warmbier:
All of the above. The scary thing when you run a business is you’re depending on one or two customers, a small business, so you want to have some diversification there. So we lacked diversification. So that’s a fear. We worry about that. So then now the opportunities for our business are, we don’t really have a sales platform. We’ve always just waited until customer referrals. We don’t have salespeople.

Loren Feldman:
You don’t do marketing?

Fred Warmbier:
No, none. I mean, I have a website. There is no marketing. Zero. So that’s where I want to get a board of advisors in, and I want to focus on the marketing aspect. How can we sell professionally? We’re good salespeople, but we don’t have a method, Kelly. I’ll ask a couple guys who are involved. They could sell for us, and then, “Well, what’s the method? What’s the approach?” And I laughed, and they laughed, and I said, “Because we don’t have one.” And that’s not good, because if we can apply these same concepts to the sales approach, then my prediction is that will have great benefit.

Loren Feldman:
Kelly, can you address that? What would Deming have to say about this?

Kelly Allan:
Before the tragedy with Otto happened, that was the next thing we were starting to focus on, to have some discussions about. Fred was also a balancing capacity capability at that time. You don’t want to get too far ahead. So no, it’s definitely time to look at that. What are the steps? What are the assumptions? What’s the aim of a sales model? Well, it’s to make sales. But there are probably some subtle things about how you go about making sales that’ll make a big change, make a big difference in the success.

Loren Feldman:
Does the Deming method help you figure out just what channels you take? I mean, are we talking digital marketing? Are we talking advertising?

Kelly Allan:
Well, yes and no. The Deming channels help you do fast experiments. We say low cost, low risk, and fast, through Plan, Do, Study, Act, to say, “Where are we going to place more of our bets? So let’s just start to find out what works and what doesn’t.” How much is the website helping us? Do we need a more robust website? You start with a lot of good questions, and then you say, “Now, let’s take the Deming methodology and find out how we can get answers to those questions. Low cost, low risk, and fast.”

Fred Warmbier:
But then it’s as simple as this: We want to increase sales, and then I have three words that I like to use at the company: by what method? And that’s when the banana peel hits the pavement. And Kelly—I know, we’re running out of time—but methods, predictions, I think those are so important. Can you just quickly elaborate on that?

Kelly Allan:
Sure. So Deming always asked the question, “By what method?” So what we say is that management involves planning. Planning involves prediction, right? So if you’re going to predict, you have to have a theory. Not some big academic theory. It’s an “if, then.” If we do something with the website, then would we expect to see this? So that’s kind of a prediction. So by what method are we going to do that? What’s our thinking? What are we going to try? Where are we going to place our bets?

Fred Warmbier:
Do you see how this works, Loren? It’s easier than you think.

Loren Feldman:
It strikes me that Fred is an exceptional example, in all kinds of ways. I’m wondering how it looks to you from your practice. How often does somebody stick with it and get the kind of results that Fred has gotten? How often do people backslide and lose the thread and go off in a different direction?

Kelly Allan:
I would say Fred’s exceptional in a variety of ways. But we have, probably with our partners, just in central Ohio, some 200 companies on that Deming pathway. Some are going faster, some are going slower. That’s variation, right? There’s no company of any size left anywhere in the world that isn’t doing some element of Deming. They may not know that that’s where it came from, but you cannot compete unless you’re doing some element of Deming. So by what method with sales? I will predict that Fred will be following the Deming method. Let’s not be setting quotas.

Fred Warmbier:
Yeah, no.

Kelly Allan:
Let’s figure out how our method is going to make this work. A lot of the Deming companies follow Deming’s approach, which is: You don’t put salespeople on commission. There are exceptions to that, of course. It’s not one-size-fits-all, but 95 percent of the time, the Deming-based companies do really well, grow really fast, have higher productivity, higher sales, and higher profits. And their people are on salary and profit-sharing.

Fred Warmbier:
Kelly did bring up a great point. We had capacity issues earlier. So in the last year, we’ve integrated quite a bit of new equipment, so our capacity went up pretty nicely. So now we don’t have those, but we have expectation issues where we don’t want to promise the customer something and then disappoint them.

You’ve assumed that we have a sales force. Let me tell you what the issues are. One of the issues for us is: The phone rings, and it’s a new customer. And so, who talks to that customer? That’s a potential sale. Who talks to that customer? Anybody who answers the phone. That’s a problem. And so what is our method to manage this thing? And then, do we have this person who does quality and all these other things? And they’ve been talking to these potential clients, where they’re probably not the best person to talk to them. So I’m trying to get our team together and say, “Hey, let’s develop a method that brings this stress down but that allows us to actually leverage these calls, because they’re calling us. And I know that we’re missing a lot of business.”

Loren Feldman:
You may have to go ahead and hire some of those salespeople. Have you gamed out what you think this is going to cost you, in terms of an investment to take this step?

Fred Warmbier:
No, because it’s not a money issue. That’s the problem with most business people. They make it a money issue. They don’t have a method.

Loren Feldman:
Well, explain that. Because you do have to think about it at some point. I mean, if you needed to expand your factory, that’s money. If you need to hire additional employees, that’s money. What do you mean when you say it’s not a money issue?

Fred Warmbier:
There’s no concept in place. We don’t have a method.

Loren Feldman:
You’ve got to do that first, before you think about money.

Fred Warmbier:
Only if you want to be successful. Yeah, and again, the ready-fire-aim doesn’t work when you’re already established. And so the idea is: Give me some things that I can focus on here. And you say, “How much does it cost?” Well, that would be the last thing… It’s not a money issue. It doesn’t matter what it costs. Because if you get the right method that’s going to be so great and successful, I’ll spend whatever. Won’t I, if I believe in it? Yeah, but generally, these don’t cost a lot.

Loren Feldman:
Thank you both for taking the time. My thanks to Kelly Allan and Fred Warmbier. This has been great.