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Leadership Style at Applied Industrial Technologies

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Leadership Style at Applied Industrial Technologies
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Netra Shetty
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Leadership Style at Applied Industrial Technologies - May 9th, 2011

With fiscal 2010 sales of $1.89 billion, Applied Industrial Technologies (NYSE: AIT) is one of North America's largest independent distributors of bearings, power transmission components, hydraulic components and systems, pneumatic components and systems, industrial rubber products, linear components, tools, safety products, material handling products, janitorial supplies and general maintenance products. Applied also provides customized mechanical, fabricated rubber and fluid power shop services, as well as storeroom management and maintenance training services.

David L. Pugh has been chairman and chief executive of logistics company Applied Industries Technologies since 2000. In his more than a decade with the company, Applied has grown steadily by building up its businesses and buying other companies. The following are excerpts of a conversation between Pugh and Plain Dealer reporter Robert Schoenberger.
The Question: Getting employees to follow your vision is a key role for leaders. How do you achieve that at Applied?
The Answer: When we look at what needs to be fixed, we come to an agreement on where the process flaws are. Then I like them to develop their own plan on how to fix them. They have to own the plan they put forward. I want commitment, not compliance.
If I'm standing up here dictating every move we make, I can get compliance, just from the power of the position.
But to me, compliance, by definition, is the lowest level of effort necessary to escape punishment. I never want compliance. I want commitment. I want people to believe in what we are trying to do as a company and take ownership of it.
The Question: You mentioned process improvement there. How much weight do you put on getting processes right, versus seeking specific results?
The Answer: Process is the most important thing. If your processes are right, your numbers will be good.
The people who manage numbers, you can change numbers quickly with some unorthodox moves, but it's not sustainable.
The Question: What are some of the ways you go about improving a process?
The Answer: Respect the people who have their hands on a process every day. When you want to improve that process, you better have them involved in analyzing the changes you want to make if you want it to work.
If you want continuous improvement, you have to talk to the people who are doing it.
The Question: Applied has purchased a lot of other companies over the years. How do you integrate new pieces?
The Answer: It's different every time.
Part of it is an ultimate respect in the people we're going to acquire. We do want to take the fear away from it. They are a full member of this family the day we sign the papers. They have full benefits and full access to resources.
But we don't pull punches. [If job cuts are needed] we'll tell them up front. People are out there trying to take care of their families. They have the right to know what's coming up so they can plan.
Communication is important, and that goes both ways. We integrate to them as well as integrating them into us. Let's learn from them. I haven't met anyone yet who I couldn't learn something from.
When those people are brought on, I want them to appreciate that we bought them to add value. We want their input.
The Question: What's the best part about being the boss?
The Answer: I think boss has a negative connotation. It sounds too harsh.
The best part about being a leader is the ability to take people beyond where they had been comfortable in the past, either through the lack of vision or lack of courage.
Once they understand you expect them to come up with the ideas, you expect them to grow it rather than sitting and waiting for the next dictate to come from the corner office, all of the sudden, you have a very vibrant, creative organization. That's how you get ahead. That's how you change before you have to.
The Question: What's the hardest part?
The Answer: The travel, being away from family so much, especially now that I'm a grandfather.
Especially in our company where you have 450 locations throughout North America, you feel an obligation to be in front of your people and to give them face time. You want to understand their concerns and challenges. And you want to express to them why we're going the way we're going.
You want to be out there. You want to be talking to them. All of that requires a lot of being away from home.
The Question: You talk a lot about relying on your employees to come up with solutions to problems. Is that your core philosophy as a manager?
The Answer: I manage from the heart as much as from the head. You have to combine the two.
You'd better care about your people. You better protect them. You better lead them.
The only power that I have ever had in a leadership job is the power that my people give to me. If they don't believe that I'm looking out for their interests, they're probably not going to give it to me.

“There were three parts to our complaint.

Firstly there was the actual swearing incident itself. Any consideration of this was blocked by legal advice from a Council Officer.

We feel the advice was flawed as it was based on a judgment in another case which has subsequently been criticised and therefore, in our view, an investigation into this matter was blocked on erroneous grounds.

It remains the case that the videos of Councillor Pugh have accumulated over 17,000 hits which will have caused damage to the reputation of the Council.

It was concerns about this initial incident that led to information being discovered about further behaviour at the Valentine Ball as well as subsequent discussions at the Council Offices in the days following 12th February which suggested an apparent attempt to control media coverage of Cllr Pugh’s outburst.

In respect of these two matters we note that much of the behaviour identified in our complaints was found to have taken place, however this behaviour has been interpreted not to constitute a breach of the Code of Conduct.

The report presented to the Assessment Committee found that there was contact between Councillor Pugh and the Legal and Communications departments and that some ‘media management’ took place but determined this was acceptable.

We have not been happy with the way in which the investigation process has been conducted and, as far as we are aware, at least one witness has already made a formal complaint about the process.

We also consider that the process has revealed a disturbing politicised and protective attitude amongst some senior council officers in respect of the current Council leadership. It was fear of this that prompted our initial request that the complaint be dealt with independently off the Island. We feel our initial fears have been shown to be justified.

Overall we still feel that our complaint was justified but that it has been considered and rejected by a flawed system. Perhaps this is why the system is due to be changed in the near future.

At the end of the day our complaints were brought about by the attitude and behaviour of Councillor Pugh and derived from his undeniably offensive outburst on 12th February and his refusal to apologise for that. We note that he has still not felt it necessary to apologise.

If he had done the decent thing and apologised to Carole Dennett it is unlikely there would have been much further interest in the incident and this investigation would not have been instigated. Unfortunately we anticipate he will display this same attitude in his response to the outcome of

Manufacturing is leading the U.S. economic recovery, boosting sales of parts and other repair products supplied by Applied Industrial Technologies (AIT), according to David L. Pugh, chairman and CEO.

Aided by that tailwind, Applied Industrial expects to report record sales for the fiscal year ending June 30 and an about 23% to 36% rise in earnings per share, Pugh said in an interview.

The manufacturing upturn is very broad, covering 26 of the 30 industry groups most important to Applied Industrial, with metals and machinery especially strong, said Benjamin J. Mondics, president and chief operating officer. Even hard-hit producers of lumber and other construction products are buying more, he said, recovering from historic lows.

Because manufacturing fell more sharply during the 2007-09 recession than the overall economy, Pugh said, manufacturing hasn't yet full recovered. And many manufacturers won't aggressively increase output until they see more evidence that the economic recovery will be sustained, he said.

"Manufacturing will continue to outperform the overall economy for the next year or two," said Mark O. Eisele, Applied Industrial's chief financial officer.

Applied Industrial supplies more than 4 million repair parts to over 100,000 customer plants across North America. That gives the company a broad gauge of industrial activity. Bearings, power transmission components and hydraulic system parts are important products.

Management late last month raised the sales estimate for the June 30 fiscal year to between $2.15 billion and $2.25 billion, compared with fiscal 2010 sales of $1.89 billion and the previous record of $2.09 billion in fiscal 2008. Earnings are expected to rise to between $1.90 and $2.10 a share, Pugh said, from $65.9 million, or $1.54 a share for fiscal 2010.

Rising costs for steel, copper, petroleum and rubber are forcing some Applied Industrial suppliers to raise prices, Pugh said. Most increases are modest, often 3% to 5%. Nonetheless, Pugh said, it can be difficult to get customers who can't get price increases themselves to pay even modestly higher prices for repair parts.

Applied Industrial is managing inventory to minimize adding to stocks, while at the same time providing prompt deliveries to customers, he said.

"Customer service is the name of our game," Pugh said, and managers may add inventory when required to provide prompt service.

However, sales are rising faster than inventories Eisele said, "and inventory turns should reach an all-time high this fiscal year."

Most customers are paying promptly, he said. Past due bills are at historical lows measured in days of sales. Bad debt rose modestly during 2009, Eisele said, but even then it was only about a quarter of one percent of sales.

"We are the people who keep their plants running," he said, "so we are the one they pay" if they can't pay all their bills.

Manufacturers closed less efficient plants and product lines during the recession, Pugh said, "which is one reason why manufacturing productivity is so high and why this has been a jobless recovery."

Shutting down older plants hurts Applied Industrial somewhat, he said, because older equipment breaks down more and normally requires more repair parts.

Applied Industrial is "very actively seeking acquisitions," Mondics said.

"Today we're much closer [to prospective sellers] in valuations" than was true a year ago, he said.

The company made two purchases last August. One was a company in Toronto, part of a plan to expand sales in Eastern Canada, Mondics said. The other was a Cleveland concern with strong government sales, another strategic target, Mondics said.

Applied Industrial this year is beginning a $70 million to $75 million three-year investment in a new enterprise resources planning system, Eisele said.

The cost will be spread over three years, he said, with about 25% treated as operating expense and the other 75% as capital spending.

This fiscal year's additional operating expense will total $5 million, he said, with $4.2 million in the second half. The company is debt-free and will have positive cash flow despite the outlay, he said.

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alex khan
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Re: Leadership Style at Applied Industrial Technologies - April 21st, 2012

well in industrial tecnology .. alot of fame is peresnt .. you can do alot of work .. alot of jobs are also peresnt ..well most technologies we can do industrial
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alex khan
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Re: Leadership Style at Applied Industrial Technologies - May 24th, 2012

well yes industrial technology is increasing day by day . many countries have lots of jobs in industrial technology
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