The ‘Self-Help’ Mantra Gains Followers Heading Into 2024

Never mind favorable industry tailwinds or a strong economic backdrop.

Speaking to the investor conference he and his team hosted early this month, Baird & Co. analyst Matt Krueger said perhaps the biggest factor separating leadership teams with a good handle on 2024 from those struggling to chart a clear path is the ability to make their own luck.

“Companies that have a self-improvement element to their story seem much more confident than those that are relying on what appears to be a very uncertain or a wide range of macro outcomes,” Krueger said during a conversation with Monish Patolawala, president and CFO of 3M Co.

Patolawala and his team have been ahead of that curve: 3M in late January said it would lay off 2,500 manufacturing workers around the world because of weak sales in several product categories. Talking to Krueger, Patolawala recapped 3M’s priorities around a small number of principles: Trim factory output and staff to match demand, shave other structural costs in the company’s core operations, build a more agile supply chain and take the company closer to its customers.

If successful, 3M’s push stands to give it an annualized bottom-line lift of up to $900 million by the end of 2025, Patolawala said. The company’s teams, he added, “are doing a lot of self-help” to stay on track for those targets.

Making Your Own Luck

That idea of “self-help” has pervaded recent earnings calls and conference Q&As: A quick search of transcripts from the several hundred public companies we track surfaced some 50 mentions just in the last half of October and first few days of November. And while it’s tempting to say “self-help” is simply a Wall Street euphemism for “cutting costs via layoffs,” it’s clear leadership teams are also taking other approaches to, per Krueger’s point, give themselves more confidence heading into an uncertain 2024.

Among the instances:

Summit Materials Inc. President and CEO Anne Noonan told analysts the aggregates, asphalt and cement company is on pace to generate an extra $25 million in EBITDA from a series of continuous improvement events at a third of its roughly 125 quarries. That dollar figure is about 4% of Summit’s 2022 total EBITDA and will grow in 2024, when Noonan said her team will “supercharge” those efforts using Lean and Six Sigma principles, among other things.
Charting a similar course is bearings and industrial motion products maker Timken Corp., where President and CEO Richard Kyle said the focus has lately shifted (finally) from fighting supply chain challenges to driving continuous improvement. That, he said, helped Timken’s third quarter be “the closest we’ve been to operating at normal” since before the COVID pandemic and has set the stage for more gains in 2024.
The self-help at oil refiner and chemicals giant Phillips 66 is focused on capitalizing on the “thousands” of opportunities to make incremental changes, Executive Vice President Rich Harbison told a recent Bank of America conference. In some cases, that means reworking processes to spend less on contractors. Elsewhere, there are big energy-efficiency gains to be made by reassessing workflows.
“We have a feed that goes to a particular unit. And in order to run that feed, you have to run two compressors on that. And these are big machines; they consume a lot of electricity,” Harbison said. “If we take part of that feed and we move it to another system [with available capacity] and we can actually shut down one of the compressors over here on this other unit, that then is a large energy savings for us.”
Truck-trailer manufacturer Wabash National Corp. is seeing solid results from its longer-term push to simplify its business, President and CEO Brent Yeagy told IndustryWeek this fall. Leaning on a “hybrid centralization” approach and a narrower focus on the transportation, logistics and distribution markets, Yeagy and his team have sought to better integrate acquisitions and move closer to their customers.
“You have to be able to reallocate resources quickly in an agile fashion and those resources have to be available,” Yeagy said. “The previous organizational design was just rife with waste, in terms of duplicity. So we had dollars and people stacked up doing really non-value-added activity. By reorganizing, we freed up those resources.”

Looking for long-term returns

Those bootstrap-pulling comments reflect a focus on optimization that Aaron Hale, a partner at audit and advisory firm LBMC, said has strengthened in the second half of 2023. With much of manufacturing in the relative doldrums, a growing number of leaders are pulling back on discretionary spending, including on contractors and consultants, to hone in on what’s proven and profitable. Driving their thinking, Hale said, are higher labor costs and lingering supply-chain issues that have lead times still higher than where they were pre-COVID.

“There’s really an element of getting the engine running on all cylinders,” Hale said, adding that there’s not much concern among his clients about a serious economic downturn over the next two years. “People are taking what’s working and focusing on that.”

That includes getting more from relatively recent investments in both technology and workers. New software, including nascent artificial intelligence tools, and equipment haven’t been maximized, Hale noted, and staff hired since the depths of the pandemic are often just now hitting full stride. On the flipside, some leadership teams are abandoning projects that haven’t progressed as planned to safeguard some of their capital.

“Things have stabilized,” Hale said of productivity trends. “Now companies are looking for a return.”

Matt Elliott, Michigan president for Bank of America and the lender’s lead sustainability executive (pictured), also is seeing clients focus on resiliency and efficiency amid a “substantial” amount of economic crosscurrents. The urge to trim the sails and play it safer for a while is understandable, he said, but inaction can be costly if firms lose ground to competitors. Benchmarking to other players in your market is key in figuring out opportunity costs, he said, as well as digging deeper into what’s working and what can be better.

“When you boil it down, we see a lot of opportunity with a lot of execution risk,” Elliott said. “There’s a high premium on management skill.”

Prioritizing Management Skill

One data point from a recently released study by manufacturing operations software firm Parsec Automation Corp. illustrates that need for skill: More than half of the manufacturing leaders who responded to Parsec’s survey about automation projects say artificial intelligence and machine learning should be a part of their future systems. But only one in three think their businesses are prepared to take advantage of that tech.

“When asked about the barriers standing in their way, respondents cited lack of knowledge (46%), lack of trust in the technology (39%) and implementation costs (33%),” the Parsec team wrote.

So, in addition to strengthening the core and benchmarking to peers, how else should leaders respond to this uncertain environment?

Placing small bets is one approach. During a recent IndustryWeek panel discussing the economic outlook for manufacturers, Ohio State University economic development professor Ned Hill said sticking to “existential” investments in areas such as labor and supply chains is a must.

“Companies that don’t invest are going to die,” Hill said.

Elliott said smaller manufacturers can often benefit from buying used equipment and retrofitting it to their processes, a strategy that can boost the value of their intellectual property. And Hale said a lot of organizations still run in part on manual processes that “are ripe for the picking.” Upgrading those one at a time can be a steady source of improvement, he added.

Along those lines, Hill said there’s also no magic wand when it comes to automation.

“This is a 20-year event that’s going to be taking place and the challenge to particularly the small and midsized companies is how do you do that one-off automation project but then link it so it becomes part of a digital integration strategy?” he said.

With that in mind, maybe one of the best self-help strategies heading into ’24 is to take a few deep breaths. You have some time to make the right decision.