While others cut, real leaders stand by their people

David Hartwell, majority owner and CEO of a 20-year-old New Hope manufacturer, laid off a few employees last fall as the company's double-digit growth rate slowed. By January, he estimated that the ranks of Bellcomb Technologies' 100-plus production workers could be cut by 25 percent, thanks to efficiencies from millions of dollars in new equipment that's coming online.

But Hartwell, 52, lost sleep over the fall layoffs and was tossing and turning again as he contemplated more cuts -- even though they could be justified.

In the end, Hartwell chose to avoid layoffs for now and told employees he won't revisit the option until June, unless Bellcomb turns unprofitable before then.

Meanwhile, the sales staff has redoubled its quest for new business while the production workers help fill existing orders, install and test new equipment, spruce up the plant and spend time working at local charities. Business is growing, but not at the 30 percent annualized clip that had become the 10-year norm at Bellcomb.

"I guess I believe in that 'stakeholder' concept," Hartwell said, after reluctantly agreeing to an interview. "This clearly will affect profitability and the payment of profit sharing. But I had come to the conclusion that shared sacrifice in these times was more important than making the best 'business' decision. We are going to focus on building the business."

Meanwhile, the big publicly held likes of Target, Best Buy and Pentair -- all profitable -- are laying off thousands of employees to preserve margins and please Wall Street. In December, IAC Interactive CEO Barry Diller, no wallflower when it comes to making a buck, ripped this kind of executive group-think.

"The idea of a company that's earning money, not losing money ... to [just have] cutbacks so they can earn another $12 million or $20 million or $40 million in a year when no one's counting is really a horrible act when you think about it on every level," Diller said at the Reuters Media Summit.

I say, so what? It's that same discredited gang at Merrill Lynch, Lehman Brothers, Citigroup and some other sullied titans (some now slopping at the public trough) who brought us the financial trauma of the last year. Why would a sensible, long-term-oriented CEO worry about a bunch of swanks on Wall Street? Answer: We're still too short-term-driven. And too many CEOs will still slash jobs before cutting their own seven-figure compensation in the ultimate act of leadership.

Jeffrey Immelt, GE chief executive, last week wisely declined to take a $12 million bonus he was due; the fact that GE's financial unit has taken federal bailout money likely played into that decision.

But wielding a discerning scalpel, rather than a chain saw, and walking the values talk with workers will be a business advantage long-term, said Kevin Stirtz, a Twin Cities consultant who says the best way to lose business is to cut customer-service staff.

Besides, why make enemies and potential competitors of talented former employees?

Have a little faith

Davis, 50, who turned down his 2008 bonus amid tougher times and public scrutiny of bankers, also authorized his business managers to cut 5 percent of costs in January, which has meant several hundred layoffs out of a 57,000-employee workforce, as a hedge against what could be a grim year. But he told a forum on faith-and-work last week at Thrivent Financial that lending is up so far this year and he has confidence in better days ahead.

"Where's the faith?" asked Davis, a friendly, direct man who worked his way up from teller to CEO over 30 years. "It's the missing equation.

"Stop watching Squawk Box every morning [and focusing on the stock market]. This is a great time to lead and educate. Tell your people what you know. Listen. Stay positive. In a couple of years, we will be through this. Our economy will be fine. I believe we will come through this stronger. A lot of people want to believe."

Quality suggestions

Brian Lassiter, president of the Minnesota Council for Quality (www.councilforquality.org) recently wrote an insightful letter to corporate, government and nonprofit members on important things to focus on during a downturn, in addition to belt-tightening.

Hartwell, the boss at Bellcomb, said last week that he has faith that the company will come through this, despite a hit to short-term profits. Bellcomb, which operates 80 hours weekly, says it has the world's largest capacity to manufacture custom lightweight, heavily insulated composite panels used in the trucking, marine, aerospace, medical and other industries.

"We expect to be profitable this year, but not as profitable as we would be if we'd laid off. We pay out 20 percent of profits in profit sharing. And I've not had one employee come up to me and say, 'I wish you had laid off so I would get more profit sharing.' This was about doing the right thing."

At Bellcomb, line employees typically work four 10-hour days, many at $20-plus per hour plus benefits and profit sharing.

Hartwell's hope is that business will improve later this year, the new technology will help the plant produce more for less, and by fall the same number of 100-plus employees will produce more superior product that will mean more customers, more orders, bigger long-term profits and more wealth for everybody.

"We have to look at the bottom line and balance interests," he said. "We probably couldn't do this if we were a public company. The markets just punish them anyway. But this is not a time to abandon our people. It's a time to do extra. To do the right thing."