The blooper today is a cafeteria sign from Denmark that said, and Danes, please forgive my horrible pronunciation, “Broccolisalat med aertestkud og salte mandler.” This translates into English, which was underneath the sign, as “Broccoli salad with peached pea shoots and salted almonds” which makes perfect sense. Except that pea shoots were spelled Pee. Not terribly appetizing. And this is exactly why, again as a reminder, you need a professional language agency to check anything done by AI or anything done by any amateurs to make sure that it is done correctly so that you don’t become a blooper on one of our podcasts. 

Today’s guest is Tim Van Mieghem, Tim is the co-founder of the Pro Action Group. a Chicago-based consultancy that revitalizes stale or stagnant private equity companies in the US and abroad to dramatically increase their productivity. 

Since 1995, he has personally worked in over 100 private equity firms and 700 operating companies, focusing on manufacturing; supply chain management; and commercial operations such as pricing, processing and sales.

Overseas, Tim has worked in Mexico, Brazil, Guatemala, China, Indonesia, and the UK. His firm also operates in Eastern Europe, and he is the author of the book Shocking Profit. How to discover your company’s hidden value. Welcome, Tim. Delighted that you’re with us today.

Thank you, Philip. Glad to be here.

Let’s start by your telling us a bit about your background and how you acquired your expertise in both profitability improvement as well as how you gained your international experience.

I’m going to go back to my college days tonight, probably so it won’t take forever to go through this, but… I’m an accountant. I was a CPA and then in one of the accounting classes or functions, I remember we had a group come in from a partner. I think it was Arthur Anderson at the time who talked about the profit improvement practice. 

I remember seeing stars at that time, and I knew that was my interest, and sure enough, I did go in and I became an auditor at Arthur Anderson. I did one audit and then I was able to get myself on that operational consulting team. 

I will tell you, Philip, I went from how many hours are left today so I didn’t care if it was Monday or Saturday because we got to connect with people and figure out how to essentially make their jobs easier, more effective, help the companies succeed, which was much more energizing. From that time forward I was able to focus on that area with a lot of work in the supply chain. 

And part of the passion that came with that was to have a result, to get to the point where this data will change, was made with the client, not just a beautiful, thoughtful report that might sit on a shelf. And that drove our practice. And as we evolved over the years and this is how we like to think of it, though, we worked with our clients and demonstrated that we come in and understand the situation to help them achieve that future state. 

Then we were asked hey, if you did this work in the supply chain, can you do this work on inventory? And we’ve got this plant over here and we’re having submissions with forecasting and supply planning and so forth. So that’s the medium version of the story.

Excellent. And then how did you require your international expertise?

Most of our clients are US-based private equity firms, but people always ask me since we’re based in Chicago, do we do all of our work in Chicago? The answer is no. The reason is even if we focused on private equity firms only in Chicago, their portfolio companies have operations all over the place. And as you know, they grow. A percentage of companies have global operations, global customers, and global suppliers. So, we got pulled into it. It’s been a fascinating expansion of the journey out, I would say.

Yeah, it’s a wonderful way to transition into it just through your clients. 

Your firm, in essence, is what I would call change managers or transformation managers, and changes are difficult in any culture or country. What methods do you use to implement these transformations? The other aspect is that you’re coming in as Americans or outsiders or foreigners, and you’re telling these client companies what to do and how to do it. So how do you establish trust with your client company?

What a great question, Philip. There are three steps in a sense to getting a new reality in place: awareness, acceptance, and action. We’ve spent a lot of our time on those first two areas. 

First, on awareness. You know that unresolved problems do not get solved, and unrecognized potential does not get tapped. People don’t work on things if we’re not aware of them and that sounds obvious, and to some degree, I’m being kept obvious right now, but it starts there. It has to start with awareness, which requires competence, and it also requires a level of curiosity. And this does tie in with your question on change management. 

First and foremost, we go in with a strong sense of curiosity and a very healthy sense of respect and appreciation. And here’s what I mean by that. I remember hearing stories about big improvements, and I’ve told them, and we’ve had some of our own stories and people often ask how the heck was that possible? How could they not know? 

Here’s the answer. It makes sense. That they didn’t know a lot of companies, for example, are dedicated to their workers and they look for opportunities to promote from within. And we’ve been that, we’ve worked at many companies where there are people who have been there for 30 years. They know what they know. Obviously, they don’t know what they don’t know. 

And so, they’ve responded to the leadership that they’ve been given, the tools that they’ve been given, the resources that they’ve been given. So, they’ve done the best they can with that. And what we have found is that the foundation is there. And they’re very good people doing what they’ve been asked to do so far. So, when we go in, our first thing – and this is so critical for change management – is to understand what they’re doing today and why. We acknowledge and we give honest compliments when we can about what they’re doing well. 

Philip, you’ll appreciate this too. A lot of times the things that we can complement them on are also things that we want to add or finish. For example, one of the most common compliments that we can honestly provide on a company is the dedication of their people to serving their customers, and every day people come in and they’re expediting. They’re doing whatever they can, and they take it personally that their customers are going to get their product when they promised it, and that should not be that hard. 

Eighty to 90% of all production and all orders should flow through the system without anybody having to make a big judgment call. So it’s an honest, good compliment, but it’s also an acknowledgment that there’s an opportunity to improve. 

The second thing that we do after we know is to learn what they do. We don’t come up with a solution to start with. And that’s difficult. For example, if we do lean manufacturing or 6 Sigma quality sourcing or supply chain projects, we don’t go in with an assumption that the tool is the right approach. Any specific tool has to start with just simply understanding where they are and what they’re doing and here’s one reason for that. Many times, their understanding of their problem is dissecting a symptom, not the root cause. 

So upfront when we think about awareness. We’re able to focus on understanding the real root cause issues that are going on and we’re connecting with their people. And we’re connecting with them to listen to hear them, not to give advice, not to judge. 

And, Philip, any culture that you’re in, it needs to start with that. If people need to feel heard and we need to be accurate, you are good at raising awareness of either opportunities or risks that need to be addressed as we go from that to acceptance. There are a few things. 

The first one is that we build it on that foundation of listening. And hearing them and making sure they feel heard. That leads to us providing our observations. And we’ve broken it down into three types of observations that help lay the groundwork for change. And acceptance that change is good and necessary. 

The first one, as I’ve mentioned, is we acknowledge what they do well today. Don’t throw the baby out with the bathwater. Whatever you do, don’t stop these things because they’re very good. And you’re a high-performing company in these areas. 

The second set is one that I feel is almost like a hidden secret to do this. And it’s so powerful and important to acknowledge their constraints and the uniqueness of their situation. Here’s what I mean, and it’s kind of an old consulting joke that people would tell when consultants get around. They’re standing around the water pool, and they’re talking about the people who don’t listen to them. They say you know, it’s so annoying. I talk to somebody. What do we do? Like wow, that’s good. You help people.

I know five different companies who need your help, thank you. But what about your company? And they’re like, oh no, you don’t understand. We’re different. We’ve got crazy clients. We’re at the chop shop, everything’s custom. We have long lead times. We have regulations. And what we do is it’s really important to do this is to show them that we hear and heard them and understand what’s unique about their situation. 

You know, in the US this big deal, it’s a union shop, it’s a custom, every job is different. We have very long lead times from our suppliers, whatever it is, we have to get it out there on the table. We hear it, understand it, and this has to become part of whatever solution we’re going to talk about after only those two types of observations. Could we then go into the observations that indicate the opportunity to improve? 

These are not recommendations. There are observations and what we do when we’ve gone through the strengths and the constraints first. Typically, people are more ready to hear the observations and a lot of times too, we’re previewing this with different people and different departments. So, they understand it and there’s nothing in there that either was wrong, or we misinterpreted something, or they have something to share on it. So, there’s a lot of important legwork to do to stay connected with people. 

Another key piece is to have people become part of the solution. Another interesting thing people will say when I tell them I’m a consultant is, “Yeah, we’ve had a few of those come in. They’re frustrating because they come in, they interview us, we tell them all of our ideas and they go present them to the board and get paid a whole bunch of money. And then the company listens to it.” And I say, “You know, you’re mostly right since you’re exactly what you’re talking about. We come in and we interview everybody. And we do take your ideas. But here are the parts that I’ll add to it though. Out of the ten ideas we present to the Board, eight of them came from you. And two of them came from our experience with other companies and whatever else we’ve had.”

However, you gave us 38 ideas. We presented the eight that make sense. We did the math. You know, we went and did build the business case around it: What’s the cost-benefit analysis? How complicated is it to implement? How long will it take? Do we have the bandwidth to do it? Will it work and can we connect with everybody to explore it? You know, as we go through it, building the case. That is a very important process, and when we do present those ten ideas, the eight that their people gave us, we do everything in our power to make sure everybody knows who gave us the bit, who presented the idea. 

Right. I’m curious when you work in a country like Brazil or China, do you work through interpreters?

So sometimes the interpreters are employees who happen to be bilingual. And well, but as you can expect, Philip, that is an issue here in the United States as well. In fact, in some cases, it’s more complicated because there are plants we work in where three or four different languages are being spoken throughout the plant. 

So, you know it’s in what sense? It’s certainly more complex. When we have an interpreter working with us, I view it as an extension. If you think about what we’ve been discussing so far, this is all about people being heard and also brought us to listen and for us to find the real answers. We’re not there to prove our hypothesis; we’re there to find the data and develop a hypothesis. 

The issue of the language barrier is an extension of something that because even if we don’t speak the same language, how do you know how often we are in a conversation where nobody’s hearing anything, right?

Can you give some examples of some stories where things worked out well and where things didn’t work?

I’ll be glad too. 

A favorite of mine was that the client that has their investment pieces was to buy a whole bunch of branded companies that have high-end consumer products and they converted or they moved all the manufacturing and assembly of these items to their factory in Southeast Asia. In China, they had 26 different brands and had about a four- to five-month lead time … from the time at which the operating brand or the operating company sent the order to China, then have it go through their planning process, get the materials, get it scheduled, and the plant then runs it. Then the state should ship it and get it to the operating company was a four- to five-month process. 

And what was fun about this was doing the analysis, first and foremost, we’re looking at inventory levels in the United States and we found that the problem is you’re treating your department, your internal manufacturing plant, like it’s a third-party supplier. Where you’re collecting your data throughout the month on what you need at the end of the month, you place an order with your supplier of what you need, and they throw it into their pool of items. They have to schedule and buy components for everything. And then it’s in that pool for a week to six weeks before it gets made. 

We were able to identify the impact. If we instead created that manufacturing plant like it’s our own company (which it is, it’s an extension of our company) and instead of placing formal orders at the end of every month, we set up what we call that Black Schedule where we took all these SKUs that all the different companies needed and put them on a schedule to make them every week. And then each week, each company would send their actual demand that week for those items, and that’s how much the company, the manufacturing company, would produce the following week. It’s very good and simple and I’ll give you the dramatic result. First, we took that four to five-month lead time and made it six weeks.

So, this is just-in-time manufacturing.

If we think about the size of the prize, here’s what that meant, and here’s what it looked like. On Friday at each store, each company would tally up their demand for that week and just email it to the company. They would use those numbers to update and prepare their schedule for the next week. They make the product by the end of the next week, then the following week it’s on the water. That’s six weeks. OK, it’ll be dramatic. 

Not only was the late time great but what it meant was their forecasting… Before that, the company’s forecasts that were less than four months old were irrelevant. You have to start your forecast four months out. Because that’s how long it took and we were able to get that back not only in six weeks, but you also knew exactly what was coming in and every week you had a little bit of inventory arriving. 

So, it was now a flow instead of the image of the state having to swallow something bigger than itself and digest it over a month.

In what country was this manufacturing?

China.

Yes, and the part you asked about making the change management component. There are a couple of pieces. The first one was with the leadership team to define the size of the price. It was the first to help them to understand what the impact would be if you were to change the flow and how our departments, our companies work together to overcome inertia. No one’s going to want to change on its own. People don’t want to change. So, the finding, the size of the price made it get on the table, and they said OK, this is important to do. 

And then when we got into the country, into China, what was very much part of it, I think, was the personality of our team, our consultant, and our approach, which was first and foremost to look and see what they were doing today to make sure that they knew that we understand how they work today. And then we brought them through why we were there and got to work on this new approach. Our consultant wasn’t in the boardroom, wasn’t in the conference room, he was on the shop floor, showing them exactly how to do it, and he was there for months doing it day in and day out until it was just second nature with them.

That’s wonderful. That’s often a very effective method, of course. 

Are there any projects that did not work? Perhaps you recommended something that wasn’t appropriate?

I’ll share one like that. 

I also want to share one that was appropriate, but it was so painful. We had another client that shipped large projects. They would be hired to do projects, to set up custom equipment all around the world and all that equipment would come. Most of that equipment came from the Chicagoland area and every time they got a new project they would go out and solicit bids from freight forwarders to handle the freight. And when we got a chance to take a look at their process. We noticed that for a company their size, they paid dramatically over the market price. And they were using the precious lead time negotiating contracts instead of planning the move. 

They’re negotiating with different providers, different freight forwarders to see who’s going to get the business instead of having an approach where they could award the business and then they’re working on what our options are to consolidate loads or to use less expensive freight options that can we ship on a slow boat versus air freight or whatever it might be if we planned it well. 

We took the client through the negotiating process. They have been doing business in a certain way for decades. Even though they put things up to bid, some people were consistently winning. They were used to that. A lot of strong relationships and so going through the process of negotiating and giving everybody a fair chance and managing the communications was a complex situation and it highlighted the importance of taking a formal approach.

And here’s what I mean by that. When the team came out with their decision, there was a tidal wave of anger, frustration, and surprise from different people at different camps, of “How could we choose them?” At the end of the day, if we couldn’t prove and demonstrate everything we did, showing the numbers, the comparisons, and the work we did to give every single supplier the same information and chance to win business, it would have been dead in the water. Anytime you can make something complex. You want to change something complex with multiple stakeholders. It’s so tempting to say I know the right answer. Let’s just go do it. But when you go from awareness to action without stopping at acceptance, it’s like trying to go from first base to third base without touching second. It’s never going to work. You’re going to get thrown out every single time. 

So that part worked. The part that became hard was the transition and going from the people that had been doing the work to the new providers that won the work. The pain. I’ll call it tribal knowledge. 

The things that people knew to do because they’d been doing it, but they didn’t even realize it was important. It wasn’t documented. It was not in a process somewhere and this was a big company, with billions of dollars in sales. There were things like this, so when we switched to a new provider, there was a lot of pain, a lot of relearning and when you asked if something didn’t work, the part that didn’t work was way more painful than it needed to be; our client was unprepared for it.

So, what could we have done better upfront?: Here’s what you can expect. This is going to be painful. You’re going to have to relearn things because we’re changing out the people soon. Don’t be surprised. It’s going to get harder before it gets better, but at the end of the day, it turned out to be wildly successful. Just a painful transition.

And in what country was that company located?

What I’m talking about now truly was global. We ended up with service providers that handled South America, Southeast Asia, and Europe. So, it was truly North America. We were bringing together many different departments and divisions.

You raised the issue, globally. When you’ve worked in a developing country like Guatemala or Indonesia, do you have certain challenges or issues that arise that do not happen in the developed world, such as the UK or Eastern Europe?

I want to say, Yes and No. 

Yes, there are things that we have to deal with that we don’t specifically have to deal with in the United States or Europe. But I would also say, we have to hear that we have to pay attention. We have to understand where they are today. We have to connect with them where they are, not where we are, where we want them to be and so you know something like for example in Guatemala, things like the assumptions we might make about  … and this is true in the United States.

Literally, do people speak the same language? Can they speak? Can they read it? What are the norms for absenteeism, for showing up on time for a shift every single day? If I bring up the topics that we might have to pay attention to in a developing country and I don’t tell you, we’re talking about a developing country. A lot of my friends would say, yeah, you’re probably talking about different parts of the US because we find we have the same issues here. You know that anytime we’re to make a change sustainable, we have to view it as a culture change. Not just the change of process. We have to get people used to this new approach, comfortable with it, and for it to become the new route.

Yes, you mean a corporate culture change.

Muscle memory process. Yes, and very often most of our clients are what I would call transitioning from entrepreneur to scalable companies and very often, we’re helping our clients go from a culture where the leader who’s the chief producer is now sort of the conductor telling everybody, making sure everybody’s doing the right thing, to a scalable company where the CEO is focused on strategic acquisitions, huge customer sales, or playing golf, but they’re not making sure orders get out the door or doing a good job serving our clients. That is a huge culture change.

And many times, when we’re getting involved, part of what we’re doing is helping the company allow people in each department to own that department, to own their little part of the world or they’re part of the supply chain.

What projects have been the most difficult for you to implement over your career?

So, I’ll start with this, and this might not be a fair answer, but it is true. It’s the project where the CEO is reluctant.

Reluctant or interfering or both?

Both. 

I would rather have a CEO who’s fighting me, and engaged and honestly thinks we’re doing the wrong thing because data and logic and everything else will go out. What I struggle with is more passive-aggressive. They’re just reluctant whether they’re doing it because they were told to do it; they’re doing it because they’re backed up against the wall, or whatever. 

At the end of the day, we’re not making anything up, Philip. We’re not coming up with new processes or principles. This is how I like to think about it. We take, you know, what does Toyota do? Well, we’re GE or Emerson Electric, and that’s where most of our consultants came from: companies like that. There are principles there that make the business work well. We’re simply applying those principles in different situations in different countries and different companies and all that. 

So, we’re what we’re doing. This is going to sound arrogant, but I promise you, it’s not because they’re not my ideas. They work every single time. We are never wrong. But the reason we’re never wrong is because we’re not going in and making up and doing what’s in our judgment. We’re going in and applying a principle that’s been tried and true and proven over and over and over again. So, the worst thing we run into is a CEO that has not yet bought in. That’s probably where I’d start.

And that makes perfect sense. And you’re right. The principles that you’re saying are very logical and ethical, moral and true because it’s all about listening to people and implementing what they’re telling you.

Exactly like today. This just came up in a discussion with the client where the respective owner, this one company, walked through and saw there was a lot of scrap coming off the line and she asked, “Do you know what’s going on here? This is a food manufacturing company.” And they asked what was going on. And they said, “Well, we noticed these weren’t perfect and we don’t want it to get to a client.” 

So, we’re throwing it away. In one sense it’s very laudable and very good that one the workers cares and that the company is paying attention to it. But what does it tell you? If we’re inspecting quality, OK, that’s what’s happening. They’re inspecting it. They’re sorting, but at the end of the process when the products have all been made. We’ve got the raw materials in there. We’ve done all the conversions. We may have even packaged it and now we’re throwing it away. The principle here is your design quality, right?

So, we’re not making big opportunities; it’s been there all the time and again. We recognize people are doing the best they can with the direction and resources they’ve been given. When we get the chance to work through it and show them and do it with them, it’ll work.

Are there any of your methods that do not apply in the developing world, for example?

That’s a really good question. I’ll think about this since we’re talking. I am going to say No. And for this reason. 

It’s the way I think about our processes and procedures; specific tools may be less or more relevant in a specific country in a specific situation. But at the end of the day, our approach is to go in and understand where they are today and what’s happening today. And raise awareness. The second part is acceptance, where we take what we saw and first we define the size of the price, which is the opportunity to improve; the room for improvement is the biggest room in the world. Is true in a sense, the ability to improve is almost pie in the sky. 

That’s a really helpful kind of thing. It’s so what’s the return on investment or the return on the efforts to improve? If we improve in this area or that area, what’s the impact? We define that. That helps to provide the leadership team with an understanding of how important it is, and how much we should invest in time and resources and effort to address this issue. When the issue is important enough, it’s a problem we’re solving, or a vision worth pursuing. Then we get that support and that action and we’re able to continue. 

They gaining the buy-in from the company and that again comes back to working through the topics, educating, getting feedback, and making people part of the process. When you look at it at that level, filling up the approach we take works everywhere. It always has to start there.

And it’s very interesting. I was asking the question because in many cultures, especially in the developing world … Southeast Asia, East Asia, the Middle East, and so forth… where people are programmed not to criticize authority. India is another very good, very major example. 

The boss tells you to do it a certain way. You don’t question the boss. What you’re saying though, is that you’re listening to people, and they do tell you what they really think.

Let me go take that a little bit further, Philip. And this is why expertise is important. OK, you need two things. I think to be an excellent consultant and to help people make the right change even when it’s difficult. 

The first one is you have to be technically competent. Truly, you have to know and be able to read the situation and understand what’s right. The second thing you have to be able to do is lead without authority. If you’re the person who says “I’m the Boss. You gotta do what I say,” you can’t be a consultant. You’ll get laughed out of town every single time. 

Here I want people to feel heard, but we also don’t need people to tell us what’s going on. We look at actually how they set up the line. We watch flows. We look at how it’s scheduled. We look at how they do this. How do people know if they’re winning or losing on the line? How do they know if they’re doing it? A good job is their metrics. Or not metrics. We’re not going to go up to somebody and ask, “Does your boss do a good job of telling you whether you’re doing well or not? We’re not going to ask them for their… I mean, we will ask people for their opinion. But we’re not going to rely on them, feel free to give it to us, because even I was laughing when you asked the question because it was part of a conversation. The time when the one client we were talking about, whether this one executive was a good executive to work with or not. And we asked one of their colleagues and the colleague was being very invasive. The person didn’t want to say anything negative. 

And I remember saying, Oh, that’s great. I said, well, how about if we have them work on this project with you? And that person…. No no no!

It was like they didn’t, they almost wanted to pull it back in as soon as they said it because they didn’t want to… They felt like they were hurting somebody else by sharing it. In one sense, that’s always the issue, but that’s why you can’t send something to someone with good intentions and the right questions to do this type of work. 

You send someone who’s run the plant, they’ve run the supply chain, they’ve run the company, they know it, production started 27 years ago about 25 years ago, we changed our model from hiring. Young, smart people and teaching to be consultants to hiring people. They have deep knowledge and experience in doing the work, and I’ll tell you it was… I am so grateful that we figured that one out because you never have to explain to someone why your price is what your price is. When the people who go in know exactly what to do.

And think about this too, Philip, it’s a vulnerable time for people when they’re going from something that they know to something they don’t know. And oftentimes, things like lean manufacturing and even supply chains can be counterintuitive. 

Here’s an example of one that’s common. Everybody knows that downtime is bad in a sense, it’s not good because when you’re not running the machine, you’re not making any money. So intuitively, people think well, we should go for long runs. We want to set the machine up and have it go. That’s not true or I shouldn’t say it’s not necessarily true. What we’re here to do is to fill orders to satisfy demand, not to reduce the unit cost of each part. 

And so, we’re asking them, in many cases, can you guys change over once a week? Now we’re going to change over three times a day going forward… But the only way to do it is we have to be there and walk through and then they see what happens…Like oh, I get it… OK, but until you see it, it’s hard to conceptualize.

Is there anything else you’d like to add briefly before we close?

You know, I appreciate the chance to talk about this. The simplicity of the idea of thinking about awareness, acceptance, then action. All three of those are so vitally important. Awareness is critical because… think of the number of times that you walk into a situation and what people tolerate. 

The number one indicator of opportunity is when we walk through a plant. When we get angry. Where they don’t have eye contact with their supervisors or the CEO, and they walk through. We don’t know exactly what the cause of it is, but we know. That there’s a ton of opportunity. 

Here’s the thing they all know: it’s stressful. But they live with it. They just got used to it. Yes, so this awareness. The piece is critical to go in with a good eye, an open ear, and somebody who’s been through it once or twice so that you can get it. You can hear what? You need to hear Not. What do you want to hear?

Yeah. And then the acceptance speech we’ve talked about, it’s so it’s so tempting to go from awareness to action. You’ve got to plant the seeds before you can harvest the corn and work through it before you can honestly expect the action to take hold.

Makes a lot of sense. Well, thank you, Tim. This was a fascinating Interview and with tremendous insights from you, and we appreciate your joining us today. I hope all our listeners will join us again next week for another edition of Global Gurus and their stories of international business.