In this paper I will discuss Aaron Feuerstein, the third-generation president and CEO of Malden Mills Industries, Inc., who leads the Lawrence, Massachusetts business with his father’s and grandfather’s values: kindness, justice and charity. He does this through his charismatic leadership and vision, which binds his employees together into realizing and achieving the same goal. I will show exactly what makes him a leader in the modern business setting and explain why a leader’s vision is important in defining a true innovator, effective manager and charismatic leader.
Feuerstein and Malden Mills had a history of taking care of its employees. Workers’ salaries average $12.50 an hour compared with the textile industry’s average of $9.50. And in the 1950s, when other New England textile manufacturers fled to the South for cheaper labor, Malden Mills stayed. Although Feuerstein’s hands-on management style has always been admired by his employees, what set him apart as a true leader was a near disaster in the winter of 1996. While celebrating his 70th birthday, Feuerstein received word that his 130 year old family owned textile company in Lawrence, Massachusetts was burning to the ground. Three of its manufacturing factories that produce the popular high-end outdoor apparel knits, Polartec and Polarfleece, were reduced to charred metal and brick. While watching the fire, Feuerstein decided that he must come up with a plan to not only save his company from financial ruin, but decide the fate of over 3,100 employees that would soon be without a job. He chose to rebuild the plant in Lawrence. He also decided that if he was to continue providing a quality product to consumers, he would have to take care of the skilled laborers who made the product. Feuerstein kept more than 1,000 jobless employees at full pay and medical benefits for three months until the factories were up and running again.
What kept Feuerstein’s company at the top was his strong managing skills. A top management position requires motivation to achieve, but this motivation may be directed to achieving personal, rather than organization goals. Feuerstein believed the role to top management should be to “manage” and the most important resource they must manage is the people that work at all levels of an organization. Their role should not be to rule, but to lead. Feuerstein also understood that employees form the foundation of any organization, and that all of them have unique strengths that can help in achieving the companies goals. In return, employees will feel useful and are placed in a position to self-actualize or attain one’s potential. When Feuerstein was asked what sets him apart from other CEO’s, he responded:
The fundamental difference is that I consider our workers an asset. Not an expense. I have a responsibility to the worker, both blue-collar and white-collar, I have an equal responsibility to the community. It would have been unconscionable to put 3000 people on the streets and deliver a deathblow to the cities of Lawrence and Methuen. Maybe on paper our company is worthless to Wall Street, but I can tell you it’s worth more. We’re doing fine.
Other CEOs feel I’m sort of a stupid guy who doesn’t know what to do with his excess money, he says. “The quality of Polartec is what I’m selling. By treating the people the way I’d want them to treat me, they make that quality. When you do the right thing, you’l1 probably end up more profitable than if you did wrong.
Feuerstein did not throw his money away. It was a well reasoned and sound leadership decision to invest millions in Malden Mills’ most critical asset, its workers. The contrast between this Feuerstein and the currently celebrated CEOs making 30, 60 or 100 million dollars a year by eliminating jobs and moving plants is simply astounding. How much are you willing to wager that every company that closed a plant in recent years to boost stock prices has a vision statement with words like …we value and respect our employees as our most important asset? How many of the laid off employees do you suppose believe that?
Perhaps the most important characteristic that transformational leaders possess is their ability to create a vision that binds people to each other. Not only must they have this vision, they also have to have a road map for attaining it. What is important is that followers “buy into” that vision and that the leader has a plan to energize them to reach it.
Leaders who are totally committed to their vision and course of action often are called charismatic. Charismatic leaders have an unshakable belief in their mission, are supremely confident that they and their followers can succeed, and have the ability to convey these certainties to their followers. Followers of charismatic leaders demonstrate unquestioning loyalty and obedience.
According to Management by Don Hellriegel, Susan E. Jackson, John W. Slocum, Jr., “leaders who are totally committed to their vision and course of action often are called charismatic leaders.” To a leader that has the conviction of his beliefs, words like value and respect must be backed up with hard decisions and actions. The real test of leadership is maintaining those convictions during change and upheaval. The first major test of Feuerstein’s convictions as a leader came during his bankruptcy in the early 80’s. Many of us might conclude that a bankrupt textile mill in a 300 year old mill town in 1981 was the end of the road. Not Aaron Feuerstein. He spent millions to develop a new product and re-opened the mill in Massachusetts with all the high paid workers (by global standards). His firm created Polartec and Polarfleece, revolutionary new products. He actually came out of the bankruptcy stronger than when he came in.
The fire was the second test, and again Feuerstein vowed to stay in business. These two actions were the most powerful communications he could have made to his workers that he had the courage of his convictions. He was willing to put his money, reputation and business on the line to move the company forward in an ever changing business climate and ever present risk. He does not believe it to be irrational to invest millions in your employees, but today most workers see that the stockholder is the only stakeholder that counts.
What distinguishes Aaron Feuerstein and other leaders like him is courage. Feuerstein has the courage to stand by his convictions and take the appropriate actions. If Feuerstein showed courage by committing his wealth and good name in rebuilding Malden Mills—he only has done what leaders through the centuries have done. He lead the way, blazed the trail, so that his followers could do the impossible. ‘Before the fire, that plant produced 130,000 yards a week’, Feuerstein said. ‘A few weeks after the fire, it was up to 230,000 yards. Our people became very creative. They were willing to work 25 hours a day.’
How many corporate CEOs in the downsize-crazed companies today could ask their employees to double production in a few weeks given no changes in the current plant—much less given temporary plants set up in old warehouses? How many of your employees would come through for you if your company needed their help? They might work 25 hours a day for you if they thought they were valued as important assets. If the communication has been that employees are movable and expendable, they may abandoned ship for a more pleasant work place given the extra demands.
Although the praise given Feuerstein is much deserved it not easy for anyone that is not a multimillion dollar owner of their own company to relate. Feuerstein did have the resources to pay out his employees for their three month lay off and medical benefits, but I believe that he gained his wealth by treating his employees fairly and in return his employees represented his company the way he liked.
Feuerstein criticizes those who downsize simply to contract out cheaper labor. There’s a downsizing that is necessary as a rules of technological improvement…,” he says. “But there’s a downsizing that is a result of the CEO searching for cheaper labor elsewhere that I don’t feel is the right way to go in the long run.” At one point during an interview with Thomas Teal from Parade magazine, as he was warming to an attack on Al Dunlap (the man who dismantled Scott Paper and fired a third of its work force), I interrupted to suggest that maybe Scott Paper was overstaffed, and Feuerstein surprised me: If one-third of the people in that company were wastefully employed, then Dunlap did the right thing. And then the new patron saint of working Americans surprised me some more. Legitimate downsizing as the result of technological advances or as a result of good industrial engineering? Absolutely. I’m in favor of it. And we do it here all day long … We try to do it in such a way as to minimize human suffering, but the downsizing must be done. Under the benevolent, angular exterior lurks a businessman—a businessman who understands labor.
The trick, he told me, is to keep growing fast enough to give new jobs to the people technology displaces, to weed out unnecessary jobs without crushing the spirit of the work force. If all you’re after is cutting costs, if you just have a scheme to cut people—that sort of thing is resented by labor, and you’re never forgiven. Feuerstein has a union shop, has long invested heavily in technology that eliminates jobs, and has never had a strike —not exactly the hallmarks of a fool.
It’s here he has shown his real genius. Any snake oil salesman with a strong enough stomach can make quick money, sometimes a lot of it, by slashing costs and milking customers, employees, or a company’s reputation. But clearly that’s not the way to make a lot of money for a long time. The way to do that is to create so much value that your customers wouldn’t dream of looking for another supplier. Indeed, the idea is to build a value creation system of superior products, service, teamwork, productivity, and cooperation with the buyer. Reduced to its essence, that means superior technology and superior employees. Reduced still further, as Aaron Feuerstein can tell you, it means superior employees.
Feuerstein has laid off people for the reasons stated above, but all of these employees have been given generous severance packages that included three months of paid medical benefits as well as job training
Feuerstein admits that, as owner, he has a great advantage over leaders of public firms because he answers only to himself. But I would like to think, he says, that the average CEO – even though they’re reporting to the public and the so-called shareholder – also feels that there’s a moral imperative that they must answer to as well.