Bosses Want the Secrets of the Family Firm That Has Never Had a Layoff in 75 Years

Hundreds of executives have made the pilgrimage to St. Louis to try to replicate Steve Gund’s elusive feat: He’s the third-generation CEO of a family manufacturer that has averaged 18% annual growth for a decade—all without ever laying off an employee.

He said he does it with a leadership model that puts The Gund Co.’s 1,300 employees’ well-being over short-term profits. He has made it his mission to evangelize the approach, especially to leaders of other family owned companies.

“It sounds touchy-feely, but it’s profitable,” said the 55-year-old Gund, whose grandfather, Ed Gund, a former candy salesman, started the composite materials company in 1951. Now approaching $400 million in sales, its customers include General Electric and Rockwell Automation. Its parts can be found in nearly every aspect of the grid, from wind generators to the green boxes dotting subdivision lawns.

The model requires trade-offs, and a lot of discipline: Gund has never had a layoff but staffs sparingly so it can weather the leaner stretches. Employees are pushed to voice and document concerns on red cards displayed on the factory floor, putting leaders on notice to take care of problems quickly. Everyone from line workers to managers crafts a career-development plan. Yet those who don’t adapt to Gund’s high-performance culture are managed out. 

And there are financial gambles: This year the company spent tens of millions of dollars to buy back its existing employee-stock ownership plan with the aim of relaunching a similar program to employees in every country where it operates—including China. 

Many of the executives coming through Gund’s St. Louis headquarters and other Midwestern sites want to see if the Gund way could future-proof their own businesses. Some are running the companies their parents or grandparents founded and approaching a crossroads many family enterprises eventually hit: Either sell out, possibly to private equity, or find a sustainable way to keep it growing in family hands.

The sustainable way, Steve Gund said, is building a business around a larger sense of mission, both for its workers and future generations of family owners. 

The Gund Co. traces its roots to Bussman Manufacturing, where Al Bussman, great-grandfather of Steve and Rich Gund, is pictured standing in the black suit.

“One of my life’s callings is to make sure that we get this message out: Business is not just about driving profitability for the shareholders, it is absolutely about taking care of people,” he told a contingent of company bosses recently visiting Gund’s Wisconsin plant in Waukesha.

Two of the visitors were Don Taylor, CEO of Welty Enterprises in Ohio, and his son Michael, also on Welty’s executive team. The Taylors had heard of Gund’s culture through other business leaders.

“Hopefully we can mimic some of that,” Don Taylor said.

Gund was at its own crossroads when Steve and his older brother, Rich—now the company’s chairman and chief operating officer—joined full time in the early 1990s, helping make spare parts for generators and other components. The business had $2.7 million in yearly sales and nine of its 20 employees were family members.

Steve likens its dynamics then to a restaurant, with “a lot of screaming and yelling going on in that kitchen.” If it didn’t map a long-term growth plan, an adviser warned the family, it would stay that way.

As the company expanded and acquired other small manufacturers, the Gunds swore off layoffs. Telling hardworking people they didn’t have a job because the executives couldn’t manage the finances was a failure of leadership, Steve’s father, Paul, then running the company, would say.

To give employees a real stake in the company’s fortunes, Gund initiated an employee-stock ownership plan for U.S. staff in 2009. As of last year, workers owned 30% of the company through the program.

Still, Steve said he didn’t fully implement the people-first strategy until a conversation with Bob Chapman, the CEO of Barry-Wehmiller, another family-owned St. Louis business. Chapman made a name for himself championing “truly human leadership,” which espouses that better business performance starts with improving the lives of the workers driving that performance.

It was 2015, and Gund’s board had just challenged Steve and Rich to return Gund to a 15% compounded annual growth rate after several years of slowing sales.

Steve, a devout Catholic, confided that he felt more fulfilled helping people in need than running a business that made industrial components. Chapman pointed out that he had a bigger vehicle for making a difference. 

“You’re trying to alleviate homelessness by going and working in a soup kitchen or handing out blankets,” Steve recalls Chapman saying to him. “Why don’t you employ people?” Creating jobs that would help people live fuller lives became Steve’s motivator, one he saw as linked to the board’s demand for growth. 

The 12-step management playbook he has developed since involves a “parental level of care” of the workforce, he said. Employees share their hopes and dreams, both for their jobs and lives, in individual development plans. Supervisors regularly walk the shop floor doing a “Gemba walk,” a Japanese term for “the actual place” where work happens. They ask staff what’s going well, how they are taking care of each other and what can be improved.

That’s how Deidra Jonas, 33, says she rose through Gund’s ranks. She started as a janitor 16 years ago, one of four cleaning jobs she juggled as a single mother. Her manager noticed her attention to detail and asked if she’d move to machine operations on the evening shift. 

Once her son started school, Jonas wanted to switch to daytime hours to maximize her time with him. She moved to reception, then customer service. Co-workers eventually nominated her for a leadership role on the culture team. Jonas now travels the world to conduct listening sessions with other Gund employees.

“My dreams and my aspirations are what no one in my family has ever even thought was on the road map,” she said.

Gund says hitting its goals requires operating with radical transparency. Its financials are posted in meeting rooms. Suggested improvements are displayed on large boards that everyone on the shop floor can see. The red cards turn yellow when a solution is in progress. Company performance is measured across three categories: taking care of each other (for instance, preventing injuries, recognizing accomplishments), taking care of the customer (quality, on-time delivery) and taking care of the business (operating-margin targets).

“If you listen, people will give you feedback, and if you take action on the feedback, things will improve,” Steve said. Gund’s profit margins have doubled over the past decade, he added.

The company typically starts employees at market average pay and shares the salary ranges for different career tracks and promotions. Entry-level factory workers start between $55,000 and $65,000 on average, excluding overtime and profit-sharing, Gund said. 

Gund supervisors regularly take part in 'Gemba walks,' checking in with employees where they work.

Though leaders from more than 200 companies have visited Gund, few have managed to replicate the 12-step blueprint. Many try three of the steps, then give up, Steve said, often because the top boss has delegated the project to, say, someone in human resources. It takes two to three years to change a culture, he said. 

Even at Gund, there is room for improvement, he said. Turnover is highest among first-year employees, though overall it’s less than 10% for its U.S. staff.

In a recent leadership meeting, some bosses mentioned it was hard to fill overtime shifts. They also cautioned that the company was growing faster than it could develop leaders. 

The Taylors, from Ohio, left the Gund plant in Waukesha that day wondering how to apply the fundamentals to their business, which includes real estate, energy and construction. They said they planned to start with one division and train leaders to do the Gemba walks. 

Other aspects of the Gund approach, like posting the company financials in every facility, would be more difficult, given Welty Enterprises has employees across 26 states who work on job sites, rather than in plants or centralized offices.

Gund says hitting its goals requires operating with radical transparency.

Some companies are further along. Leaders at Cambridge Air Solutions, a second-generation, family-owned industrial HVAC manufacturer, have created a unified system for safety and quality since visiting Gund’s St. Louis plant last year. 

It took several months to get the first step in place, Meg Brown, chief operating officer, said. To help speed things up, Gund supplied Cambridge with training materials and allowed Cambridge executives to make it their own.

“We’re in the bowels of industrial manufacturing,” Steve said. “If we can do this, anybody can do this.”

As seen in The Wall Street Journal and written by Allison Pohle.