Industry veteran and KJ Electric founder, Ken Jacobs, has more to celebrate than just 30 years of being in business: Try surviving The Great Recession without a single job loss.
By Anna Wells, Executive Editor, Industrial Distribution
Throughout the thirty years since opening its doors, Ken Jacobs has been able to take an old-fashioned electric motor distribution service and transform it into what KJ Electric is today—a 5-branch distributor with sales, engineering services, repair, panel building, and servo technology.
Incremental expansion, improved service and product offerings, and a cultivation of staff skills over the years have been the support beams for a business that puts customer service and loyalty to its employees first. In fact, it was this loyalty that was really put to the test in the economic collapse of the late 2000s—a difficult 2-year period that KJ Electric was able to survive with no head count reductions.
“I think in a good economy, anybody can look like a good president or CEO,” says Jacobs. “But it’s in the tough economies that you really have to manage.”
Preparation & Loyalty
So what does this mean when it comes to a manager’s daily strategy? According to Jacobs, it was about knowing what is ahead in order to avoid a reactive strategy. “You’ll top your competitors by being proactive,” he says. “If it’s going to be a bad year, you know it ahead of time and you prepare for it.”
Despite preparation, the unpredictability of a manufacturing and OEM customer base could nonetheless create margins that scrape like two dry nickels rubbing together. Many national and regional distributors alike found that out the hard way in 2009-2010. Jacobs’ take on the situation is that many companies—namely manufacturers—made errors in judgment by turning their strategy into a numbers game. “The manufacturers made big mistakes when they cut inventory. It’s an accounting thing, and I don’t let my accounting department tell me anything. They can count 2 and 2 and make 4, but don’t talk about inventory or head count.”
Retaining his staff, then, was more than just loyalty to the hard-working and knowledgeable staff that helped build his company. For Jacobs, it’s also a pragmatic approach to retaining the value a competitor may be eliminating. “Do not lay people off. Don’t cut your sales or your inventory. Eventually you’ll rise above because your competitors are going the other way,” he says. “The first thing many of them do is cut inventory, cut personnel, and cut service. That’s what we’ve grown on is service, so even in the bad times we’ve got the best that’s out there.”
30 Years To Learn
When you’ve had thirty years at the helm of the same ship, you learn a thing or two. Jacobs has navigated KJ Electric through several downturns, and this one, he says, has by far been the worst. The post 9/11 recession was a time, says Jacobs, where “people were afraid, but the economy was still okay and you were still supplying products to the customers. This past year, the customers were not okay. They were putting their foot on the brake pedal, and just not cutting orders.”
Since the reduction in orders was so widespread, Jacobs strategy for KJ Electric was to hand pick markets to go after. With a product line capable of addressing multiple applications, KJ could afford to be choosy when some other motor distributors might have been shackled to the automotive industry. Instead of automotive, or even industrial, says Jacobs, “you wanted to be pinpointing municipalities who still had tax money and were able to spend it.”
In addition, KJ Electric has spread its reach fairly evenly between OEMs and end-users. “Two years ago, I set up a division strictly with product managers going after the OEM base. They do work with our salesmen on the user base, but basically it’s their job to go into the OEM directly,” says Jacobs. A shifting focus on the OEMs at the start of the recession was one of the strategic moves that was able to carry the company through, despite its requiring some additional staff for the expansion of the division. “When everything went down, I hired more people. I’m like a fish that swims upstream; I just don’t die when I get there.”
According to Jacobs, his OEM product managers can rival the manufacturers because of KJ’s emphasis on customer service. “Once the customers saw the kind they got from us, we had a loyalty that we were able to build up in our OEM customer base. That really carried us through the last two year,” Jacobs says. “(Manufacturers) don’t give customer service. They don’t even know what it is. That makes us even more important. We average 95 percent on-time shipment, and that’s due to our inventory and putting pressure on the manufacturers to deliver our products faster than normal. You have to be on top of that part of the equation. If you accept a manufacturer’s 8 to 10 week timeline—and they push it out—it does not bode well for your customers.”
The Pathway To Educated Service
In Jacobs’ world, business relationships are a two-way street, and if your customers aren’t sticking with you, you’re doing something wrong. For those distributors out there who say it’s because there is no loyalty left? “That’s because they’re not giving service,” says Jacobs. “When you’re not giving service, then you’d better give low price.
“We have schools for customers if they buy drives or motors or controls, so we can educate and help them. You’re not going to find a lot of distributors doing that. They’ll take an order and they’ll process the order, but they don’t earn the order. They’ll just open the mailbox and hope it’s there. We earn the order. Our customers know that we’re going to jump when they need us, and we’ll deliver motors at 3 o’clock in the morning.”
Jacobs also sees the value in his staff’s ability to know and understand KJ Electric’s line inside and out. “When you call our people, you don’t need a model number,” he says. “Just give us the application and we’ll give you the correct motor.” This knowledge base is continually fed through ongoing education, spearheaded by Jacobs. The company hosts Monday night meetings focused around product-specific educational content. In addition, Jacobs has signed employees up for an online schooling on 22 different products in 2011. “I’ll get the results of each test score and know how they’re doing in specific areas,” he says. “I want to not only educate my managers in management skills, but also the inside sales staff on product skills.”
And for their hard work, the employees of KJ Electric are rewarded with perks—big ones like profit sharing, all the way down to the homemade Christmas cookies Jacobs and his wife bring in each holiday season. But most importantly, they have their jobs. This benefit for the KJ Electric family is one Ken Jacobs feels confident he will always be able to retain. “I look to myself to be loyal to them and make sure they have a paycheck every week,” he says. “2009 and 2010 were difficult, but we stick together and we’ll make it through. I’ll do what I have to do.”