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December 12, 2002 FIN – Editor’s Note: NIFS Hall of Fame acceptance speeches tend to be perfunctory. Wayne Golden of Star Stainless Screw Co. startled the audience with a stirring speech at his induction. Industry veteran Bob Lehman, who said he has attended every NIFS HoF banquet, predicted Golden’s speech “will long be the most memorable.” Here are excerpts:

“Why would anyone put me in the NIFS Hall of Fame?” Wayne Golden asked the audience rhetorically at his induction into the National Industrial Fastener Show Hall of Fame last month.

“I’ve had a reputation with customers as being off the wall, crazy, difficult, different, strange and not too smart,” Golden reflected. “I think I know the answer. In 1970 when I came in to the business, Star was #7 out of seven competitors. Every one of them is either gone today or has gone bankrupt. I won by default.”

“In this age of ruthless capitalism how could a slow crazy like me win the race against all the other rabbits? And there were some tough rabbits.”

Golden answered his own question -“So what did Star do to beat all the rabbits?” – with six rules the stainless fastener supplier has lived by:

Golden’s Rule #1: “First, you’ve got to make a profit. My father used to have a cartoon on his wall. It showed a worn-out man sitting at his desk, and a sign on the door said, “Chapter 11.” The man in the cartoon was saying: “I don’t know what went wrong. I met every price!”

While competitors operated on low profit margins and discouraged small accounts, Star “doesn’t think enough to apply any 80/20 rules.”

Golden’s Rule #2: “Differentiate yourself from your competitors. One way Star did that is inventory. Star has 1.5 inventory turns a year, and I’m satisfied at that level. But a lot of distributors think that I’m crazy.”

Some distributors who meet to exchange ideas interviewed Golden and “thought I was not progressive enough, that I didn’t understand basic business theories, and that a lower return on investment would catch up to Star, our competitors would overtake us, and we’d be out of business. They thought one of our competitors who later went bankrupt had brilliant ideas and really knew how to run a business.”
Star is selling a commodity product and “wound up with a 60% or 70% market share, maybe more. What we’ve tried to do is give the customers what they wanted: a big inventory from regional branches, so customers could get quick service.”

Golden’s Rule #3: Star paid attention to personnel. “Star has 350 employees, and I can’t exaggerate to you how hard we try in working with our employees. In return, we have very loyal employees, for the most part, with almost no turnover for salespeople, managers, warehouse people and office.”

Golden’s Rule #4: The dumbest theory in business school is that return on investment is the most important objective for any business.

“A lot of MBA’s don’t understand that having your own business is more important to some people than return on investment. If we studied each procedure that we do at Star, we’d abandon half the things we do. I’d rather have a 70% market share and not be too smart.”

Golden’s Rule #5: The second dumbest theory in business school “is to borrow as much money as you can, leverage, as long as your projections show you will earn a greater return than the interest.”

The problem is that in the stainless business, prices can go up 50% in one year, then collapse; so in a given year, stainless sales can fall 20% and margins can go down 10 points. If you owe too much money, you go bankrupt.”

Golden’s Rule #6: “I have an MBA myself, but I try to hide that. I’ve learned that the most important thing in business is to differentiate yourself from your competitors. If you follow the MBA rules, you become the same as your competitors.”

“I learned two things in MBA school: One was that I can sort of read a financial statement. The other was to never ask business questions or listen to business advice from accountants, lawyers, bankers or consultants. They know nothing.
We don’t analyze or over think at Star. We’ve never had a budget or a projection. We never borrow too much money, because we won’t let bankers dictate to us. We use common sense at Star. We don’t analyze, we don’t plan and we don’t have management meetings.”

“As Yogi Berra said, ‘You can’t think and hit at the same time.'”

After the speech Golden told FIN he missed an opportunity when the audience laughed in approval of his advice to not listen to accountants, lawyers, bankers or consultants.

“I should have added that when Star opens a new branch, we don’t say we are ‘maximizing synergies,’ we say we are opening a new branch. And when we put inventory in the new branch, we don’t say we are ‘optimizing our capital flow’; we just figure out what customers in that region will need and put the stock in.
“And when suppliers or customers talk about supply chain management, we look upward to the sky. I think supply chain management is an excuse for distributors not to have stock and blame it on the next loop in the chain.”

“I’ll bet that someday the stainless steel mills themselves will start stocking 1/4-20 finished nuts, and some business school professors and MBAs will call that “Reverse Vertical Integrated Supply,” and they’ll figure out a reason why it’s good.” ©2002/2009 Fastener Industry News

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