The Wisdom of Chairman Ko

Solectron's third application, in 1991, finally yielded a site visit from the examiners, which Nishimura figured was worth about $250,000 in consulting fees. But the payoff proved even greater: The committee awarded the prize to Solectron in a White House ceremony in October. It was the first and only time a company in the often-maligned outsourcing industry had garnered the quality prize. The first time, that is, until 1997, when Solectron won a second Baldrige, making it the only two-time winner in the award's history.

Baldrige Award recipients are ineligible for the quality prize for five years. So Solectron has developed an internal assessment process fashioned after the Baldrige. "We want to be the best at what we do," says Nishimura. "Our internal process, which we administer every 18 months, keeps us focused on continuously improving things for our customers. That's the only way to be the best."

"I need these people. I need these people -- and more"

In a sector once disdained as being an unsophisticated collection of low-paying assemblers, Solectron's Baldrige achievements have helped repair the industry's bad reputation and demonstrate that contract manufacturers can be trusted to handle even the most demanding tasks. "We used to be thought of as a sweatshop industry," says Nishimura. "Now we're rated investment grade by the likes of Standard & Poor's and Moody's."

Other OEMs couldn't be more pleased. Anxious to cut costs as well as to rid themselves of the tedious, unsexy job of actually building the products that they design and sell, company after company has sold off its factories and turned over production to contractors like Solectron. The strategic shift on the part of the OEMs has given Nishimura the enviable opportunity to pick and choose his customers. In the process, Nishimura has globalized Solectron's holdings with a series of major acquisitions that have expanded its technology and manufacturing base along with its employee roster, which has tripled since 1995 to approximately 33,000 "associates," the name that Solectron uses for all of its workers.

Any acquisition can be a major undertaking: It can stretch the resources of the acquiring company, and test the attitude and commitment of the acquisition. But Solectron's purchases seem to have worked for both sides. People who now work for Solectron have found new energy after working for OEMs that had little genuine resolve to succeed. And for his part, Nishimura has stayed true to Solectron's core principle of respect for individual workers, and found value not only in the high-tech factories that he acquires but also in the everyday workers whose commitment he requires.

"I need these people," he exclaimed last year, while touring NCR's retail-systems factory, in Duluth, Georgia, near Atlanta. "I need these people -- and more."

Nishimura's message was just what veteran NCR manufacturing director Jim Wallace had hoped to hear. Wallace, a 38-year-old North Carolina native, had helped design NCR's suburban Atlanta factory in 1989, and he'd since poured years of sweat into creating margin-building efficiency in the sprawling, 300,000-square-foot plant and its 700 employees.

That wasn't an easy task: NCR's fortunes roller-coastered, buffeted first by being acquired by AT&T in 1995, and then by being spun off. Management struggled to redefine its strategic focus, and priorities soon shifted from hardware manufacturing to software and services. A push to reduce employee head count followed, and support for and investment in manufacturing all but dried up. "It's not our core competency," Lars Nyberg, 47, NCR's CEO, says of his decision last year to sell off the company's entire manufacturing division. "The hardware just isn't crucial to us."

To Wallace, a manufacturing man working for a 113-year-old company that once defined itself as the world's leading builder of nuts-and-bolts cash registers, Nyberg's sentiment repudiated everything he'd worked to achieve. Then, late in the summer of 1997, his boss explained that the company had made some "strategic changes." The big news: Management had concluded that the best way to move forward would be to outsource NCR's manufacturing operations. "At first, I felt as if I had been kicked in the stomach," says Wallace, who started working for the company after he graduated from Georgia Tech in 1987. "I felt as if there was no appreciation for what had been accomplished."

To add insult to injury, Wallace was asked to help engineer his own downsizing. He would have to find a buyer for the entire Atlanta operation and then hammer out a favorable outsourcing deal. Wallace had already overseen the plant's contracting out of printed circuit boards and other piecemeal assemblies. But when he had looked at outsourcing additional operations, he found that "it wasn't economically justified. My first feeling was that the company would be worse off by additional outsourcing. I was pretty cynical about the future of the entire operation."