The Wisdom of Chairman Ko

But his gloom began to lift when Nishimura visited the plant a few weeks later. Solectron's CEO was among the first to express interest in buying the NCR factory, and his enthusiasm for the operation was infectious. "This can work!" Nishimura said -- in stark contrast to another potential buyer who had ominously estimated a significant layoff. Seeing a growth opportunity where others saw only a cost-cutting headache, Nishimura would use the plant's excess capacity to serve other outsourcing customers, squeezing additional efficiency from the plant and saving hundreds of jobs in the process. "It was a totally different perspective," says Wallace. "Rather than seeing us as a necessary evil -- a cost center to be controlled -- he saw us as a business in which manufacturing was the core competence."

Wallace was already impressed with Solectron, which had been a trustworthy supplier of printed circuit boards to NCR for four years. More than just a hollow promise, Solectron had backed its customer-first policy with weekly customer-satisfaction surveys, the feedback from which -- to Wallace's amazement -- was addressed within days.

Despite lingering doubts about the decision, Wallace told his NCR bosses that he would support the effort. But on one condition: If the choice wasn't Solectron, he wouldn't be involved.

NCR's chief executive happily obliged. Solectron's offer, which promised to retain all the Duluth plant's workers, "was a very smart move," says Nyberg. "We lowered our costs without sacrificing quality, and they got to profit by increasing the factory's efficiency"

"Re-create the business -- from scratch."

The key to the success of Solectron's NCR purchase, and to its other acquisitions, is that Solectron gives its plant managers the authority to run their operations as if the plants are the managers' own businesses. Solectron also keeps corporate bureaucracy to a minimum, and it shares profit-and-loss information with the rank and file. After basic financial goals are set, managers can bring in new business, invest in plant equipment, and manage their staffs as they see fit. Meanwhile, quarterly "variable pay" programs for both managers and line workers tie bonuses directly to plant performance, and Solectron's stock-purchase program has put a total of more than $1 billion worth of stock into the hands of its workers, even its part-time employees.

While Wallace and his fellow managers scrambled to calm the widespread rumors and concerns about the pending deal, it would be the managers themselves whose roles would change the most. "We had to re-create the business -- from scratch," says Bob Hawkins, the newly minted vice president of Solectron Georgia.

When Hawkins had been the factory's head of operations for NCR, he had neither responsibility for, nor knowledge of, his factory's impact on NCR's bottom line. "It was simply a cost center," says Hawkins, who notes that NCR handled sales, finance, accounting, and human-resource functions. "We didn't even pay our own bills."

So Hawkins and Wallace began honing their accounting skills and took a hands-on crash course in running a business. Of course, they got plenty of support from Solectron, which by then had more than a dozen acquisitions under its belt and already had a 90-item checklist for helping factory managers transform their operations into profitable businesses. But Solectron still gave Hawkins and Wallace the freedom to search out and integrate whatever management policies they deemed best for achieving Solectron's core goals of superior customer service and individual respect -- and, of course, profitability.

"We did some benchmarking, but a lot of it was common sense," says Wallace, pulling out a chart showing the average sick time claimed by the operation's workers. Under NCR's companywide policies, full pay for sick time was guaranteed for all employees who worked at least 26 weeks per year. The policy's unintended effect, however, was to provide unlimited sick pay for scofflaws who knew how to work the system. "It was very frustrating," says Wallace, pointing to a bar graph showing nine hours of sick time claimed each month by the average NCR line worker. "But under the old system, there was nothing we could do about it."

So Wallace and the plant's human-resources director Beth Introini sketched out a new plan under which sick pay would accrue at a rate of five days per year. Within a few weeks of the change, sick time dropped to an average of less than two hours per month. "The most amazing part was that we made the change without dealing with miles of red tape," says Introini, who was a 13-year veteran of NCR's corporate bureaucracy. "Although we were joining this huge company with 25,000 people, I felt as if we were a startup."