The LFM Quarterly // Inside LFM: Operations Spotlight
LFM’s Ken Hoefling Talks BCP, KPIs and Power BI
A year after COVID-19 shut down most of the United States and swept the globe, we spoke with Ken Hoefling, an Operating Partner at LFM Capital and former Vice President at Caterpillar, to discuss COVID’s impact on lower middle market manufacturing, business continuity planning in times of crisis, the critical role of good data within a business, and more.
COVID Response
When asked about the effect of COVID-19 on US manufacturing and then more specifically, on LFM’s portfolio companies, Ken was able to provide a singular, all-encompassing, answer. “ The United States has a diverse manufacturing industry and LFM’s portfolio is indicative of that. Some companies grew and benefited, and some had their industries decimated.”
The stimulus money provided by the government was critical to the businesses it helped. This provided much-needed liquidity and cash but being private equity only a few of LFM’s companies received any help.
Ken’s experience from working at Caterpillar during the 2008 financial crisis taught him to recognize that a problem, “is just that, a problem, and life is about how you respond.” He espouses the value of structure in a time of distress. By facilitating honest conversations with the leadership teams, Ken and LFM were able to take quick action which helped their companies to remain as strong as possible.
Business Continuity Plan
Ken said LFM approached crisis management as if each company would be negatively impacted, which led to the creation of a portfolio-wide Business Continuity Plan (BCP). The BCP was created and implemented at one company for four weeks, then adjustments were made and the plan was rolled out to the remainder of LFM’s portfolio companies.
“The BCP was developed based on what our management teams were experiencing across the country,” Ken said. “We narrowed in on critical metrics by assessing what was needed to stay in alignment.” The metrics LFM homed in on for each company were sales, cash flow, and cost structure, putting together three forecasts for each – one they hoped for, one worst-case scenario, and one middle-of-the-road.
Power BI
Over the last year, in addition to the continuity plan, Ken also championed the use of Power BI, a data presentation tool that allows decision-makers to have near-time data. Ken knows from experience that “with better data, you have an increased probability of making better decisions.” With Power BI, Key Performance Indicators (KPIs) can be measured and presented in an easily digestible manner. “It is an efficient way of achieving consistency and a single version of the truth,” he explained. “Using Power BI allows us to spend time on what the data is telling us, rather than collecting it.” Ken started his career in engineering analytics and saw “to be the best leader, you need to have the best data.”
There are some caveats that come with using Power BI. “How success is defined and measured drives behavior, so be careful about what you measure,” Ken advises. After implementation of a tool like Power BI, it is important to be continuously engaged with the program and course correct to keep the KPIs in line with the business’s strategy. Ken noted that “this allows leadership to look at the scoreboard and make adjustments 364 times during a fiscal year.” To create the unique KPIs for each company, Ken suggests asking, “what’s the definition of winning?”
New programs also require adaptation from those who will be using them. Ken’s advice for smooth change management is to have the program make a good first impression and make sure those working within it have the “aha” moment of the tool working for them, rather than vice versa.
Innovation from Crisis
Over time, Ken has learned to “never let a crisis go to waste” and COVID was no exception. One of LFM’s portfolio companies, which was deemed essential, had to get creative to keep operators safe and multiple shifts running. Some of these initiatives will stay in place and continue to create value long after COVID-19. He noted that through COVID, an LFM’s portfolio company re-envisioned how marketing and social media might be done. For another, what started as a closer look at cost structure resulted in new and improved initiatives that would not have otherwise been discovered. On a much broader scale and looking forward, Ken notes “COVID-19 highlighted the risk of offshore manufacturing. We’re now seeing a renaissance of US-based supply chains."
To learn more about Ken, check out his profile on our website here.
LFM's Spring Happenings
LFM's portfolio company, J&E Precision took to the skies with the safe landing of two add-ons, Alloy Specialties and Beranek. Click here for more information.
Sound the sirens, we sold Medix! Click the link here for more details.
Congratulations are in order for two recently promoted LFM team members, Russ Aiken and Tucker Cowden. Click here for more details.
New Faces
Heather Rogers - Portfolio CFO
Prior to LFM, Heather was in private practice offering CFO services to companies in Oklahoma across multiple industries including help with GAAP accounting, startups, acquisitions, systems implementations, and process development and controls. For Heather's full bio, click here.
Richard Butler - Portfolio CFO
Richard was President and CEO of EDSCO, a prior portfolio company that LFM sold in January 2020. For Richard's full bio, click here.
David Juneau - Business Development Associate
David comes to LFM from the Lenox Group, a boutique investment bank in Atlanta, where he was a Business Development Associate.
The Snack-Up Plan: Inside LFM’s Pantry
ABOUT LFM CAPITAL
LFM Capital is a private equity firm based in Nashville, Tennessee. The firm’s mission is to partner with portfolio company management to develop and build world-class operations through a combination of manufacturing and operations excellence and targeted growth and expansion strategies.