Baldor CEO shares culture with leadership group

story and photos by Linda Kaufenberg

John McFarland, chairman and CEO of Baldor Electric Co., was the final of four speakers in the Spring 360 Leadership Series.

The 360 Leadership Series was created by a group of John Brown University graduate alumni whose mission is to provide professional development, networking opportunities, and spiritual growth for Arkansas River Valley professionals.

McFarland started working part-time for Baldor in 1970 and was vice president of sales from 1991-1996, vice president of marketing in 1996, president from 1996-2004;  CEO since 200 and chairman of the board since 2005.

McFarland said Baldor officers took a hard look at their culture when the company almost doubled in size with the acquisition of another company. Baldor spent all of 2009 working to absorb the $1.8 billion acquisition of subsidiaries of Rockwell Automation.

"We wanted to build a culture, not just a company." he said.

The Baldor culture is focused on being the best in its business. The company makes, designs and markets industrial electric motors, motor drives, power transmissions and generators. McFarland said the focus is working as Baldor has the largest share (45%) of the commercial electric motor market. They had sales of $1,524 billion with 2009 earnings at $59.7 million. There are 26 plants in five countries, with 21 located in the United States. Baldor has more than 7,000 employees globally. About 2,000 are employed in the Fort Smith area.

"The amount of income we produce each day was the annual income for Baldor when I was hired in 1970," McFarland explained.

Parts of the Baldor culture McFarland shared with the 360 Group included the following points:
• Job security comes only from customers;
• We always overreact to customer’s problems;
• We want to export products, not jobs;
• Bureaucracy is the enemy;
• Management’s role is to eliminate roadblocks keeping us from reaching our potential;
• We believe in promoting within; and,
• We desire to remain union free.

“We have an open door policy at Baldor, and don’t need a third party intervening,” McFarland said in explaining the company’s desire to remain free of a union.

He also stressed the importance of continuing education, saying that Baldor pays 100% of the costs for employees who seek advanced education.

"I went to John Brown University for many nights obtaining my degree," McFarland said.

McFarland is also proud that Baldor has not had a layoff since 1961

“I won’t be the first CEO in 50 years to call for a layoff," McFarland said. "On the Way to work, I want employees to think about, ‘What can I do today to make Baldor a better company?’ not whether they will have a job that day or not."

However, the company did initiate a workforce reduction of 900 that began in December  2008 and continued through June 2009. The reductions, the company made clear at the time, were from normal attrition and not through layoffs.

The company also offers profit sharing and stock options (eligible every five years) to every employee.

"If we work smart and make more money, every employee benefits which also influences stock prices to make the company more valuable," McFarland noted. "Fifteen percent of the company is owned by its employees and 80% of our profit sharing goes to non-officers."

Clarification: Baldor offered the following language to better explain the profit sharing plan: "The company shares 12% of the pre-tax profits to employees who have been with the company at least two years through the profit sharing plan.  Every employee also receives stock options every five years."