Golden Threads

The Textor Story

Textor was a basket case when Phillip Butler bought the textile maker from its parent, the British company Lantor International, in December 2000. Everything looked wrong: Textor was in the wrong industry (textiles) at the wrong time (tariffs were ratcheting down) in the wrong country (high-cost Australia).

Sales were in freefall - from $17.5 million in 1996 to a low of $7.7 million in 2001 - and Textor had been making losses for years. Butler, then managing Lantor’s Asia-Pacific operations, was ordered to fire the staff, liquidate the assets, and put the business out of its misery.

But Butler thought Textor was salvageable with the right leadership, products and financial management. After convincing Commonwealth Bank that he had the skills to manage a turn-around, he got the financial backing to buy Textor.

The Challenge

To turn an aging, money-losing textiles business in Australia into a profitable, competitive and innovative industry leader.

The Solution

Butler started by treating his staff - all of them - like adults with a role in making the business profitable. Influenced by John Stack’s book, The Great Game of Business, Butler introduced open management in May 2001. Now, on the last day of each month, the machines are shut down and a stocktake is done. Then, at 2pm promptly, the entire staff of 44 meets in the boardroom to draw up a profit and loss statement for the month on a huge, four-panel whiteboard.

Butler says: “The first time we did the P&L, the final number was a loss of about $60,000 for the month. There was a hushed silence. Then, a voice from the back said, ‘Phil, what do you want us to do now?’” From that moment on, everyone from managers down to the staff member who handles CHEP pallets has been focused on profitability. Everyone has a number to report each month. And 10% of annual profit is split evenly among all staff.

Butler switched production from products such as automotive fabrics to medical textiles (such as the yellow wound cover on bandaids) and parts for disposable nappies. But he was not aiming for high-margin products - the conventional strategy for competing with China’s cheap textile producers.

Instead, Butler prefers low-margin, high-volume, cash-generating products that keep assets active and reduce labour inputs. Labour costs have been steadily falling as a percentage of overall costs. Textor competes on speed, quality, innovation and proximity to its key clients such as Kimberly-Clark.

Waste and inefficiencies such as sickies, which Butler frankly calls “fraud”, have been rooted out. He began by paying each staff member $100/day for each sick day they did not take off, or about $800 at the end of each year for no sickies. (Legitimate sick days - those with a medical certificate - are not penalised.) When that didn’t work, he upped the figure to $200/day or $1600 at the end of the year. Last year, sickies were reduced to zero. He also aims for zero residue from production.

Butler has undisguised contempt for the money men of the 1980s and 1990s who tried to run manufacturing businesses - and ran them into the ground. He has a near-obsessive focus on getting factory-floor processes working as efficiently as possible using the very best equipment.

The big textile machines are now run by touch-screens like ATMs rather than decks of red and green buttons. Computerisation will soon run the machines and staff will monitor the computers. The aim is to maximise asset utilisation, which, in turn, fuels the flow of cash through the business. Butler pays more attention to the balance sheet than profit and loss as a measure of business health.

Finally, Butler has made a firm friend of his bankers at Commonwealth Bank. He treats them as his outsourced risk advisers (such as when making big new investments), and regards them as financial partners in the business.

The Result

Textor’s transformation is reflected in its financials. Turnover for 2006 is forecast at $13.6 million with a profit of $1.2 million. In 2005, Commonwealth Bank showed its confidence in Textor by approving an $11.9-million investment in new, state-of-the-art German textile equipment that will allow Textor to produce a new generation of products.

Butler lives by the Toyota adage: “We get brilliant results from average people managing brilliant processes. Our competitors get average results from brilliant people managing broken processes”.

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