Ownership Mindset Drives Innovation: Milwaukee Tool CEO
The tool company achieved double-digit revenue growth thanks to a culture that stresses ownership, agility, and candor, says CEO Steve Richman.
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Culture Champions
Aleksandar Savic
When Steve Richman became president of Milwaukee Tool in 2007, he inherited an 83-year-old company with less than $500 million in revenue. It was “your grandfather’s brand,” he says, competing against rivals 10 times its size. Today, Milwaukee Tool has logged double-digit annual revenue growth for nearly two decades. Richman shares advice on three cultural elements that drove the company’s success: strategic clarity, extreme ownership, and candid discussions of setbacks.
When Steve Richman became president of Milwaukee Tool in 2007, he joined an 83-year-old company selling a limited range of traditional power tools. “We were this small little company. … Our brand was your grandfather’s brand,” Richman recalled. “It was the brand of old plumbers and electricians and mechanical contractors.” With revenues under $500 million, Milwaukee Tool was competing against rivals like Dewalt, Black & Decker, and Makita that were 10 times the company’s size.
During his tenure as president, Richman transformed the company’s strategy and culture and led a steady stream of technical and product innovations. Today, Milwaukee Tool is the global market leader in its segment, selling a wide range of cordless power tools for the building trades. Milwaukee Tool has achieved double-digit revenue growth, year in and year out, for nearly two decades. During the past 10 years, Milwaukee Tool’s parent company has generated total shareholder returns of 17% compound annual growth rate compared with 7% among its direct competitors.
Richman attributes much of the company’s success to great people and a distinctive corporate culture. Employees agree, having voted Milwaukee Tool one of Glassdoor’s best places to work for three of the past five years. Not only do employees love the culture, but they also say the company excels at living by its core values of empowered leaders, candor, obsession, and agility. In Glassdoor surveys, Milwaukee Tool employees mentioned empowerment, for example, twice as frequently as their counterparts in other industrial companies, and discussed it more than twice as positively. Here, Richman shares three elements central to the company’s culture.
1. Strategic Clarity
The statement “culture eats strategy for breakfast” is only half right. While misalignment between culture and strategy can derail execution, it is also true that a great culture alone is unlikely to drive business success if a company lacks a clear strategy to create and capture economic value. The need for strategic guardrails is particularly important for corporate cultures that emphasize agility. Absent clear strategic guidelines, employees often interpret agility as a license to pursue any opportunity they spot, without regard to its strategic fit.
“Our first couple of years, we didn’t care about culture,” Richman recalled. “We had zero focus on our user and [on] understanding what their pain points are. We had no relationships with our vendors and our strategic partners … and we realized that we needed to turn this around. And that assessment up front was really not about culture.”
In the first few years of the turnaround, the leadership team focused on the strategy of providing solutions to mechanical, electrical, and plumbing tradespeople to increase their productivity and safety on the job. To deliver on its value proposition to target customers, Milwaukee Tool committed to using lithium-ion batteries to power its tools (while its competitors relied on older battery technology and power cords) and forged strong relationships with retail partners like The Home Depot and with other key distributors and influential mechanical, plumbing, and electrical end users.
“And then a switch happened,” Richman said. Two senior leaders walked into his office one night and told him that the company’s initial success wasn’t sustainable without a focus on culture. “We had some talented people that were walking out of the door who said, ‘What’s in it for me, and why am I going to continue working at this level?’ And then new people [were] coming in saying, ‘I love all these aspects of the company — that we’re agile, that we’re innovative, that we’re disrupting — but am I going to be empowered, and what does “empowered” mean?’”
2. Extreme Ownership
In the early days of the turnaround, Richman and the senior team were “knee-deep in every single element” of the business, he said. But they realized that their hands-on approach wouldn’t scale. To continue launching value-added products and features, they needed to empower the employees closest to users to identify unmet customer needs and propose solutions.
“We had to empower people, but we had to explain what empowerment meant,” Richman recalled. “There were a lot of people that believed empowerment meant [they] could do whatever [they] wanted to do.” Richman and the leadership team wanted employees to think like owners — empowered to take initiative but also accountable for delivering results. “Part of what empowerment means is, when something goes wrong, when you smell that there’s a problem, when you see there’s a cost overrun, when you see you need help, you need to raise your hand; you need to ask for help and support. And that, unlike [at] other companies, is not a bad thing.”
“We had to empower people, but we had to explain what empowerment meant.”
As they adopted an ownership mindset, employees also needed to ensure that opportunities and initiatives supported the company’s overall strategy. “Empowerment was not a free-for-all,” Richman explained. In fact, the company recently changed the wording around its core values from “empowerment” to “extreme ownership” to reflect the importance of accountability for results. Emphasizing ownership can also help employees do what is best for the company as a whole rather than just their own teams, particularly when it comes to reallocating resources.
3. Candid Discussions of Setbacks
Surprises and setbacks are an unavoidable cost of trying new things while innovating. Since organizations cannot avoid these issues, leaders and employees need to discuss them frankly and quickly enough to minimize the downside while seizing the upside. “[Being] candid is the most challenging cultural element of any company,” Richman said. “And we believe that it really leads to success or failure.”
When problems arise, Richman explained, “it’s not about pointing fingers. It is about understanding why and understanding how together we are going to fix it. Now that is very different than somebody hiding what occurred and not [being] willing to bring it to the table. … In successful cultures, teams, people, parts of the organization can bring problems up and bring them up in a way to be able to say, ‘How are we going to rally the troops as one team, come together, fix it, and figure out why we got into this mess, and what are we going to do to not do it again?’”
Candor is a two-way street. To build trust, leaders need to provide an honest assessment of the state of the company and the path forward — a “candid communication of where you are,” Richman said. “And if you’re not willing to stand up and say where you are as a team and as a business and as a company, [or to say,] ‘Here’s the steps that we are putting in place to change,’ then how could you expect that people believe that the culture is the right culture for success or that you are going to walk the walk on that culture?”
Want to hear more advice from Richman? Watch this conversation and the entire series on the CultureX YouTube channel, on Spotify, or on Apple Podcasts.