Manufacturing: Mr. Fix-It

Written by ProfitGuide Staff

Never tell Peter Hart that “if it ain’t broke, don’t fix it.” In defiance of that popular aphorism, the president & CEO of St-Laurent, Que.-based Rideau Recognition Solutions Inc. not only saved his business from potential failure, but also lifted it into the ranks of Canada’s Fastest-Growing Companies for three years in a row. By reinventing the producer of custom jewellery and promotional merchandise he’d purchased from his parents in 1978, Hart has created customer value that his rivals — even the low-cost Asian factories that threaten manufacturers across Canada — have not been able to match.

Before Hart took the helm, Rideau (then called Stephenson International, after its 1912 founder) sold plaques, mugs and other types of corporate merchandise to national clients such as Zellers. Meanwhile, the European subsidiary Hart’s parents had set up a few years before was churning out millions of costume necklaces, bracelets and earrings for firms such as Nino Ricci and Avon. When Avon bought the European arm of the family business in 1977, Hart and his three siblings, all of whom owned shares in Stephenson, made enough money to buy out their parents. But if Hart was riding high on Stephenson’s success, the 1980s made him uncomfortably aware of a new trend in manufacturing that threatened his company’s existence: offshoring. Increasingly, clients were buying from Asian suppliers for a small fraction of the price Stephenson charged. “We were faced with a real challenge,” Hart remembers. “How do we grow our company?”

The answer: adopt a new philosophy, tie yourself to customers and invest big in technology. As a result, Rideau, which the firm has been called since 1983, has evolved into a global supplier of traditional and Web-based employee- and customer-incentive programs that can scale to any size. It’s also the 176th-ranked firm on this year’s PROFIT Next 100, with five-year growth of 301% and 2007 sales of $51.9 million. Yet Rideau’s transformation from pure manufacturer to diversified supplier of products and services is still not complete.

When Bruce Beatty, the designer of the Order of Canada, went looking in 1983 for a Canadian firm to make the medals, he asked Hart to come to Ottawa to explore the possibilities. The discussions gave Hart an admiration for the Order of Canada’s system for recognizing people who’ve demonstrated excellence. When Hart left Ottawa that evening, he had a new contract, an idea for a new company name (after Rideau Hall, the official residence of the Governor General) and a vision: he’d sell customized programs that would allow big companies to easily reward their employees on a regular basis — but he would still manufacture the rewards. No longer would he sell only corporate gifts to order; he’d sell a turnkey recognition system that would encourage customers to stick with Rideau.

Hart first approached clients such as RBC with a model that linked gifts to tenure (e.g., a gold watch at 25 years). “In the beginning, we saw [recognition systems] simply as an outlet for our products,” Hart says. But by 1995, RBC wanted more. Hart jumped on the opportunity to develop and manage a behaviour-based recognition program for Rideau’s long-time client — one that would reward not just employee milestones but their actions, such as meeting sales targets. Around this time, Rideau also started sourcing more rewards, such as gift certificates — an obvious benefit to companies that otherwise would have to deal with separate vendors to distribute, say, movie passes to their staff. It was a step in a new direction, and, ultimately, the diversification opportunity that Hart was looking for. Employee recognition and performance incentive programs quickly became Rideau’s core business, spurred by explosive growth in employee perks aimed at retaining a new generation of disloyal employees.

Keeping Rideau’s total number of clients low has also been key to its strategy; it currently provides programs for just 25 big-name customers such as Bell Canada, H&R Block and Scotiabank. With such a short client roster, “we can invest time in building strong relationships with our clients.” But managing recognition programs for large corporations, many of which have more than 100,000 employees, poses a challenge: mountains of paperwork. “We were branding and customizing their programs, providing the product and doing the complete back-office administration, which was all paper-based at the time,” Hart recalls. The emergence of Web technology offered a more efficient way to track and dispense employee rewards. “By 1997, we realized how much application the Internet would have to our business and decided that technology would drive everything we do,” says Hart.

In 2001, Rideau plunged head-first into its own technological revolution, developing its rewards-management software in-house. Since then, it has spent millions on IT; today, one-fifth of its 210 employees are programmers. “We became bigger than most Web developers,” says Hart.

Although Rideau still sells promotional products such as recognition medals, its online rewards systems represent 94% of its business. Now, a client such as Boeing can track multiple recognition programs involving thousands of people with a daily download of information from Rideau. “Even today, we’re spending millions,” says Hart. “When this economic downturn is over, we’ll be really well placed and able to maintain the competitive advantage we’ve always had.”

Moving Rideau’s programs to the Web also opened its door to multinational clientele. Since 2003, its export sales have grown from 3% to 45% of total revenue. What’s more, in tracking and recording the performance of thousands of employees around the world, Rideau has developed a “deep and well-founded expertise in employee performance,” says Hart. He hopes to parlay that expertise into performance-management software for HR departments — more evidence that the best kind of transformation never stops.

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