Increased earnings to ensure new growth

He knows the company better than anybody from his 27 years with Grundfos. He may not be an engineer, but as a business economist he has a very keen eye for which “levers” to pull in order to increase value throughout the company. His vision is clear and the objectives tangible, so he is in no way nervous about the idea of assuming the enormous responsibility of being Niels Due Jensen’s successor. In this interview Jens Jørgen Madsen talks about the objectives for the years to come, the expectations of the Management team and employees, about his cooperation with Niels Due Jensen in his new capacity as Chairman of the Board of Directors, and about the private person Jens Jørgen Madsen.

- Niels Due Jensen and I are different people, but we have three things in common – and these three things will form the basis for my way of managing the Grundfos Group. First of all, the strong values that Grundfos has been built on. Secondly a philosophy of man that means we are serious when we say the employees are our most important asset, and finally, we are both very ambitious for Grundfos. These common attitudes will form the basis for our continued partnership in our new roles, and I am sure that we will succeed.

What are your ambitions for Grundfos?
- Niels Due Jensen has achieved excellent results for Grundfos during the past 25 years, and has built a sound foundation for the future. Therefore, the overall motto for my Management team and I will be: "Make a strong company stronger".
- We need to have clear, ambitious, yet realistic objectives. It is essential that the objectives are realistic. If you set unrealistic objectives, it is easy to create a loser’s mindset in the team, and the difference between a loser’s and a winner’s mindset is very big. I normally use the metaphor of the pole-vaulter who has yet to reach 2.20 metres. His motivation and belief in success will be extremely limited if the height at the beginning of the competition is 2.25 metres.

What are the tangible objectives?
- We have set an objective for the coming three to five years to put a greater focus on earnings, with continued increases in sales growth. The objectives are as follows:

  • 10 per cent in pre-tax profits in 2005.
  • 15 billion Danish kroner (2 billion Euros) in sales turnover in 2007.

The thinking behind these very tangible and realistic objectives is a desire to become the number 1 in the world of pumps.
- One decisive prerequisite for turning these objectives into reality is that Grundfos is able to provide trend-setting pump technology and world-class product quality, and these areas will continue to have top priority. I do not like setting tangible objectives for more than five years ahead – and I sometimes wonder why people make very detailed statements about what their company can and will do in 10 years. Then it is not a question of objectives – but dreams – but, on the other hand, there is nothing wrong with dreaming!

Why is it important to make more money?
- Because that is the ultimate measure of success for a company. There is a direct link between the company’s earnings ratio and its freedom of action. When earnings are satisfactory, we have the freedom of action to do the right things, and at the same time it is the best way to show social responsibility in the form of more jobs and an increased contribution to society at large. Increased sales in itself is not a guarantee for earnings, whereas increased earnings is decisive for being able to raise the future growth in sales.
- We all need to understand that improved earnings mean we can invest even more money in the future and in new jobs.

What are your expectations for 2003?
- There is still some uncertainty about the world economy due to the tense situation in Iraq, but we have prepared a flexible plan for 2003 allowing us to step on the brake if need arises, or – preferably – to speed up if the overall developments allow. We expect a sales growth of 5-7 per cent, and an improvement in earnings of 15-20 per cent. At the same time we will intensify our efforts in growth markets such as Eastern Europe, Russia, China and India. And we must not forget the record-breaking investment programme for 2003 of 950 million Danish kroner.

Where do you plan to increase production?
- It is Grundfos’ strategy to produce in all parts of the world. That remains vital, both when considering competitiveness but also when thinking about access to the new markets. Many countries have raised tariff barriers, for example India and Brazil, and if Grundfos really wants to enter these and similar markets, we need to go via local production. And this is one of the places where some of the future growth will come from. Also, Grundfos plans to step up production in Hungary, China and Taiwan, and to establish an assembly plant in Russia.

Which areas will you focus on as Group President?
- I would like to emphasise that managing Grundfos is not a one-man show. I am acutely aware of the fact that as Group President I have a special role to play, but it will be the team around me and my large and able group of Grundfos managers who – by means of good team-work – will lead Grundfos in the right direction. Grundfos has a strong mission, vision and good basic values – in short: A very solid foundation to build on.

What do you mean by setting the right priorities and focusing correctly?
- Grundfos ”only” has 10 per cent of the world market for pumps. So we have almost unlimited scope for increasing our market share. To do that, it is imperative we prioritise well and focus correctly in order to be successful in future. We cannot do everything at once and succeed with everything. The objective is to reach a sound balance between projects that yield earnings in the long term and projects where the investment returns quickly in the form of earnings.

What requirements does that make on the organisation and the employees?
- Teamwork is a key word. Grundfos has come very far in involving all employees, but there is still great scope for doing an even better job. One of the biggest jobs for me as executive is to make executives and employees cooperate well – both individually and across these two groups. That is one of the most important prerequisites for achieving even better results in the future.

What are your favourite ideas within management?
- To make complex things simple is an art – the opposite is a very bad habit, and it is amazing that something as simple as management can be a topic for an endless number of textbooks year after year!
- I will focus on simplicity, as I think there is a general need for that. That also gives great scope for streamlining and improving earnings. While we often see complexity being used to create an impression of knowledge and expertise, simplicity must be turned into an area of prestige.
- My most important jobs as chief executive will be the following:

  • To create agreement about clear, ambitious, yet realistic objectives.
  • To communicate these objectives as clearly and as often as possible to the entire organisation.
  • To list our efforts in order of priority and focus on the right strategies.
  • To compose effective teams at all levels of the organisation.
  • To ensure things do not become too sophisticated and unnecessarily complicated.

And your personal management style?
- My management style is characterised by the basic fact that we must treat each other with respect in everything we do:

  • Mutual trust (it is all right to draw attention to problems as that will often automatically reduce them)
  • Open and honest communication
  • Hard work (we must be efficient when “on stage”)
  • Highly result-oriented (we must always remember why we are here)

It has to be enjoyable – and it will be a bad day if we have not had time to have fun together
- I would like to be Group President to all Grundfos employees. One of the things that pleased me most at the reception held when I took up the position was the senior shop steward’s remark: ”Although I do not really know you, you were our favourite for the job. We think that you have the right personal qualities.” I will do what I can not to disappoint them.

What is most important to you in relation to the employees?
- My network in this company is widespread, and everybody can come to me if they have something important to bring up. However, they also know that they should not see me for the sole purpose of leaving the problems at my desk. I always expect at least a couple of sensible suggestions to solve any problems I am being told about. As chief executive you must be careful not to become “the man with the answer book” who has the correct answer to everything – nobody has.

How do you view other people?
- It is very important to me that our employees are whole people. The type of employees who talk about how they work day and night are problematic, because that will not last in the long run. That does not leave room for leading a full life, and I really doubt their efficiency, as it is a mistake to use the number of working hours as a measure of efficiency – quite the opposite, in fact. There must be room for family and leisure time pursuits in order for it to last.

How do you feel about being in the full glare of publicity – now more than before?
- I will have to get used to the increased focus on me as a person. I do not really have a great desire to be in the limelight, but I see it as a new and interesting challenge. Here, too, I will focus on credibility, openness and mutual trust.

Mention the three most important elements in your own spare time?
- My family, my family and my family. My family simply has top priority and is a vital basis for my professional activities. Golf is a very important leisure time pursuit for us, and “the Madsens” play a very good 4-ball – a team of the right sort.
- Together with golf, running is very important to me. Actually, I have run a marathon in 3 hours and 56 minutes – now I have reduced the distance to 10 kilometres – in the same number of minutes as my age. As I told you, it is important to set realistic objectives!
- I used to play handball at league level, but I now play a more passive role via the co-operation between BFH and Grundfos. Finally, if I want to forget everything around me, I really enjoy playing the piano, concluded the Grundfos Group’s new top executive.