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A made-in-Canada solution

By Chris Atchison | June 20, 2013
A made-in-Canada solution
Craig Muhlhauser

Craig Muhlhauser is well aware of the expert opinions that long ago declared Canada’s manufacturing industry dead or dying. But as the CEO of Toronto-based Celestica Inc. likes to remind, reports of the sector’s demise are greatly exaggerated.

In fact, he feels skilled manufacturing is very much alive in this country, as evidenced by the growth and success of Celestica’s 1,200-person operation in north Toronto that feeds talent, ideas and innovations to the company’s 25 locations in 14 countries around the globe. Where others see a sector in decline, he sees one with a healthy future.

Of course, if there was a C-suite executive in North America qualified to make such a pronouncement, it’s Muhlhauser. An American who joined the publicly-traded contract electronics manufacturer in 2005 and became CEO in 2006, Muhlhauser has held high-level positions with large multinationals ranging from General Electric to Ford Motor Company. He understands what it takes to compete and succeed on the international manufacturing stage—not to mention the imperatives of maximizing corporate efficiencies and profit margins, particularly in such a highly-commoditized sector. “The easy thing for me to do when I was hired would have been to come in, see the infrastructure, see value in the (Toronto) site, shut it and move the work to Asia,” he explains.

But Muhlhauser did the exact opposite. After carefully analyzing Celestica’s vast talent pool—one featuring world-class product designers and engineers among many other top professionals—it became clear that despite challenges, Celestica could continue to grow on Canadian soil with the right strategic push and a commitment to realigning and refocusing the company culture. People and not products, the CEO determined, would be the key to entrenching Celestica’s position as one of the world’s leading contract manufacturers. “I have a lot of people in here who believe in this place,” Muhlhauser says. “I told them, ‘You believe in this place, I believe in you, but we have to do something different.’” The CEO embarked on a journey to differentiate the company’s service offering based on its high quality ideas, production, reliability and supply chain leadership. Focusing merely on the commoditized production of rudimentary components wouldn’t ensure long-term growth, he determined—what could was leveraging the skills of his talented employees. “We went through a transformation here where we used to showcase what we produced, but we now showcase our people. Our business is driven by ideas, innovation, values, behaviours and figuring out how to do something better than anyone else.”

What Celestica—which was spun off from IBM in 1994—does better than most other manufacturers is adapt and modify its processes and services at a lightning-fast pace to capitalize on growth opportunities. Consider the company’s recent decision to manufacture solar panels and boost its offering on the sustainability front. Although it had never dabbled in solar energy, just a year later Celestica now boasts a world-class lab where accelerated life tests help produce some of the highest quality solar panels in the world. Relying on that kind of operational speed and flexibility have been key components of Muhlhauser’s strategy to reimagine Celestica’s role in an increasingly globalized economy, while continuing to produce strong bottom-line results. As such, the CEO understood that it would be nearly impossible to compete with Asia-based manufacturers who were also producing its core electronics products such as servers and storage units—often at much lower prices than Celestica thanks in large part to lower overseas wages. Instead, he looked at the supply chain value Celestica could deliver and made a swift push into service areas such as product design and customer care, while maintaining the organization’s traditional contract manufacturing operations. The move provided a strong point of differentiation that leveraged the vast knowledge base at the company’s Toronto headquarters and satellite facilities around the world. Celestica’s Canadian base would no longer be known simply as a manufacturing facility, but rather an ideas incubator where innovation, collaboration and communication drove every process and client interaction.

The CEO was then faced with a fundamental question: How could Celestica apply those value-added skills to serve other industries that had not yet benefitted from outsourcing, while also driving growth across its core communications, computing and consumer electronics manufacturing business? The immediate answer was to diversify, offering contract joint design and manufacturing services to clients in industries such as aerospace, defence, complex electronics, healthcare and sustainable energy—sectors facing massive demographic, urbanization or data management challenges, and where the importance of product reliability inevitably trumps cost concerns—while implementing lean, Six Sigma operating and manufacturing processes to optimize quality, improve efficiency and minimize costs. The move paid off. “Ninety-five per cent of our customers rate us number one or two on their (satisfaction) score card,” Muhlhauser states. “We’re not the cheapest, but when it comes to flying airplanes, using navigation equipment or dealing with the world’s most advanced technologies, the quality, intellectual property protection, safety and integrity we provide is crucial.”

So, too, was a company-wide commitment to building and maintaining long-term relationships with customers rather than simply producing products on a transactional basis. To that end, Muhlhauser has focused on reinforcing a key message about his company to those customers who might be averse to outsourcing their manufacturing operations: Celestica has a strong track record, it’s a stable and reliable company—and it’s here to stay. He feels that focusing on a long-term partnership approach to client engagements is more than a successful strategy for Celestica, but also indicative of a major supply-chain trend. “I think in general the world is shifting to a business model that leverages partnerships, where people are moving to fewer suppliers with longer-term agreements and more risk sharing associated with the value,” he explains. “I think that’s how partnerships fall apart—they view it as a transactional relationship, they get complacent and meet the scorecard requirements, but no intrinsic value is created.”

Of course, when kick-starting any conversation with new customers, Muhlhauser does far less selling than merely highlighting the vast skills of his people and strong company-wide culture, factors that ensure quality production and cutting-edge innovation at every turn. How has he built that culture? From his earliest days with Celestica, the CEO has focused on driving employee engagement and demanding high levels of personal accountability and performance. “Employee engagement is my top metric,” he declares, adding that the internal engagement index for the company has been around 70 to 75 per cent, a stunningly high score for a corporation with more than 30,000 employees worldwide. According to Muhlhauser, that strong performance comes down to putting the right leaders in place to constantly reinforce and breathe life into Celestica’s values, providing opportunities for employees to achieve their full potential and giving them a voice in the company’s future. Employee brand ambassadors across the company also help to reinforce that strong culture, as do comprehensive orientation programs for new hires and consistent performance recognition programs. “I wanted to create a company where people feel opportunities exist everywhere, and if you want to realize your full potential and believe in that philosophy, we’re the company to work for.” To facilitate organization-wide collaboration and help maintain that culture-driving shared sense of purpose, Muhlhauser mandated the implementation of a web-based Google platform to allow for global information sharing, while encouraging concise and focused communication by doing away with lengthy PowerPoint decks and forcing communiques to be delivered in a single page whenever possible. 

As Muhlhauser puts it, building and maintaining a strong culture has largely shaped Celestica’s success—a point symbolized by the dozens of posters featuring employee photos and quotes that line the corridors of the north Toronto facility. The company’s growth, he points out, has largely hinged on management’s ability to provide staff with ambitious goals, then remove the obstacles to realizing them. “I’ve worked in a lot of companies around the world, and our Toronto site is looked at as the knowledge source for this company,” he states proudly. “We’re a Canadian company headquartered in Canada, but we’re global and that’s a symbol for what’s possible. And we’re just getting started.”

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