Q&A with Jim McManus, CEO of The Hinckley Co.Posted on Written by Richard Armstrong
Jim McManus, 49, has been chief executive of The Hinckley Co. since 2007 after establishing a career in hospitality and service management, luxury branding and positioning, sales and marketing, mergers and acquisitions and customer service.
His resume includes stints as CEO of Zoots, a startup dry-cleaning company that grew to become one of the largest in the country; a senior executive at Aramark, a worldwide managed services company specializing in food service and facilities services; a consultant at the McKinsey & Co. management consulting firm; and a financial analyst at Lehman Brothers.
He is a graduate of Yale University (1985) and Harvard Business School (1990).
The son (along with three sisters) of Irish immigrants, McManus grew up in New Haven, Conn., where his father was a custodian and his mother a nurse. Although his parents were not boaters, McManus soon found his way to the waterfront.
I grew up boating on Long Island Sound, he says. I pulled lobster pots as a kid and sailed small boats like Sunfish and Lasers. During summers in college, he crewed aboard large power yachts chartered out of Manhattan for day cruises and crewed on his father-in-laws cruising sailboats.
His three college-age children also are passionate about the water: All my kids are avid sailors, he says.
McManus took over at Hinckley shortly before the global economy nosedived, forcing a substantial downsizing and the layoff of 80 percent of the production force. Under the leadership of McManus and new ownership as of December 2010, the company appears to have navigated the recession and is emerging as a more efficient yacht builder and service provider. Hinckley plans to have its production staff comparable to 2008 levels by the end of the year.
Its an exciting time for us, he says. There are lots of things that are clicking. Weve seen a pretty dramatic turnaround, compared to the dark days of 2008 and 2009.
Q: The Hinckley Co. has been recruiting of late for all trades to work at its Trenton, Maine, production facility. Thats a long way from the big layoffs in 2008-09. How is business and how many people are you looking to hire?
A: Our production backlog is the highest its been in about six years. In fact, were all the way out to 2014 with some models.
We went from roughly 200 production people in early 2008 to about 35 in the middle of 2009 and were approaching very rapidly back to the 200 level. We have seen tremendous productivity and changes to our production process, so our actual productivity is higher with fewer people than it was in mid-2008.
And we also invested significantly in training, particularly over the last 12 months. We work very closely with the OEMs to make sure that our service and production crew are trained in state-of-the-art mechanical systems, hydraulics, electrical and electronics.
Weve learned so much since the downsize. On the way back up we spent a lot of time rethinking and re-engineering the production process and weve become so much more efficient in terms of how were assembling the boats. Some really good thinking went into that by the team in Maine, led by that core 35 people.
Q: The capital investment firm Scout Partners bought a majority stake in Hinckley 18 months ago, led by David Howe, an old friend of yours from your days at Harvard Business School. What motivated the move and what does it mean both short- and long-term?
A: It is only long-term. We dont talk short-term. Every conversation we have is about doing whats right for our people, for our customers and for our brand. I think there is an incredibly deep appreciation for the Hinckley brand and the place it has in the American marine industry. The company has been an innovator and known for delivering an incredibly high level of craftsmanship and service since 1928. We are stewards of that.
Its not about doing things for the next three months or six months or nine months. Its really a 15-year horizon that were focused on and thats the minimum time frame that we ever talk about.
When were out looking to raise capital we met many, many people who had a superficial understanding of Hinckley and the brand and were very focused on the pure financial returns, and they kind of flipped to the back of the book and looked at the income statement and balance sheet.
David and I literally spent two weeks talking the boats and the people and the service people and the strengths and weaknesses of the entire company in a very deep way before we even broached the financials. And I think that speaks loudly about ownership. Not that were not performance-driven and looking to grow, but its more about achieving the potential of the entire company and a brand than what the profitability is for this month.
Q: You joined Hinckley as CEO in 2007 as the economy was weakening. What were the keys to surviving the Great Recession and turning the company around?
A: I think the most important thing we did was that we were very honest with ourselves about what demand was going to be. We were very realistic. We didnt try to paint a picture of the future that inevitably wasnt going to happen.
When we came to July 2008 when things started to slow down, we looked at each other as a team and said, We dont think were going to sell many boats for some months, and its incumbent upon us to take the necessary steps to ensure that the company survives. And so we did. We downsized dramatically [at] every level in the organization, and we were very prudent about where we were spending.
Second, we did not let up on new product development. We were hopeful because our owners were really the last people to stop buying boats. We were strong through 2008 while we saw our peers starting to lose traction much earlier. I was confident I should say hopeful because nobody was confident about anything back then. I was hopeful that once things did stabilize our owners would be the first people back in, and we knew that if we continued to invest in new product when things turn we would have some really exciting products to bring to the marketplace.
Thats when we launched the new Picnic Boat Mark III. In the fourth quarter of 2009 we had a record quarter, and it was virtually 100 percent due to the new Picnic Boat MK III. And at the same time we were beginning the investment in the development of the Talaria 48.
Key No. 3 was really being open with the team in terms of where we stood at every step. We were honest about where things were and there were really tough decisions to make.
And the fourth key was that new ownership, which came in post-survival, allowed us to pick up momentum as we were exiting the down time.
Q: How has the high-end consumer market that Hinckley caters to changed in the last several years? Is that customer-base more recession-proof?
A: Our customer is discerning in the sense that they appreciate extraordinary quality and service, and our model as a company marries the craftsmanship and performance of the boats with service. Our eight service yards are a perfect match for what our customers and owners are looking for. It is very easy to own a Hinckley because we have this concierge service through our own Hinckley yards.
But theyre not recession-proof. I think everybody felt pain back in 2008. I do think that our clients have become increasingly focused on doing things in their lives that bring them closer together with their families and add enjoyment to their lives. I think that, in general, people are tired of kind of waiting around for better days. What were seeing is more and more people are saying, OK, I can afford to do this, I think my family would enjoy it, I think Ill enjoy the overall ownership experience since I love the boat and Im going to do it.
Q: Do you have a vision of how the industry as a whole will look when the recession is finally considered a part of the past?
A: I think powerful brands will continue to be powerful and I think companies that continue to invest in quality product and service and are committed to service will succeed. Honestly, when I wake up in the morning my priorities are service, service, service because its so core to who we are as a company. A lot of people dont realize that 65 percent of our total revenues are in service. Weve been building extraordinary boats since 1928, but there needs to be service over the top.
My view of the industry is that brands that have traditionally sold through dealers where it was much more about the volume than about the quality of the ownership experience I just think that thats a model thats fraught with issues. This isnt rocket science, and were starting to see dealer networks dismantle and struggle. Its more than economics. It is the quality of the overall experience. Whether its automotive or home design or construction, peoples expectations are higher.
So I think when the dust finally settles and who knows when that will be well have a collection of very strong brands, and those are brands that are going to have a business model that is centered around the service provided to their owners.
Q: In the past 15 years Hinckley has focused on expanding its yacht service business and now operates eight yards along the U.S. East Coast. How critical was that move to the companys success?
A: Service is absolutely critical to the company. Its stable dont get me wrong, it declined somewhat but it is stable in that we have strong customer retention rates and its a critical source of new customers. This is how I think about Hinckley: Were a direct-sale company, built to order, so its a very intimate experience. During the decision-making process youre working directly with one of our sales directors in designing your boat. Then youre working with a project manager directly while your boats actually being built. So through all your custom options you really get to know the people in the plant; you really get a feel for the company during the build process.
Then you take delivery of your boat, and Im fond of saying the real ownership experience starts at delivery. Youre introduced to a service manager in whatever yard youre closest to whos responsible for your ownership experience so that youre really enjoying your time on your Hinckley. Then, after you enjoy that experience for X number of years, you decide to sell your boat and you engage with Hinckley brokerage to sell your boat. So it really is a completely integrated, direct, intimate customer experience.
Q: The first Talaria 34 will be launched this summer, following the introduction of the T48 in 2010 and the revamped Picnic Boat in 2008 all featuring a substantial redesign that accentuates interior space. Can you describe the recent evolution of yacht design at the company?
A: We spent a lot of time on the issue of design and its so core to the debates we have internally. We think that the Bruce King lines have been extraordinary; the Down East style has obviously been extraordinary for the company. Now weve been working with Michael Peters in the most recent designs, starting with the Mark III Picnic Boat, and I will say that an area were most proud of is being able to maintain a beautiful aesthetic while dramatically enhancing performance. From a seakeeping standpoint, these hulls are just fantastic.
In terms of the future designs we are very focused on re-energizing the sailboat line. We have a number of concepts were now exploring with critical designers, and so thats exciting. In fact, we have a Souwester 42 were building in the plant right now, and we have a number of others were contemplating.
The future will tell whether new products are an extension of the existing Talaria model lineup or theres a departure from that, but were not fearful about changing the lines going forward. And were not in a huge rush. This is not a case of We need to get a new product out next month. We like the cadence that were at in terms of new product development.
Q: Why is new product in the pipeline so vital?
A: Because technology is changing so rapidly. We are taking weight out of the boats, incorporating new construction methods. We are always exploring new propulsion systems. The T34 has a Hamilton Jet thats unique to us. So new technology pushes us to make sure we are staying ahead of the innovation curve.
The other thing is, new product generates interest; it brings people in. They might not buy the new product. They may buy an existing product, but they came to the company because they were interested in the splash of the new product. When done right, it really attracts attention.
I look at it as wed really be different now without the Picnic Boat MKIII and the T48, and now the T38. They have been such huge contributors to our success over the last four years. Probably the most critical part of this is that we have ownership that is willing to invest significant capital in new product development.
Q: Hinckley shook up the industry in 1995 with the introduction of the original Picnic Boat with its jet drive propulsion. What role will innovation and technology play in future Hinckley yachts and the industry as a whole?
A: I think things are moving so fast, its unbelievably exciting. We have an internal product development committee, but we also spend an awful lot of time with outside partners to make sure that its not just us staying abreast of whats happening from a technological standpoint, whether its construction materials or were going through a dramatic upgrade of our jet sticks right now, adding significant features. I admit that other control systems have come very close to what we introduced back in 1995. You think about that its been close to 20 years since we introduced the first jet stick. There have been significant developments in the technology, and we need to stay ahead of the curve.
Q: Where do you see growth potential for Hinckley? Is it overseas, a more affordable domestic product, additional services offered?
A: Yes, yes and yes. We spend a lot of time strategizing about all of those opportunities.
One area is geographic expansion, but not only overseas expanding to the West Coast of the United States and really expanding our presence anywhere geographically.
On a product side, its introducing what could be smaller, more economical boats; it could be larger yachts and really testing the overall power side of the line at the top end. Then clearly there are even gaps in the existing model lineup between the 29 and the 55. So I think about, for example, the success of the 48. We had a gap between the 44 and the 55, which, from the standpoints of functionality and price point, the 48 has filled in beautifully.
Price point is something we spend a lot of time focused on, but it has to be Hinckley and thats where the debate lies. We need to live up to the Hinckley brand from a quality and craftsmanship standpoint.
From a service standpoint, its really about continuing to invest in our service business, to identify and work closely with our owners to package the right services to match their needs and desires. But the other growth opportunity in service is to make sure people understand that you dont need to own a Hinckley in order to experience the benefits of Hinckley service.
Q: What are the traits of a good leader?
A: I think a good leader is one who has compassion and really understands the wants and desires and objectives of the people in an organization and puts themselves secondary to that. Understanding what makes your team thrive and get excited is critical.
Second, someone whos not afraid to put the right people in the right places, and thats not always easy. Thats the responsibility of the leader. Its not about one individual; its about the whole of the organization.
The third is someone who really understands customers and is passionate about and uncompromising about what their customers deserve and what we can deliver. We need to be absolutely uncompromising in the craftsmanship of our boats, of the service we are providing, and leading by example in that area.
The stronger my team is, the stronger this company will always be and the stronger the level of service this company provides will always be. Im not a production expert, but I have a chief operating officer, Mike Arieta, who is extraordinary. And Im not an engineer, but I have Mike Arieta and Burr Shaw, director of engineering, who are just extraordinary product development guys and concept development guys and engineers. So my role is to help marshal resources and provide to them the tools they need to be successful.
This article originally appeared in the July 2012 issue.