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Jan. 14, 2018
I felt like the only person at the Denny Sanford Premier Center headed out the door in the middle of a big game at the Summit League Tournament.
But I could stay for only the first half of that game back in 2015 because Dan Rykhus wanted to talk, and I had a feeling it wasn’t good news.
It was an especially cold March day, similar to this week, and it was a cold day inside Raven Industries, too.
Rykhus, who had been CEO for about four years, told me his company was laying off 130 people.
Caught in a so-called perfect storm of downturns in all of the industries it serves, including agriculture and energy, there wasn’t enough demand to support a workforce of about 1,200 people. Between attrition and layoffs, the total reduction was closer to 300 by the time it was done.
I gave them credit back then for bringing me in to share the news. Not every company approaches layoffs that way.
I give Raven even more credit, though, for what the company has done since then.
Last week’s announcement of a $5 million donation to SDSU to further precision-agriculture investment brought deserved accolades to a business that has continued to invest in ways others might not have.
I sat down with Rykhus and members of his leadership team recently, and I learned things that the rest of the business community needs to know about how Raven managed through its downturn.
First, Raven didn’t cut research and development.
That would have been seen as low-hanging fruit by some companies. Stick to what you know, stay the course, right? And R&D always carries some risk. Plus, there’s little to no short-term gain to be had.
“The reason we did that was we knew new product development would be what pulled us through the ag market, and it’s paid off great for us,” Rykhus said. “The only reason we’re growing in applied technology is because of the research and development investments we made in the last two years and new products we introduced as a result.”
The company’s Hawkeye nozzle control, for instance, has been a big sales driver. It makes sprayers ultra-precise, reducing spray drift and increasing consistency in spray pattern and accuracy in droplet size and placement.
While spending still hasn’t rebounded in the ag sector, Raven’s product has allowed it to gain market share in a challenging environment.
The R&D investment “was at the detriment of our earnings, so it took a conscious decision on our part to invest for the long term,” CFO Steven Brazones told me.
Another investment – purchasing Integra Plastics in 2014 – also required long-term vision. Shortly after buying it at the height of the energy market, conditions forced them to shut down the Corson plant temporarily.
“And now it’s 24/7, and the energy market we serve from films has come back,” Rykhus said.
Raven also didn’t lose focus on its culture.
“Despite having to pare back, we’ve always made team member development a top priority,” said Margaret Carmody, director of communications and administration.
The company has an internal leadership program called Raven University, “and the offerings have never been better,” she continued. “Leadership classes, financial planning and things we know impact team members inside and outside of the workplace.”
Raven maintained its commitment to helping employees achieve peak performance through mind, body and spirit, she said. A celebration recently recognized staff members who had completed walks along the nearby Big Sioux River.
“Sometimes when you have to make difficult choices, those are the first things to be cut and never come back, but it’s something we remained committed to,” she said.
The same goes for Raven’s internship program, which pays college students and puts them in real-life scenarios working on projects. Students wait in line six or eight deep at internship fairs because of the program’s reputation, Rykhus said.
“The ability of these young people is amazing. It blows our mind. We’re giving them some of the harder engineering work we do, and they’re taking it on just like that.”
Imagine if Raven had cut back on that. Think of the long-term ramifications to workforce attraction. Instead, their program can serve as an example for many other businesses here that I fear lag behind in what they offer students compared with employers in larger markets.
One last thing.
“You know,” I said to Rykhus as we sat in his downtown headquarters, “did you ever sort of regret investing in this building the way you did? It would be understandable if you had.”
I always sympathized with Raven on this from a timing standpoint. The company did an absolutely fantastic $15 million renovation of its headquarters shortly before its markets started declining. The project showed what’s possible when companies are progressive in how they design and furnish a workspace. But I had wondered for a while if the leaders ever regretted it a bit.
“That’s one thing I never second-guessed,” Rykhus replied. “It’s beautiful, and it sets us apart. When we get people here to see it and to see Sioux Falls, it blows their mind because they’re not expecting it.”
Again, it shows a long-term belief in the company and what it needs to do to be successful not just in one fiscal year. And, in a few short years, that strategy already has resulted in a return to growth. The company reported a 95 percent increase in earnings over the last 12 months. There are more employees today than when cuts began a few years ago.
“When we point to how we’ve grown this year, we can draw a black line right back to the choices we made,” Rykhus said. “That’s pretty satisfying.”
From a mass layoff to a $5 million donation, it’s what happened in between that really sets Raven Industries apart.