The Tale of Malden Mills

A Bittersweet Deming Transformation Case Study

An un-dated photo of Malden Mills’ original factory in Lawrence, Massachusetts.

THE AIM for this post is to share with you a bittersweet Deming management method “success” story about Malden Mills in Lawrence, Massachusetts which I first learned of in Mary Walton’s 1986 book, The Deming Management Method. Their story is one of challenges, redemption, transformation, and principled leadership who stood fast where lessers would cut-and-run. It’s also a cautionary tale that even when management does the right things for the right reasons, circumstances can still conspire against them, reminiscent of the old Hebrew adage, “Man plans, God laughs”.

Background

Malden Mills was a part of the Lawrence, MA community dating back to the glory days of the American textile industry in the early 20th century, and was the city’s largest employer. Their name might not be immediately familiar, but you probably know about and maybe even use one of their most popular innovations: Polartec Fleece. Their customers “read like a catalogue of catalogues: L.L. Bean, Lands End, Eddie Bauer, the North Face, Patagonia. The Department of Defense… even ordered clothing made of Polartec, and Special Forces [used] it in Afghanistan for cold weather operations.” (Source)

However, in the 1980s Malden Mills’ future wasn’t so assured as they weathered an economic downturn, stiff overseas competition, accruing operational challenges, and an increasingly disappointed and disgruntled union workforce. Lawrence itself was on the ropes, having lost many Malden Mills’ competitors and suffering increasing unemployment.

The Situation at Malden Mills

Malden Mills was in serious trouble and in dire need of a new way to manage their operations with numerous issues in production and employee relations. Their situation was compounded in early 1981 when the bottom fell out of the real and synthetic fur market industry-wide, which would precipitate a price-war that summer and the company filing for bankruptcy protection by September. This directly affected the Flock Division whose losses now threatened to take the whole company down with it.

Within the plant employees were disaffected and disengaged, frustrated with management who seemed indifferent to their complaints about the working conditions where temperatures in some departments could reach 110F, the deteriorating state of their equipment, and unobtainable production bonuses designed to incentivize people to work weekends to make up for losses during the week. Unsurprisingly, they protested with high absenteeism rates, further straining relations with management.

Management themselves became disconnected from the problems of their workers, believing them to be unavoidable consequences of production rather than signals of trouble. While they did make some progress on improvements over the past decade that were Deming-aligned (eg. improving supervision, driving out fear, breaking down barriers between departments, and eliminating barriers to pride in workmanship) they still suffered from uneven application, with some supervisors resorting to yelling at staff to blame them for slipshod quality and waste. It seemed there wasn’t much joy at work for anyone, and they only stayed because it was a steady, if precarious, job in the midst of a recession.

What Did Deming Do?

A scant four months after his appearance in the NBC White Paper documentary, If Japan Can, Why Can’t We?, Dr. Deming received an urgent call from Bob King , Manager of Industrial Relations for Malden Mills, in October of 1980 asking for help. It was a crucial time for the company that was now facing declining demand for their products, significant losses to defects and rework, and a looming bankruptcy.

Edit: Forgot to include an interesting factoid about Bob King at the time I published this post: Dr. Deming mentions him by name in Chapter 2 of Out of the Crisis, in reference to his being in Japan in 1983.

After receiving assurances that they were serious about doing what needed to be done, Dr. Deming agreed to deliver a four-day seminar in February 1981 to a newly-formed community group King was heading up, the Growth Opportunity Alliance of Greater Lawrence, or GOAL, to lay the foundations for turning around the fortunes of Lawrence’s businesses, Malden Mills inclusive. Of the 180 participants, 35 were from Malden Mills alone, however the course proved too much for some with only twelve of the original thirty companies who registered completing the course.

After this, it was up to each company’s management team to apply the learnings.

What Did Management Do?

It’s not entirely clear from Walton’s writing how involved top-management was in the “transformation” of Malden Mills beyond delegating most of the activity to experienced line managers who showed the most aptitude and enthusiasm for applying Deming’s theory, such as Marshall Hudson, the #2 man in the troubled flock division. He was tasked with introducing the methods and teachings to the company, along with initiating improvement projects that invited employee participation rather mandating it.

Hudson and his peers began to put into effect changes they learned at the GOAL seminar, inspired by and aligned with Deming’s 14 Points, such as:

• Installing Personnel Coordinators in departments to assist workers with personal and work-related problems without having to go directly to management (#8 Drive out fear).

• Replacing the cynical production bonus system with profit sharing that rewarded everyone for production system improvements (#10 Eliminate work standards/quotas on the factory floor, substitute leadership. Eliminate management by objective, management by numbers, numerical goals. Substitute leadership).

• Efforts were also made to work with suppliers to reduce the opportunity for defects in incoming materials and to ensure uniformity in the direction of seam laps for backing, along with replacement of machines that could be demonstrated as the source of excessive variation and defects with control charts (# 5 Improve constantly and forever the system of production and service, to improve quality and productivity, and lower costs).

• Training was also improved to ensure everyone knew the correct methods for operating machinery according to a defined schedule rather than the highly variable methods of “worker-training-worker”, and how to collect system data for improvements (#6 Institute training on the job).

In short, from Walton’s version of events, it seems that there was a sincere and concerted effort on the part of Malden Mills’ leadership and management to study and apply Deming’s teachings throughout the factory.

What Were the Results?

Significant and manifold improvements were realized:

• By applying statistical process control techniques, $2M in savings were realized in a $45M division on an initial investment of $50k in training and consultant fees; $1M in savings alone was realized by using control (Shewhart) charts to account for flock and adhesive weights on one of their production lines;

• When it was discovered that the fabric cutting blades were causing rework, they replaced them with improved chromed ones that not only reduced seconds levels due to poor clearings, but improved longevity, saving $125K in regrinding and re-chroming costs;

• Employee morale and engagement steadily improved after the elimination of the production bonus system, contributing to better relations with management. Employee turnover was reduced tenfold to 25% while absenteeism dropped from 6.5d to 2.5d per 100 workdays and grievances went to zero over a two year period;

Despite still having to declare bankruptcy in September 1981, it seemed that things were definitely looking up for Malden Mills at the time Walton wrote about them, circa 1984-85. After reading about their success story, I wondered what ever happened to them: did they continue to prosper? Was the Deming management method still followed or did they backslide?

Epilogue: The Fire, The Rebirth, The Decline

In my research I learned that nine years after Walton published her book, a devastating fire destroyed Malden Mills in December of 1995, caused by an explosion near the boiler room that destroyed a newly-installed sprinkler system. The ensuing blaze, blown by 45mph winds, spread across three buildings and burned for 16 hours, injuring more than 30 workers.

Undaunted, CEO Aaron Feuerstein immediately set to work on how to rebuild the factory, and then did something completely unheard of: rather than laying off his workers, he continued to pay them for six months while the new mill was being built. It cost him $25M of his own funds. This selfless act of leadership earned him the title of The Mensch of Malden Mills, and would definitely put him into the Deming Leadership Hall of Fame for best-exemplifying what a leader should do in a time of crisis to support his workers.

By 1997, the new main factory reopened, and better days seemed to be ahead. In the video below, Feuerstein shares his story with Morley Safir in a 2003 60 Minutes interview:

While it looked like the worst was behind them, by 2001 Malden Mills was once again facing bankruptcy brought about by high debts from the rebuilding, and filed for Chapter 11 protection. Feuerstein was forced to step down as CEO as a result of the restructuring, retaining a lesser role in the company. In 2002, the business re-emerged with the help of investors and was renamed “Malden Mills Industries, Inc.”, but they once again faced bankruptcy in 2007 with their remaining assets purchased by the Gordon Brothers investment group. In 2015, the company, now called Polartec, relocated from Lawrence to Cleveland, Tennessee, taking 300 jobs with it. In 2019, it was purchased by Milliken & Co. The brand survives to this day, continuing to produce and market one of Malden Mills’ most successful products.

Aaron Feuerstein passed away on November 4, 2021 in a Boston hospital at the age of 95.

Concluding Thoughts

The Deming transformation at Malden Mills was, like many of the era, a product of crisis, but it is instructive in our current, yet similar, times of what can be done when leadership understands what must be done. It’s rather apt that Dr. Deming titled his first book on management Out of the Crisis, because this is literally what he intended to provide to anyone who would listen: a way out and forward from their predicament, guided by 14 Points and some knowledge about statistics and variation.

The results were nearly instantaneous: defects went down, quality and productivity went up, employee morale and engagement steadily improved, and management was now providing leadership instead of criticism and dictatorial control. From what I was able to uncover, it seems the period between Walton’s book (1986) and the fire (1995) were some of their best years, with annual sales of $425M and a payroll of $65M - likely all due to the recovery that began 14 years earlier. Despite this, I’ve not been able to find any acknowledgement of the role Deming played in the stories of either Aaron Feuerstein or the recovery of Malden Mills.

Feuerstein’s decision to pay his people out-of-pocket not only demonstrates uncommon leadership, but a mindset well-aligned with the first of Deming’s 14 Points:

Create constancy of purpose toward improvement of product and service, with the aim to become competitive and stay in business, and to provide jobs…

No doubt he thought it not only right, but a minor investment to keep the people who helped restore the business through the first crisis to help with the second. What led to debts overtaking the business is unknown, but it is clear that after he was forced to step down, the prevailing style of management crept back in, and the inevitable ending was all but written.

Reflection Questions

Consider the story of Malden Mills and its management team: What would you have done under similar circumstances? What aspects of their challenges are similar to the ones faced by your own organization, or others you’ve observed? Would application of Deming’s 14 Points help or hinder?

Consider Aaron Feuerstein’s decision to pay his employees’ salaries while the factory was being rebuilt: Would you or your leadership do the same in similar circumstances? Why or why not? What would you have done instead?

Suppose the fire had happened in 1981 instead of 1995: do you think CEO Feuerstein have made the same decision to support his employees out-of-pocket? Why or why not?

In your opinion, what could have been done to prevent the decline of Malden Mills? Were they really victims of circumstance, a case of “man plans, God laughs”, or a consequence of not managing what mattered? Would a Deming management method renaissance have helped, or were they too far gone?