In a country like Argentina, where growth is negative, inflation is approaching 40 per cent and foreign reserves are running low, bold and courageous leadership has never been more important. After all, history has shown that those with the guts to step forward and lead change during a downturn will be one step ahead during the recovery.
But there is more to courageous leadership than being confident enough to take a risk when the rest is hunkering down and waiting for the storm to pass. Courageousness can also mean being prudent, self-restrained and humble – especially in a highly cyclical marketplace like South America.
Argentine family business Metalúrgica Hermann is a company that may have found just the right balance between entrepreneurial bravery and conservative values like prudence and moderation. According to Joint Director, Hugo Hermann, retaining those values in an age of unfettered capitalism is key to ensuring the long-term viability of an organisation, even if they often come second to the frantic day-to-day business.
“I believe prudence in business is the wisdom to see what is virtuous, suitable and profitable. It is about knowing when to hold them and when to fold them,” he says. “Hermann is a classic family company based on ethical behaviour, leadership, competence and teamwork. The entire business has to reflect that attitude, especially now that the economy is so unpredictable here in Argentina.”
According to Hermann, rushing headlong into the future can backfire quickly if there is no underlying framework of traditional values in place, which is why Metalúrgica Hermann integrated a fair amount of tradition into an otherwise progressive growth model.
One reason for the survival of such modesty in the age of economic Darwinism may be that Metalúrgica Hermann has come from very humble beginnings. It was established in 1973 by Alejandro Hermann as a one-man repair shop and only slowly moved into vehicle manufacturing. In 1978, Alejandro sold his first metal-based semi-trailer, and the rest is history.
Rising demand for Hermann-branded transport equipment soon prompted Alejandro’s three sons to join him. Today, Jorge, Hugo and Juan Hermann jointly run the family business – Jorge as Production Manager, Hugo as Administration Manager and Juan as Sales Manager – while Alejandro has officially retired. However, you can still see him around talking to employees and having lunch in the common dining room almost every day.
Now the top-selling brand in Argentina, the second-generation family business is one of the few capable of enduring the current economic decline in the country. In fact, it has grown from a market share of 2.5 to 11 per cent over the past decade, having produced some 1250 units in 2013 (60 less than in 2012).
Given Argentina’s highly fragmented transport equipment scene and stagnating economy, that development is often likened to a micro-economical miracle – especially since the competition is plentiful and hungry.
According to Hugo’s brother Juan Hermann, it all comes back to the values that Alejandro espoused some 40 years ago. “Like every family business, our organisational culture and management style are largely influenced by tradition, and I believe that’s a good thing in our do-or-die world. Business is not just a numbers game; sometimes you just have to trust in your gut feeling and go with what you believe is best for the business.”
Juan says that more ‘informal’ approach to business has also made Hermann more open to collaboration. “We regularly visit leading businesses in our industry, for example Guerra in Brazil, and are in contact with the automotive industry, such as Ford de Argentina and Mercedes-Benz,” he says. “It’s a classic ‘exchange programme’. We ask those who are doing a good job to let us learn from them and share information that could help both of us advance. We also participate in or attend trade shows around the world to make sure we are informed about market trends and have the necessary knowledge to translate them in production processes.”
One result of that collaborative management style is the introduction of a lightweight B-double in 2012. At the time, B-doubles were only allowed in the Argentine state of San Luis, but Hermann could see the potential of the new design. “We had seen what high performance vehicles were able to do in Australia and Scandinavia, so we decided to give it a go and maybe start a new trend here in Argentina,” says Juan, who consulted a team of experts from round the globe to guide Hermann through the design process and support the company’s lobbying work.
Today, only two years after Hermann’s first foray into high performance vehicle design, the political framework in Argentina has shifted. In April, President Cristina Fernández de Kirchner surprised the trucking community with the announcement that a piece of legislation authorising B-doubles to operate nationally had been signed. The legislation would allow for high productivity vehicles measuring up to 30.25m in length and weighing up to 75 tonnes to operate throughout Argentina.
“In a moment where many provinces were pressed to enact similar legislation, the fact that now there is a national one they can adhere to is extremely helpful,” says Juan. “But just like in other countries that have authorised high performance vehicles before Argentina, it won’t be a stroll in the park until we really see them on the road.”
Despite that restraint, Juan says contributing to the evolution of Argentina’s commercial road transport industry is a reward in itself and proof that the family’s considerate and thoughtful way of doing business can indeed go together with the principle of continuous improvement.
“More importantly, it’s a sign that focusing our energy on the local Argentine market was the right decision,” adds Hugo Hermann. “Sticking to one area of expertise at a time is often more effective than diversifying and growing too fast. We try to dominate one segment of the market at a time and create a unique culture around it.”
Unsurprisingly, Hermann’s main market is the local Argentine one, where the company’s main competitor is Brazilian powerhouse Randon. Only two per cent of the Hermann production is currently being exported.
“Argentina is our main market and I believe we have a lot of growth potential here,” says Hugo, pointing at the growing importance of aftersales service in South America. “Our aftersales service is what distinguishes us from the rest of the pack and is an important driver for growth.”
Over time, Hermann has developed a network of 20 dealerships and sales offices across Argentina to ensure its clientele has direct access to qualified Hermann personnel at any time. What’s more, the company’s frontline staff is right at the source of information on the latest industry trends, making for a highly responsive business model.
One recent industry trend the 240 people strong Hermann team has registered is growing interest in lightweight transport equipment. “People now demand less heavy, more customised and more efficient equipment, so we work hard to adjust our range accordingly,” says Jorge Hermann – revealing that the B-double presented in 2012 was the first to use lightweight steel and a more refined chassis design.
A second major trend is partly driven by the Hermann organisation itself – safety. Jorge comments, “Focusing on providing safe and reliable equipment is another way of differentiating us from the competition. Even though a safe vehicle could cost more than a standard model, we do recommend certain safety features to ensure our industry is moving in the right direction.
The company’s business development expert adds, “In Argentina, both air suspension and disc brake technology are still seen as expensive add-ons, but we’re trying to educate the market one fleet at a time. We also point out they can lead to productivity gains over the long run, which has been quite a successful strategy.
“At Hermann, we want to actively contribute to the safety of our industry instead of just making a quick sale. Even if it may sound antiquated, we believe that we are one big family with an obligation to look after each other – especially now that the economy has hit rock bottom.”
Going forward, Juan, Jorge and Hugo want to pass on the family’s work ethic to the next generation. “We believe our company will continue to grow in the time to come, just as Argentina’s economy will grow again,” says Juan. “By then, a new generation will take over and they will bring even more strength and creativity to the mix to ensure we can continue the journey Alejandro embarked on in 1973.”