Q&A With Joe Nettemeyer, CEO Of Valin Corporation

Industrial Distribution recently had the chance to speak with Joseph Nettemeyer, President & CEO of Valin Corporation, a company that made the 2012 Big 50 Watch List. Joe entered Valin as the company’s second CEO when the founder wished to retire and the semiconductor industry, which had been Valin’s bread and butter, could not sustain the business alone.  As a result, he has had to overcome tremendous challenges and growth hurdles in the past 12 years. Under Joe’s leadership Valin has grown from $25 million to $150 million in the company's most recent fiscal year. Industrial Distribution asked Joe what he thought was the reasons for Valin's success.

  • What kind of a background did you come to Valin with? How did this help to set you and Valin up for success?

I credit a lot of my success to Chuck Knight and Emerson because they gave me the toolkit I needed to lead and grow Valin.  I was with Emerson for 21 years, of which 16 years were spent at the vice president level.  Those years engaged me in sales, marketing, finance and operations.  Taught me the competitive advantages of being a best cost provider, and maintaining tight cost controls.  Most importantly it taught me to stretch myself, to take on the difficult missions, and gave me the confidence that any obstacle could be overcome. 

Emerson also provided me with outstanding training.  I learned how to develop a plan, test a plan, and remain committed to the execution of the plan, how to make acquisitions, and how to make the tough decisions that are required in a turnaround situation.  Everything I learned at Emerson was exactly the right skill set I needed to navigate through the issues and deal with the challenges Valin endured early in my tenure.  When things fell apart, I knew what to do and did it without hesitation.

  • What types of challenges did you have to combat after signing on with Valin?

In my first 120 days with Valin, we went from being a $75 million company to $25 million.  We didn’t lose market share, but still suffered a huge loss with the “dot-com crash” as 87 percent of our business focused solely on the high tech market. That was exacerbated by 9/11 and the contraction in our secondary markets.  On top of all this, the company had just bought out the ownership, was debt laden and had to learn how to manage for cash

But my biggest challenge in all of this, was telling my wife that I needed to take a 20% pay cut after we had just moved across the country for this job and had taken on the largest personal debt we had ever had.  She took that set back in stride and her support allowed me to concentrate on fixing the problem.  She took the high road in the discussion and her confidence in my ability to turn things around was inspirational.  I was not going to let her or my family down.  Failure was not an option.

  • Why did you – and why do you – believe that the ESOP model is what works for Valin?

I think people are more motivated when they have a stake in something.  I feel very strongly that if  the people working with you are also participating in the success of the company through ownership, they will make the personal effort investment necessary to make the company a success.

You don’t get 100% of employees who get it, but I would say that 75% do get it, including the managers.  Yes, you still have to struggle through selfishness and a sense of entitlement in some cases and you have to deal with that.  However, the ESOP focuses people on working  for the common good, not just a paycheck.  It’s the promise of a better retirement, and knowing that we share our success that makes the difference.

  • What kinds of acquisitions did Valin look for, and how did they become successful building blocks for the company?

We wanted to become a process solutions provider and had to assemble a portfolio of businesses to provide those solutions.  We had to diversify our business to include control valve systems, filtration, process heating, measurement, automation, and networking.

  • To what do you describe the majority of Valin’s growth in the last decade? What kinds of actions did you take to avoid the same slump as other distributors during this time period?

The key to our growth has been acquisitions, but in some areas – oil and gas – we made strategic investments to get in front of significant capital investment opportunities.  Our measurement solutions for the oil & gas industry have experienced wide acceptance and our revenues have doubled in this sector for each of the past three years.  We assess markets and pursue opportunities in those segments that will produce above average growth rate opportunities.  We see additional opportunities in the energy sector and a new generation of equipment being designed for the manufacturing of semiconductors and we plan to be significant participants in those areas of investment.

Consistent Profits, Consistently was the title of a Harvard Business Review article about Emerson.  That is our mission and we accomplish that by continued diversification into new geographies, new markets, and new solution portfolios. That diversification and consistency made the Great Recession a more challenging business year than normal, but not a life and death situation like we had in 2001.

  • What’s next for Valin Corp.?

We are focused on making more acquisitions and expanding our ability to sell services – not just inventory, but our engineering, design and build capabilities, and educational services.  These create value outside of the products.  Last year, about 35% of our revenue was attributed to services.  We are aiming to raise that percentage to above 50% in the next 3-5 years.  We strive to create value outside of the product, because if we are solely focused on selling our inventory, our only differentiation is price.  We live in challenging but exciting times and the best is still in front of us.