Executive of the year: Rick Valeriote leads by example

GUELPH, Ontario—Rick Valeriote has been part of the rubber industry for more than four decades.

The journey has taken him from working for his dad, to being a CEO before he was 30. From being fired to being a consultant for several years. From joining with two partners to form their own rubber molding firm, to selling that company to a European rubber firm, but remaining to run the business as chief operating officer.

That company is Poly-Nova Technologies L.P. in Guelph, owned since 2011 by the Starlim/Sterner Group of Austria. During the time since that acquisition, Valeriote has led Poly-Nova's staff of 150 on a path of transformation where sales have roughly doubled and most of the molding operations—located in two facilities—are either fully or partially automated.

And he has done that all while sticking to the core values and principles instilled into him by his father and shared by most of the people he has worked with, including Poly-Nova's current owners.

For these qualities and the success that he has helped Poly-Nova accomplish, Valeriote has been named Rubber & Plastics News 2017 Rubber Industry Executive of the Year, the first leader of a Canadian company to receive the honor.

"Bricks, mortar, machines. Everybody can do that," Valeriote said in an interview at the firm's headquarters. "But people are a different story. These people are running the place on a day-to-day basis. I have a simple management approach. I manage results, not activities. If the results are what they are supposed to be, then I'm not managing anybody's activities, because these young men and women who are making it happen are self-motivated. They don't need me to be watching over their shoulder."

Rubber roots run deep

As early as age 14, Valeriote would help out cleaning molds at Silcofab, the former molding company started in Guelph by his father, Joe Valeriote. Of course as a teenager, he didn't always want to get out of bed and accompany his father into the facility.

"I remember him getting me out of bed and saying, 'I'm giving you a job. You need to come in,' " Rick Valeriote recalls. "I was not at all happy to be there, as sleeping was more important."

But that changed over time. In high school, Rick Valeriote was convinced he wanted to be a lawyer. But as much as he thought he would enjoy that career, he decided he would rather join the family business. "I worked there in the summer," he said. "I was always allowed to be involved in some way or another in the production process. I learned to run presses, the extruders, the mixing equipment. And the minute you have that experience, it gets in your blood."

There was no pressure from his father to join Silcofab. It was all Rick's idea. Of course, Joe Valeriote did have one decree for his son. "His exact line was, 'No degree, no job,' " Rick said.

Now Rick didn't want to just copy what his father was doing. He wanted to bring something else to the table. As engineering seemed a logical choice, he did seek advice from Joe Valeriote on which area to study. "He said, 'I need a chemist. A chemical engineer would be somebody I would be happy to hire.' "

So Rick went to Ryerson University in Toronto, graduating in 1975 with that degree in chemical engineering. And from there it was straight to work. "My friends at the time all headed to Europe for a backpacking trip, but I ended up literally going from writing my final exams to working," he said.

Joe Valeriote was a tool and die maker and didn't have a university education. So he assumed that because his son had a college degree that he knew everything off the bat. "I had theoretical education and some practical, but the minute I walked in the door and was brought in as an engineer, that's when the actual learning started," Rick Valeriote said. "I knew how to run all the equipment, but I had to learn the actual technology of how to formulate the compounds and how they worked."

Not everything was smooth sailing. He remembers trying to develop a compound to be used in a hose application. He did all the formulating but didn't pay enough attention to the type of color he was using. The compound used a color that ended up consuming all the peroxide that was in the rubber, so it wouldn't cure.

"My father said to me, 'You have to break a few eggs, but this will have to be the last eggs that you break because you just ruined 200 pounds of compound,' " Valeriote said. "I made very certain that never happened again."

He was 21 at the time, and it was an example of how his father provided him the opportunity to learn. He began to be given responsibility outside his normal scope, but he dedicated himself to learning, putting in long hours in the process.

Valeriote figures it took him two to three years to move from his theoretical education to learning what he needed to know in the real world. "If you look at the business we're in, we're a converter of raw materials to finished goods," he said. "This business is a technical business, which you aren't going to necessarily learn in a university setting. You're going to do it with work experience."

Becoming a CEO too early

Joe Valeriote, now 91, retired as CEO of Silcofab in 1981, as he had other things he wanted to do. That elevated Rick to CEO at age 29, "way too young in retrospect," he said.

In 1989 Silcofab was sold to the Dowty Group of the United Kingdom. It later went through a number of other owners, including Smiths Group, John Crane and finally Trelleborg. The Guelph operation was closed about a decade ago, with the work moved to Mexico.

Rick Valeriote remained at Silcofab only two years under Dowty ownership.

"What happened as is often the case in an acquisition, I was terminated, fired—whatever you want to call it—as president," he said. "I was handed a very nice severance package and off I went."

Dowty at the time had gotten into a defensive hostile takeover mode. As commonly occurs, the acquiring company eventually will put in its own CEO, and that's what happened in Valeriote's case.

"They did me a huge favor," he said. "I wasn't at all surprised. They put in a guy from the U.K. to run it. Our philosophies were different. At the time I was fundamentally opposed to how the business was being run. That's the difference between patient (private) capital, and the reality of public ownership. I understood fully the pressures they were under. But when you grow up your entire life in a family owned business, things are different than in that public setting."

Valeriote wasn't idle long. In fact, his long-time friend, Claude Sauquet, who was with Gerland Group—now Saint-Gobain—called him the morning of his termination jokingly asking why Dowty hadn't fired him yet. "I said to Claude, 'If you give me a couple of hours, that's going to happen,' " Valeriote said. "He went dead silent and waited to see what I meant."

When he finally understood Valeriote was serious, the two made plans to talk later in the day. Sauquet told him he needed Valeriote to come to France immediately for potential work as a consultant. So after being fired on a Thursday, he flew to France three days later.

"On the plane and in my hotel room, I wrote my proposed consulting agreement," Valeriote said. "I went and met with Claude Sauquet and the managing director. We sat down and had a nice talk. They said, 'What do you have in mind?' They looked at my proposal, and said, 'That's wonderful.' They signed it with no discussion at all."

Valeriote worked in a technical advisory capacity, building machines that are the precursors of what are on Poly-Nova's production floor today—wasteless, flashless molding machines. He also built them for other clients under his Nova-Sil consulting business, and worked with Gerland in other areas such as medical goods, and seals and gaskets for aircraft.

"Every area I had expertise that they could use, I was invited to participate," he said. "I chose to learn to speak French, which for a Canadian is relatively easy. There, management execs all spoke English, but in the factories they didn't. When I was here, I would listen to French tapes. When I was there, I spoke French. It took six months to get to the point where they would start to answer me in French. That for me was a huge accomplishment."

Valeriote was under a non-compete clause with Silcofab at the time, and he felt it was best to go to Europe, spending two weeks a month there for three years, not an easy task for someone with a young family. But it was important to him to do what he felt was best for the significant number of people who remained behind at Silcofab who had helped him build up that business.

"I had a moral responsibility to those people not to do anything to damage them," he said. "That's the same approach that my father would have taken."

Establishing Poly-Nova

After consulting for three years, two business associates from when he was at Silcofab—Tom Hahn, owner of Hahn Elastomers, and Tom Wood, owner of the Epsco Inc. sales agency—decided they wanted to start a rubber molding business. "They said, 'Rick, you know how to do this,' " Valeriote said. "I was still consulting, and the next thing you know, Poly-Nova Inc. (as it was originally known) was born.

From 1993-96 the firm operated in Plymouth, Mich., inside of the Hahn Elastomer factory there. It made parts that Hahn already was selling, but previously was buying from outside vendors. "I set the whole thing up from scratch using the technology that I picked up from a good friend of mine who made the type of molds and machines we needed, and off we went," he said.

By 1996, the company was outgrowing the space in Detroit. And the automotive industry—which currently accounts for 80 percent of Poly-Nova's business—was booming in Detroit, so there was a shortage of labor. He suggested the firm consider relocating to his home area of Guelph, where the economy was still in transition from the North American Free Trade Agreement that initially resulted in a slew of factory closings.

In July 1996, Valeriote and others came to Guelph, drove down the street and saw the building was available for sale that still serves as Poly-Nova's main manufacturing site. They contacted the realtor and struck a deal.

"On Labor Day weekend 1996, all those machines (in Plymouth) were put on flatbed trucks," he said. "We had prepped this building for them. The move started on the Friday and we were back producing parts for our largest customer at the time, Whirlpool, on Tuesday of the following week."

For 26 open positions, they had 400 applicants because of the economic conditions. But they set out to build up the business, utilizing the technical skills they had in the business, bringing in more people and helping them get up to speed. "I did the same thing for them that my father did for me," Valeriote said. "I did it by being out on the floor and training people, explaining how the machines worked and the chemistry of the material. I knew full well that the company would not succeed unless there was somebody other than me driving it."

But grow they did, though Valeriote wasn't sure if it was more because they were lucky or good. Customers would come to the site, talk with the team, and Poly-Nova normally provided customers design and material assistance. Poly-Nova runs fluoroelastomers, silicones, fluorosilicones and HNBR, among other materials.

"We were a little over the top," he said. "Part of the culture here is a sense of urgency. My father was the same way and so am I. When there's a customer who has a problem, the sense of urgency for us to solve it ends up being significant. We'll bring whatever resources to bear that we need to solve those problems."

By 2011, sales had grown to about the $20 million range, he said, the business was quite profitable, and employed about 120 at the time.

Valeriote really didn't have a desire to sell, but there also was the sense that Poly-Nova had gone as far as it could on its own, and may need additional resources to reach the next level. Plus his two partners—who weren't directly involved in the operations except for the use of Wood's sales agency—needed an exit strategy.

Enter Starlim/Sterner

The courtship between Starlim/Sterner and Poly-Nova was a long one. John Timmerman, Starlim North America Corp. vice president, had worked with Valeriote years earlier at Silcofab.

Over lunch, Timmerman suggested a simple strategic partnership, where Starlim, a liquid silicone rubber molder, would refer customers who wanted to mold using other elastomers to Poly-Nova, and likewise Poly-Nova would return the favor with certain LSR prospects.

In the process, Valeriote was introduced to Thomas Bruendl, CEO of parent Starlim/Sterner Group in Austria. "Probably the best way to describe it is, we hit it off," the Poly-Nova executive said. "I am all about technical excellence, and Starlim's all about technical excellence."

It took two years of going back and forth, meeting a few times a year. It started out as a friendship, then one day Timmerman and Bruendl asked if he would ever think of selling Poly-Nova. "Quite frankly, I had no intentions whatsoever," Valeriote said. "But when the idea came to the table, I had two choices. One was to keep it to myself, which I would never do. The other was to tell the partners."

So negotiations started, the sides reached a deal everyone could live with—Valeriote retains a small equity stake—and the rest, as they say, is history.

Valeriote initially had some significant concerns about selling, given what had occurred early in his career at Silcofab. But he believed in the integrity of those running Starlim/Sterner—also a family owned company—and what they said they would do at the time of the purchase is exactly what has taken place.

"For me, the most important thing was not to leave the people behind who helped me to create this company," he said. "The staff and management team are the same ones who are here seven years later."

That is not to say there haven't been changes. He told the staff that to continue to move Poly-Nova forward, everyone had to commit to continuing education to bridge what their skillsets were to what they needed to be.

And that includes Valeriote, who constantly is taking courses to update skills and continue learning. "My biggest fear is that somebody's going to ask me a question I can't answer, and it will be because I didn't keep myself current," he said.

Project Meta

Valeriote believes Starlim wanted to acquire Poly-Nova partly because rather than refer prospective customers not needing LSR services to the Guelph firm, they would be able to keep those customers in-house. But more importantly, he said that companies the group has acquired over the years—firms such as ATG and Silcos—all had what he views as "technical respect."

The Austrian parent also asks this question: "If you were to dream what this could be like, what is your vision?"

For Poly-Nova, Valeriote said the "holy grail" was for the molding presses to open at the same time and every single part come out of the mold perfect. That became the basis for what he dubbed "Project Meta," where they would strive to drive all variation out of the process.

That led to in-house development of molding operations that were fully automated where feasible and highly automated elsewhere. Not everything went smoothly at first. The first attempt at a system ended up as a boat anchor, as the joke goes, bringing back visions of the 200 pounds of compound a younger Valeriote ruined at Silcofab.

He said Poly-Nova had the vision at the time, but not the capabilities. They taught themselves how to program, and brought in other people with new expertise. And he credits Starlim/Sterner for not forcing Poly-Nova to use its processes, knowing that its state-of-the-art LSR molding lines weren't transferable to what Poly-Nova needed.

As it moved forward, it knew it needed multiple robots to be used in the molding cells, with the jobs of employees evolving along the way. Eventually Poly-Nova got the knack of it, with scrap rates—traditionally 2-3 percent for a good operation—dropping to the 0.14 to 0.17 percent range.

"Variation in rubber molding is a killer because you've got physics in play," Valeriote said. "You've got the chemistry of the material in play, and if you're not treating or processing the material in the exact same way every cycle, guess what? You're in trouble. That as much as anything is what we've accomplished here."

He credits a good bit of the success to Garrett Hutchinson, a mechanical engineer at Poly-Nova, for helping to drive Project Meta to where it is now—nearly complete but with more improvements still to come. Valeriote said: "I stood upstairs with him and I looked out the window and I looked at him and said, 'You need to bring your children here.' And you need to have them look out that window with you and say to them, 'I created this.' "

One measure the transformation is succeeding is one of the many "Rick-isms," as his colleagues like to call them. In this case, it's the "10 Step Rule." He said there was a recent prospect who took 10 steps out onto the Poly-Nova shop floor, and was sold.

"That customer came back in the conference room and looked at us and said he'd been doing this for a long time, and 'that is how I always thought it should be done,' " Valeriote said.

Business-wise, Poly-Nova roughly has doubled its revenues in the time since the acquisition, according to Valeriote. It doesn't deal in the commodity realm of the business, with the vast majority of its goods involving overmolding onto metal or plastic, and being used in critical applications. The firm also offers a large range of engineering services, from materials development and testing to product design assistance and production intent rapid prototyping, among others.

Valeriote is constantly asked why he's still working. He was convinced he'd be retired by five years after the deal, but he was still enjoying work and loved working with great people.

"The day I stop having fun," Valeriote said, "at that point in time maybe it's time to do something else. I have a significant respect for the people who I work with, both here and at Starlim. At the point in time I outlive my usefulness, then it's time for me to go."