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Interview with Delbert W. Johnson

August 1, 1989


David Levy Vice President

Interview with Delbert W. Johnson

In September 1987, the Federal Reserve System's Board of Governors appointed Delbert W. Johnson to the board of directors of the Federal Reserve Bank of Minneapolis.

Johnson is president, chairman and CEO of Pioneer Metal Finishing Co., which has plants in Minneapolis, Green Bay, Wis., and Phoenix. Pioneer is a division of Safeguard Scientifics Inc., King of Prussia, Penn., of which Johnson is a corporate officer and vice president.

After spending three years in the Army and attending several colleges and business schools, Johnson began his career at Pioneer in 1965—by 1978 he was named president of the company. In 1984 he received the Safeguard Award of Excellence and three years later he received the Silvio C. Faormina Award—the highest award in the metal finishing industry.

In addition to the board of directors at the Minneapolis Fed, Johnson also serves as a director of Hospitality House Inc., a North Minneapolis agency founded 25 years ago to support minority youth. The privately funded organization recently opened a second Hospitality House in South Minneapolis.

Region: Tell me about the business you operate. What happens at Pioneer Metal Finishing?

Johnson: We chemically process aluminum. We coat aluminum for various reasons: for corrosion protection because aluminum is a very highly corrosive material, for hardness, density of hardness, and for various engineering applications. And we also coat aluminum for decorative reasons: for recreational vehicles, for trim on boats and motors and for some of the fancy things on automobiles. The process itself is called anodizing.

Region: How did you get into this business?

Johnson: I started at a company as a summer job when I was in high school. I just never stopped. It was down in my home town, Freeport, Ill., and I worked every summer at what I considered to be a real sweatshop by comparison to Pioneer. This facility is probably the most modern metal finishing operation in the United States.

Region: Those who have watched your management style say you promote a decentralized system where you give people free rein to do the things they need to do, and only when they have problems or need advice do they come to you. Is that correct?

Johnson: That's very correct, and I guess I adapted the policy or the concept from Safeguard Scientifics, our parent company. They believe in decentralized management. You prove yourself and you get yourself some kind of a track record, and then they give you the ball and let you run with it. Basically, 1 have the same kind of a feeling with the people who work here. They are professionals and I don't think I should walk around behind them, holding hands, telling them when to come to work and when to go home. I think that decentralizing their jobs gives them the autonomy to make decisions and makes them feel like they are a stronger part of the business and the company.

I used to say to Safeguard that I would rather beg for forgiveness than to ask for permission. And I think that a person who comes to me and has to ask me for permission for everything really is not a decision-maker. He's a follower, not a leader. So the people in the key positions around here really do their own job and do it well, and I'm just like the captain of the team. I get into the act whenever there's something that comes up that requires a team meeting, or when they need to ask for approval on something special, but other than that I'm basically not even involved.

Region: Somebody told me that you have two rather interesting sons?

Johnson: I have two very interesting sons, like most any other parent would say, I suppose, who has children that are meeting or exceeding certain goals. They have developed as outstanding citizens, excelling in school and through their participation in church and community activities.

Region: Here's a speculative question: Do you raise your sons in the same way that you manage your people?

Johnson: That's basically true. I think I have a tremendous open relationship with my two boys. They come and talk to me about everything that's on their mind, everything that they are involved in, and I think we share a father-son relationship that is second to none. I've always had that open conversation with them coming up all the way through the system. So they're pretty nice kids, I think.

Region: There are a number of people who have built lifetime careers in your company, who have committed their lives to working in this organization. Finding lifetime commitments is becoming less and less common in the labor market. To what do you attribute your success in building these long-term relationships?

Johnson: Well, I've been here since 1964, and I'd say that out of the work force of about 180 we've still got about 25 who have been here as long as I have. To me that's remarkable. These people make the commitment, for reasons that I think are not totally attributable to me. It's mainly due to the fair treatment policy, the open-door policy that we have. Employees have the right to talk to their foreman, to the plant manager and the general manager, and they have the right to walk right into my office and tell me anything that they feel would improve their situation or the company's situation. We open the door for them. We look forward to it.

When I walk through the facility from time to time, I can just see that they want to talk, they want to share something. I know nearly all of the employees by first name and about 80 percent by their last name. And whenever there is someone sick in their family, whenever they've had a baby, I try to acknowledge that in some way. I'm very supportive as far as when they're in the hospital, I'm there to see them. I'm constantly keeping up with what's going on with their lives. So, from that standpoint I think we get more productivity out of the sensitive way that we deal and cope with their situations.

Region: Turning to the Fed—in the directors' meetings when you hold the "go-around," each member describing economic conditions in the district from a different perspective, it's been noted that consistently your reports are thorough, interesting and the information is useful. How do you prepare?

Johnson: The first thing is to try get a reading from the other job shops in the Minneapolis/St. Paul metropolitan area. Through several organizations that I've belonged to, I've been able to generate relationships with people who watch and monitor their businesses. They're capable of giving me information that I value and that would be of some interest to report. I tell them up front that I am using the information in preparation for my meetings at the Federal Reserve. And I just basically ask them about pricing pressures, wage pressures, forecasts for the next three months, comparisons with the previous quarters—just try to get some kind of reading. So it's really networking with people that I have been associated with over a period of years. I respect their opinion and judgment.

Region: You've been named deputy chairman of the board and will assume your responsibilities the first of next year. Is that correct?

Johnson: I recently received a letter from the secretary of the Board of Governors asking me to officially write an acceptance letter to Gary Stern (Minneapolis Fed president).

Region: What's your reaction to that? And I'm asking that with one other thought; traditionally, the deputy chairman ultimately assumes the chairman's role when that term is complete. So that you are, if tradition holds, potentially the future chairman of the board of the Federal Reserve Bank of Minneapolis. What strikes you about that? Or what's your general reaction?

Johnson: Well, I guess I really haven't let my mind drift that far in the future, but I think by being the deputy chairman I will have an even better opportunity to observe the System and how it functions.

Number one, it's a great honor to serve as a director of the Federal Reserve; and number two, to be an integral part of the executive committee and then moving to the deputy chairman's role at the Minneapolis Fed is very, very exciting. If that's as far as I go, I can always say that my career or my tenure at the Fed was exciting and dynamic and very rewarding. In all these board situations, and I've been on a lot of them, you tend to always get more out than you put into them.

Region: The Fed is often described as a three-legged stool. That is, one leg of the stool is supervision and regulation, one is the provision of financial services, and the third is the monetary policy or the research leg of the operation. As you've had your directors' meetings, we've had senior staff people from these three different legs of the stool talk to you: the research, the supervision and regulation, and the financial services. Which of those interests you the most?

Johnson: I think the research interests me the most. Having no formal economic training, I'm fascinated by how they construct their models and by what is considered good and bad news. They factor this all in to form economic goals and then go on to make the ultimate monetary policy decisions. I'm just always fascinated by the research reports that come out and I read them diligently. I even go back and compare some of Art Rolnick's (director of research) research papers and see how they compare to the ones last year about this same time. I look for a correlation and make sure he's not hedging on his previous predictions.

Region: To conclude, let me ask an even more open-ended question. Since we're discussing the Fed, is there something that we didn't talk about that you'd like to have included in the interview?

Johnson: I guess if I had to close with a scenario or comment relative to the Federal Reserve, I would go back and think about when I first received a call to meet with Gary about becoming a director. I remember the strong professional way that he dealt with me. That was also coupled with support from Mike Wright (chairman of the board). The staff, officers and other directors aided in the education process. That has been just a fantastic educational benefit to me as a businessman. And now I've been able to listen and hear other people talk about things that maybe two or three years ago would have gone right over my head because they weren't of any interest. Now, all of a sudden, when I hear these things, they come back to what I've been involved with or what I've witnessed at the Fed.

Region: Thank you, Mr. Johnson.