Ron Jadin, CFO of W.W. Grainger, says there are pros andcons to being in a short-cycle business.

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Because Grainger, an $8.1-billion provider of maintenance andrepair supplies and operating equipment, doesn't have a big orderbacklog the way longer-cycle industries typically do, “it can behard to tell when a downturn is coming,” Jadin says. “We didn't seethe downturn until the fourth quarter of '08.”

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The upside is that when a downturn happens, a company likeGrainger can turn on a dime and cut its costs.

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“We have a lot of part-time employees in our warehouses and workcenters,” he explains, “so we can have flex employment, cutting ourlabor costs. Managers in each location manage their labor hoursevery day, so if you have the right tools and reporting, you cancut part-time hours out right away.”

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Jadin notes that when the economy reaccelerates, the company isable to pick up the pace quickly. “When you have the tools to showdemand is picking up again, you can add people quickly,” he says,“by just adding to their hours again.”

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Cutting hours isn't the only way that Jadin, who wasappointed CFO in March 2008, cut Grainger's costs during therecession. “We took $100 million in inventory out of a total of $1billion in inventory,” he says. “And we did that without hurtingour service standards at all, and that's not easy.”

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In fact, he says, the company was able to gain more market shareduring the downturn than at any time in recent memory. Itaccomplished this by micro-managing the inventory cuts, so thatinstead of wholesale reductions, it reduced the amount of eachproduct on hand only slightly—for example, keeping eight of acertain type of hammer in each warehouse instead of 10.

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Jadin says that through the recession, he andthe rest of the company's senior management focused on providinggood service to customers. While Grainger laid off 600 employees,it added 150 salespeople. He also rolled out a proprietary tooldeveloped by the company, called KeepStock, to help Grainger'scustomers manage their own inventories.

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Jadin also implemented a board decision to increase thecompany's dividend. “Our earnings were down 10% in 2009, but weincreased our dividend by 14%,” he says. “The shareholders lovedit!”

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Jadin, who joined Lake Forest, Ill.-based Grainger in 1998 afterserving as a financial analyst at General Electric, says that afterhe was named CFO, he “introduced more of a contingency-planningmind-set—because you have to have a playbook.”

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That contingency planning includes strategies to extend thestrong performance of Grainger's stock in recent years.

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“We are currently in the top 3% to 5% in total shareholderreturn,” he says. “Well, nobody repeats that. You can't do the samething for five more years that you did for the past five. We need anew strategy. We need to put a lot of effort into figuring out whatto keep and what are the important things to focus on.”

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One focus is global growth, Jadin says. “We're still 75% in theU.S., and we think we need to grow more outside the U.S.”

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The other area he wants to focus on is e-business. “We're the15th-largest e-tailer with $2 billion a year in sales,” Jadin says.“There's a huge opportunity for moving more of our business to theInternet over the next five years.”

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See Treasury & Risk's 2012 100 Most Influential Peoplein Finance list here.

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See a slideshow of the CFOs on this year's list here, and complete coverage of the list here.

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