Like many dealers, the recession caused John Mensinger to lay off employees, sell equipment, and pay closer attention to his deliveries in order to keep afloat his business, American Lumber Co. in Modesto, Calif.
But how many, like Mensinger, reallocated their investments into government bonds before the market for domestic stocks plummeted in late 2007? That move, initiated by an article the American Lumber president read in the Financial Times, helped preserve the bulk of American Lumber's portfolio ... and alone probably paid for the Master of Business Administration (MBA) degree he earned from Harvard Business School 30 years ago.
That example by itself may not inspire or persuade lumber dealers to seek advanced business degrees, nor should it. But it does underscore the value of an MBA in a business historically built and sustained more on relationships and service than on financial acumen.
Certainly, an advanced degree like an MBA (or even an associate's or bachelor's) degree is no guarantee of success in the lumber business. "I've seen specific examples of MBAs in this market who have ruined small companies in our industry, as well as folks with nothing more than a high school diploma who are savvy, smart, and effective operators," says Rick Lierz, a former attorney who now is general manager and co-owner of Franklin Building Supply in Boise, Idaho."Some of our best operators started working here after high school and could outsmart, outthink and outwork anyone with a higher degree when it comes to running a lumberyard successfully."
Mensinger doesn't necessarily disagree. "The world would be a much better place if it were run by lumbermen," he says of the work ethic and flexibility of his industry peers. But he also defends his advanced degree–and any sort of continuing educational opportunities for dealers. "Education is a beautiful thing," he says. "Even if I only use my MBA 10% of the time on a daily basis, I'd rather have it than not."
"On a day-to-day basis, it doesn't make that much of a difference," says Steve Patterson, president of Central Valley Builders Supply, a six-location, family-owned dealer based in St. Helena, Calif., who earned his MBA in 2002 from the University of California's Davis campus. "It does help me recognize and more quickly assess the value of opportunities that might serve the business in the long term," Patterson says.
Applied Theory For example, Patterson's periodic SWOT analysis (looking at the operation's strengths, weaknesses, opportunities, and threats) unveiled an opportunity to help his contractor customers reduce their increasing labor costs by starting a truss manufacturing facility ahead of his competition–and the recession.
Mensinger and Patterson can cite numerous examples of how they applied business theories to the real world of lumber sales. Patterson diversified the company's existing agricultural irrigation division into global markets and opened overseas channels to import special orders for his custom builders. Mensinger, meanwhile, helped bring American Lumber back from the brink of liquidation in the mid-1980s by selling off the company's wholesale lumber division and land holdings to build cash reserves that enabled the firm to persevere and eventually thrive.
And now, even as the San Joaquin Valley market struggles to recover from what the Census Bureau measures as an 80% drop in residential building permits since 2006, American Lumber maintains an enviable cash position thanks to Mensinger's shrewd and sometimes decisive moves, such as selling off a truck and trailer that was no longer of use in his depressed market (a $50,000 cash influx) and, sadly, cutting his employee count in half to reduce operating expenses.
"Under these circumstances, you do what you have to do," he says.
He also has distinguished himself with lenders at a time when credit is hard to come by. "I have a very detailed presentation that summarizes the company's history and strategic goals, our market position, operating practices, and how we're specifically dealing with this recession," he says. It's not rocket science, he says, but it works. "It helps to be able to talk the talk."
While some dealers without an MBA may have followed suit, Patterson credits his education with shortening his learning curve to make those and other decisions. "Instead of 20 years [of gathering knowledge], it took three," he says of the working professionals program he engaged at U.C. Davis to earn his advanced degree, which enabled him to run his lumber business while studying. "It's a continuing education of general business principles and practices" that others may be able to gain piecemeal, if over several years and business cycles.
Muscle Memory Both Mensinger and Patterson agree their MBAs would be far less valuable if they lacked real-world LBM experience. Both worked summers in the yards of their respective family businesses as teenagers and came up through the ranks of various sales and management positions once they returned to the fold as adults. "It was traditional to know the business from the ground up," says Mensinger.
Educators also encourage MBA candidates to get some seasoning before entering an advanced degree program. "An executive with an MBA degree and the experience that comes along with it often makes the difference between an organization's success or failure," says Steve Allen, associate dean in the College of Management at North Carolina State University in Raleigh, N.C. "They're able to look at old problems with a fresh perspective and draw from the insight they've gained from their years of experience."
Joost Douwes, vice president and general manager of Chinook Lumber in Monroe, Wash., agrees. He earned his advanced degree 13 years ago from Seattle University and has been in the LBM business since 1990.
"Common sense is the most important, then work experience," says Douwes. "The MBA is third."
–Rich Binsacca is a contributing editor to ProSales. Additional reporting by Craig Webb.