Second of three parts
In the first part of this feature, I argued that building a strong culture plays a crucial role in whether a lumberyard can move beyond good to become great. In this section, I'll talk about how we worked to change the culture at one of Florida's largest LBM operations: Dunn Lumber, now part of ProBuild.
The results were great. Revenue increased dramatically. Inventory turns were increased and DOG inventory eliminated. We increased our gross profit margin by more than 2.2 percentage points while moving from a consumer to a contractor customer base. Our product mix was widened and we expanded our installed sales program. These initiatives helped result in significant improvement to our bottom line and cash flow.
We wanted the employees to be rewarded for the company's improved performance, so a human resource manager was hired. We began conducting annual performance evaluations and instituted a system for wage increases. Employee benefits were enhanced and we increased vacation pay from two weeks to three weeks, dependant on years of service.
But with all the changes implemented over several years, we still were not satisfied with our bottom line. While our company was no longer struggling, our profit results were average. We wanted to be a highly profitable, dynamic company, yet with the implementation of every new initiative, our net profit percent remained about the same. In addition, I was literally spending two hours every day with the human resource manager discussing employee complaints. This was very frustrating, because I felt we were being more than fair to the employees considering the wage increases and benefit enhancements we had made.
Our HR manager began talking to me about corporate culture and gave me some books to read on the subject. This began a process that I believe moved Dunn Lumber from average to dynamic.
In the fall of 1999, Dunn Lumber held its first managers' retreat. The focus of the retreat was "Corporate Culture." We held a brainstorming session and asked the managers to list the positive values and practices which they felt were a part of our culture. Here's the list:
- Image in the community
- Long history (stability)
- Customer service
- Employee friendly
Then we asked the managers to list the negative values and practices they felt were a part of our culture. Here's that list:
- Negative management styles
- Lack of teamwork
- Poor communication
- Poor management attitudes
- No consistent level of customer service
- Lack of pride in the company
- No face-to-face visibility from the officers with employees or customers
- No employee ownership in the company
- Negative attitudes among the workforce
- No training or cross-training
- Secrecy and mistrust
- Poor upper-level decisionmaking
- Taking customers for granted
The list was long, and the negative feedback was sobering. I must admit that, at that moment, I felt I had failed my company. We had made many positive changes at Dunn Lumber that had improved company performance and benefited our employees, but the employees, including the branch managers, didn't feel a part of it. I took personal responsibility for that. Our culture was a mess. It was now apparent why we continued to achieve average results. I knew we had to change these values and attitudes if we were going to be a dynamic company. We had to change our culture and change it dramatically.
Our next step was to establish the priority issues on which our culture would be based. Together we did more brainstorming and came up with the following six priority issues:
- Teamwork and communication
- Internal and external customer service
- Employee development and training
- Managerial and leadership behavior
- Employee ownership
Over the following weeks and months we established company values and initiatives for each of the six issues identified. I'll expand on those in the third and final installment, plus tell you the results of the work.
Gary Farber is the former CEO of Dunn Lumber, Daytona Beach, Fla. Contact him at email@example.com.