We've all heard the depressing drumbeat of stories about climbing unemployment, increasing foreclosures, severely depressed national housing starts, and failed dealers and builders. Many yards have cut payroll 50% or more and aggressively managed expenses, margins, inventory, and receivables. Nevertheless, with sales down as much as 80%, they are still in danger of failing.
These conditions can produce a cocktail of fear and uncertainty that can leave LBM employees lackadaisical–even paralyzed–at work. While it's great to still have a job in this economic climate, layoff survivors face no shortage of formidable challenges. Time-strapped workers must perform their regular jobs while absorbing unfinished assignments and the unfamiliar daily tasks of former colleagues. Some troops end up exhausted from the multi-tasking. Others just focus on appearing busy (trying to confuse management with activity rather than accomplishment) in hopes of preserving their jobs. Productivity slowdowns are inevitably creeping into many companies' work environments.
I know about this all too well. In the 1980s, I ran a three-unit LBM company headquartered in Hutchinson, Kan.. When the major employer in Hutchinson failed, 20% of the population left the community within two years and unemployment soared to 12%. Annual single family housing permits dropped by 90% from the average permits throughout the 1980s.
Initially as our sales declined, we did what many pro oriented companies have done in the current downturn: We assumed our long-term, pro-oriented plan that focused on 75% pro sales was correct. We ordered some layoffs and focused on cost cutting, margin improvement, and tight management of inventory and receivables. But eventually it became apparent there would never be a significant housing recovery in our market.
To Survive, We Had to Reinvent Our Company. First, we went through a painful strategic planning process that resulted in a strategic plan fitting the new reality in our market–that we couldn't make a future solely from pro sales. Diversification was critical. Our plan included closing our large component plant and our contractor distribution facility. We consolidated our distribution at our retail lumber/home center facility. We implemented a new marketing strategy focusing on retail customers, remodelers, government and industrial sales. And we laid off 75% of our employees.
Talk, Talk, Talk. Second, we communicated with our employees continuously. We shared the broad details of the new strategic plan with both our employees and management team. We discussed the role each of them would play. We had regular monthly meetings for all employees, threw small celebrations (pizza, company picnics, etc.) when we achieved a company goal, and worked hard at boosting morale.
Everyone in my company knew we faced huge challenges and that the new plan of reinventing the company required their dedication, teamwork and a positive attitude. The willingness of my management team and my employees to embrace the plan and commit to executing it aggressively played a pivotal role in our survival during that housing downturn.
We survived and eventually successfully sold our business to Star Lumber of Wichita, Kan. Hutchinson's single-family housing starts are still 70% below the average of the annual starts in the 1970s. Eight of the other nine competitors in our market are now out of business. Our store survived.
Now it's your challenge to keep standards up despite low morale and exhausted troops. Again, a well-thought-out strategic plan and ongoing, positive communication strategy are critical. Focus on developing a corps of employees who believe in the company's future, are confident the company will survive by growing market share and/or diversifying, and are energized by challenges. Sharing management's vision for the future plays a key role in getting buy-in from everyone, employees and management alike. It gives the employees confidence about their chances of survival, and it lets all employees know specifically what their role is in the success of the company.
When the CEO approaches his job as the lead actor on his company's stage, he has the critical role to play, and the CEO must play it well.
Show You Care. The CEO's attitude and demeanor set the tone. If the boss reflects optimism, so will employees. If the boss multi-tasks, it sends the message that everyone must multitask. If the boss is discouraged and lets it show, pessimism will permeate the workplace.
One of the CEO's key jobs is keeping the troops focused and performing at a high level in spite of trying economic times. The CEO sets the tone by doing unexpected tasks, like picking up trash in the parking lot on the way into the office. It sends the message that no job is too menial. When the CEO empties his wastebasket, the message that everyone must multitask spreads quickly. If the CEO rides with outside salesmen occasionally, customers and employees can catch the executive's long-term optimism. If CEOs ride with the truck drivers too, they will gain some special insights into their yard operations. A CEO who schedules himself on the sales floor for a few hours weekly gives customers and sales floor employees the opportunity to see his commitment.
Some CEOs make a conscious effort to record mental notes about something important about each employee. When the CEO comes in contact with these employees later and shows an interest in their life ("How did your son do in his soccer game?" "How's your mom doing?"), it sends a powerful message of caring. Eventually it becomes second nature.
To survive today you need an effective strategic plan. Although everyone's plan will be different, the key ingredient is that the owner, management team and employees believe in it.
The author, Jon Davis, is a Kansas-based consultant to building material dealers, a roundtable facilitator, and a member of the ProSales Editorial Advisory Board.