As an independent owner/operator, your greatest strength lies in your ability to differentiate, step off the beaten path, and live in your largest competitors' blind spot. Today that blind spot is the people.
Something interesting happened Jan. 10. Peter Alexander, president and CEO of BMC, was replaced by David Keltner as interim CEO. Remember, Peter came to what then was called BMC Select, one of the largest full-line lumber dealers in the industry, in July 2010. (See story.) He led the company six months after emerging from bankruptcy and reorganization as a private holding.
Peter then re-defined BMC, focused on people over profits, and over the next five years built a company capable of buying Stock Building Supply in June 2015. BMC shareholders became owners of 60% of the new company, a result of BMC's superior profit margin.
Profit differentials aside, the greater challenge became integrating these two companies' divergent cultures. That was a rough road at times, but the journey was completed in less than 30 months under Peter's leadership.
Fast forward to January 2018. The act of moving a board member into the interim role and having no successor in place as the company conducts a search, certainly is not the preferred method of CEO transition. That makes it difficult to believe Alexander's departure now was part of any long-term plan.
The average tenure of CEOs among the top 3,000 publicly traded US companies is nine years. No board wants their CEO to flame out earlier than that. Why would the BMC board replace Peter now?
Granted, running dual corporate headquarters in different states seems dysfunctional. The majority of administrative and financial professionals operate from the old Stock HQ in Raleigh, N.C., while the executive leaders operate from the new HQ in Atlanta; this would seem to be fertile ground for silos to develop.
Potentially, the tale of the dual headquarters is a reflection that the integration never really happened where it matters most, in the boardroom. Stock Building Supply executives still hold board seats, and historically their strategic plan has been clear: focus on operations first, measure metrics and cut costs. A common financial-first agenda potentially should not be a surprise from a board with only two operators and seven financial-first professionals.
BMC, under Alexander, excelled at developing people and fostering high levels of autonomy in each market, gaining high levels of engagement from its people through being sales-driven and operationally aware. Remember the result of this method was BMC gaining 60% of the equity of the combined BMC/Stock organization.
How does Peter's strategy mesh with the Stock Building Supply operations-first, efficiency, top down business model? Based on recent events, it doesn't. Hence the transition.
Conversely, running a $3.6 billion business serving 43 metro markets across 18 states, in a decentralized structure, puts a colossal demand on talent. The new direction of the BMC board does have its advantages. It lowers the level of talented experience needed in the field and lowers risk as all key decisions come from HQ. The mantra from executive leaders becomes "watch your spreadsheets, focus on operations and efficiency metrics and we will handle the rest".
If you are 24 years old, with a lot of energy and motivation but lack of experience, this could be a great place to start your career. Operations-first, spreadsheet leadership models can work well when developing an inexperienced work force. As demand increases in a rising new home construction market, does the value of experienced professionals decline? As the national production builders' share of new home starts continues to increase, does the operations-first and spreadsheet business model have advantages? The BMC leaders appear to be betting on it.
If you are an independent dealer owner competing against BMC, 84 Lumber, Builders FirstSource, or any dealer with volume over $1 billion in annual sales, turning their blind spot into your greatest competitive edge is clear: focus on the top talented people.
The greatest competitive advantage of being a small or mid-size independent business is the ability to attract and top-grade talent. As the largest dealer competitors become over focused on financials and the daily stock price, leveraging this advantage steadily becomes much easier to achieve with broader impact.
A solid benchmark for your team might be: for every $5 million in sales you should have a professional who is in the top 10% best-in-class in the industry. If you are a $100 million company, you should have 20 people that are in the top 10% best-in-class in the industry.
Developing and hiring 20 top0graded professionals with the right resources can be achieved quickly. Think about it: If BMC applied this method on $3.6 billion in sales they would need 720 people that are in the top 10% best-in-class. Impossible? Maybe. Improbable? Likely!
The top-talent people problem for the largest dealers in the industry is potentially the No. 1 reason they shift their strategy toward centralization and reducing authority in the markets.
