Briefing/apallas/mark2nd
Sandy Gray was operations manager of a struggling manufacturing company in Gardena when he received an offer he couldn’t refuse. The firm’s chief executive had abruptly retired and the owners tapped the 26-year-old Princeton graduate to turn the firm around. It was a tall order; American Hardwood Co., which specializes in wood venetian blind components, was near bankruptcy, and Gray’s only qualification was his understanding of the operations side of the business.
Today, American Hardwood has $22 million in annual sales and more than 100 employees, and Gray recently was awarded the Blue Chip Enterprise Initiative Award from MassMutual and the U.S. Chamber of Commerce, which recognizes companies that have come back from the brink. Gray spoke with Alexa Apallas about some of the challenges of making American Hardwood profitable once more.
Here I was only five years out of college, with no MBA or management training, and I became CEO of a struggling company with $10 million in sales and 70 employees. The challenge was overwhelming.
American Hardwood was in financial meltdown. We had been losing money for three years. We lost $4.2 million between 1990 and 1992 alone and still were losing money. Most of our bills from our vendors were 90 days past due, and many of them were threatening to cut off supplies of critical raw materials.
I had no choice but to completely overhaul the business. We had to have a better idea of what our costs were. First, we began taking physical inventories every month something that the company had never done before focusing on how we utilized the lumber. Next, I made some operational changes. I introduced some new technologies in critical wood processing areas and increased operator training to minimize wood loss. We were able to reduce the wood costs by 28 percent and after three months, we had positive net income for the first time in over three years.
Next, we had to overhaul the way we sold and marketed our products. American Hardwood had been selling only to a handful of the largest users of wood blind components. One customer accounted for 60 percent of our sales, which allowed them to virtually dictate the price at which we could sell to them. It turned out that we were losing money on every sale to that client. The more we sold, the more we lost. Three months after I became CEO, we ceased selling to our largest customer and started rebuilding our customer base.
It turned out that there was a much larger market for wood blinds than we had realized, made up of small and medium-sized operations that wanted to add wood blinds to their product lines. To reach that market, we had to get our products known and our quality known. We began setting up booths at industry trade shows. And we introduced a high level of service. We started shipping orders within 24 hours of placement. The attitude in the industry at that time was that a week’s turnaround time was fast.
Finally, I had to change the management style to get morale back up. I didn’t cut any jobs in order to increase profitability, and once we got the fundamentals in order, I implemented a new approach to management. I started asking more questions, encouraging people to make decisions. I solicit contributions, especially from longtime employees. When I have ideas of my own, I look for support within the company. Companies can only grow so far when driven by one individual. There’s no limit when they are driven by a team.
