Rifle or Shotgun?
Until July 2008, for the 30 years he had been in the LBM business, Shepley had never resorted to layoffs. But as business and revenue continued to drop off early in the year, he initiated staff reductions that eventually trimmed his payroll from 159 employees to 126.
Though the layoffs were tough, Shepley chose that route instead of making across-the-board pay cuts. “We recognized it was better to adjust our size to the volume of the business than do something that affected every employee,” he says. According to the global consulting firm Watson Wyatt, 23% of U.S. companies across all industries plan to lay off workers this year.
Such cuts are never easy, especially in what is usually a local business and family culture among LBM dealers. “It’s like putting a knife in my heart and turning it,” says Rick Baumgarten, president of Lee Lumber, an eight-location dealer serving Chicagoland that recently pared down its payroll, the first time the company ever made permanent workforce reductions. The next round, he said late last year, would cut workers with up to 17 years seniority. “We had to lay off people who had done nothing wrong other than getting caught in this miserable economy.”
Though right-sizing remains the prevailing way to reduce costs against a revenue drop, job cuts in 2007 and last year have left many companies with a core group of valued and productive employees, causing managers to seek alternatives to additional layoffs as the recession continues. Businesses trying to keep their best workers have used tactics including direct wage cuts, four-day work weeks, unpaid furloughs, voluntary unpaid vacation time, and halting bonuses or matching 401(k) contributions. Though experts warn that workers eventually will tire of sacrificing for a sinking ship, these cost-cutting alternatives appear to create loyalty among those who remain. They also spare the company the time and cost of hiring and training employees when the market recovers.
On the other side of the ledger, some dealers are benefiting from a diverse array of products and services that hedge against slowdowns in new construction. Mark Graber, sales manager at Graber Post Buildings, a $29 million, single-location operation in Montgomery, Ind., says that keeping the company’s toes in several business lines, including metal roofing sales and installation, retail hardware, and trusses, has let it maintain its revenue levels during the recession. “If we were only in residential trusses, we’d be in trouble,” he says.
Inside Incentives
Experts argue about the benefits of incentives, particularly those doled out as salary increases, bonuses, higher commission rates, or “spiff” bucks toward personal purchases. Some swear by them as effective ways to recognize–and thus motivate–workers. Others consider them akin to treating a rocket scientist as a kindergartener, and quote studies that say money doesn’t motivate better or even steady performance. “I find that incentive systems don’t fix someone; they simply reinforce good people who do it right anyway,” says Shepley.
The question of incentives, though, really gets back to a flexible style of management. “If an employee, usually a sales associate, sees value in a bonus or higher commission rates after achieving a certain goal, more so than a few extra days paid vacation, then that’s his or her motivator,” says Graham Weatherall, a business coach in Fort Worth, Texas. “Someone else on the team may value the vacation days or a higher level of authority.”
Financial incentives also may work if they are a new wrinkle for the company. Happily propelled by the housing boom of the first years of the decade, mostly from large production builders, the Stockton, Calif., location of Golden State Lumber has since seen new home-building activity in its market area drop 50% since 2007. “We used to be so loaded with orders that everything else fell to zero,” says sales manager Beau Nobmann. “Now, we have the opportunity to introduce some incentives.”
Nobmann and his counterparts at Golden State’s three other locations initiated a fourth quarter “game” to spur sales of specific product categories. In Stockton, for instance, the sales staff focused on moving hardware: those with the highest percentage, gross profit percentage, and total sales were eligible for a grand prize of an all-expenses-paid weekend for two to Las Vegas.
And while the dealer scaled back its matching amount to employees’ 401(k) retirement plans as a cost-saving measure, it also initiated a deferred compensation plan that puts a percentage of total revenue into a managed account should Golden State Lumber meet its bottom-line goals. “It’s part of our showing [employees] that they are part of the overall success and stability of the company,” says Nobmann, even if sales at his location are off. “They see themselves as contributing, and hopefully that’s a motivator.”
Reward or not, sales guru Nicki Joy of Nicki Joy & Associates in Johns Island, S.C., advises sales managers to set intermediate and shorter-term goals, including those not directly related to sales. “Maybe the goal is a second meeting or a demo pitch,” she says, which helps breed success and build momentum and confidence. “It also gives managers more ways to evaluate and recognize associates,” she says, while strengthening the sales process after it was allowed to soften in boom times.
At Graber Post Buildings, though, bonuses and commissions–in fact, any sort of extra financial incentive–is not part of the motivational mix for employees. Located in an Amish community, the business enjoys what Graber describes as an enviable work ethic among its staff, and the owners see no reason to introduce sales incentives. “There is no future that will lead us there,” says Graber. “If you do a good job, we pay you a fair hourly rate.”
The company does offer periodic (usually annual) wage raises to cover cost-of-living increases and recognize superior performance, and the owners may provide a surprise bonus now and then. But Graber says his workforce is primarily thankful to be working, which motivates the owners and managers to maintain a steady ship and foster that environment.
“If you feel good about coming to work and doing your job, you’ll like working here,” says Graber. The company rewards that ethic by being flexible about personal time regarding family and vacations. “We don’t want to lose a good employee by being inflexible.”
That kind of give and take is a trademark of a new management style that appeals to both longtime employees and a new, younger generation of workers that generally feels entitled to be included in company decisions and policy development–and in turn gets motivated to perform. “We encourage our staff to bring ideas, and we try them with the attitude that the worst that can happen is that they don’t work and we have to start over,” says Shepley. “It’s not the end of the world, it’s just the next idea.”
For the record, Robert E. Lee was a quiet leader, a master strategist whose men believed they were doing everything themselves. He motivated his troops by reminding them that the fate of “helpless others” depended on their actions. Herb Brooks, meanwhile, devised an innovative and relentless attacking style against the Russians –and the rest of the world at the Olympics–and built a team not of the best players, but of those he considered the right players for his vision.
How you and your management team choose to lead your business through your own version of adversity and challenges will likely earn you a place in the company’s history.
