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The comeback kids

BY Ken Clark

It’s a relatively simple script: A large, publicly traded company finds itself over-leveraged. It enters and exits bankruptcy protection, reorganizes and emerges as a leaner, more focused company.

It’s a story that has played out many times in corporate America. But don’t be fooled by the simplicity of the plot. It’s never easy.

Case in point: BMC, which emerged from reorganization in January 2010. There was nothing simple, nor easy, about the transformation, according to the people who lived and worked through it. Plus, like any reorganization, there was never a guarantee that it would work, despite the confidence of the principle actors.

Some of the executives and managers who worked through the challenge shared their thoughts with HCN on some key themes of the transition.

On moving the headquarters to Boise, from San Francisco

Stephanie Erickson, VP human resources: “It was like getting back to our roots and getting back to basics, shedding all the excess and focusing on business. San Francisco was kind of considered to be the ivory tower — the second-most expensive real estate market in America, and we had a building materials company there. When we moved it to Boise, we said, ‘OK, we’re going to get back to our roots that made us successful.’ “

On belief in the transformation

Danny McQuary, CFO: “There wasn’t a question that financially we were going to make it. But what was gratifying was to see our new board come in — a group of outsiders — and do a complete 180-degree turn. They tended to think their job was to sell the company, but after a relatively short period of time, they realized there was way too much value here. Even though we believed it, here came a group of outsiders who also believed it, and that was important.”

Michael Badgley, executive VP company-wide operations: “I never once felt that I was going to have to look for a job. And I don’t think that from an operating level any of us ever doubted that we would make it through. It was just a matter of going to work and getting down to the basics and taking the business where it needs to go. We knew we had a very strong operating company inside of that nonsense that was going on.”

On focus

Wayne Mangan, market sales manager, Tacoma, Wash.: “We got stuck in the mentality that bigger was better, and that mentality cost us. When we thought bigger was better, we thought, ‘Let’s get concrete.’ We got into areas where we shouldn’t have. The difference with this new company BMC is we’re not going to get into anything that is not in our wheelhouse. The idea is: ‘If you’re in it, you better be good.’ “

On restructuring the sales team

Mangan: “[CEO] Peter [Alexander] said, ‘I got news for you. I hired a VP sales for you.’ It was Keith Costello. ‘And I want to know how you guys are going to accept this.’ My answer was: ‘Thank you!’ We needed one so badly. That was the start. We are customer-driven and not operational-driven. I think everyone was hesitant at first, but now we love him.”

On the annual sales meeting in Las Vegas

Mangan: “Visualize this: You’re in a room full of hundreds of people. I grabbed the microphone and asked [former president Stan Wilson] to come on up front. I turned to face him and in front of everybody said: ‘On behalf of the company, we would like to say thank you. You took us through these tough times. You could have retired, but you kept us afloat.’ There was a standing ovation.

“Then I called Peter up to the stage. ‘I don’t know what we can say to you. We were in the middle of the ocean treading water. You pulled us in. Thank you.’ Another standing ovation. That was a defining moment.”

Keith Costello: “At first, the feeling was, ‘I don’t want to be gone for a week at a time.’ Taking time out is difficult. But now they’re looking forward to coming back and meeting with the team. It’s a great chance to learn not only from their fellow employees, but also from the vendors.”

On cuts and the comeback

Erickson: “When I joined the company in 2006, we had 23,000 employees. Now we have 4,600.” 

McQuary: “At the operational level, we had cut and cut and cut, closed locations, and done a lot of things. But I think there was a perception in operations the cuts had not been as deep at the corporate level. There was a psychological benefit to cutting off the high-cost San Francisco holding company, but it went beyond that. In January 2010, when we emerged from bankruptcy, we had 160 corporate employees. Now we have less than 110. Yet we’ve grown 35%. So the feeling now is we’re more in line than we’ve been in 15 years.”

On receiving the 2012 Pro Dealer of the year award

CEO Peter Alexander: “It hasn’t been easy. At our peak, we were nearly $3.7 billion in size with nearly 23,000 employees. We were public. We were over-leveraged and ultimately went through a financial reengineering to right our ship for the future.

“We were humbled as a company beyond reproach. We emerged as a new company in January 2010. We used that opportunity to define a plan, determine the best people to drive the plan forward and define the pace by which we execute.” 

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BMC: Keeping ‘em happy

BY Brae Canlen

Anyone in the LBM trade knows it’s all about keeping the customer happy, whether he be a remodeler with a pick-up full of plywood sheets or a purchasing agent with a spreadsheet. A customer will let you know he’s happy by bringing back more business or making a referral. Sometimes, he will even tell you. All you have to do is ask.

Chris Warr, a purchasing agent for David Weekley Homes in the Austin, Texas, market, inherited BMC from his predecessor. The company (then called BMHC) had been supplying the production builder for 10 years, and Warr saw no reason to change. Five years later, he feels the same way.

“[BMC] has a solid knowledge of the local market and a good understanding of what our goals are,” Warr said. “They’re the closest thing to what we would call a true partner.”

David Weekley, a production builder with operations in more than 16 cities, purchases panels, millwork, hardware and turnkey framing from BMC, and Warr estimated their business is “knocking on $10-plus million on an average year, depending on the market.” The Boise, Idaho-based pro dealer also installs some of these products.

Construction services can be tricky, both in terms of pricing and execution. “It’s been an evolution over the past five years,” Warr said. When he contracted with BMC to frame houses, it caused some friction in the local market, but BMC smoothed this out by hiring some of the key framing crews in town — something Warr said he appreciated.

Keith Costello, VP sales and marketing for BMC, said the company is “not just in this to sell a 2 by 4. We want to bring them solutions.” While this often means bundling installation with products, Costello is also talking about proposing changes to a building’s design to save on costs. A BMC rep might even show a different style of cabinet to homeowners, one that better fits their tastes and their budget.

“[Custom builders] don’t have the resources that the nationals have, so they’re looking to us for different ways to get the job done more quickly and efficiently,” Costello said.

Candlelight Homes is one of those customers, although Joe Salisbury’s company dwarfs that of a typical custom home builder. Salisbury is a partner in the Utah firm currently building homes in the Wasatch Front, the area surrounding Salt Lake City.

Candlelight Homes uses BMC to do about half of its framing. “They prebuild a lot of it and bring it over,” Salisbury said. “But they can make changes quickly. They’re not just a framing crew.”

Indeed not. BMC operates both a wall panel plant and a truss manufacturing facility in West Jordan, Utah, not far from the headquarters of Candlelight Homes.

Salisbury also purchases interior trim, base molding, shelving, door hardware and the doors themselves, both interior and exterior. BMC installs all these products, too. The Utah home builder said he likes the fact that BMC can “work across multiple contracts.”

John Osborne, one of two sales reps who works with Candlelight, estimates that BMC is supplying materials and services to 20 different Candlelight homes right now. “We sell all the different categories, so they can buy a lot from one shop,” he said.

Salisbury is also happy with the pricing — ‘They’re priced right,” he said — and most important of all, the service. “They’re responsive,” he added. 

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The ABCs of BMC: An HCN CEO Q&A

BY HBSDEALER Staff

HCN editors have been listening with interest to Peter Alexander, the chief executive of BMC, since his days as chief executive of another U.S. building supply company. (Check out our October 2007 profile.) Today his company is larger, the stakes are higher, and his influence on the industry in general is greater. And, he’s still interesting.

Our October 2007 profile said Alexander was “equally at ease” in the worlds of finance and lumber. It’s a background that served him well as the executive who guided what was BMC West and SelectBuild out of reorganization and into the growth phase BMC is currently enjoying.

Here is the HCN Q&A conducted shortly after he accepted — on behalf of the 4,600 or so employees of BMC — the 2012 Pro Dealer of the Year award during the October 2012 ProDealer Industry Summit.

HCN: There’s the old BMC and the new BMC. What’s the biggest change?

Alexander: We launched a decidedly different strategy and are running the business to be better — not just bigger. Today, BMC operates as one single company with a local market approach. This differentiates us from our competitors by giving the local guys the resources that a large-scale company has, but the ability to respond to market-specific needs and engage as a local community partner. In terms of buying, systems, metrics and financing, we also knew that operating as one ship would allow us to benefit from our economies of scale. And we decided to have fun as we rebuilt BMC into a better company, which has definitely put the spring back in our step.

HCN: And that accounts for the new BMC branding.

Alexander: Previously, the company operated as a federation of businesses with different labels, different focuses and different metrics. We brought it all under one logo that represented one message — that we are the best. That sounds like a small thing, but that was one of my larger challenges given the legacy businesses and geographic diversity. 

HCN: During your ProDealer of the Year acceptance speech (see video at HCN.com), you said going through reorganization was a humbling experience. What was it like going back to the vendors?

Alexander: I think they were justifiably nervous. Vendors were saying: ‘OK, I know they’re protected under the restructuring process, but we don’t want any additional exposure.’ Before I came on board, our executive team did a fabulous job communicating with vendors through the process with integrity and purpose. And all of our supplier partners stuck with us.

HCN: And you became CEO in July 2010, after serving on BMC’s board.

Alexander: When I took over as CEO, we immediately brought together the CEOs of the top 50 vendors to lay out our plan. We told them: ‘Here is what we’re going to do.’ It was almost like a campaign stump speech. We explained where we were and where we were going. And we explained that we would circle back with them, either quarterly or every six months to check in. Since that meeting, our report card has all A’s, and we’ve done everything possible to reward them for their support.

HCN: Do you believe that the role of the CEO is to be the communicator in chief?

Alexander: The CEO should be the maestro of everything that goes on in the company, and ultimately the buck stops with him or her on strategy. It’s communicating the plan to the field, and communicating up to the board, and out to shareholders and lenders. It is a relationship-management job, internally and externally. It is a recruiting job, making sure you have ‘A’ players in place at every single discipline. It’s creating a culture that works. About half of today’s BMC management team has been with the company upwards of 35 years, and the other half I brought in over the last two years. The meld has been seamless. I’m thankful that the senior team has such great chemistry and a can-do attitude. That permeates down to the field.

HCN: The smaller competitor would argue that his advantage is his connection to the community. How would you respond to that?

Alexander: There is enough room for both the large and small guy in the market today. It does not need to be us versus them. As I mentioned earlier, there is a beauty to the functionality of BMC’s model, where our local guys can easily respond to market-specific needs. We also have a strong commitment to knowing and engaging at every level of a community — upstream and downstream. You can see it in every one of our diverse markets. Charitable giving and community involvement are part of BMC’s culture. We’re involved, and we’re giving back to our communities through groups like Light the Night and Homes for Hope and local charities, to donating to the victims of hurricane Sandy who aren’t even in our geographies. 

HCN: And the benefits of size and buying power?

Alexander: From an economic standpoint, BMC’s model is a true positive. Being larger differentiates you to the major suppliers and vendors. And BMC is investing a great deal of money and resources in product and field training and personnel to support our supplier partners. Suppliers know that we execute well, have the financial strength and strong working capital available, and the suppliers have been rewarded.

HCN: You’ve described having Jim Collins’ latest book as an inspiration for your company. What’s behind that?

Alexander: It’s called “Great by Choice,” and even before cracking the book open, the title spoke to us about where we were as a company and how we would decide to rebuild the business. Service is our brand, and we think beyond the LBM industry. I posed this to my team: ‘Why not attain greatness as a business? Why not make BMC a poster child for a company that was a federation of broken parts and pieces that came together, did its hard financial restructuring, set a plan in place, put metrics in place and got people the right incentives to move their behavior toward that plan? Why can’t we be written up in Jim Collins’ next book?’ And our folks got it. They said: ‘Damn straight, why not?’ Our team gets the vision, and they believe they can do things that previously seemed impossible. 

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