Wharton@Work

June 2017 | 

Energizing the Next Generation of Lumber Leaders: LMC and Wharton

Next Generation Lumber Leaders

The U.S. housing market has weathered extraordinary change since the housing collapse almost a decade ago, which had an equally catastrophic effect on the building supply industry. Fran Monk recalls that time well. As marketing director of the Philadelphia-based Lumbermens Merchandising Corporation (LMC), she cites the challenges facing the cooperative’s dealers, small and medium-sized family-owned businesses that serve as the retail-facing arm of the lumber and building supply industry: “During the housing downturn, we lost a generation of builders and contractors and many independent lumberyards closed or were sold.”

In the context of rapid industry consolidation and other pressures, LMC recognized that one way it could ensure the competitiveness of the industry and attract and retain the next generation of leaders was to enhance the business leadership skills of its members.  Three years ago, it forged a partnership with Wharton Executive Education to bring aspiring leaders onto Wharton’s campus for a weeklong custom-learning program.

LMC: Driving Growth came about as the industry was rebounding, though the level of housing starts is half of what it was during the height of the home-building boom, LMC officials say. “From a new construction perspective, we went from a peak of 2.1 million housing starts before the downturn to 1.2 million new housing starts in 2016. Of that number, LMC dealers supplied materials for 35 percent of these housing starts,” notes Joel Gelb, VP of business development at LMC.

To ensure the program would resonate with lumber leaders, four LMC members worked with Wharton faculty to develop key components of the class, including an industry-specific case study.  Program participants work in small teams on the study to assess whether a lumberyard owner should acquire a millwork operation four hours away that had significantly different branding, culture, and financials.  “I haven’t identified any training of this level of quality in our industry — it’s unique,” says Gelb.

Since the Wharton-LMC program began, 135 LMC members from 77 companies in 31 states have participated. Based on its continued popularity, LMC officials now are working with faculty to create a new program to be offered in January 2018. In fact, when Gelb surveyed dealers on whether they would send a leader to a new Wharton program, it only took 24 hours to secure enough participants to fill it, and for LMC to begin planning.

“Wharton has helped our aspiring leaders build networks within their own industry, and that has helped us retain some of our brightest leaders,” says Gelb. Program participant Tim Huff, CFO of Building Center, a 114-year-old building supplier in Gloucester, Massachusetts, agrees: “It has been a great networking tool. Of the 40 students in my class, I would be comfortable calling half of them and asking them anything.”

Huff describes his organization as a logistics business that “transport[s] large quantities of lumber all over northeastern Massachusetts on a daily basis.” In recent years, a big focus of his firm is in supplying lumber for home-remodeling projects. His biggest day-to-day challenges are negotiating the best product pricing with builders, and driving a new culture at a company steeped in tradition and struggling with complacency.

“The biggest tangible success for me from Wharton has been helping change my company’s culture so employees share our customers’ sense of urgency,” he says. “Smaller wins have been in the negotiation area — being able to negotiate better deals — and also giving managers a basic understanding of accounting and why finances are important.”

With regard to culture transformation, Huff says that Wharton gave him a realistic picture of what culture change involves — the fact that “it is a five- to ten-year process and persistence and patience are required. Stay with it and eventually you will see real dividends and that’s what has happened.”

He notes that the most visible way culture change has taken hold is in the increased efficiencies of the business as employees take pride in doing an outstanding job. “That’s where the metrics come in. When employees know where we need them to go, they’ll go there,” says Huff, who credits Wharton’s insights and tools with helping him help inspire his team to achieve new operational efficiencies. “We have shaved two points off operating expenses, which has gone directly to our bottom line,” he says.