CONSOLIDATION IN THE LBM INDUSTRY; ADAPT OR START A NEW CAREER SEARCH

CONSOLIDATION IN THE LBM INDUSTRY; ADAPT OR START A NEW CAREER SEARCH People, teams, and companies grow and change. Sometimes all parties are growing in sync, mutually enhancing, and rewarding the broader relationship. But more often, people, teams, and companies grow in different directions, and the foundation of the alignment of personal and professional goals supporting the company’s goals has crumbled, leaving all parties on unstable ground. The LBM industry is experiencing consolidation merger and acquisition events at a breakneck speed. The smash together of BFS and BMC is going through the typical stages of an integration of two large, well-established, distinctly different cultures and business models. BFS is also requiring its leaders to integrate Alliance Lumber, a $400m Arizona business, and Paradigm, a design estimating technology business. As with most large corporate smash togethers, those involved have a front-row seat to watch how the sausage is made – some leaders are promoted on merit, others clearly on something other than merit. USLBM is keeping pace, buying JP Hart, $400m, ACS, $800m, and Brand Vaughan, $150m, adding to their long list of acquisitions. The publicly traded culture of BFS has existed since 2005. USLBM with Bain Capital will likely be following the NYSE listing path. Bain will want a return on its investment, and the best place to realize that goal is an IPO. USLBM has a “no one is left behind” approach to leaders, which benefits the underperforming leaders, often at the expense of the people who report to them. 84 Lumber has not changed since 1956. It remains a fluid, high-performing business. Roughly 800 fresh 22-yr-old managers-in-training are brought into the company every year. 84 Lumber efficiently releases those recruits who do not measure up, and what remains are hungry, humble, and hardworking people. If you are 50 years old at 84 Lumber – well done keeping your edge and youthful hunger as anything less would earn your last 84 Lumber paycheck. Everyone must respect the transparency, consistency, and focus on performance. Not forgetting their privately held status generating $4B in sales. I will let the professional writers John Burns, John McManus, Greg Brooks, and Craig Webb write about why the housing demands remain high and interest rates low, positive job and wage growth, and the endless stream of investment cash into the LBM industry space. Their articles are excellent. Please remember there are now 20 publicly traded home builders in the US, and they are gaining share. In the Minneapolis market, the top 15 builders (the majority of which are public) now control 80% of the new housing starts. Know the ownership structure of general contractors in your market to better anticipate market changes. Here are two key questions that impact your career planning: What do the home builders demand? The largest home builders want an LBM dealer who will evolve their business model to embrace the rigor of continuous improvement and partner with them to crush the inefficiencies out of the supply chain. What does the LBM Dealer ownership want? People who handle the intensity of meeting the customers’ and ownership’s expectations. If the ownership structure is publicly traded, the complexity of an already difficult role, leadership in the LBM industry, just becomes 3-dimensional chess. The key words: Speed: Speed is a major factor when measuring alignment. How fast can you grow as a professional, and is that on pace with your company? How quickly can you adapt? How fast can you take on more responsibility and drive greater results? Professionals bringing the right solutions to these questions will have a bright career path. If the company or leadership is not evolving at the pace needed to create the right opportunities for you, or the customers are losing market share, this is a clear signal to start a career search process. Publicly traded: The LBM dealer industry has only one publicly traded company for a reason. (LBM is defined as lumber being the #1 product category by volume.) Historically, the high levels of siloed fragmentation, volatility, chaos, variation, and complexity create uncontrollable levels of risk for Wall Street. LBM dealer leaders navigate a challenging environment without being publicly traded. Where do BFS and USLBM go to find the leaders, they need? Simply there are not enough elite leaders with a proven history of success leading under this Wall Street expectation who also understand LBM leadership dynamics in the field. Developing excellent leaders at the market level are major challenges for BFS and USLBM as the scope of market and regional leadership ranges from A+ to D-. BFS and USLBM will be best served by quickly expanding their leadership development programs, promoting the best leaders, and removing the under-performers without political consideration. Leaders who can effectively integrate new acquisitions and hit the cultural and quarterly financial goals low in supply. Under these pressures, D- minus leaders will be vulnerable, and vulnerable leaders are erratic, unpredictable, and poor mentors. Hire Smarter Fact: The strength of your mentor determines your career progression. The people quickly identify the underperforming leaders in any business. If you are reporting to an underperforming leader – embrace the inevitable “time to start a career search to find a better mentor to report to.” Alignment: Evaluate companies’ values on their actions, not their words. Here is a list of excellent questions: Who is being promoted, hired, and fired? What defines success? How is success measured and rewarded? How do companies invest in people? Which leaders are known for developing and promoting people? Understand the pace and speed of the company. What is the level of accountability and responsibility, and does the role have ample authority to deliver on expectations? If you are 25 years old, working for BFS and USLBM, you are likely to find solid alignment with your personal and professional goals. You are with a fast-growing stable company with somewhat of a clearly defined career ladder. If you are in that high adaptability career arc common with 25-35-yr-olds, soaking up all the training and development USLBM and BFS offer, the business model is likely to be structured around you. Boot Camp: Definition: a military camp for new recruits with strict discipline; a prison for youthful offenders, run on military lines. What is excellent education for one is Groundhog Day boot camp for another. Rule of large, fast-growing companies with 300 plus locations, they have to build a business model that evolves around the lowest common denominator, the 25 – 35-yr-old green leaders. Publicly traded companies are risk-averse by nature; their shareholders demand it. Greater centralization and top-down directives are to be expected. If you are 40- 60 years old, you graduated from boot camp a long time ago, and have earned the authority to make market and account-based decisions quickly – this will continue to be eroded with corporate bureaucracy and death-by-meetings. At 40-60 years old, what is your next best step? What is within your circle of control? Act like a 25-yr-old – adapt, shift, make sure you can bounce a quarter off your bedsheets and your boots are polished and wait for your marching orders. Focusing on mentoring the young people in the company will be of high value to both companies. Or embrace the fact your professional value and life happiness are likely much greater outside of these corporate business models. You and your family’s socioeconomic life experience is predicated on how you are valued by the people and company you work for. People commit 33% of their life to this endeavor. Maximize the positive energy and financial rewards from the experience. Our team at Misura Group is well-positioned to ensure you are not settling; rather, your personal and professional goals are aligned and supported by the team you are engaged with. Hire Smarter™ - Tony Misura