s0-year'old Utah retailer does sharp turnaround

A FEW months ago, 50-year-old .CLCantwell Brothers Lumber Co.. Smithfield, Ut. (pop. 5,000), found itself in a frustrating yet all-to-common predicament for a second generation family-owned lumber yard: freefalling profits despite rising sales.

Wayne Cantwell, who owned the $8 million-a-year company with his sister and two brothers and had run it since their father died in 1972, thought they needed outside help. Oldest brother Clair, a retired dentist who helped out occasionally at the 8acre yard, wondered what some young consultant could tell a lifelong lumberman about the lumber business. "Don't assume we know everything," Wayne replied.

Story at a Glance

Plagued by dwindling profits despite rising sales, second generation lumberyard calls in turnaround specialist.

The Cantwell brothers turned to turnaround specialist Clark Sherman Colvin Inc., Salem, Or., which had just helped to correct a similar case of rising sales-yet-falling profits at Kingsley Lumber, Portland, Or. At first, the Cantwells asked just to implement the firm's compensation package, but principal Clark S. Colvin convinced Cantwell to sign up for the full treatment.

Unlike the typical consultant who drops in, sizes up problems, suggests solutions and gives you his pager number, Colvin immersed himself in the company, serving for two months as interim c.e.o. He recommended a complete restructuring. But instead of redesigning individual functions, such as the inventory control system, the focus would be on redesigning the organization and the relationships between all the business functions.

The overhaul would be rooted in a functional organizational structure, managerial accountability, budgetary controls, efficiency standards, and pay based upon performance. Teamwork wouldn't just be talked about in the abstract, but strived for after employees saw that old-fashioned hard work, efficiently performed, would be rewarded. "We use modems, computers and other technology to tie it all together, so it's fancier than anything our grandfathers could have done, but it's the same principles," says Colvin.

The first step was designing an organizational chart with precise job descriptions. Controller is an especially crucial, often overlooked position. Says Colvin:"It might be a $25-million company and there's Aunt Bertha doing the accounting."

Clair Cantwell explains, "We're in a university community and our staff reflected that-a lot of part-time help. We de-emphasized that and started looking for career people. We always promoted from within, but as a result, we didn't have enough professionals."

Cantwell Brothers had offered flat salaries. By slashing base salaries and offering high incentives, the company was able to hire away managers from BMC West and Anderson Lumber, including new store manager Bob Stanley and general contractor sales manager Larry Astle. The staff was trimmed from more than 60 to 46.

Colvin split apart the retail and contractor businesses so he could analyze the sales, pricing and gross margins of each. He determined what the "break-evens" were, then scrutinized the inventory.

"Many times the major co-ops and vendors don't know their customers," Colvin says. "Most of their stores are mini-HomeBases to the detriment of SOVo of their customers who are contractors. They have lawn and garden (items) and power tools that haven't turned for six months. They need to remerchandise. I'll demand the vendors take back the slow-movins merchandise."

The changes were especially difficult for Wayne Cantwell, who had spent years creating and fine-tuning most of the systems and procedures only to see an outsider replace them. "It was painful, very painful," Clair remembers. "Everything had rested on Wayne's shoulders. He learned to delegate."

Colvin likened the situation to changes he had to make as interim c.e.o. for a family-owned, three-yard operation in South Carolina. The first yard, opened in the 1940s, was in a bad neighborhood and losing money. But the owners couldn't close it for sentimental reasons. "They needed an objective person to do that," Colvin explains. "A few tears were shed, but now the company is healthy again."

After Colvin returned to Salem last month. Clair. 67, joined the business fulltime as the new c.e.o. Wayne, 56, is now c.o.o. They are optimistic about their business'future.

"I'm encouraged," Clair says. "It's now up to us whether we are up to the challenge."