Finding Your Place in a Great Industry

Touring two plants in July, I couldn’t help wondering which would be a better place to work in the current slowdown. Both are privately owned businesses that are being managed by second-generation owners. Plant “A” is in a stable, rust belt market, and plant “B” is part of a longstanding organization that has expanded to a rapidly growing, southeastern market. Comparing the two sheds light on the key characteristics of a sustainable business. Companies that exemplify these factors are the best places to work, even though all component companies are impacted by the overall health of the housing market.

Slowdowns are hard to predict, but they are more difficult when they follow a euphoric period, like the recent Covid-induced mini-boom. That was a rare period when our industry prospered while others suffered. Now it seems that we’re doomed to repeat the feast-and-famine, ratcheting economy that has plagued the component industry. The fact that most of us have been through several of these down cycles offers little consolation. But, most of us also made it out the other side, and many of us even got to a better place, though not necessarily by choice.

This component business was, is, and will be a good place to stake our future. Recall its euphoric birth described in last month’s Home Building Technology, Part VII: Carol Sanford’s Quantum Leap, when a piece of metal costing seven cents could be sold for a dollar. And realize that, over the subsequent few years, trusses were so much better than their alternatives that a worldwide industry was created in less than a decade. Certainly, housing starts have been volatile since then, but they have been less volatile since 1990. The sharpest declines have occurred after the greatest excesses, and today we are not generally close to being in an overheated market. We are producing less units, about 1.2 million annually, than the 50-year average of 1.4 million units, with a population more than double what it was at the start of this industry.

According to our builder customers, the future looks bright. At the June SBCA Open Quarterly Meeting, NAHB presented the results of a heartening survey of 1000 builders. Although expected sales increases varied across types of builders and regions of the country, 12% plan to purchase more wall panels and 20% plan to purchase more roof trusses over the next five years. What was striking is that national builders plan to purchase 29% more wall panels, despite the significant skepticism of many CMs.

More important than this data is the resilience of a company and how it makes the tough decisions that have to be made. As I learned in the military, the worst decision is the decision not made. And the more tough decisions a company has survived in the past, the better chance it has of surviving in the future.

Now, to assess the resilience of the two organizations I visited, the measures outlined by Jim Collins in his book, “Good-to-Great,” are most instructive. From the many plusses shown in the categories in the chart, it is obvious that both companies have strong attributes, which is what it takes to succeed through the ups and downs in this industry. However, their main differences are shaped by the markets where they operate. To succeed in a steady market takes a steady and usually humble leader. But to succeed in a hot market generally takes a much more driven leader, who is willing to work “outside of the box,” and who leverages the latest equipment and software technology to beat the competition, which is always greater in hot markets.

As both companies would be great to work for, the decision comes down to an individual’s tolerance for risk. Moving to a new plant like A in a hot market, as I have done, is riskier, but offers greater rewards. However, the overall cost of living is a large consideration in a relocation. For example, houses in the small college town where I moved cost significantly more than houses in the much larger city of St. Louis, where I began working.

What if you were asked by either of these two fine companies to move into a different functional area and/or city? I say welcome the opportunity to take on new or unfamiliar responsibilities, as I had to do when I was moved, not by choice, from engineering to marketing. This helped me years later when I had to move from truss plant manager to salesman, and I’ve known others in this industry who have converted unplanned changes into successful careers.

Of course, you should know everything you can about your company, especially its profitability and how it is faring against its competition. That means reaching out and meeting personally as many people as possible. LinkedIn can open doors, but it is your job to go through those doors and see what’s on the other side. That provides perspective.

Fortunately, the component industry is part of the largest and most essential industry in America, and the use of the products we make will continue to grow. There are hundreds of great entrepreneurial component companies across American that have found their niche. Now it is up to each individual to find theirs.