Laying the Foundation for Stable Partnership and Community
Employee Engagement and Vendor Collaboration Produce Win-Win Solutions for Lumber Traders
The Employee Stock Ownership Plan (ESOP) model stands as a testament to an empowering approach to ownership and operations. Within the verdant world of the lumber industry, this innovative structure embodies a positive vision of prosperity and collaboration.
ESOP companies in the lumber sector have risen to a distinct set of challenges, navigating a complex landscape while upholding a commitment to employee well-being and business success.
These challenges are the crucible in which ESOP lumber companies forge their path, finding ingenious solutions that balance growth, sustainability, and employee engagement.
The lumber industry, often synonymous with tradition and legacy, has seen a surge of ESOPs embracing progressive ideologies, fostering an environment where employees aren’t merely stakeholders but owners and visionaries.
Lumber Traders, an ESOP based in Port Angeles, Washington, has displayed an outstanding ability to manage the intricacies of maintaining consistent high quality product offerings, grappling with market volatility, and fostering a culture of inclusivity and participation.
It shows through its performance how industry challenges can become transformational catalysts, propelling ESOP companies in the lumber industry toward excellence.
Resilience, adaptability, and foresight define its approach as it carries the unwavering spirit of collaboration, innovation, and dedication to the workforce that makes it all possible.
A Start on the Heels of Succession
Lumber Traders came into being as an ESOP under the exact conditions many ESOPs today hope to resolve.
The former owners, Arnold & Debra Schouten, were approaching retirement and needed to make their exit in a way that preserved the value of their employees as well as the legacy they’d spent so many years building.
Because the company was the combination of two other businesses, Angeles Millwork & Lumber Co. and Hartnagel Building Supply, liquidating assets was not an option.
So, after consulting with an expert in January 2004, Lumber Traders officially stepped into the realm of employee ownership while Arnold and Debra stepped into their retirement–although they both currently occupy seats on the company’s Board of Directors.
According to President and CEO Danny Steiger, their support has been absolutely vital in the growth of the company as an ESOP, saying that it has been “fantastic having them as a resource, [people] who know the business so well… it’s been an amazing gift that they’ve given to the employees.”
Employee Engagement as a Driver of Company Success
Since transitioning into an ESOP, Lumber Traders has experienced tremendous growth, boasting over seventy employees. The key to its development lies in the way employees are handled relative to their ESOP benefits.
“One of the foundational building blocks is education and awareness,” Steiger says, explaining that that is an absolute necessity for any ESOP’s success, “if employees don’t understand [the structure], then the business is just paying out a ton of capital… and not really reaping any benefits to the company.”
To ensure that employees know the full extent of their ESOP benefits, in 2019, Lumber Traders initiated annual education classes that every new employee is initially required to attend. Existing employees also have the option to retake them to refresh themselves on how the benefit works.
Additionally, the company has changed the format of its stakeholder meetings, which now focus on the driving factors behind share value so that employees can see the connection between that, their efforts, and ultimately, their retirement benefits.
The company also makes use of what Steiger calls his ESOP Master Spreadsheet, which is a visionary resource that he created to accurately calculate projections of what the ESOP benefit will look like ten years down the road.
With this combination of immediate education, updated benefit performance, and future benefit projections, the result has been strong employee retention.
This mixture of information presents a perfect explanation for their amazing growth, as doing this allows them to refine their employee quality while increasing their employee quantity over time.
It’s a major win-win because, within the challenging ESOP space, it’s quite easy to lose track of expenses. However, ensuring that employees know the full extent of the financial security and retirement benefits provided to them is certainly a worthwhile expense.
“If anyone thinks they can just set up an ESOP and go about their merry way, they’ll quickly realize that it’s expensive… if [employees] aren’t given information [it] can be dangerous,” Steiger says, throwing in the fact that the company even goes as far as to give employees the hourly equivalent of their projected ESOP value to help them gain perspective on what their hard work translates into.
A Community of Contributing Partnerships
Lumber Traders goes so far for its employees because, as a concept, employee ownership goes hand-in-hand with its goal of building up its surrounding community.
By building up its employees, the relatively small town of Port Angeles benefits overall, as it will have a more financially secure population that can put more into the town’s overall economy.
Lumber Traders also actively participates within its community, which is why, in 2020, it was recognized as the Business of the Year by the Port Angeles Chamber of Commerce for its role in supplying local non-profits with Personal Protective Equipment to aid the healthcare industry during the pandemic.
“Most people want to be a part of something… to feel that their contribution is valuable, and that’s really the culture we work hard to create,” Steiger says, explaining how that communal philosophy carries over to the companies that Lumber Traders associates itself with as well.
The company has a number of partner companies that it works with to make its vision a reality.
One important factor to its supply chain is Epicor Eagle, a software company that provides it with the digital tools it needs to generate the analytics it needs to reduce its risk of overstocking and stockouts.
There is also Swinerton Construction Company, another ESOP that shares the same vision as Lumber Traders that it partnered with to recently complete a large casino remodeling project.
In May 2022, the company even added a glass division called Glassworks to its services. Steiger himself played a key role in convincing the four lead installers of a company who were planning to start a separate business together to join the Lumber Traders team.
Steiger’s ESOP Master Spreadsheet was actually the persuading factor that showed the installers what the Lumber Traders ESOP would look like in a decade, and, as a result, it acquired a glass division that is currently on target to contribute 20% of the company’s gross profit.
That new glass division works closely with several of Lumber Traders’ key partners, Milgard Windows, Alliance Door Products and Codel Doors, who, according to Steiger, does a “ton of work” with the company.
The list doesn’t end there. Other vendors like Cascade Capital, Weyerhaeuser, James Hardie Siding, Simpson Strong-Tie, Prime Source, PSS and Boise Cascade also play a vital role in providing Lumber Traders with many of the specialized lumber and building materials that really can’t be found elsewhere.
Steiger speaks quite fondly of the character these vendors display when working together, saying, “They bring a lot of great products that we need… we try not to ask too much, but when we do, they always work with us, and that’s absolutely important.”
Leaning more on the retailer side of things, Lumber Traders is also heavily involved with Do It Best Hardware. This phenomenal partner played an important role in helping the company acquire nearly 500 hundred thousand dollars worth of additional inventory to both its locations in 2020.
As a company, Lumber Traders is always concerned with creating win-win connections between all parties involved.
One of the ways it ensures that it brings value through a mutually beneficial relationship with its partners and vendors is by asking them to participate in the annual customer appreciation events, where one of the goals is to give them a chance to meet the customers and show their product lines.
“When our company wins, our community wins, and when our community wins, our company wins,” Steiger says, explaining that “business isn’t about milking every last drop of profit [at] your partner’s expense. It’s about building something bigger, something better than either entity.”
A Prosperous Future of Expansion Ahead
Community is certainly a concept that has been lost in the conglomerate world over the years, but it doesn’t seem Lumber Traders will have that issue as it expands, and it surely has plans to do so rapidly.
It’s currently expanding to a new third location that will be opening up in the first quarter of 2024 with a focus on rental equipment and outdoor power tools. It also has plans to unify the dispatch operations between its two truck fleets at both of its locations to maximize both profits and overall efficiency when it comes to distribution.
“All-around, it’s about sustainable growth and diversification,” Steiger says, referring to how the company will continue to diversify itself through the addition or acquisition of companies in other ancillary industries–similar to what it did when setting up its glass division.
Overall, Lumber Traders is an ESOP that excels at returning value back to employees, vendors, and customers alike! Any business owners planning their succession should take note that a conversation with a company like Lumber Traders is a giant leap in the direction of making a noble exit.
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AT A GLANCE
Lumber Traders, Inc.
What: Industry-leading ESOP in Pacific building material solutions excels in high employee engagement, low turnover, beneficial partnership, and care for its community.
Where: Port Angeles, Washington, USA
Exterior Wood, Inc. – www.exteriorwood.com
Founded in 1977, Taiga Exterior Wood is located in Washougal, WA and has established themselves as a leader in the pressure treated industry in both quality and inventory. Taiga Exterior Wood’s meticulous quality control process ensures that every piece of raw lumber is properly graded for the correct application before treating.