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Jan 4, 2000 - The office buildersBack
The founder of Krueger Metal Products, Al Krueger, probably would not recognize what his company has become, were Krueger alive today.
Of course, the president of what now is KI Inc. doesn't really recognize the company he joined in 1964 and took over as president in 1983 either.
"When I started here in '64, to imagine that we'd be 4,000 employees, that's hard to imagine," said Resch. "One of our jobs is to manage change. We're not concerned with the next quarter or the next year - we're looking at the long-term trajectory of the company."
KI is one of Northeast Wisconsin's largest employers, yet most people probably do not know what KI does, or the fact that KI is the seventh largest contract manufacturer in the U.S., or the fact that KI is employee-owned. Its plants in Bellevue, Bonduel and Manitowoc and the company's corporate headquarters in Bellevue employ 1,750 of KI's almost 4,000 worldwide employees.
The company manufactures and sells furniture for institutional buyers, including colleges and universities (where the company has the largest market share), elementary and high schools, government and health care, and business, including "high-tech fastgrowing companies," and medium and large companies, with lesser sales in arenas, airports and churches.
Resch converted the company through two lever aged buyouts, from a company owned by two daughters of Krueger into a company owned by all of its employees, either through direct stock or indirectly through 401(k) plans. The company, which projects sales of $605 million in 1999 and $700 million in 2000, has set a goal of $1 billion in sales for 2003.
The names of KI and Resch will be known better in the coming years because of their purchasing of naming rights for Brawn County's new arena in Ashwaubenon and expanded convention center in downtown Green Bay The KI Convention Center, which includes what now is known as the Regency Conference Center, will be completed in the summer of 2000. Work on the Resch Center, near the Brown County Veterans Memorial Arena, is scheduled to begin this year, and the new arena is scheduled to open in early 2002.
"The community has been very supportive of not only KI but myself," said Resch. "I've been living here for 35 years. And basically Im very grateful for the support the greater Green Bay area has given not only me and my family, but also KI, and I look at it as a way to give back for the progress we've had since I've been president.
KI has a long list of guiding principles, including making it easier for customers and dealers to do business with KI than with any of its competitors, empowering employees to "Provide the best possible level of service to the customers," maximizing profits and earnings for shareholders (that is, the employees), making KI the favorite customer of suppliers, and providing "human and financial resources to enhance the community socially and economically."
The company has changed enormously since Al Krueger began Krueger Metal Products to build folding chairs in Aurora, Ill. in 1941. Building metal folding chairs during World War II required Krueger to call on steel companies daily to provide scrap metal to manufacture the chairs.
Resch, a Minneapolis native who got an associate degree from Graceland College, a mechanical engineering degree from Massachusetts Institute of Technology, and a Masters of Business Administration degree from Harvard, came to KI in November 1964 after one year working for Hudson Pulp & Paper Corp Resch got a "third-hand reference" for Krueger, a company with 100 employees and less than $4 million in annual sales, when he found that no Midwest paper company was looking for someone with his background.
"They [Krueger] were looking for somebody with an engineering background and a business degree, and because the company was so small, they needed somebody who could do everything from a time study on the floor to cash-flow management," said Resch, who spent his first three months with Krueger on the plant floor. "I never got to see the facilities enough [with Hudson], and I'm a hands-on kind of guy. It was a growing company, with all the problems of a small undercapitalized company, and I thought I would be a contributor to its growth."
Resch was named vice president/manufacturing in 1967, one year before Krueger died. He was promoted to executive vice president in 1975. Four years later, Associated Bank, which held Krueger's daughters' stock in trust, decided to sell the company, which had grown to $39 million in annual sales, to diversify the daughters' investments. While large venture capital firms looked at Krueger, Resch decided that nothing was stopping him from putting in a bid for the company himself, even in an economy with double-digit inflation and unemployment and prime interest rates approaching 20 percent.
Resch's group, 51 percent awned by Northwestern Mutual Life with contributions from Marshall & Ilsley Corp. and an LBO firm, took over the company Jan. 1, 1980. A second leveraged buyout, in 1987, enabled Northwestern Mutual to sell its 51 percent stake KI's sales now are 18 times as much as they were the year before the first LBO.
"We accomplished as a team very rapid growth, and profitably," said Resch, who was me of three shareholders after the 1980 LBO. "We deleveraged the company twice; that's a very scary time when you have everything you owned, but we not only survived, we thrived. If you don't succeed, it was bankruptcy for me and the company. All shareholders will do well in an LBO if its successful, not just management. Let's say we were quite motivated and a little scared."
The company today, the fastest growing in its industry since 1990, has almost 4,000 employees spread among its corporate offices, four US. manufacturing plants KI's other U.S. manufacturing plants are in Tupelo and Winona, Miss.), three overseas manufacturing plants, and 16 showrooms, from Kuala Lumpur, Malaysia, to Jeddah, Saudi Arabia, to Treviso, Italy, to Pembroke, Ont. In the past two years, KI has acquired AGI Industries of High Point, N.C., which manufactures wood-frame chairs and executive and waiting area seating; ADD Specialized Seating Technologies Inc. of Los Angeles, which makes health care furniture; Spacesaver Corp. in Fort Atkinson, which makes mobile storage systems; and Period Furniture of Henderson, Ky., which makes residence hall furniture. Resch said the acquisitions were designed to expand the company in its core markets, by expanding sales and product lines.
Besides setting a record in sales, 1999 also saw a 60-percent expansion project at KI's Manitowoc plant, capacity-doubling projects in Pembroke and AGI Industries, a 50-percent expansion project in Tupelo, and a project to quadruple capacity at Period Furniture. "We're very well positioned in terms of bricks and mortar for the future," said Resch.
Everything back into KI
The company gives no dividends to its shareholders, putting all its profits back into the company. Employees get stock grants based on the profitability of the company up to a maximum of 15 percent of salary. The company now has 150 to 200 direct shareholders, and all employees are at least indirect shareholders through 401(k) plans, 60 percent of which include KI stock.
"Customers appreciate the fact that everybody has a stake in the company," said Resch. "When customers take a tour of our plant, a technician should know how the company is doing, how their operating units doing Customers like to have people who think of themselves as owners. I believe so strongly in developing incentive systems, retirement systems, so employees think Eke owners. We're all trying to add value to the raw materials we buy, which means we try to be as efficient and effective as possible. We try and inculcate our philosophy throughout the company, so they know what rewards are possible and what responsibilities come with being an owner of the company."
Part of becoming a company's best customer, or easing doing business with a customer, involves focusing on what the customer needs, whether those needs are met by what KI has in stock. "We really tailor our product offering to what we call a market of one," he said, to "sell solutions, not products ... a solution no matter what it is - how new, how difficult, how complicated it is, how fast they need it."
To do that, KI does what Resch calls "mass customization." KI first determines if the company's existing products can fill the customers' needs. If meeting needs requires modifying its existing products, KI will make the modifications. If meeting needs requires creating a specific product, KI will quote a price on that product within four hours.
The "mass customization" process has required millions of dollars of investing in "a robust information infrastructure," hiring employees with cross-functional skills, and "a lot-sizeone philosophy," said Resch. "We want
to build one chair as effectively and
efficiently as 10,000 chairs."
Quality is a major emphasis, KI is one of the 0.5 percent of U.S. corporations that are ISO 9000-certified throughout the company; Resch said ISO certification "guarantees a process that should give you good quality." KI was the first company in its industry to achieve ISO 9000, 9001 and 9002 certification.
Resch describes ISO certification, which is voluntary, as "table stakes - you have to be an ISO shop. To be one of the top companies in our industry, you have to be ISO-certified."
KI also emphasizes "first-time quality," manufacturing quality that doesn't require post-purchase repairs. That involves working closely with suppliers.
"Our philosophy with our vendors is we want to partner with our suppliers," said Resch, whose company's list of core values for suppliers includes efforts "to maximize the financial returns for both companies." "This is not a company where we try to negotiate the lowest price; we try to negotiate the best value for our customers. We both come out with better value for our customer.
"Price is certainly part of it, but if you pay X dollars, and you get X plus Y value, that's what we're talking about. If we really learn about our customers and what they need in the future, we can provide them with solutions with high value - price plus functionality."
The company also places environmental protection high in its values. The fact that KI is vertically integrated allows the company to recycle easier in, for instance, recycling thermoplastics for used office furniture. The company's chromeplating facility treats waste water to drinking-quality standards; "It's not cheap to do that, but it's the right thing to do," he said.
"I don't think its difficult; I think its like anything - if you're committed, you can get it done. We're always looking to improve. While they may not have a short payback, they all have long payback when you take the long view."
I
Gifts while you can see them
The $3.8 million Resch Center and KI Center donations are split between a $1.9 million contribution from Resch and $1.9 million in in-kind donations from KI for arena and convention center furniture.
Having the KI name on the convention center "certainly will have some promotional value, but I think its more a statement of our commitment to the community," said Resch. "My philosophy is I'd rather see the results of my personal donation while I'm still alive than have my family or a foundation have it when I'm dead. It's more fun."
Resch said KI can design a state-of-theart seat for the Resch Center, featuring power and data connections and wiring for hearing-impaired assistance devices, depending on the center's construction budget.
Resch's name is part of several other community projects. He was one of the founders of the Greater Green Bay Community Foundation, and made "sizeable" donations to a family center at a YMCA resident camp and to the new Green Bay YMCA Day Camp, and paving a walking trail and bicycle path along the East River. He also has served on the boards of or contributed to Bay Area Humane Society, the Boys and Girls Club, the Green Bay Drug Alliance, the Green Bay Symphony, the Northeast Wisconsin Technical College Foundation, and the University of Wisconsin-Green Bay and its Weidner Center for the Arts.
"A lot of it is youth-focused, and you have some obligations to the community to do some community-type things," he said.
To reach KI's $1 billion annual sales goal by 2003 will require "greater penetration in our current markets, developing new products in our current markets, and developing new markets," said Resch. "I'd like to be here when we get to $1 billion, and then its time for a new team to take it to $2 billion or $3 billion.
"We're in good position in the market, we have great employees, and I think a good leader knows when it's time to step aside and take the company to a new level. To me, that's a manager's best legacy, that he left a strong management team and the foundation for the company to double
or triple in size."
By: Prestegard, Steve
Publication: Marketplace
Date: Jan 04, 2000
Subject: Office furniture
Location: Wisconsin |
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