Behind the Scenes at Ganahl - American Business Media

2011 ProSales Dealer of the Year Ganahl Lumber
The Intelligent
Lumbermen
In 2009, Peter Ganahl wrote a guide
for senior managers called “The
Intelligent Lumberman” that sets
down the company’s guiding
principles (qualities that should
persist) and lists current successful
practices (things that can change
over time). Here are a few of both
from this Dealer of the Year:
Good housekeeping “is a state
of mind and a sign of a profitable
and well-run operation.”
Stay “small” in the eyes of
customers, employees, and the
surrounding community. But Peter
adds: “I believe our company can
still have a ‘small’ feel at $600
million.”
Sell shares in the company
only to people who run it. And sell
the shares for real money, not for
stock options.
Gate guards receive a bonus if
they spot errors, regardless of
whether those mistakes hurt or
help the company. Some sharpeyed
guards at busy yards can take
home an extra $600 a month.
Ganahl includes legal costs
when it calculates its losses as a
result of bad debts.
Sales reps get a “spiff” if their
customer pays on time but lose
virtually all their commission if the
bill goes over 90 days past due.
Ganahl serves as its own
internal two-stepper by purchasing
certain products in bulk, warehousing
them and then holding them
until the branches need the
product. When it does, the
wholesale division sells them at
slightly more than original cost. This
helps protect the company should
a sales rep—who enjoys enormous
control to set prices on bids—try to
sell those goods at a rock-bottom
price.
Company-wide quarterly and
annual bonuses are given out
based on the company’s financial
performance, thus keeping
everyone fixated on income.
“Always make ethical
decisions … Period.”
Ready To Move:
Luis Rojas (left)
has just taken
over management
of Ganahl’s
Laguna Beach
store from Barrett
Burt (center),
who is getting set
to run Ganahl’s
newest facility,
in Pasadena.
With them is
Bill Ferguson
(right), who manages
Ganahl’s
Capistrano Beach
facility.
loans. It also shared the wealth by
adjusting compensation plans so that
staff could get even bigger bonuses. But
when the crash—er, the Opportunity
Zone—came, those same pay plans
caused an automatic drop in compensation
costs, thus limiting the impact of
what has been a 44% decline in revenue
since 2006.
Other practices insulate the company
at all times. One example is its
policy of not paying any bonuses until
the operating profit tops 4%, something
Ganahl has done with ease for at least
the past 11 years. “Peter and John aren’t
giving away money unless they’re making
money,” Schield notes.
Another insulator can be found in a
warehouse adjacent to the Anaheim
yard, where the buyers work. That’s
the home of a unit called Ganahl
Wholesale Distribution, or GWD.
You can think of GWD as the bulk
buyer of hardlines for all of Ganahl’s
branches, employing its combined purchasing
power to snap up deals at the
Do it Best and Orgill shows. Roughly
half the SKUs it stocks are show buys.
But you also can view GWD as the
company store, because it requires the
branches to restock their hardlines from
it, and when GWD “sells” those goods,
it does so at a slightly higher price than
what it paid. That helps add a few pennies
to the company’s bottom line even
if an OSR slashes the usual sales price.
The pallets of GWD goods rest
adjacent to another room that figures
in Ganahl’s success. It’s filled with
product displays in which vendors are
invited to create planograms for the
stores. Signs above some gondolas
proclaim: “100% shoppable at 72
inches,” and “Strive for $2,500 in
sales, $1,125 in gross profit. Every
linear foot of gondola generates these
numbers in every store every year.”
“We have high expectations for
how our planograms will perform,”
says Larry Gray, GWD manager and
Ganahl’s director of advertising.
Ganahl takes pride in how it sweats
lots of operational details, from keeping
the lumber stacks neat to striving for
an on-time, in-full delivery rate of at
least 98%. “Their execution—everything
from having the bid correct, shipping
the orders on time without back
orders—was great,” Schield says. “One
of our salespeople could never [tell a
customer] ‘Well, they don’t get the lumber
to you on time.’ They were good.”
One reason why Ganahl managers
were so quick to cut staff a few years
ago is because they are urged to keep
labor costs at 30% to 35% of gross
profit; at 40%, it’s time to sharpen the
knives. Ganahl aims to get no more
PHOTO: TIM RUE / WWW.TIMRUE.COM
42 / ProSales / January/February 2011
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