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By Charlotte Huff
May. 12, 2006
Weyerhaeuser leaders didn’t have to mess with success. By 2004, the company’s residential wood products division could boast of $8 billion in annual sales and 15,000 employees scattered across four time zones.
But they recognized some worrisome fissures. Cultural rifts persisted in the wake of several high-profile acquisitions. Five businesses fell under the division’s umbrella, competing for and confusing customers. Meanwhile, the home building industry was rapidly consolidating.
Leaders have responded with what they describe as the company’s largest strategic overhaul in recent memory. The goal: to prove that entrenched work habits can be gutted to build a new strategic framework—one house at a time.
If all goes well, the new organization—unveiled in April under the name iLevel—will have achieved more than a massive consolidation of five businesses into one. iLevel leaders will have also reshaped the long-term goals of employees to better court and retain customers.
“It’s a pretty daunting task,” says Allan Bradshaw, the wood products division’s director of human resources, who led the change process. “But people rise to the occasion. People can do more than they think they can.”
Rather than selling wood products piecemeal, Weyerhaeuser officials want to be considered the one-stop location for all of the innovation and products required to construct residential home frames—joists, beams, floors and all. To achieve that, Weyerhaeuser, long a product-driven company, must learn to operate more like a service company, responsive to the subtleties of customer demands. The company, located near Seattle in the community of Federal Way, Washington, celebrated its 100th anniversary in 2000.
“The cultural piece has probably been our biggest challenge,” says Kurt Liebich, vice president of marketing. “I think everyone understands what we are trying to do and supports it. But people still slip back into the old language and the old behaviors.”
Speed rules. In just 12 months—from January to December of 2005—the 11-member business leadership team was selected and the entire workforce restructured. The bulk of the changes occurred during the latter six months, when the business leadership team picked the next several levels of managers, called “transition agents.” Together, they educated employees about the reorganization and worked through a 178-item action plan to launch the new organization internally in January.
Among the steps they took: retraining the strategic sales force, developing a new glossary of terms and creating an online game and employee DVD to highlight the division’s new strategic direction. With the help of a consultant, the business leadership team and 300 transition agents gathered weekly in an online discussion room to update their progress and address any concerns.
“It’s really hard when you are sitting at the top of a 15,000-person organization—everything gets filtered,” Liebich says. “The question is, how do you cut through all of the filters and really understand how people are feeling?”
Bradshaw, who got involved in 2004, participated in everything from strategy meetings to the selection of iLevel’s business leadership team. Together with Lee Alford, the leader of iLevel, he reshaped the residential wood products division without gutting it.
There were only 108 job losses, mostly related to merging the sales forces, Bradshaw says. Still, creating iLevel has required creative destruction, touching nearly everyone in some way.
“When we dissolved the old organizations, we didn’t give them (the employees) a home to go back to,” says Alford, senior vice president of residential wood products. By launching a new organization from scratch, “We removed the familiar,” he says.
This big-concept thinking occurs against the backdrop of a home building industry skittish about skilled labor shortages and a possible housing bubble. The National Association of Home Builders has predicted that total housing starts, which reached a little more than 2 million in 2005, will decline 7.2 percent this year.
Housing pressures are another reason not to dally, says Alford, part of Weyerhaeuser’s senior management team. “We think in some ways this is an opportune time to demonstrate how we can add services that save the dealers and home builders time and money,” he says. “And, at a time that they’ll need it, because they will be in a price squeeze.”
Labor challenges
To illustrate how home building has changed, Weyerhaeuser officials frequently point to the television show Extreme Makeover: Home Edition, which the company helps sponsor. Each episode features the rapid overhaul of a home made possible by transporting preassembled materials to the lot, reducing the need for carpenters and other skilled laborers.
“Home building is such a margin-driven industry,” says Steve Shook, associate professor of forest products marketing at the University of Idaho in Moscow, Idaho. “The manufacturers know that the only place the builder can increase their margin is by lowering their labor costs.”
Finding skilled labor these days isn’t easy. A survey of 427 builders conducted in October by the National Association of Home Builders found that nearly half—47 percent—were having at least some difficulty locating skilled carpenters.
At the same time, small home-grown builders are rapidly being overshadowed by large companies capable of raising thousands of new roofs annually. In November, Fort Worth, Texas-based D.R. Horton boasted that it had closed more than 50,000 homes in a single fiscal year.
With its own significant scale, Weyerhaeuser hopes to entice labor-sensitive builders with preassembled materials and other products that can shave time on-site.
Weyerhaeuser’s purchases of Canadian forest products company MacMillan Bloedel in 1999 and Portland, Oregon-based Willamette Industries in 2002 added mills and other production capacity, Bradshaw says. The acquisition of Trus Joist in 2000 beefed up research and development.
By 2004, several of Weyerhaeuser’s residential wood products division’s product lines, including engineered wood and soft lumber, led all or nearly all of its competitors worldwide. Its sales revenue last year comprised slightly more than one-third of Weyerhaeuser Co.’s $22.6 billion.
But the acquisitions introduced differing decision-making styles and even a mishmash of corporate language. The five businesses largely operated independently, with their own product allegiances and tracking their own profits and losses.
“They had their own sales forces,” Bradshaw says.
Weyerhaeuser leaders haven’t wasted time paring down the workforce, which peaked at 64,000 employees following the Willamette purchase. The company now employs about 47,000 people after a series of mill closures in Washington state, Arkansas and other locations. Prior to creating iLevel, “we had already trimmed ourselves of the nonproductive assets,” Bradshaw says.
The question was, how best to maximize their acquired strengths? “We said, ‘We have the potential to offer a whole framing solution—the bones of the house,’ ” Bradshaw recalls.
Creative destruction
The frame of the new organization started being erected in January 2005, when six cross-functional teams were formed, comprising 10 or so people per team—all experts pulled from different areas of the company.
Each team was assigned to develop a proposal for redesigning sales, manufacturing or another function of the new venture. They were directed to work in confidence and to be creative.
“Rather than start with the org chart, we said, ‘What are all the things that need to be done, for example, in sales?’ ” Bradshaw says. “We developed about 10 different options for how we could organize sales.
“Then we evaluated each option against a set of criteria to determine which option provided the best return for the company.”
The five leaders of the affected businesses evaluated the final proposals along with Bradshaw, Alford and several other key leaders. It was sometimes an uncomfortable process, Bradshaw recalls.
“There was a lot of discussion and debate,” he says. “You have to remember that these five leaders, they all had long careers. They had run successful businesses. They had a lot of stake in tearing down the business walls and reassembling them into one integrated business.”
Meanwhile, Alford and Bradshaw were engrossed in selecting the nascent organization’s new leadership. Weyerhaeuser’s senior management team wanted fresh blood for the new venture, Bradshaw says. The process was assisted by retirements; three out of the five leaders announced they would be leaving. “We started with a blank sheet of paper,” Bradshaw says.
| “It’s a pretty daunting task. But people rise to the occasion. People can do more than they think they can.” –Allan Bradshaw, director of HR, wood products division |
Motivating employees
In October, the 300 newly selected managers gathered in Chicago for a three-day meeting where they learned about their role. Their mission: to educate and energize fellow employees about the business case for launching a new venture.
“We’ve learned through acquisitions that in a massive change effort you need to have transition agents,” Bradshaw says. The team used the term “transition agent” instead of the more traditional “change agent,” he says, to signal that the overhaul would have a beginning and an end.
“Those 300 people who came together in Chicago had three months to go out and tell the story, generate commitment, empower people to change their processes and get the organization in place on January 1,” Bradshaw says.
“Using transition agents was one of the concepts championed by Leland Russell, a consultant hired last summer to “look over our shoulder,” as Alford puts it, “to challenge us that we’re doing the right thing.”
Russell advocates speed where organizational change is involved. Moving quickly provides a faster financial and strategic payoff, says Russell, president of Newport Beach, California-based Geo Group Strategic Services. (The Geo Group and design firm Hornall Anderson were the only two outside consultants used throughout the iLevel reorganization, Bradshaw says.)
“The faster you move, the less chance for systemic resistance,” Russell says. “The status-quoers don’t have time to get organized.”
Reorganization depends upon intracompany collaboration, gumming up the effort, Russell says. “It’s very, very difficult to move fast.”
To boost efficiency, Weyerhaeuser purchased access to Geo Group software so the 300 transition agents could meet weekly, gathering online in 30 groups of about 10 people each.
Every Monday the topics were distributed, and the groups would meet online the following day with the assistance of human resource facilitators. By Wednesday, Bradshaw and the facilitators were holding their own meeting to summarize feedback. The leadership team convened Thursday to take action and develop topics for the following week.
The transition agents were particularly helpful in relaying employee concerns, Bradshaw says. Once an employee DVD was developed, they hosted numerous meetings to show it to employees and answer any questions.
| “When we dissolved the old organizations, we didn’t give them (the employees) a home to go back to. We removed the familiar.” –Lee Alford, senior VP, residential wood products |
Issues did bubble up. An online computer game had been created to teach employees more about iLevel’s strategic focus, but 15 percent of employees don’t have easy access to computers at work, Bradshaw says. Plus, the transition agents were not impressed with their trial run of the game, complaining that it was plagued by technical glitches.
“They were advocating that we shoot the game,” Liebich says.
In the end, the technical problems were fixed. An offline game, with a booklet of puzzles and questions, was developed to reach the remaining employees.
Positioning iLevel
Many companies before Weyerhaeuser have attempted to move from a product focus to a solutions-based mind-set, says Nathaniel Foote, managing director for TruePoint, a consulting and research firm in Waltham, Massachusetts. “But the track record is not very good,” he says.
Employees with product strengths may not adapt well. In product sales, Foote says, “all of your instincts are about maximizing your own profit in the transaction. If you move to solutions, you want to build customer loyalty and your share of the customer wallet.”
The ripple effect extends far beyond the sales department, he says. Manufacturing may need to produce a more complex line of products to keep customers happy. Employee evaluations should be based on new criteria, such as retaining customer loyalty over time.
“This is a pretty dramatic shift for Weyerhaeuser,” says Foote, who met informally with wood products leaders early in the reorganization process.
In recent months, Weyerhaeuser has been retraining its strategic sales force, about 250 employees, to approach customers with solutions in mind. It is a consultative selling approach, says Rob Taylor, vice president of lumber technologies.
Never again, he says, will a salesperson merely sell 10 orders of lumber. Instead, they will discuss the builder or dealer’s long-term needs for wood and other products. Ideally, better collaboration will help both the customer and Weyerhaeuser, Taylor says. “The more we are able to predict the demand, the better able we are to plan against it and deliver against it.”
For some on the strategic sales team, the new approach also has required a return to the basics, with a crash course in the nuts and bolts of home construction, Bradshaw says. “We want them to know how a (home) frame gets built and how the components interact in that frame.” With that newfound knowledge, he says, “what we want them to do is help our customers find solutions that make them money.”
To signal its new organizational focus, Weyerhaeuser hired Hornall Anderson Design Works to study branding issues. Once it was determined that a new name was required, the Seattle-based design firm worked through some 700 possibilities, says Hornall marketing director Michelle McRae.
Last summer the business leadership team gathered, listening intently as Hornall representatives clicked through a PowerPoint presentation, building to the unveiling of the organization’s new name: iLevel.
“And you could have heard a pin drop,” Bradshaw recalls. “We all said, ‘What is iLevel?’ “
They soon recognized that the name had legs, with the “i” embodying many of the new venture’s strengths: innovation, integrity, integration. “And a level is a No. 1 tool for a builder,” Bradshaw says. “Level means quality. It means honesty. That we’re going to level with you.”
Wearing a name, McRae says, is like donning a new coat. “It’s an empty vessel and you have to fill it full of meaning.”
With the five businesses now operating as iLevel, employees are committed to raising the roof on customer loyalty and, they hope, everyone’s bottom line as well.
Workforce Management, May 8, 2006, pp. 1, 28-36 — Subscribe Now!
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