Dacor grew from a struggling mom-and-pop business to sales of $200 million in 35 years. What were some of the strategic moves to your success?
MJ: There have been several strategic moves we have made which have allowed us to survive and prosper in a very difficult business, but from day one we’ve been a product-driven company. We’ve always known that we must continually develop innovative and high quality products in order to grow in the high end segment.
One of our big steps was getting into the gas cooktop segment. We developed a six-burner gas cooktop that was well received in the LA market-so boom!-we jumped from $6 million up to $14 million in two years time.
Next, we developed the first 30-inch convection wall oven because we had enough money to invest in tooling, and that took us up to $25 million. Then sales hit a plateau for a couple of years while we adapted to our new challenges and prepared for future growth. Our sales have increased sharply since 1993 and we’ve done awfully well. Our sales growth has compounded annually at over 25 percent for the 35 years that I’ve been with the company.
Growth is just a habit we’ve gotten into. It’s the culture of the company, still driven by great products, but now we have very capable people in all areas of the company.
SJ: I think some consumer trends helped out too. We’ve always been an upscale, high-end appliance manufacturer and the market for high-end products grew with us. So maybe part of it was being in the right place at the right time. Blessings from God, too, that’s a factor.
Blessings or sound business decisions?
MJ: They certainly are blessings. Getting up to $100 million took some time and some 25 years. But since the introduction of the value statement we’ve doubled that. So, to the more secular-minded, my message is that acknowledging God in the workplace certainly hasn’t hurt our business. And, of course, I think it has made a wonderful difference.
What has been the impact of the value statement on Dacor?
MJ: Employees know they are going to be treated fairly, and I think that helps create an environment where people feel safe. I think that can be measured in our low turnover.
MR: For the most part, I believe there are always strong similarities between any family’s values at home and the Dacor ones. Moreover, God is within all of us at anytime, right? Well, at Dacor all we are trying to do is to bring our faith and those family values to our workplace, where we spend a great deal of our lives. This has a great impact on every aspect of our business activities and our personal lives.
SJ: In meetings, our value system comes up regularly-when there’s an ethical dilemma, it’s referred to, or someone might even say, “That’s not in line with our values.”
MJ: We have it on our business cards, our newsletters, in all our showrooms, and our offices as a reminder that this is how one should behave, and if we have a bad day, we have a good moral compass to get us back on track.
The nice thing is that the value system isn’t mine anymore; it’s now owned by the Dacor associates. That is a sign of success.
SJ: There’s one part of the value system that I really like because it helps to cover all the bases: the “celebrating our lives” part of it. I think that really helps people feel like they’re not just here to work hard, but also to enjoy life.
I think it makes them feel good that their CEO wants them to live good lives-and not just here at work. We are 600 people, but if you add all the families, our suppliers, and our customers, we affect a whole lot more people than that. So it helps us affect them all positively.
MJ: A big part of our marketing initiative is to bring dealer groups in from all over to spend two or three days with us. One of the consistent comments we get back is that there just seems to be a different attitude at our plants in the way people approach their work.
MR: You have to take the plant tour or visit our headquarters in order to experience the impact of such a powerful message. Dacor is an extension of our homes and all our stakeholders are part of our family. If we are constantly trying to honor God in all we do, how would you think we are doing? We are one of the industry leaders with a very strong reputation in high quality, innovation, design, and performance. We are also well known for our strong ethical standards.
SJ: It also helps to attract new talent. A lot of our executives came to us because they read our value statement, like Tony Zavala.
Tony, how did you find out about Dacor?
TZ: It was a friend of mine who showed me a job posting for Dacor. The posting talked about this company with these special values that was looking for an HR executive.
My friend urged me to look into Dacor, but I was happy with my job. He ripped out the ad and left it on my desk. I ignored it. About a week later I had a discussion with my boss that irritated me and I got mad. I said, “Okay, fine.”
I called and spoke with Dacor’s then HR Director, Chris Fesmire, now director of community relations. After a brief conversation he advised me to visit their website. I said I would, but after I calmed down, I forgot about it.
Four days later Chris called me and asked if I wanted to pursue the job. We had only spoken superficially-I hadn’t sent in a resume. I said, “No,” so he asked me to do him a favor and take a look at the website. I finally went to their values web page thinking I would see different financial indicators. What I saw was Dacor’s Company Value statement. I looked at the header and thought I’d gone into a religious organization’s website. I said to myself, “This must be a for-profit organization that simply does not take those values seriously. Everybody gives lip service to a lot of things, but this is not real.” I kind of just set it aside.
A few days later Chris called and asked me to send him a resume. I sent it and then I began the interviewing process.
Mike asked me why I was interested in Dacor and if it was because of the Value Statement. I told him he had a major challenge in front of him, that I was interested in learning how to run a successful business and at the same time practice these values.
MJ: Tony came on board and showed us the way we could implement the Value Statement in the company to take it to the next level.
What do you mean by “the next level”?
MJ: Tony developed an eight-hour “Values” curriculum that every employee must go through. We have 26 nationalities and all major religions represented at Dacor and words can mean different things to different people. We go through the training and ask them what the values mean to them, and then at the end, we say, “This is what the values mean at Dacor.” For example, respecting others doesn’t mean that you shouldn’t report coworkers for doing bad things. There’s a story behind each one of the six phrases, about how it evolved and what it means.
SJ: It’s a great place to work when you have an environment where people respect each other and help each other and are led by values. One thing about my dad, he’s always had this desire to make sure that one’s full life is taken into consideration.
How do you take care of the “full life”?
MJ: We have a very good benefits program, we pay people well, we share 10 percent of the profits of the company with employees, and we have an Employee Stock Ownership Plan (ESOP).
TZ: The employees contribute roughly two percent of the cost of their benefits. We are now going on our twelfth year with no increase in their contribution.
MJ: We also have some things that maybe other people don’t have but should. We have a 24-hour hotline where people can call a psychologist-around 15 percent of the company will call over the course of a year. It’s recognition that they’re more than just the employees that come and work here eight hours a day; they are also mothers and fathers and people with challenges outside of Dacor.
How did your values system come into play when there was a slump after 9/11?
TZ: After 9/11 the demand had gone down somewhat so we cut back on overtime. Most of us tend to live a little above our means, so our employees needed the overtime. I had my HR people and my salaried administration people run comparisons.
There was no real reason to say we needed to make a salary adjustment other than in my mind it was the right thing to do.
I brought it to the executive team and I told them about the 30 people who have been here 20 or more years, another 50 who have been here for 15 or more years. We have very, very low turnover. The productivity that our associates give us is about two to two-and-a-half times that of our competitors. “They are the company,” I said, “and they are hurting and we are successful financially, so we should do something.”
Mike asked what I wanted to do and I told him I wanted to raise the hourly pay for everyone by one dollar. It was a big chunk of money. It took him about 45 seconds, and he said go ahead and do it.
Our CFO said that we really needed to analyze this-that’s his job, to raise the issues for analysis-but Mike’s response was, “It is the right thing to do, and so we’re done with the analysis. Do it.”
It had a huge, positive impact on the associates. They were so amazed they asked me to explain why we were doing it. Everything just got better on that one action alone. And I think most organizations today would not do that.
What happens when employees fail to live up to the value system?
MJ: With 600-plus people we have a large cross-cut of the population here, and we have some of the same issues as a lot of other businesses. We have people who do things they shouldn’t be doing from time to time, and we have managers who do things they shouldn’t be doing. I like to think that’s an exception, and that they don’t get away with it for very long because this is a climate where that’s not acceptable. That’s what I’m hoping.
Having our value system sets the bar really high, and as humans it’s fairly impossible to live up to it all the time. So, it’s a journey we are trying to achieve.
We’re all divinely created, and I believe you should treat people appropriately. But say there’s a case when somebody is not doing good work, not performing at an acceptable level in the company. I think we err on the side of giving them every benefit of the doubt.
Employees who are not performing are required to begin a performance improvement program where they are given 90 days during which they are coached and given updates about how they are doing. At the end of the 90 days they are clearly aware of whether they are going to make it or not, and it really provides a soft landing for people.
I’m embarrassed by the executive who is known for saying, “You’re fired” on his TV program. I haven’t said, “You’re fired,” in 35 years. That’s not the right way to treat people.
Do your values limit your growth?
MR: Not at all. When we live our values we grow as individuals, as a team, and we obviously continue to evolve as a company. That also means that we are constantly looking for new opportunities to fulfill our end user’s needs and wants. Ever since the values were implemented, the company has grown rapidly in terms of revenues and number of employees, but also in terms of product offerings, incorporating dishwashers, a full refrigeration line, and expanding into wine and coffee products.
SJ: One of my favorite things my dad says is that we’re only going to grow as big as our values will let us. So, I think a lot of those CEOs are maybe challenged because they need to grow so quickly or they need to make certain figures and it conflicts with their values. Here we make the values number one.
MJ: The twist to that is that there is absolutely nothing limiting to our growth in these values. There’s no reason why we can’t go to a half-a-billion or a billion dollars because of these values. In fact, we’ll probably get there faster because we’ve properly implemented our value system-particularly in the good work and the respect.
There’s not been anything but positive impact, and I give a lot of credit to our values as well as to a good business strategy. We have selected the right market niche to be in. Certainly as a niche manufacturer you don’t want to go up against GE and Whirlpool and the mass-middle-priced product market, and so we focused on the remodeling industry and that’s done nothing but grow over the years.
SJ: Part of the success is also the relationships we built with our dealers, keeping them profitable was always one of our main intentions-not to compete against them but to drive customers to their showrooms and to protect them with prices that would earn them a good profit.
MJ: We introduced an MSP or minimum sale price several years ago. There are a lot of people copying that now, but we were the first ones out there saying, “We don’t want you to sell this item below this price.” Because dealers need a minimum profit to survive, we don’t sell to some big retailers because of the way they discount products and provide little customer training or service.
So for Dacor, relationships are important?
MJ: They are core to our business. We probably bring in over a thousand dealers a year to visit the company. We update them on our product lines and we entertain them. We put them up in a nice hotel and reaffirm those relationships so they can go back to their dealership and say to a customer, “I was just cooking on this product at the factory, and it works great.”
Has the values statement made you better leaders?
MR: As we try to “walk the talk” every day, we constantly challenge ourselves to be better human beings. We understand that we have the responsibility to provide our associates with the right tangible and intangible tools to do good work and also celebrate their lives. We have learned from Mike and Tony that in our company the CEO is our value statement.
MJ: The first obligation of the leader is to set proper standards of behavior and to be consistent; people will pay attention to that and will react very positively-the vast majority will.
I’m really pleased with the people I’ve drawn around me now. I have some very qualified leaders in the company, which makes my job a lot easier. I can be more of the cheerleader. I say my primary job is providing the right environment for our associates to do their best work. I have a good idea every so often, but it’s not totally dependent on me to run this company anymore. When we were smaller, my brother and I were responsible for all the decisions, and now some big decisions are being made without me.
One of my favorite stories is when I was starting on this journey to greater enlightenment; I read an article about Bible studies going on in plants. I went to our HR director and said, “You know if people would like to do a Bible study on their own I’d be okay with that.”
He said, “I guess you don’t know we’ve had a Bible study in English and Spanish for over five years.”
So, you know who’s leading the parade and who’s catching up sometimes. I think a leader needs to keep that in mind, too.
TZ: At the level of CEOs, COOs, and presidents, you have to have a high level of integrity and tell the truth. I have two simple rules I tell all my direct reports: Tell me the truth and don’t cause me to have to take any action to lay off people.
I think another key element is to be straightforward and constructive in your communication.
Be the motivating force for always making things better. What you are actually doing is leading by example-walking the walk and not just talking out of both sides of your mouth.