Case 12.

2 - Crown Point Cabinetry

Faculty of Management Studies, Delhi University 3107 - Management of Control systems BY GROUP J Objective:

The purpose of this analysis is to determine the causes for the turnaround at Crown Point Cabinetry and determine what other changes (if any) need to be made. This report will determine if Brian Stowell, CEO of Crown Point Cabinetry, should continue with the changes he began in 1993. This analysis will guide Crown Point into the future and determine what should be done to continue its productivity gains in an increasingly competitive cabinetmaking industry.
Description of Current System:

Crown Point Cabinetry was founded in 1979 by Norm Stowell when he began making cabinets in his garage. Crown Point was a family run business which included all seven of his children and expanded to 100 employees by 1992. Brian Stowell, with his fathers and siblings agreement, became lead executive in 1993. When Brain Stowell took over, things were not running smoothly at Crown Point. Annual worker turnover was 300 percent and absenteeism was a major problem. Employee/management relations were described as horrible. Managements solution to handle the situation was to wield a heavy hand but this had little effect. The greatest problem at this time was poor in-process quality control. Some cabinets were built three or four times before they got out of the shop. Brian decided to take a different approach. Brian called a company meeting and announced that he would be making changes. Brian wanted people to say that they loved to work at Crown Point (which was not a desirable place to work at the time).He encouraged his skeptical workers to trust him. From 1994 to 2002, Brian Stowell and his wife Becky, introduced many changes to Crown Point Cabinetry. First he reduced payroll from 76 to 53 people. This increased unit and dollar sales. The management system was then revamped. The management layer was removed and replaced by a team-based management approach. These employee-based management teams were empowered with personnel and management decision-making responsibilities. These teams held daily meetings to facilitate communication, air grievances, suggest work improvements and schedule production. Co-worker review sheets were created to evaluate team member performance and recommend salary increases. These teams also had the power to hire and fire teammates. In an effort to reduce labor costs (which constitute 25 percent of costs) a program termed gainsharing was introduced. A set percentage was multiplied by sales figures for each month, labor cost were subtracted from this amount and the remaining funds were

distributed evenly among employees. Gainsharing bonuses were paid out 95 percent of the time averaging 11-20 percent of annual compensation from 1997 to 2001. Other changes were also introduced by Brian and Becky Stowell. A penalty of $1000 to the gainsharing pool for every backorder was implemented. If no backorders were incurred during the week a lunch was held for the workers. This reduced backorders noticeably. Wages were increased in 1998, 2000 and 2001. This increase contained gainsharing bonuses at less than 25 percent on an annual basis and gave workers a more stable wage. Safety teams were also introduced, which determined penalties (including dismissal) for violators. Retraining on safety standards for all employees (even the founder) was also introduced. In 1992 experience mods (a measure of worker injury claims) were 40 percent above the state average; by 2002 it had dropped to 32 percent below the state average. Crown Point introduced a 401K retirement plan in 1996 and now provided its employees with annual picnics, a box suite at the sports arena and a downhill skiing program. Crown Point Cabinetry has now completely transformed itself from its low times of 1993. Crown Point is now a desirable place to work and the Stowell family is now viewed as truly caring for their employees. Employee turnaround has been reduced to near zero, absenteeism is negligible and management employee relations are at an all time high. Sales have more that tripled between 1993 and 2001. Gross margin has increased 6 percent and is more than 15 percent over the U.S. average for cabinetwork plants. Net margin has moved from breakeven to over 10 percent. Problem Identification:
Suggestions :

Crown Point could go back to the way things were in 1993 but this would only cause the problems it had to come back. Crown Point could create a new management and compensation program but there does not seem to be a need to do this at the current time. The most logical solution is to keep everything the way it is. These changes have increased productivity and profit as well as decreasing employee absenteeism and turnover. The programs that Brian Stowell has implemented may not work in all industries but they are working well for a manufacture the size of Crown Point and in the cabinetry business. Crown Point should continue the programs that it has implemented and continue to focus on treating its employees as its priority.
Future Directions:

For the future, Crown Point Cabinetry should continue the programs it has started. They must continue to monitor the companys financial results and employee attendance and turnaround records. If Crown Point notices an unacceptable decline in these figures, new programs should be examined and implemented to correct these drops. If Crown Point continues to treat its employees well and reward them for making a quality product they should continue to be a successful company.