Great Little Box Company: A Team Approach to Success - Part 1

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Vancouver, British Columbia
Date established: 1981
www.greatlittlebox.com

VANCOUVER, BRITISH COLUMBIA — Robert Meggy was just 35 years old when he purchased a failing Vancouver-based box-manufacturing company. The year was 1982 and the country was in the midst of a recession. The timing couldn't have been worse.

"I had just bought the company and the economy took a nosedive," says Robert. "I had personally guaranteed the rent for two years. I had personally guaranteed the company assets, which I had bought way over market value. At one point, I owed more on my house than it was worth. It was not a good time."

Robert says he lost $15 000 and 7 kilograms in that first month. Five months later, he wasn't sure the company would survive. "The first five months were very bad," he says, "very bad."

Total sales for 1982 were $80 000. By 2005, the Great Little Box Company had grown to become the largest independent corrugated-sheet plant in western Canada, with $23.4 million in sales, 170 employees and offices in Vancouver, Victoria, Kelowna and Everett, Washington. The company turns out more than 150 000 cardboard boxes a day from a 140 000 square-foot (13 000 square-metre) manufacturing and warehouse facility. Today, the company's sales for one day are more than the total sales that first year. "We fill more orders in an hour now than we did that first month," says Robert.

•  Background
•  Financial management
•  Sales and marketing
•  Teamwork
•  The "open-book" process
•  Profit sharing
•  Information sharing
•  Recognition and rewards
•  Incentive programs
•  Performance management
•  Future plans
•  References

Background

The Great Little Box Company was originally established in 1981. When Robert Meggy and his wife, Margaret, purchased the fledgling company a year later, it was floundering and had fallen into receivership. Rather than start from scratch, the Meggys purchased the company and all its assets, including the name. "I wanted the Yellow Pages advertising," said Robert. The company had been operating for a year or two before it fell into financial troubles, and Robert wanted to take advantage of any and all existing promotional opportunities. One of the company's biggest sources of new customers was its ad in the Yellow Pages directory, which had already been published with the company's original phone number. "I remember having to pay the telephone company $1400 to pay off the old phone bill so that they would give me the same telephone number."

The Great Little Box Company reopened in April 1982 with three box-making machines or "presses," two machine operators and a sales representative. Robert, a certified management accountant (CMA) by training, would pitch in and operate the third press when it got busy. "I did everything in the beginning," says Robert. "From taking orders and making sales calls to running one of the machines and shipping out the completed jobs."

The Great Little Box Company is in the corrugated-packaging industry. Specifically, it makes boxes, a complete line of corrugated boxes in all shapes and sizes. "It doesn't matter what you make, it has to go in a box to be shipped," said Robert. The company designs, makes and prints a variety of boxes ranging from very basic stock boxes, such as shipping boxes, to custom boxes with detailed artwork and four-colour printing. About 80 percent of the Great Little Box Company's customers are manufacturers.

In Canada, the corrugated-packaging industry is dominated by a handful of large, multinational companies. The Great Little Box Company is the largest regional firm in western Canada, and Robert attributes the company's success to his employees, who are committed to providing the company's customers with good service, quick turnaround and on-time delivery. "If you keep your staff happy, they will keep your customers happy," says James Palmer, Vice-President of Sales and Marketing.

Robert is no stranger to the packaging industry. His first job out of university was with Crown Zellerbach's packaging division in Vancouver. He later worked at a family-owned forest-products company where he learned first-hand the value of good management practices. "I'd always wanted to own my own business," said Robert. "I wanted to see if I could put into practice what I learned at university." He said that at first he thought it would be easy, but "Having a good understanding of the theory and principles of running a business doesn't quite prepare you for the actual experience," he says. "I was very, very green. I could read financial statements, but that doesn't prepare you for the day-to-day realities."

Financial management

From the beginning, Robert has paid close attention to financing. He and Margaret took a second mortgage out on their house to help purchase the company. Margaret, also an accountant, continued to work as a college instructor in the evenings while staying at home during the day to raise the couple's two young children. Her steady income helped support the family during the company's start-up phase. She and Robert had also done very well with real estate investments. "We owned quite a few rental properties," said Robert. Because of their real estate investments, "The banks were quite happy at the time to give me a line of credit, which was bound by personal guarantees." Another $20 000 came from family and friends.

"At the beginning, it was very easy to get financing," said Robert. "We owned a lot of real estate, and the year before, around 1981, real estate prices had doubled. I remember I made $1000 a day for a whole year. It was great. I think it helped because we were doing so well and the bank was comfortable with what we were doing. Then in 1982 everything crashed, but we already had what we wanted, which was the line of credit."

They have also practised a strict policy of protecting their cash on-hand by financing any equipment purchases through bank loans. "We finance everything we buy because we want to make sure we always protect our cash," said Robert. They also make sure that they only use a small portion of their line of credit at any given time, leaving most of it available as a cushion in case of emergencies. "We've always paid our bills and we've always watched our cash very closely," said Robert.

Sales and marketing

The first year was tough and the first five months were the toughest. It was 1982 and the country was in the middle of a recession. "It was pretty ugly in the beginning," said Robert. "We just weren't getting any sales. There were some days that we didn't have any orders. We had $8000 in sales the first month, but we lost $15 000. So it was pretty ugly there for awhile."

By the fall of 1982, Robert had decided he couldn't continue with the way things were going. He approached one of the company's largest customers and offered them a partnership deal. "They were a shipping-supplies firm that bought shipping boxes from us, so they were in a similar business," said Robert. "The idea was that I wanted them to buy half the company because I wasn't doing well and my big problem was sales."” He proposed a deal in which he would be responsible for administration and production while they would look after sales and marketing.

The shipping-supplies company jumped at the idea. They had just laid off one of their sales representatives so they brought him back to work with Robert full-time. Sales turned around almost immediately. "He upped our business 80 percent overnight," said Robert. "It was just what we needed." That month, the company made money for the first time since the Meggys took over. "He was very good at one-to-one selling on the phone. He just took our customer list, got on the phone and was very, very good at closing deals." He brought back many of the old customers who had gone elsewhere when the previous company had closed down, and he also handled all new telephone inquiries.

The experience taught Robert that a good sales and marketing department was essential to the company's success. He already had a couple of sales representatives, but the new sales person just happened to be very, very good at what he did. "This changed my opinion about sales people completely," said Robert. "I'm terrible at sales. I just don't have the personality for it. So now I make sure I get very good sales people in place." The proposed partnership with the shipping-supplies firm eventually fell through. "It turned out that they just wanted to know more about our business so they could start their own box-making company," said Robert. The shipping-supplies company pulled out, but their sales representative decided to stay with the Great Little Box Company. "He wanted some shares in the company, so I gave him 20 percent," said Robert. At that point, the company wasn't worth a lot. A few years later, when the sales representative retired, Robert bought the shares back. By then, the company had increased in value. "He ended up with quite a good income for quite a few years after that," said Robert.

As the company grew, Robert continued to build his sales department. "Eventually we got big enough so that I could put a sales manager in," said Robert. "That was probably about five years after we started." Today, the company has 20 people in its sales and marketing department, with sales offices in Vancouver, Kelowna, Victoria and Everett, Washington.

Realizing the immediate results of having a good sales force was a turning point in the company's history and set Robert on a path that has led to the transformation of his company from the bottom up. By the end of the first year, the company had stabilized and grown to seven employees. With the exception of a break-even year in 1991 and a loss during the recession of 2000/2001, Robert says that the company has been profitable every year since that money-losing first year. He has managed to grow the company by reinvesting those profits back into the company's operations.

"After that first year, we grew pretty steadily every year," said Robert. "We were growing very strongly, maybe 20 or 30 percent a year, way more than the average company." When the recession of 1991 hit, the company's growth slowed, but it didn't stop. "We were still growing, but instead of growing 20 percent a year, we might have slowed down to one or two percent at the worst. The recession wasn't all that bad for us then. We didn't lay off anybody; it just slowed our growth for a couple of years."

Robert recognized that the key to controllable growth was paying rigorous attention to financial details and delegating while you're still small. "I know by the hour what orders are, what sales are and what percentages we're making on them," he said, pointing out that financial management is simply a matter of knowing your costs cold, and you don't have to be an accountant to do that. "I used to summarize costs by the day. By hand. If you're not looking at financial statements at least monthly, you're headed for trouble."

As for the importance of delegating, his positive experience with hiring the right sales person reinforced his belief that a well-trained, highly-motivated and committed workforce was essential to ensuring long-term profitability. "I see it so often," he says. "Businesses get to a certain point and they start losing money because the owner can no longer control what's going on. Some people can't delegate because they don't hire people that are good enough. Everybody who works for me has to know their job much better than I'll ever know it." On the other hand, some people don't want the added responsibility. "One of the worst things you can do is to promote someone beyond their abilities," says Robert.

Lacking the economies of scale available to the larger manufacturers, the Great Little Box Company focussed on speed and customer service as a way to differentiate itself from the competition. The fact that they were small in relation to the marketplace gave them a definite competitive advantage. "We were surrounded by dinosaurs," said Robert. "Our main competitors were very large and very slow. We used to get our orders out before they got their quotes out. They used to control the marketplace, so they just went by the way they used to do things." Which meant six-week delivery times. But times were changing, and smaller sheet plants like Meggy's were able to turn orders around much more quickly than their larger competitors. "We have about five-day delivery now, but we want to be less than that," said Robert. The larger plants have also speeded up and cut their delivery times down to two weeks or less.

Robert recognized that providing on-time delivery and excellent service required much more than having the latest tools and equipment. "They're only as successful as the people employing them," he says. "A good employee will bring you back three times their salary. A poor employee can cost you that, and more," said Robert. "It's very expensive to lose someone — it can cost anywhere between $50 000 and $100 000 per person. You especially can't afford to lose anyone when you're growing."

Almost from the very beginning, Robert began the process of putting in place a system that would support his belief that the company's greatest assets are its people. "Everything we do has to be by people who are well-motivated. I see it in the bottom line for us. Turnover is very low. If you've got people who enjoy working together, they don't leave."

Robert's "people first" approach included improving teamwork and boosting morale by applying the principles of open-book management, supported by a solid human relations strategy and program. For the program to work, it must be firmly embedded in the company's organizational structure and not be left to chance.

Teamwork

Robert believes that building teamwork improves the bottom line and is essential to attracting and retaining good employees. As people work better together and understand each other's jobs, there are fewer mistakes and more efficiencies.

In the beginning, with only three employees and himself, building teamwork was as simple as instituting a golf tournament and a Christmas party. There were only four employees at that first golf tournament and the Christmas party consisted of a single table at a restaurant. In June 2005, the company celebrated its 23rd annual staff golf tournament with 83 people participating in the day-long event, capped off with a buffet dinner for employees and their spouses. At the Christmas party in 2004, 225 employees and their spouses attended, sitting at pre-arranged tables to ensure a good mix of office and plant staff. The company also rents a hall and hosts a Christmas party and lunch for employees' children, complete with a volunteer Santa and elves. Robert prides himself on knowing the name of every employee's child and personally does all the shopping for the gifts.

Employees are encouraged to attend company social functions. Robert says the majority of those who do not attend are less likely to stay on and usually leave during their first year. "If they don't go to social events, it usually means they're not interested in the people they work with — and if you're not interested in that, you're not interested in the company — because people make up the company," says Robert. "Think of how much time you spend at work in any given week," he says. "Often, you are seeing more of the people you work with than your own family, so it's important to develop your relationships there."

He organizes as many events as possible, from annual trips to bowling nights, running, squash groups and lunchtime barbecues. "Everybody has to enjoy going to work, including me," he says. "I'm the one who has to portray being positive. If I don't, it goes all the way down the line."

The "open-book" process

The Great Little Box Company's program is designed to involve everyone in the company's success through a process of regularly sharing information and acknowledging employee contributions. Every month, the company shares its corporate and financial information with all employees. When he first introduced the concept, Robert says he had to spend some time showing everyone what an income sheet and a balance sheet were, and explain income-to-debt ratios. "Finance 101" he says, and he continues to make sure that everyone understands the financials.

The monthly meetings are arranged at two convenient times to accommodate the schedules of both office and plant employees. At those meetings, the monthly figures are presented on an overhead screen and Robert explains the reasons for the results. The meetings ensure that everyone knows how the company is faring and what can be done to improve things. "A company goes broke and usually the most surprised people are the employees. If they had known what was going on in the first place, it probably never would have happened," he says. When there is a profit, the share for each employee is included in their next paycheque.

The monthly meetings also allow a forum for input and for recognizing and rewarding employees for their efforts. "It's important to share the financials with everyone," says Robert. "It makes people feel more a part of the company. It's so easy and, frankly, I've never seen a downside. It instills a sense of trust. Regardless of whether the news is good or bad, people want to know and, ultimately, will try harder to make the company more profitable."

Besides, says Robert, "We want employees to run the company like their own business."

Corrie Vugteveen, Great Little Box Company Costing Analyst and Account Manager, says that the meetings make her feel part of the company. "And because we know what's going on, we're better able to contribute to its growth." Customer-Service Representative Sandra Fung says that the willingness to share financial information shows that the company "is not trying to hide anything. If we have been profitable that month, it makes me feel good to learn that I have contributed to that."

"Everyone works together to reach the same target," says Maintenance Manager Philip Lim, who has been with the Great Little Box Company for 14 years. "The company cares about the employees and, in turn, the employees care about the company."

Profit sharing

"I've always believed in profit sharing," says Robert. "We've had it from the very beginning." The company pays out 15 percent of its profits on a monthly basis, divided equally among all eligible part-time and full-time employees. All employees receive the same amount, regardless of their position or wage rate. Robert believes that every single person in the company contributes equally to its success. "When it comes to teamwork, everyone is equal here," says Robert. "The truck drivers, the controller, office staff, plant supervisor — everybody gets the same amount."

Following presentation of the financial information, if the company has made money that month employees receive their share in their next paycheque. "I believe that the more immediate the better for recognizing employees' contribution to the company's success," says Robert. From March 2002 to June 2005 (the most recent period for which data were available at the time of writing), the Great Little Box Company paid out profit sharing for 40 consecutive months, averaging $200 to $300 per employee per month.

Information sharing

In addition to sharing corporate goals and financial information at the monthly companywide staff meetings, daily production meetings and weekly departmental meetings ensure there is a steady flow of communication with plenty of opportunities for employees to ask questions, provide input and receive feedback.

Robert sets the tone by making a point of meeting with everyone in the company twice a year, in small groups of 10 or 12 people. "You can't have any more than that or it loses the original intent, which was to give everyone an opportunity to meet with Robert oneon- one," says Jacqueline Simpson, Marketing and Communications Manager.

During the small group sessions, Robert provides a "state-of-the-nation" report on the economic outlook and the company's direction, the "bigger picture stuff that doesn't come up at the monthly staff meetings," says Jacqueline. That's followed by discussion on key issues such as quality, safety or production. The meeting is then opened up for questions and feedback.

"People take these meetings very seriously," says Jacqueline. "They feel comfortable enough to ask him very tough questions. Over time, Robert has created a level of trust between him and his staff that allows people to speak freely. He truly believes in being open and honest. People know there won't be any negative repercussions and they'll get answers to their questions."