In the winter of 1979/80, mild weather and lack of snow caused the Toro Company warehouses to pile up with snow blowers. Sales plummeted from $400 million annually to $200 million. The red ink flowed, and the company was losing money. There was fear that they might not survive. Something had to be done.
It was under these dire conditions, some twenty years ago, that forty-year-old Kendrick B. Melrose took over the helm of The Toro Company. How do you turn a company around? Find the right person to do the job? Ken Melrose, a graduate of the University of Chicago and the MIT Sloan School of Business, was, and still is, that person.
"It didn't come easy," claims Melrose. "I had committed myself to lead the rebuilding effort for this fine company. As a public company, I had a fiduciary responsibility to our shareholders; however, it was most important that we build a business model that would work over the long term." And make it work he did. Sales last year reached $1.4 billion annually, and growing. (That's with virtually the same number of employees!)
From 1981 through 1984, the company was losing money. In order to stop the flow of red ink, Melrose and his team cut out most of the fat, i.e., company airplanes, etc., reduced the staff from 4200 to 1800, and set about rebuilding Toro, one step at a time.
Melrose is a strong believer in people. "You have to grow good people to be even better people. It's like growing fine turf. You need to feed (train) them, pull them up in time of need (nurture and motivate them), and basically give them room to grow (empower them). Toro has great people, which makes for a good work environment," says Melrose.
By the late 1980s, with the turnaround working, Melrose and his team were able to make some acquisitions for their consumer division. This strengthened the consumer products division, and the company was soon in a more competitive position. It was now time to focus and build on the professional products area. Consumer products were 65 percent of the business; today, commercial and golf represent 65 percent of Toro's business.
Realizing the landscape contractor segment of the power equipment industry was growing by leaps and bounds, Toro developed a separate division to address this segment. "One of the bright spots for the growth of our company is the landscape contractor market. Developing specialized equipment for this segment will be our focus," remarked Melrose. "I am excited about this part of our future. We have identified the landscape contractor, and are working diligently to develop a close relationship with him. After all, he is the guy who buys our mowers, from walk-behinds to zero-turns to even larger equipment. We also recognize that he buys and installs our irrigation components."
"Speaking of irrigation, we now realize that we didn't pay enough attention to our irrigation division. Over the years, we lost sight of who we were in irrigation, and although I hate to admit it, we lost our leadership disciplines. We somehow forgot about new product innovation, product quality, etc. I have to admit we lost on both counts. However, we are changing that now."
Bringing back into focus the corporate culture of introducing new products and making quality its number one priority, Melrose appointed Bill Hughes as general manager and vice president of the irrigation division. "With Hughes, we are making a strong effort to get our customers back," says Melrose. "Hughes had been working closely with his customers when he owned one of our distributorships. He has a passion for the customer. He knows our customers are the landscape contractors, irrigation designers and the irrigation installers, and we intend to work closely with them."
Melrose wrote a book titled Making the Grass Greener on Your Side: A CEO?s Journey to Leading by Serving. The book describes how you can manage a company by behaving as if the customer is the boss, and the management facilitates the employees to work for the customers. Melrose calls it 'servant leadership' where everyone is empowered to serve customers, and that is the path that he follows.
"Wall Street no longer looks at us as a company that builds snowthrowers, they see us as a market-solution-oriented company. Our goal is to have the Toro name stand not only for quality, but integrity as well."
On the personal side, Melrose and his wife, Julie have four children, Rob, 30; Lia, 27; Kendra, 23; and Taylor, 12. Melrose believes in physical fitness. He jogs, plays tennis and golf, and skis, but his outdoor passion is whitewater rafting. For twenty-five years, Melrose has been an amateur guide on the Salmon River.
Melrose envisions an exciting future for Toro. "The Internet and other technologies will take us to a different place from where we are now, and the contractor division can be our brightest star."
A realist, Melrose has no delusions of grandeur. When asked where he thinks the company's volume will be in the near future, he remarks, "I don?t think $10 billion is realistic; however, I can see us in the $3-$4 billion range."
"We've still got a lot of work to do. I have a lot of work left. We have to pay attention to the details. As we bring new, innovative products to market, we have to ensure that quality goes with it. Our customers demand it, but they also deserve it."