100 Years of Innovation

Having survived two world wars, the Great Depression, several recessions, and a near-bankruptcy, The Toro Company turns 100 this year. In our rapidly-changing world, any entity that reaches the age of 100 years should be called a "survivor". Today, The Toro Company is much more than just a survivor; it is a thriving $2 billion a year, worldwide business.

What has made The Toro Company grow from a small company to a very, very big one, and kept it thriving for so long? We asked the current president, chairman and CEO, Michael J. Hoffman, that question.“We find ways to help customers solve their problems and do their jobs faster, easier or better,” he said. “We treat them with respect. It’s a simple formula, and it has worked for us for 100 years.”

The early years

The Toro Motor Company was founded on July 10, 1914 in Minneapolis, Minnesota. Farming was becoming mechanized, and the Minneapolis-based Bull Tractor Company needed motors for its tractors.

When their original supplier was unable to keep up with demand, the Toro Motor Company was formed to manufacture motors for Bull.

However, the United State’s entry into World War I in 1917 meant that manufacturers had to do their part, and Toro got busy making steering mechanisms for merchant supply ships. By 1918, the war was drawing to a close, as was Toro’s association with Bull. The young company faced a new and uncertain future.

Toro was fortunate that its first president, J.S. Clapper, was good at identifying new markets. He also had a strong belief in building customer relationships, a guiding philosophy that Toro maintains to this day.

When the war was over, the company returned to the agricultural market. It had been working on a revolutionary new product since 1915, the To-Ro (two-row) Cultivator, a tool which combined a cultivator and tractor in one. Ads trumpeted that it could “replace two to four horses.” Unfortunately, shortly after the To-Ro was ready for market in 1919, a major farm depression struck and Toro decided to exit the business.

However, that same year brought a big breakthrough for the company, and its entry into a market segment where it still has a strong presence to this day.

The company’s founders, avid golfers, were approached by the chairman of the greens committee at Minneapolis’ exclusive Minikahda Country Club. He was hoping that the techniques of mechanized farming might be applicable to golf.

This led to the development of the first piece of mechanized golf course maintenance equipment, a fairway mower called the Toro Standard Golf Machine. In 1920, the company was rechristened The Toro Manufacturing Company. A hands-on guy, Clapper strolled around the factory floors, asking the employees their opinions about how products and systems might be improved.

Clapper nurtured strong relationships with golf course and park managers, and sales kept growing. In 1923, the company debuted what might have been the first fairway sprinkler system: the Sea Serpent. This made Toro the only company to offer both turf and irrigation equipment for golf courses. It kept rolling out turf maintenance products and constantly improving them, as it still does to this day.

In early 1929, the company went public; shares could be bought for $1.40 each. But nine months later, the stock market crashed. The company survived the subsequent Great Depression by hanging onto its strong core values. “Our founders never had the luxury of sitting back and relaxing; there’d been so many challenges,” said Bob Wolff, manager, corporate communications, and unofficial company historian. “So they didn’t sit still for a minute— just continued to work hard, innovate, pursue new markets and develop relationships.”

Management made the decision not to have massive layoffs, but to instead cut hours. The employees got smaller paychecks, but at least they still got one. The company maintained a reputation for paying a fair wage. Top executives pulled money from their own pockets to start a special employee fund for struggling families, to which every worker decided to contribute.

When World War II began, the company, like other American manufacturers, converted completely to war production. Instead of mowers, its factories cranked out a variety of war materials. An accounting after the war showed that Toro produced 65,000 rocket shells, almost 100,000 recoil mechanisms and thousands of other items.

The postwar era: growth, growth, and more growth

In 1945, three young college buddies and war veterans, David Lilly, Robert Gibson and Whit Miller, bought the company. Their energy and expansive optimism, as well as new product introductions and acquisitions, helped fuel Toro’s growth.

The company entered the snow thrower market in 1951, and sales cascaded over the $7 million mark. Through the 1950s and ‘60s, new products were introduced in the homeowner market as well as the professional market. President David Lilly continued in Clapper’s footsteps, walking the factory floors and valuing worker input in generating new ideas.

Toro’s list of industry ‘firsts’ reads like the history of the green industry itself. There are too many to list, but we will highlight a few:

An expansive research and development testing facility in Bloomington, Minnesota, (the site of its current headquarters) was opened in 1952. Its purpose was to test new products and conduct agronomic research, and was the first such facility in the world.

In 1956, Toro became the first company in the lawn and garden industry to advertise on television.

On August 1, 1962, the company made the crucial acquisition of California-based sprinkler company Moist-O-Matic. From this point on, Toro will be a major player in underground irrigation.

The Valve-In-Head sprinkler, a unit that combined two formerly separate key components—the valve and sprinkler head—was introduced in 1964. That year also brought the first lightweight consumer snow thrower. In 1968, it debuted the first key-starting electric consumer lawn mower, and in 1973, the all-hydraulic Groundsmaster 72. Sales exceeded $50 million.

In 1971, the firm changed its name to The Toro Company. The 1970s was another era of rapid expansion, innovation, and acquisition. But, as the company headed into the 1980s, trouble lurked on the horizon.

To the brink of disaster “There was a disaster movie a few years back called ‘Deep Impact’ (about an asteroid that could destroy Earth),” recalls Hoffman. “In it, they referred to something called an ‘ELE’ which stood for an ‘Extinction-Level Event.’ Back in 1981, Toro experienced what could have been an enterprise extinction-level event.”

What Hoffman is referring to is a series of business decisions that almost ended the Toro story. “The weight of the company’s business was on the residential side, and snow throwers were a huge part of the company’s profitability,” he said. “Before this, we’d enjoyed a number of years of success. We were approaching the $400-million level; we had deluxe executive offices and a corporate jet.”

“All of this was bet on snow,” Hoffman continued. “But it didn’t snow one year, and snow thrower inventory started to build. Now the decision was, do you batten down the hatches and say, ‘We’ve got to get leveled out?’ Or do you say, ‘Let’s double down; it’ll never not snow again, certainly not two years in a row,’ and build even more inventory? The consequence of that decision is, ‘If I’m wrong, the company will go bankrupt, and all these people are out of work.’” The leader, at that time, was willing to roll the dice. The decision was made to keep manufacturing snow throwers. But the following year proved to be snow-free as well; the company looked as if it might go bankrupt. The president was fired and the CEO departed. Many other top executives left or were terminated. The board of directors tapped one of the young leaders who was still in place, Kendrick B. Melrose, to become Toro’s new president.

The Melrose Years

The new president had a lot of tough decisions before him. The most painful of all was cutting between 50 and 60 percent of the workforce. “It was a bloodbath,” admits Melrose, “just a tragedy. Friends that you’d worked with for years, you had to let go.”

Melrose is credited with pulling the company back from the cliff. “It wasn’t Ken alone; he had strong support from the board of directors,” said Hoffman. “He was a relatively young man when he stepped into that role—only about 40—and untested in something like this, yet he demonstrated extraordinary leadership to get us through that crisis.” A few years later, Melrose would acquire the additional titles of CEO and chairman.

Next came the toughest assignment of all, rebuilding trust with the 1932 Master series tractor with sickle bar attachment employees who remained. “Everyone was hunkering down in their cubbyholes, and nothing much was getting done,” Melrose remembers. “We had to unleash the potential of our employees, by letting them know that they weren’t going to get fired just for making a mistake. We came up with a motto: ‘Freedom to fail, with learning.’ People in lower parts of the organization started coming up with some terrific ideas.”

One employee-generated idea ended up saving the company millions of dollars in product liability losses. It came from two Toro paralegals, Helen Gotzian and Carol Kelley.

“We’d been promoting the idea that we need to love our customers and value them,” says Melrose. “But how do you love your customer when he’s suing you over an injury? These two women said, ‘Let’s get on a plane and go talk to these people.’”

“When we started doing this, a lot of people thought we were nuts,” recalled Melrose. “However, 70 percent of our liability cases were resolved amicably. Previously, most of them ended up in court. More importantly, these people became customers for life. We didn’t think about how much money we would save. We thought, ‘How can we keep this customer and make him happy?’”

Melrose also believes strongly in ‘servant leadership.’ “It means that the company’s leaders serve the employees,” explains Melrose. “Instead of running roughshod over them, telling them what to do, or chewing them out, you try to make your team the best it can be. If your team does really well, then you are going to do well. It means mentoring and recognizing people’s value. And, it’s about creating an environment for initiative, giving people the freedom to fail without worrying about getting fired.” It included the concept that every employee can make a positive contribution to the company, and that it’s management’s responsibility to unleash his potential.

“Ken reengaged us in the core values that were true for the company back in 1914,” said Hoffman. “We’d gotten off track in the 1970s on an unsustainable growth curve, and then things went south. Ken got us back to talking about performance and people.”

Hoffman’s potential was unleashed in just this way. He started at Toro as a service representative. Melrose met him on a plane, and began mentoring him. He supported Hoffman’s plans to go to college. Hoffman earned his B.A. attending school at night and on Saturdays, while continuing to work full time (he was promoted to a sales position in 1981, and then to marketing in 1987); he went on to earn his MBA in 2002. And now, he has Melrose’s old job.…

The ’90s and beyond

This period saw some very important moves. In 1996, the company began acquisition of James Hardie Irrigation. This made Toro the number-one global supplier of irrigation products and systems. (A portion of that business has been rebranded as Irritrol.)

The company bought another mower maker, Exmark Manufacturing, in 1997. Also in ’97, Toro sales hit the $1 billion-a-year mark for the first time. Innovation kept the company moving forward, and in 1999, a self-propelled drive system on walk-behind mowers was introduced.

The company’s emphasis on listening to its customers continued to pay off. “About eighteen years ago,” recalls Bill Brown, group vice president for commercial and irrigation business, “we were just starting our landscape contractor business. We sent one of our people out to talk with the contractors, and figure out what they needed. One of them came up with the idea of a walk-behind, skid-steer loader product. This ended up becoming our Dingo compact utility loader, which today is used by all types of contractors.”

Along with listening to what its customers need or want, quality is first and foremost on the mind of every person in the Toro Company.

With water conservation a growing customer concern, in 2008 the company responded by introducing the Precision Series of spray nozzles. These cut overall water use by up to 30 percent. Then, the growing need to slash emissions resulted in the industry’s first lithium-ion battery-powered walk-behind greens mower, the Toro Greensmaster eFlex, which came out in 2010.

In 2011, Toro entered the landscape lighting business with its acquisition of Unique Lighting. It also introduced the first wireless moisture sensor for the residential market.

An open corporate culture

When asked, “What’s the main reason for Toro’s success?”, every one of the executives interviewed for this article said, “It’s our people.” People are valued for their hard work, their ideas, and their drive.

In addition, any dependent of a Toro employee worldwide can apply for two different college scholarships, either through Toro, or through the Kendrick C. Melrose Family Foundation Scholarship program. Grants range from $500 to $2,000 per year. Between these two programs, the company gives out approximately $200,000 per year. There’s also a tuition reimbursement program for Toro employees themselves.

In 2004, Melrose retired, and Hoffman was elected president. In 2005, he was named chief executive officer, and in March 2006, adds chairman of the board to his titles. Hoffman continues in the footsteps of Clapper, Lilly, and Melrose, as he walks the halls and talks to the people. Can anybody approach Hoffman? “Oh, sure,” he says. “This probably gets me in more trouble, but I’m just ‘one of the boys’ here. I understand titles and all that, but we don’t operate that way.”

“Everybody’s an owner,” said Brown, a concept that Melrose instituted. “There’s a mentality that everybody’s on this team together, and we’re all going to benefit from each other’s hard work.”

“It’s very fashionable today for companies to talk about ‘employee engagement,’” says Hoffman. “But Ken (Melrose) did it long before it was fashionable, and we’ve sustained that for 30-plus years. The level of caring about customer service that we have means that we go the extra mile. It means not saying, ‘Well, the day’s up; I can’t solve your problem right now because it’s time to go home.’”

A global outlook

Although Toro is an iconic American company, it’s not kept its vision narrowly focused on our shores. “We’ve been globally oriented almost from the start,” said Rick Olson, group vice president of international and micro-irrigation businesses. “There were Toro distributors as far away as Australia going back to ten years after the founding of the company, and perhaps even earlier.”

As for today, Olson says, “There’s a lot of growth in developing countries like Southeast Asia and in China, where they’re getting more enthusiastic about golf. There are also projects in Africa and in the Middle East, where water is a major problem. We’ve found a really good fit with our message, which is precision and responsibility with water. We can bring these countries more efficient nozzles and sprays, as well as our moisture-sensing technology.”

“If there’s a company that can lead with innovation, it’s Toro,” said Philip Burkart, vice president and general manager of the irrigation a n d lighting businesses. “If you look at the Irrigation Association awards we’ve won over the last six years, they were all for product solutions based around water management.”

“New emissions requirements are cascading across the world,” said Mike Happe, group vice president for the residential and professional contractor business. “Those regulations are accelerating the development of alternative technologies.”

And Toro’s right there, developing them. “We have a commitment to innovation and coming up with the next best thing,” says Hoffman. “We created the Center for Advanced Turf Technology (CATT) led by Dana Lonn more than a decade ago. It’s charged with thinking about outside-of-the-box concepts such as sensing technology, robotics, and new fuel sources like electrics and fuel cells.”

The future looks bullish

What does Toro contemplate as it looks toward its next 100 years? Hoffman says, “We’re saying, ‘How do we find ways to grow? How do we grow the core and go beyond it, and find balance as we think about our golf, landscape, residential and grounds businesses?’” “One of our greatest challenges will be maintaining intimacy with our customers,” says Happe. “We have the brand of a big company, but we have the relationship with our customers that smaller companies enjoy. We’ve been a bit more responsive, and a bit more nimble than some of our competitors.”

Hoffman likes to quote business author Jim Collins. “He says that, ‘It’s not only important to build a company that can endure, but to build one worthy of enduring.’ Well, this is a company that’s proven worthy of enduring.”

“We want to help our customers save water, use less fuel, and leverage their labor costs. Someday, there’ll be more robotic mowers and other systems; we want to be a leader in that, too.”

“We’ve added on the rental segment and made investments in micro irrigation in the agricultural market,” continues Hoffman. “We’ll be looking over the fence and considering what other businesses we should add to the Toro portfolio.”“Bu t the heart of it all boils down to people,” he says . “ We ’ll continue building on the strength of our whole enterprise with quality people. We have them all over the world.”

Toro continues to see expanding opportunities around the world. “There are 300-plus million people in the U.S., which represents 70 percent of our business,” notes Hoffman. “But there are six to seven billion people outside of the U.S. That represents a huge opportunity for growth over time. My suspicion is that a lot of companies are looking at that as well. Success will lie in making the right choices.”

If the past is any indication of the future, we can look for Toro to make many more ‘right choices’ over its next century, and beyond.

Oh, and by the way, the company just recently reached another milestone: $2 billion a year in sales. Not bad for a company that started out tiny 100 years ago, struggled to survive, almost went broke, and came back to thrive.

That’s a tribute to the people who make up The Toro Company.