From Home Furnishing Business
Take 5: Randy Ariail
Randy Ariail has seen a lot. In the early 1970s, when he came into the furniture industry, most furniture companies were family-held businesses. Then came investment bankers and offshore owners, and now, back to investment bankers.
As principal partner with Ariail & Associates, a retained executive search firm specializing in the procurement of senior management in the furnishings industry, he has a unique perspective on how management—and the criteria for it—has changed through the years. He recently shared his insights with Home Furnishings Business.
Home Furnishings Business: You have witnessed the transition from family to investment bankers to offshore owners and now to more investment bankers. The criteria for management changed as we moved through each transition; did we meet the challenge?
Randy Ariail: When I came into the business in the early ‘70s, there were a number of strong family-held companies: Thomasville, Broyhill, Henredon, Drexel Heritage, Lane, Berkline, Stratford, and Schnadig, just to name a few. Many of these companies became attractive targets for large non-furniture entities such as Armstrong, General Mills, Beatrice Foods, and later, Kohler and Masco.
In some cases, families continued to manage the companies but in other cases the purchasing companies brought in new management with mixed results. Armstrong brought in the best and brightest young managers from their Resilient flooring division with excellent results. Other companies had mixed results or were simply unsuccessful in transitioning non-furniture executives to the industry.
In most cases failure had very little to do with personal competency; rather, a lack of understanding of the relationship nature of the business. Secondly, they saw family owned companies making decent profits, and they assumed that they could bring in their Ivy League MBAs, financial experts, and process-oriented people to teach what they assumed to be rather unsophisticated managers how to make some real money. As we all know, that was not the case. However, there was a positive effect regarding the development of management. Many of the large corporations and family owned companies during the ‘70s had very defined management development programs. They would hire college graduates mainly from the N.C. State FM&M program, as well as graduates from schools such as Virginia Tech, UNC, Mississippi State, etc. and put them in structured management development programs geared toward manufacturing or sales/marketing. Thomasville, Broyhill, and Simmons Bedding were the top of the heap in this regard. Simmons developed a number of fine managers who moved from the bedding business into furniture companies.
HFB: As the large corporations, i.e. Armstrong, Masco, etc., acquired companies, corporate training programs were required to develop future talent. What has emerged to fill the vacuum?
Ariail: Unfortunately, in the early ‘80s many companies discontinued their management development programs and concentrated on beating each other’s brains out on price. This not only led to a deficit of talent but an aging demographic in terms of senior management that we still suffer from today.
In the ‘90s and up until the 2000s, due to a shortage of senior management, I actually saw a number of CEOs that failed numerous times still be able to get another assignment as a CEO. This was a low point. The industry was incestuous to a fault and as well all know incestuousness breeds idiocy.
While we still suffer from the aging demographic, I am seeing some light at the end of the tunnel. Progressive companies such as Four Hands, Mitchell Gold, Markor, Ashley, and even more traditional held companies such as Bernhardt and Hooker [Furniture] are bringing in young, fresh talent from the outside as well as developing managers to embrace the new paradigms of the business. Many of these companies have progressive CEOs that embrace both the traditional and digital marketplace. (I consider anyone under 55 years old young in this industry.)
It is interesting to note that we are seeing a much different phenomena occurring today as opposed to the ‘70s and ‘80s. The offshore companies who are doing roll-ups in the industry, Samson and Markor in particular, are choosing to attract senior managers with industry talent rather than bringing in executives from outside the industry. As a general rule, they are buying well-managed companies and leaving management in place. This is also true of many of the venture capital firms currently investing in the industry. They are doing their homework and not repeating past mistakes.
HFB: Have we lost the product maven and merchant lore that our industry put on a pedestal?
Ariail: I see another notable change regarding the formative experience of CEOs and senior management in the industry. For a number of years, CEOs normally came from the manufacturing, finance, or the sales side of the business. We are now seeing successful CEOs and senior management come from the merchandising and product development arena. Most of these are talented individuals who are capable of thinking out of both hemispheres of their brain. They are creative but they have the finite and people skills to run and motivate an organization. While the digital marketplace has taken some importance away from creative product, the furniture industry is still a creative business. Additionally, what many large corporate entities did not understand is despite the e-commerce phenomena, it is still and always will be a relationship-driven business. Senior managers, whether from inside or outside the industry, that fail to understand this will enjoy limited success at best.
While there is still somewhat of an aging demographic and a deficit of talent in the industry, I am very optimistic for the future regarding senior management talent. Women, who in the past have been relegated to creative positions, are starting to emerge as CEOs and senior management in the industry. I am also seeing a new breed of mid-management talent being developed by progressive, forward-thinking companies. Another talent pool that is being tapped is marketing and merchandising executives from the retail sector of the industry. I have seen a number of retail executives transition very successfully to the manufacturing/import side of the business.
HFB: A more analytical approach to managing is a necessity. Do we have management teams with the expertise?
Ariail: While I am optimistic and see light at the end of the tunnel, make no mistake, there is a war for talent. As part of fighting this battle on a daily basis, I can testify to the fact that companies need to be flexible in terms of compensation, benefits, and lifestyle considerations in order to attract top talent. It is our job to market the opportunity to individuals that are gainfully and successfully employed. Within reason, we need that flexibility to attract top talent.
I have been asked on occasion by other search firms as to why I deal exclusively with furniture manufacturers/importers. Simply put, while there are people with different degrees of competency, there are very few bad people in the industry.
HFB: Local universities were active in the industry: N.C. State (manufacturing), High Point University (management program), UNC–Chapel Hill (executive MBA). Why did they lose interest?
Ariail: In terms of schools and colleges educating younger people for the furniture industry, we have lost technical schools such as N.C. State, Kansas State, and others due to the offshoring effect. However, schools such as Appalachian State and Catawba Valley Technical College have taken up some of the slack regarding technical education, while High Point University has created innovative programs for furniture marketing and management. We still gave great design schools such as Kendall, Parson’s, and the Savannah School for Art and Design credit for educating our creative people.