Analysis of Crown Point Cabinetry

Prepared by Keith Tarvainen

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. Are the safety changes, increased benefits, increased wages, gainsharing and team-based
management systems working or could Crown Point handle this process differently? This report
will guide Crown Point into the future and determine what should be done to continue its
productivity gains in an increasingly competitive cabinetmaking industry.

Executive Summary:

Crown Point Cabinetry has transformed itself into a profitable company with a motivated,
content workforce which should be a role model for other small companies. Brian Stowell
implemented changes in 1993 that have greatly reduced absenteeism and made turnover almost
nonexistent. This was accomplished with programs such as gainsharing which also reduced labor
costs and wage increases. Management level was eliminated in favor of employee based
management teams which control employee reviews and hire and termination of employees. This
reduced cost and increased employee participation. These changes have transformed Crown
Point Cabinetry into a profitable, admired company that people want to work for which was
Brian Stowell’s goal. No changes need to be made at this time as what Brain did was successful.
Continuing to focus on its employees is all that Crown Point needs to do at the present time.

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 father’s 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.” Management’s
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:

Crown Point does not have any noticeable problems. It has addressed the issues that it was
facing in 1993 when Brian Stowell became lead executive and has become a more profitable
company. This is due mainly to a much happier workforce that is involved in the management
process. Line employees now have a stake in reducing labor cost, reducing backorders and
reducing absenteeism. Employee management teams are also responsible for safety and the
hiring and termination of employees. This has made Crown Point Cabinetry a more profitable
company with a more stable workforce. Clearly Brain Stowell has addressed the problems
Crown Point had with its workforce and it is now a model for what a company can do when it
addresses employee issues.

Solution:

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 company’s 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.