L&R Pallet Case Study Notes

L&R Pallet: Bringing God into the Business

Introduction

• L&R Pallet, the largest wooden pallet manufacturer in the Rocky Mountain region, faced chronic staffing issues.
• James Ruder, president of L&R Pallet, sought to solve these issues by hiring Burmese refugees.
• An incident where a refugee employee was injured by a nail gun highlighted the challenges of this approach.
• Ruder needed to decide the future of the refugee hiring program and address turnover problems.

Company History and Background

• Founded in 1974 by Larry and Doris Ruder with $500.
• Started operations in their basement, making new pallets and refurbishing used ones.
• In 1993, James Ruder began to transition into ownership.
• The company had 12 employees and 1 million in annual revenues at that time.
• Ruder continued his father's management style, which focused solely on work, not personal lives.

Human Capital Challenges

• High employee turnover: Hiring 300-400 new employees annually to fill 130 positions.
• workers would quit within days or weeks.
• Turnover rate reached 300 percent annually.
• Desperate hiring practices: hiring anyone willing to work without drug screenings.
• In 1996 Ruder bought finished pallets from another company to keep up with demand.
• Effort to hire Bosnian refugees was unsuccessful due to integration issues.
• Ruder attempted to stay competitive with hourly wages, paying 10 percent above minimum wage.
• The 2008 recession made the situation worse, with undesirable working conditions leading to more turnover.
• The company focused on punishing infractions rather than rewarding successes.

The Embezzlement Episode

• By the end of 2010, sales fell from 16 million (2008) to 14 million, and profit margins decreased.
• Ruder realized he could not afford his mortgage payments or his children’s Christian school tuition.
• In March 2011, Ruder implemented new checks and balances and discovered an embezzlement scheme.
• The assistant plant manager stole about 250,000, and the plant manager stole about 20,000.
• Total loss estimated at 550,000$$ going back to October 2010.
• Other types of abuse occurred on the plant floor, with employees subject to blackmail and fear of authority.
• Employees described L&R Pallet as an unpleasant place to work due to bad leadership.
• Teamwork and respect were lacking, and communication was strained.
• The experience taught Ruder about human nature and why people don’t come forward.

The Embezzlement Aftermath

• Despite challenges, the company held onto its customers because of its pallet quality.
• Ruder managed the business alone for 18 months, working 14+ hour days.

Mission Trip to Peru and Spiritual Growth

• Ruder’s family took a mission trip to Peru in late March 2012.
• Ruder joined a subsequent mission trip to Peru in October 2012.
• He had a transformative experience, realizing he needed to care about people.
• Ruder realized that L&R Pallet was God’s company, and he started running it accordingly.
• Six months after returning from Peru, Ruder hired a new plant manager, Jay Doyle, in April 2013.
• The company secured a line of credit due to cash flow issues.

Transformation and New Vision

• Ruder and Doyle advertised on Christian radio stations and reached out to halfway houses.
• The office environment was tense and confrontational.
• Doyle described the workplace as unsafe, with employees not caring about safety.
• There were also issues of employees being high or drunk at work, or selling drugs.
• The company faced multiple worker's compensation lawsuits.
• Ruder became part of the C12 Group, a network of Christian CEOs, and started viewing his workplace differently.
• He changed L&R Pallet’s mission and core values to be biblically-based.
• He erected a prayer wall and hired a chaplain.
• Employees who were uncomfortable with the changes were asked to leave.
• Ruder concluded that he needed to