L&R Pallet Case Study Notes

L&R Pallet: Bringing God into the Business

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.

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.

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.

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.

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.

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.

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