L&R Pallet Case Study Notes

L&R Pallet: Bringing God into the Business

Introduction

• L&R Pallet, a wooden pallet manufacturer in the Rocky Mountain region, faced chronic staffing issues.
• James Ruder, the president, sought solutions to high employee turnover.
• An incident involving an injured Burmese refugee employee highlighted the challenges of a refugee hiring program.

Company Background

• Founded in 1974 by Larry and Doris Ruder with $500.
• Started in their basement, making and refurbishing pallets.
• By 1993, had 12 employees and $1 million in annual revenues.
• James Ruder took over the business from his father, operating with an "old-school" mentality.
• Manufacturing environment involved hard physical labor with potential dangers.

Human Capital Challenges

• High employee turnover: hiring 300-400 employees annually to fill 130 positions.
• Turnover rate reached as high as 300%.
• Desperate hiring practices: minimal screening, hiring anyone willing to work.
• Ruder resorted to buying finished pallets from another company to meet demand.
• Initial attempt to hire Bosnian refugees was unsuccessful due to integration issues.
• Competitive hourly pay offered, but high turnover persisted.
• 2008 recession compounded staffing issues; undesirable work conditions led to employees leaving for other jobs.
• Focus on punishing infractions rather than rewarding successes.

The Embezzlement Episode

• By 2010, sales declined from 16 million to $14 million, profit margin evaporated.
• In March 2011, Ruder implemented new checks and balances, uncovering a significant drop in used pallets received.
• An embezzlement scheme involving the assistant manager (250,000 stolen) and plant manager (20,000 stolen; cocaine addiction) was revealed, amounting to approximately 550,000 in losses dating back to October 2010.
• Other abuses: employees blackmailed and threatened by corrupt managers.
• Poor teamwork, lack of respect, and strained communication contributed to a negative work environment.

The Embezzlement Aftermath

• Company maintained customer base due to its reputation for quality pallets.
• Ruder struggled with trust and managed the business alone for 18 months, working long hours.
• Employees described the work environment as depressing.
• Employees suspected of involvement in the embezzlement were terminated.

Mission Trip to Peru and Spiritual Growth

• Ruder's family went on a mission trip to Peru, which deeply impacted them.
• Ruder joined a subsequent mission trip where he experienced a profound spiritual moment.
• He felt a calling to care about people and realized L&R Pallet was