Exit Interview: Retiring Shaw president Randy Merritt - Dec 2017
Interview by Kemp Harr
On the day I interview Randy Merritt for this article, he has worked at Shaw Industries for 41 years, seven months and 16 days, a fact he casually mentions amid our discussion. At the close of this year, he’ll step down as president of Shaw, the position in which he has served for over 11 years, to spend more time with his wife, Sharon, his three children, and his brood of grandchildren, exploding from four to seven come 2018.
Merritt, a North Carolina native, attended NC State studying biology and was a member of the school’s tennis team, then transferred to the University of South Carolina for his senior year to improve his chances of getting into The Medical University of South Carolina, but found he was, as he puts it, “too average” for the pursuit. When this realization hit, he called the late Bryce Holt, founder of Holt Textile Sales Company and father of his college roommate’s girlfriend, and asked him for assistance in landing a job.
Merritt graduated from USC on Saturday, May 1, 1976. The following Wednesday, he interviewed with Shaw’s research and development team. On Thursday, they offered him the job, and Merritt accepted the same day. “They asked me, ‘When do you want to start?’” the sixty-four year old recounts as if it were yesterday. “I said, ‘Today’s Thursday. How about Monday?’ And they said, ‘You just graduated on Saturday. Don’t you want some time off?’ I said, ‘Yeah, I’d love some time off, but, man, I don’t have any money.’ They asked, ‘Don’t you need at least to go home and gather your belongings?’ I said, ‘I’ve got everything I own in my little station wagon outside, and if it’s all the same to you, I’m going to go find myself a place to live and be here Monday.’ That was May 10, 1976-my first day at Shaw.”
Q: How did you transition from R&D into sales?
A: Mr. Shaw called me to his office one day and said, “Randy, we have a big distributor customer based in Chicago called Carson Pirie Scott. Our business is growing like crazy, and their business is growing like crazy, but we’re not growing with them. Would you go to Chicago, meet with them and see what you can learn about why we’re not growing?”
I said, “Sure, that’d be awesome.” Now, I always like to say that I learned a lot of lessons on this trip. The first one I learned is that you don’t go to Chicago in November with no overcoat. I got off the plane, and I’d never been so cold in my life. I went downtown and met with Dean McKinney, who was the president of Carson Pirie Scott, and Roger Hunt, who was the VP of sales, and Jimmy McDonald, who was VP of marketing, and I said, “Guys, I’m here to try and figure out why we’re not growing.”
They said, “We love Shaw. We love your products. And we have them all in the showrooms.” Of course, that was in the time when-as one of the largest distributors in the country, if not the largest-they were buying from World, from Salem, from Galaxy, from Horizon, from Diamond, from Shaw, from Mohasco, from Aladdin. They had every mill in the world there. They said, “Now, we have 13 branch locations, and every one of those branch managers decides what they’re going to sell in their market. We put all these products in the showroom, but they can’t sell them all, so they pick and choose.”
I said, “Well, are we calling on the branch managers?”
And they said, “Gee, we don’t know if you are.”
I came home and told Mr. Shaw, “I think the problem is that we aren’t calling on those branches.”
So about two weeks goes by, and he calls me back over to his office, and he says, “Randy, do you think it would really make a difference if we called on those local locations?”
I said, “I think it would.”
He said, “Well, starting tomorrow, you’re in sales. That’s your account.”
So I started calling on all 13 of those branches, and I remember the people to this day, every one of them. I said, “Guys, we’re going to figure out how we’re going to grow our business with you.” The first year, I think Shaw did $8 million to $10 million in sales with them. Within three years, we were doing $50 million. And that was my second lesson from the trip: it’s great to have a relationship with the owner, the buyer, but you’d better develop a relationship with the people selling the product.
Q: Tell me about how you became president of Shaw.
A: The only person who could have made that decision was Bob Shaw. There’s a whole team of folks who have worked very hard for a lot of years to make Shaw industries what it is. I just happened to be one of them. Why Bob picked Vance [Bell] to be CEO and me to replace Julian [Saul] as president, I’m not sure. I’m glad he did. I have been fortunate to be in the right place at the right time a lot of times, and that was probably just one of them, but it couldn’t have worked out any better for me.
Q: You stepped into the president’s role in August 2006, and Vance was named CEO that year. Those were tough days for the industry. As a young executive team, how did you lead Shaw through the recession?
A: Early on, Vance, Ken Jackson and I made a trip to Omaha to see Mr. [Warren] Buffett, and I remember Vance telling him that we were in the early throes of what seemed like it was going to be a downturn in the housing market, expected to last at least a year.
Mr. Buffett looked at him and said, “Vance, I think you’d better plan on several years.” As is often the case, he was way ahead of everybody, and he knew it would be a significant recession. And it started in flooring before it really heated up full steam through the whole country. Being part of Berkshire Hathaway, we were fortunate to be able to continue to invest and prepare for a better day through those recession years. Mr. Buffett came to see us at the height of the recession, and one of the questions someone asked him was, “How do you evaluate a company’s performance in such a downturn?”
He said, in the way he makes everything so simple, “What I look for is how the company is preparing to better service the customer when the inevitable upturn arrives.” And I’ve used that very question with a lot of customers. I’ve looked myself in the mirror and asked that personally. I’ve asked my children. I think it’s a great question. Are we better positioned today than we were yesterday?
Q: At the start of the recession, Shaw was almost solely a soft surface firm. Today, it is number one in carpet, number two in hardwood, one of the top two in resilient, fourth in laminate and a player in tile. Has getting to this point meant having to make a lot of hard decisions?
A: No question. You don’t just wake up one day and say, “We’re going to be in the hard surface business.” That has required a lot of change. We have invested a lot of capital in manufacturing capability and in capacity in several of those segments.
In 2006, we had a good bit of corporate debt. We had about 500 million pounds of staple fiber-in a billion pound industry-a fiber that we knew was headed toward obsolescence. We had essentially no position in hard surface, very little. We had a rug business that we struggled to make money in. And if you fast-forward to today, we have a good position in hard surface. All that staple capacity is gone and replaced with more efficient extrusion assets in nylon and polyester. Our corporate debt from 2006 is gone. We’ve never been financially stronger than today, and we have never done more to be a part of the communities in which we live and work.
In addition, in that time, we acquired Anderson and really all of our hardwood assets. We converted our South Pittsburg, Tennessee yarn plant into a hardwood plant, doubling the size of it; exited the area rug biz and converted our Ringgold, Georgia rug plant into an LVT facility and invested heavily there. We bought US Floors. We’re investing heavily in a carpet tile plant. That’s a huge investment. We have about a $250 million project going on right now to upgrade and improve capacity and capability in polyester.
Q: What has kept you at Shaw long term, and what do you hope to be remembered for?
A: I’ve got a lot of great friends here at Shaw. People ask why I have stayed so long, and I say, “Lord, it’s all the people I get a chance to work with every day.” I enjoy people. I love hearing their stories, trying to figure out how to help-that’s been the greatest part of my career. The fact is, I can go to almost any city in America, and if I am in trouble, I know someone who would come help me. I don’t know if there’s any better thing you could say.
As for legacy, I hope I’ve been a good citizen to the industry, a good partner and friend to our customers, a good teammate to my fellow associates here at Shaw.
Both my boys were in Boy Scouts, and one of the teachings from Scouts is that you always leave a campsite better than you found it. I hope that I’ve been a small part of helping to leave Shaw in a better position today than it was in when I came.
Q: Looking back, what is your proudest moment?
A: Today is my proudest moment, I think. We have been through ups and downs. We’ve made more mistakes than we want to remember, and people often ask, “If you could change one thing, what would it be?” To be honest, I don’t think I’d change anything because if I changed something, it might not have turned out how it has, and I can’t have asked for anything more.
What I’m most proud of is the fact that I’ve been married to the same wonderful woman for almost 39 years now, that I have three great kids. My wife spent every waking moment-until those kids left the nest-nurturing, teaching and disciplining. She did all the heavy lifting because I was on the road travelling. Anyone in a position like mine has to have a support group. For me, that was Sharon and the three kids, and I’d never be here without them.
Q: As a leader, how do you plan for the years when you’re not there?
A: I found a note from J.C. Shaw, Bob’s older brother, when I was cleaning out my desk. When I came to Shaw, he was chairman of the board. He sent Vance and me a note around ’06 or ’07 and talked about the fact that passing the baton and preparing to pass the baton is one of the most important functions leaders have.
For years, we have worked on leadership development, trying to develop leaders who can assume more responsibility, take the company to a higher place. That’s why I am so comfortable when I say next year will be the best year Shaw’s ever had. It’s because we’ve got an incredible bench of leaders in sales, manufacturing, logistics and customer service. We have a tremendous team of people who are going to step up and make sure Shaw doesn’t miss a beat.
Q: What has been your guiding principle through your years at Shaw?
A: I’ve got stacks of business books here in my office, but the best advice came from my mother when she taught me the Golden Rule: treat people as you want to be treated. We do that with our customers, with the people we work with. And at the end of the day, that seems to work pretty well.
Q: What do you see for the future of the industry?
A: We’ve seen massive changes through the years in the flooring business, but the thing I love about it is that I’ve never seen a building without some kind of a floor. There’s always going to be business if we’re smart enough to figure out what the end user and consumer want, and if we’re smart enough to create a product fashion-forward enough that it makes them want to change theirs out.
I can tell you that the next couple of years will be good for the industry. All the economic indicators are as strong as they’ve been in years. The industry faces some changes. Labor is a huge problem for our industry. We’re all working on solutions to that, and I think we’ll figure it out.
Channel shift has gone on for years. When I started, the biggest flooring retailer was Sears, and, today, they’re hanging on by a thread just to stay in business at all and have been out of the flooring business for years. Independent retailers are the lifeblood of our business. I’m concerned about the independent retail community, but at the same time, I’m encouraged. I’ve met many of the second- and third-generation people coming into the industry, and I’m really excited about the energy and passion they are bringing to the business.
Q: Do you feel the same optimism about the country?
A: Yeah, seeing those up-and-coming leaders gives me a lot of hope, not just for the flooring industry but also for the world. We live in the greatest country there is. We all get frustrated by some of the problems that we see [in the world], but this too shall pass.
I know a lot is said about Millennials. They have certainly grown up in a different world than I grew up in, but I think at heart they aren’t that different than I was when I was 23 or 24 years old. I fully believe that every one of those Millennials will want to be a homeowner eventually, raise their children in a good environment; that they’ll care about the community they live in.
Q: So what will your life look like come January 1?
A: Sharon and I are going to live for a while in Jackson Hole, Wyoming. We have a son, daughter-in-law and two granddaughters there with a third grandchild on the way. We also have a set of twins that will be born in Portland, Oregon around the first of the year-so we want to be out west where we can get to know them all better. Ultimately, we’re going to end up in Charleston, South Carolina, but we don’t know how long we’ll stay in Jackson Hole-at least a year, maybe longer.
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