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Ronald W. Kaplan took over as chief executive of the decking manufacturer Trex one year ago. His mandate: Turn the company around and make it profitable after it was slammed with quality problems in 2007. The stock price of Winchester-based Trex, which makes decks, rails and fences out of recycled wood and plastic, has nearly doubled since Kaplan was named chief. Kaplan has weathered flat sales by tightening the company's operations, slashing production, cutting jobs and using cheaper materials. An edited conversation with Kaplan about surviving a brutal year for housing-related industries follows.
QHow has the turnaround effort played out at Trex?
ATurning a company around requires the willingness to gore some sacred cows and to challenge strong internal beliefs that may exist within the company.
Trex historically had a very strong emphasis on sales and marketing, which served it well. But the company needed some additional experience in manufacturing, finance and administration, as well as the recognition that costs were too high for their level of sales.
At the factory level, people were being paid based on the earnings of the company; now their compensation is based on their productivity. Executives are paid exactly the same way that shareholders are -- which is based on earnings per share, rather than personal goals which may or may not have a direct impact on shareholder value.
The challenge at Trex has been to marry up a wonderful legacy of marketing expertise and entrepreneurialism with basic operating discipline and control.
Where do you see Trex in the green building material industry?
Trex has been a green company before green even became popular. We have been manufacturing our product out of 100 percent recycled material since its inception. We have grown very steadily over the years not because we are green, but because we make a low-maintenance, highly aesthetic product. The fact that we are green is now starting to catch on, which will further amplify its attractiveness.
Your sales were flat for the first nine months of 2008, compared with the same period last year. Did that meet expectations?
