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An Interview with Bill Hayward of Hayward Lumber Company

Using SH&E Investment as a Competitive Advantage

Background

Hayward Lumber Company, a professional builder supply business, has served builders and contractors throughout California’s central coast for more than 83 years. Headquartered in Monterey, the company has multiple manufacturing and distribution facilities in Pacific Grove, Salinas, Santa Barbara, Paso Robles, San Luis Obispo and Santa Maria.

Hayward Lumber Company is one of the largest building supply companies in the United States, the fifth largest in California and a dominant player in California’s central coast market. In 2002, it earned net sales of approximately $115 million in an industry with national annual revenues of about $130 billion. Today, Hayward Lumber Company employs over 450 people.

Bill Hayward is the company’s fourth-generation President and Chief Executive Officer (CEO). Hayward, an environmentalist, has searched for an opportunity to illustrate his personal passion and respect for the environment in business and to educate customers about the concept of green building and sustainability. Hayward’s innovative business methods and strategies based on environmentally sound practices have literally created a whole new market. In fact, Stanford Graduate School of Business recently conducted a case study of the company’s success and of Hayward’s vision for the future.

Hayward Lumber Company has also invested in an extensive safety, health and environmental (SH&E) management program, which has resulted in significant financial return for the company. In this interview, Hayward discusses this program, his views on SH&E as the CEO of a large manufacturing company and the ways in which SH&E professionals can improve their programs to gain further recognition and support from senior management.

Please describe Hayward Lumber Company’s current SH&E staffing and resources.

We have a human resources director and a safety coordinator at each location, and our company has a strong commitment to sustainability and to the environment. As President and Chief Executive Officer (CEO), I emphasize this commitment, which includes the way we take care of our people. We believe that the right people given the right resources and freedom will achieve greatness. This mantra defines our thinking.

Although our industry has a high injury rate, we believe that it is unacceptable for companies to measure themselves against the average number of industrial accidents. We all must strive for the lowest possible number of accidents.

What is your and Hayward Lumber Company’s philosophy regarding SH&E investment, and how does it fit into the strategic goals and objectives of the company?

By becoming more aggressive and by taking more risks, our premiums and totals spent will amount to $700,000 this year. This is a phenomenal return on investment (ROI) for managing safety well. More people come to work everyday and do not go home hurt, which helps to build morale and shows that we actively care for the safety and health of our employees.

Is SH&E management part of Hayward Lumber Company’s strategic plan? Why or why not?

Absolutely. It is included in our annual operating plan. We discuss and plan how we will manage and mitigate risk and how we will promote a good safety culture. Our management takes innovative steps to make this culture a reality.

How do you balance your involvement in Hayward Lumber Company’s SH&E program with your responsibility as a CEO to move the company forward?

In 2004, I made it my personal mission to improve safety performance. I coordinated with our human resources director, held quarterly safety meetings with branch safety coordinators and developed comprehensive safety programs.

Also, if a recordable injury occurs at any one of our branches, we charge that particular branch with the total cost of the injury the very day that the injury happens instead of waiting. This initiative has helped everyone to become much more engaged in safety management.

We understand that you view SH&E practices as “a must to doing business” and that all employees must be involved to make it a success. How are supervisors and employees trained to address SH&E issues?

I view SH&E practices as essential to business. We do not want our employees to go home injured, and we have learned that effective SH&E implementation saves us money and gives us an advantage over our competition.

To train our supervisors and employees, we hold monthly safety meetings at all locations, conduct basic safety, new hire and driver training, perform audits and review all lost-time injuries.

Our basic safety training is ongoing and intense. Employees are trained in ergonomics, equipment, proper lifting, handling and personal protective equipment (PPE), and they know that we take their safety and health very seriously. For example, we recently purchased Aeron chairs for employees who sit for the majority of their workday, and during any lost-time injury review, the injured individual and branch manager come to the corporate office to personally meet with me and with other executives to discuss the injury.

Also, our consultant is a certified safety professional (CSP) who visits our branches each month to teach first aid and cardiopulmonary resuscitation (CPR). We require that a minimum of six employees at each branch be certified in CPR.

There is much discussion surrounding SH&E management. Some believe that U.S. business methods are changing and that it is important to show not only compliance with the law but also dollar return. Others claim that showing a positive ROI for SH&E management misses the point of such programs and that it is not feasible or realistic to provide such measurements. As the CEO of a large company, what are your views on this debate?

ROI criteria must take into account how many people are getting injured. We save money because of our efforts to protect our employees, and we are able to buy insurance at a much lower cost because we manage our safety risk so well. People who do not measure ROI are missing the point. Achieving zero injuries is possible, and it is easy to measure bottomline value to determine how well you are doing. How we treat our employees is directly related to our financial return. This should not be considered “missing the point,” but part of the point.

Hayward Lumber Company also uses a consulting firm. How do you work with this consulting firm to measure the impact of SH&E on your company’s bottomline?

Without the work of our outside consultant, we know that we could not achieve our safety results. These results far outweigh our consultant’s fees.

ASSE members maintain that safety is a component of an organization’s overall business objective and that both injury metrics and leading indicators are identified and measured during the evaluation process. How does Hayward Lumber Company measure its programs, and what tips can you share with our members about the creative methods you have used?

We look at the numbers of medical and first-aid recordable injuries as well as lost-time and recordable incident rates. I do not know if our methods are really “creative,” but the way we allocate the cost of an injury at a branch is definitely motivating.

What is Hayward Lumber Company’s ROI with respect to its SH&E management and programs?

Our current ROI on safety investment is close to 100% of the level of investment we make. This saves us between 200% and 300% in our compensation premiums, reduces lost time and increases morale.

Hayward Lumber Company has historically reinvented itself to provide new products and services in a very competitive industry. How has Hayward used SH&E management as a positive growth tool during these reinvention periods?

We are considered a company that genuinely cares about its employees, and this helps us to hire better people. We are in a low-margin business, so good safety management affects our total workers’ compensation costs, which in turn affects the costs of doing business.

What are your personal views on compliance with existing federal and state laws? We know that the law is the law, and we must all follow them. The ASSE believes that compliance with the law is just the beginning of a quality SH&E management program, and we know that Hayward Lumber Company has gone above and beyond compliance. Do business strategies or other factors drive this commitment to stay ahead of the curve?

Business strategies absolutely drive this commitment. It is all part of being the top employer so that we can retain the best people, improve our hiring ability and continue to be a low-cost operator.

Employees and members of the public sometimes work in the same environment at Hayward Lumber Company’s facilities. Do you manage these exposures with one program, or do you provide different management techniques?

We really just have one program, which consists of the work that our safety consultant does. In addition, we conduct training, hold monthly meetings and offer incentive items such as high-profile safety giveaways and lotteries.

One of the most significant business of safety-related issues our members face is the multi-language workplace and its impact on SH&E performance. How does Hayward Lumber Company address this issue?

We provide our literature in both English and Spanish to communicate with those who do not use English as their primary language. We also have Spanish-speaking individuals who work with those who need assistance.

What recommendations can you make to companies that wish to improve their own employee training programs? What training methods do you believe are the most effective (hands-on, online, classroom, etc.)?

In any good safety program, the owner and CEO must embrace and endorse SH&E values, and everyone around them must believe that what they say is true. I have invested much money into our incentive program to support my belief in SH&E values, and I have participated in safety meetings at each of our branches. Employees know that we take safety seriously because other executives and I are always willing to meet with them personally.

I feel that there is no substitute for hands-on training, and mid-management must actively demonstrate this. If they do not, you can train your employees forever, and it will not matter.

Why do you think so many companies continue to cut back on SH&E during difficult financial times?

I suspect that this is outdated thinking that refers to a time when workers’ compensation was less of a percentage for business. Today, workers’ compensation will not get cut, but some companies lose sight of the importance of employee morale and of effective hiring and retention. If these companies tracked their ROI, then workers’ compensation would matter. Many companies also believe that they cannot change their safety records. Reducing injuries and incidents requires effort, and change does not occur overnight. But companies must realize that to change their safety records, SH&E must be a way of life. The injury and incident rates in our industry rate our actually quite high, but they have been accepted as the norm.

From a CEO’s perspective, how can safety professionals more effectively interact with senior management at large organizations?

They can start by having the CEO’s cell phone number! I think that safety professionals can more effectively interact with senior management by becoming familiar with safety data and with ROI criteria. If safety professionals can speak the CEO’s language, they can translate data into information that the CEO can use. We offer our safety professionals an incentive that requires them to report a laundry list of items to me, and if they do this, they receive $2,500 in addition to their base pay. We also have an “open-door policy,” which makes our safety coordinators feel comfortable enough to ask for help, and they do.

What advice would you give to SH&E professionals who wish to advance into senior management positions?

I believe that if SH&E professionals learn to think like operations managers, they will be more equipped to complete tasks on their own instead of asking operations managers what to do. This self-sufficiency helps to make SH&E professionals more promotable and marketable.

Hayward Lumber Company is a good example of how a company can use effective SH&E management as a competitive advantage. One of your newest manufacturing facilities uses cutting-edge environmental technology. From an environmental perspective, how does the technology at your newer facilities influence your competitive advantage?

The facility you speak of is our Hayward Buildings Systems Plant, one of the three greenest manufacturing facilities in the United States, as denoted by the U.S. Greenbuilding Council’s Leadership in Energy and Environmental Design (LEED) Gold Standard. Only 25 buildings in the country have gold distinction. Our facility is highly energy-efficient—it is 50% solar power and uses almost no water. And since it has such great indoor air quality, our employees rarely call in sick. Thanks to the amount of press our facility has received, people always visit and often ask if they can work there because it is so nice.

We also made a major investment in steel-top tables for the factory floor in our facility. Most in the industry work on plywood tables, but with steel-top ones, you can easily walk between tables and do your work from a standing position instead of bent over. This investment has made us 30% to 40% more productive than our competitors who use plywood tables.

You and your company are committed to creating innovative ways of providing environmentally friendly products and services for the construction industry. As a matter of fact, Stanford Business School documented your success in a case study. How has this product differentiation helped your company along environmental lines?

We sourced the Forest Stewardship Council (FSC), and we sell FSC-certified lumber, which means that our wood only comes from sustainable, well-managed forests. This has opened us to a broader customer base of green builders both inside and outside of our market, and it has allowed us to gain a greater market share. In 2001, we decided to no longer stock or sell arsenic-treated lumber. One year later, the Environmental Protection Agency (EPA) announced that it would be illegal to sell it by the end of 2003. Our employees and customers really appreciated the fact that we made our decision before the EPA declared an official ruling.

Hayward Lumber Company must also compete against other companies in different countries. What are your views of our nation’s SH&E laws versus those of other countries? Do you feel that our laws put American businesses at a competitive disadvantage?

We do not compete with other companies outside of our country, but I think that when developing products, companies should follow environmental standards that this country and other countries support. This creates an even playing field for all involved. The public has also begun to value products with fair-trade and FSC certification, which further evens the field. For example, if Americans only wanted to buy fair-trade products, then other countries would have to follow the Occupational Safety and Health Administration’s (OSHA) standards. Yes, this may create a competitive disadvantage, but if we do not take care of people and the environment, then we are not doing the right thing. It is our job as businesses to do these things and to stop whining about it. I believe that work performed around SH&E results in better costs and allows companies to hire better people.

Biography

Hayward Lumber Company has become a national leader in the supply of sustainable (green) building products. They were the first full-line lumberyards in California to stock Forest Stewardship Council (FSC)-certified lumber that comes from sustainably managed forests and the first lumber yards in the country to eliminate arsenic pressure-treated wood from their product line in 2001. Hayward Lumber Company is committed to building all of its own facilities using the latest principles in green building and building science. Additionally, Hayward Lumber Company is pioneering a business model that incorporates the principles of sustainability into its business practices.

Bill Haywardassumed leadership of Hayward Lumber Company in 1993. He currently holds the positions of President, Chief Executive Officer and Director of Sustainability. Under Hayward’s direction, the company has grown from $33,000,000 in annual sales to $150,000,000. This growth has included an environmentally focused, award-winning showroom design center in Santa Barbara, California and the world’s only solar-powered truss plant for which Hayward received Gold Leadership in Energy and Environmental Design (LEED) Certification—the benchmark of environmental stewardship. Hayward Lumber Company also includes a force of seven lumberyards, three additional design centers and EcoTimber, the company’s environmentally friendly flooring division.

He currently serves on the Board of Trustees of the Monterey Institute of International Studies, the Board of Directors of the Forest Stewardship Council (FSC) and the Board of Directors for the Brazil Ranch Environmental Center.

Hayward holds a bachelor of science degree in political theory from the University of California-Los Angeles. He has participated in the Monterey Institute of International Studies Intensive Language Program in Spanish, and he has also taken classes for a master degree in business administration.