Marvin’s CEO Avoids Layoffs Despite Sales Downturn
The Great Recession tested the mettle of Minnesota’s Marvin family, which refused to eliminate jobs of the factory workers who make windows and doors.
Now CEO Paul Marvin, a fourth-generation member of the family that built a giant business from small-town Warroad, Minn., is charged with safeguarding the jobs of nearly 6,000 employees during a pandemic.
“We have not laid off any employees, and don’t plan to,” Marvin said. “We have a long and proud history of not laying off, both from a values standpoint but also a strategic standpoint. You hear a lot of companies talk about their most important asset, and yet [employees] can be the first to be cut loose, which doesn’t make sense to us.”
Paul Marvin, who became CEO in the summer of 2017, is not simply making difficult financial choices during tough economic times. The health crisis caused by Covid-19 also has cast Marvin into the role of chief communicator. Since mid-March, Marvin has recorded 10 videos for employees that explain everything from the cratering of orders for home building products to how to maintain social distancing in the company’s 14 manufacturing plants in eight states.
In an extensive interview with Twin Cities Business this week, Marvin discussed using temporary furloughs to save jobs, the financial challenges facing the building industry, simultaneously addressing health and economic threats, and what he has in common with Dr. Anthony Fauci, the nation’s top infectious disease expert.
Furloughs and federal stimulus
During the 2012 presidential campaign, the Marvin family was lauded by President Barack Obama and his Republican opponent Mitt Romney for protecting the jobs of its workers during the Great Recession, instead of slashing them as many other companies did.
While the U.S. was being jolted by a financial crisis and home foreclosures, the employees of Marvin Windows and Doors were holding on to their jobs while earning smaller paychecks. “We reduced to 32-hour weeks and occasionally less than 32-hour weeks to match supply and demand, to match our labor to our incoming orders,” Paul Marvin recalled of the sacrifices of a decade ago. “Every salaried employee in the company took a 5 percent pay cut.”
In 2020, as he leads The Marvin Companies, Paul Marvin and his employees are forced to deal with the coronavirus that threatens their livelihoods and their personal health. The speed with which the virus ravaged the U.S. economy prompted Congress to pass the CARES Act, a federal relief and stimulus package that exceeded $2 trillion. That action by Congress caused the Marvin family business to take a different approach to coping with bad economic times.
In recent weeks, Paul Marvin said, orders for the company’s products have fallen by 15 to 25 percent, depending upon the product line. That leaves a substantial revenue gap for covering payroll costs.
In a Thursday video message to employees, Marvin said, “We expect that every team member at Marvin will furlough for at least two weeks, and it’s likely we will furlough more frequently than that in the weeks and months ahead.”
The furlough strategy is linked to the CARES Act, which President Trump signed into law in late March. The Marvin Companies furlough policy works this way: Many employees in the manufacturing plants are working 40-hour weeks and getting paid for full-time work, while some of their peers are on one-week furloughs.
When Marvin employees are on furloughs, they qualify for state unemployment benefits and The Marvin Companies maintains their health insurance coverage. Through the CARES Act, the furloughed employees also are eligible to receive an additional $600 a week in federal unemployment benefits.
The Marvin furloughs began the week of April 20, when some employees were furloughed at plants in North Dakota and Virginia. “It’s very likely that sometime in May we will furlough employees at the Warroad plant,” Marvin said, but a specific timetable hasn’t been released.
“Orders have slowed, and in each of our businesses and plants they slow at different rates based on the products that they are making,” he said.
Choosing the furlough strategy over an ongoing practice of 32-hour work weeks was an “easy decision,” he said. He emphasized that’s the perspective of both the senior leadership team and the board of directors, which is chaired by Susan Marvin, former longtime Marvin company president and a past chair of the Minnesota Chamber of Commerce.
“This [furlough option] presented better opportunities for the financial health of our employees and our business,” Marvin said, because employees avoid the 20 percent pay cut that was the result of 32-hour work weeks during the Great Recession. “This is an unprecedented pandemic and the federal government, in a bipartisan package, has come forward and said, ‘We need you to stay open. We need our economy thriving. Here is a $2 trillion package to help do that.’ ’’
Big profit-sharing to big recession
That emergency aid bill was passed just a few months after Marvin employees gathered on December 19 to celebrate a successful 2019. About 2,000 employees congregated in Warroad to hear Paul Marvin announce that about 5,700 Marvin employees would receive $11 million in profit sharing payments. The festive event was streamed live to 14 other company locations.
“Our aspirational goal that I laid out three years ago was to average 10 percent annual growth every year and we’ve been achieving that,” Marvin said. On the heels of double-digit sales growth, company leaders were planning for another strong performance in 2020. “We were having a great year, until the middle of March came,” Marvin said.
The devastating economic effects of the coronavirus quickly damaged the home construction sector. In mid-April, the National Association of Home Builders reported that its confidence index had plummeted to 30, a drop of 42 points and the largest single monthly decline in the history of the index.
All of Marvin’s windows and doors are made-to-order. Marvin customers are dealers, lumberyards and other companies that sell the products to builders, contractors, remodelers and homeowners. More than 90 percent of Marvin products are sold in the United States, so Marvin’s financial results in 2020 and 2021 will be closely linked to the condition of the U.S. economy.
Marvin factories have remained open during stay-at-home orders and the lockdown of many other businesses, because the building sector was deemed essential by government leaders. “But it takes consumers to make decisions on building new houses, replacing their windows, and doing that remodel job,” Marvin said.
“It’s fair to say that as people spend more time in their homes [during the pandemic] that you could expect more replacements and renovations,” he said. “On the new construction side, it’s guaranteed that entry-level homes are going to take the biggest hit.” With record unemployment rates and many Americans struggling to pay their rent or mortgages, builders are likely to focus on prospective homebuyers who have higher incomes.
Marvin products are used for building in the middle and high-end price ranges. Industry insiders have the most optimism about construction projects moving forward in “mid-level, new construction,” he said.
Before the coronavirus spread, labor shortages were making it difficult to build some high-cost homes. If the “economy putters along,” Marvin predicts many of those projects will move forward. “If there is a more significant decline, a collapse, then I think it is going to affect all sectors and all segments of the housing industry,” Marvin said.
In a Thursday video report to employees, Marvin said, “While orders are still depressed, the free fall in orders appears to have bottomed out, and we are holding steady.”
Rapid response to pandemic
During his rise to the top job in the company, Paul Marvin was vice president of sales. He’s now using his communication and messaging skills to persuade employees to strictly adhere to safety protocols in Marvin plants, at their homes and in their communities.
The willingness of workers to take the virus seriously is as critical to the Marvin company’s future as the state of the overall economy. The Marvin family understood that reality from the outset of the Covid-19 threat. That’s because the company had a pandemic plan.
“You don’t get to be a 108-year-old, fourth-generation family business without thinking long-term,” Marvin said. It’s why general counsel Steve Tourek led the effort 10 years ago to develop the pandemic plan, and why the company’s leadership had done training in dealing with a pandemic.
“The thrust behind it was this is a serious thing that can bring not only a world and nation, but a company, to its knees, and we want to be prepared,” Marvin said. “We’d already done the homework to know this can get really bad, and you can’t wait to see how it unfolds.”
The plan included a governance structure, Marvin said, and the existence of the pandemic plan “put us weeks ahead” in crafting the Marvin response to Covid-19.
“We acted very quickly to err on the side of employee health and well-being,” he said. “We created new sick leave policies. We don’t want employees feeling like they have to come to work, if they are sick, or they are needing to take care of loved ones.”
Based on recommended quarantine periods, Marvin employees get 14 paid days of Covid-19 sick leave. But Marvin said it can be increased if the employee faces circumstances in which they need more paid time off.
The Marvin Companies also created an employee helpline to answer questions about worker benefits and Covid-19. More than a dozen employees were redeployed to staff the line six days a week. Company leaders have been conducting a “Stop the Spread” campaign, which educates employees on hand washing, cleaning hard surfaces and phones, staying home when you are sick, and other protocols to reduce the risk of virus exposure.
Social distancing was an early intervention, and it required employees to learn new practices. “Even though the majority of our work allows us to maintain a distance of six feet, there was no compelling reason to do it before this,” Marvin said.
However, in a Marvin plant, he said, “To huddle over a drawing, at a table, of a window would have been very common.” But now workers have found ways to look at drawings and avoid standing next to co-workers. “It does take behavior change and constant messaging and thinking differently,” Marvin said.
“We are less efficient because we are taking extra precautions, but that’s short-term pain for the right long-term decision,” Marvin said.
When there is a suspected case of Covid-19, Marvin said, a company representative makes sure the employee has the resources to quarantine at home or access treatment from a health care provider. The Marvin company also does contact tracing to reduce the spread among other employees.
Aggressive measures to reduce Covid-19 cases have been successful in many German factories, according to a May article in the Wall Street Journal.
Marvin said he will keep adding safety protocols to ensure the health of his workforce. For weeks, Marvin plants have been providing masks for their workers, but wearing them was optional.
Starting in mid-May, wearing masks becomes mandatory in Marvin facilities. “We are collectively safer when we all wear masks at work,” Marvin said in a message to employees. He predicted that more companies will require employees to wear masks. “But we’re not going to wait, we won’t wait until it’s too late,” Marvin said.
A majority of Marvin employees work in Minnesota and North Dakota, and they’ve seen virus cases spike in a Grand Forks, N.D., factory that makes wind turbine blades and in meat processing plants across the Midwest.
“We have not had a large outbreak in any one of our plants,” Marvin said in the TCB interview. “We certainly have tracked the few cases that we have had.”
The Dr. Fauci connection
Paul Marvin has never met Dr. Anthony Fauci, who has been director of the National Institute of Allergy and Infectious Diseases since 1984. “A lot of Americans are following Dr. Fauci with great admiration,” Marvin said, about the leading national voice in the fight against Covid-19.
Yet Fauci and Marvin have one important life experience in common. They earned their undergraduate degrees from a Catholic liberal arts school in Massachusetts, College of the Holy Cross, which was founded by Jesuits.
“We did have that same Jesuit experience, which is rooted in service to others,” Marvin said. “It has served me really well as a leader at Marvin, and I bet it has served Dr. Fauci as well.”
Marvin noted that the values he saw in action when he was an economics major at Holy Cross are similar to the values the Marvin family has kept alive over four generations of running their business.
“I cannot stress enough the anchoring of our values,” Marvin said. “We have five values, and the first one is ‘Do the right thing.’ ’’
When company leaders were discussing implementation of the new furlough policy, Marvin said, they recognized an employee issue that they wanted to address. While on weeklong furloughs, employees have continuous health care coverage, but when they return to work, they owe premium costs for their health care plan.
“We talked about it as a senior leadership team, and we said, ‘What if we just pay those?’ So we are covering the cost of medical care, from a premium standpoint, for any and every employee who is furloughed. I just think it is the right thing to do for our employees,” Marvin said.
Regarding his views on service, Marvin told his employees on April 2 that he is “forgoing my salary” during the current crisis.
Marvin and other Minnesota-based businesses are facing a harrowing economic period, but Marvin said he believes the company’s clear mission is helping him and other leaders move forward on a constructive, sustainable path.
Marvin said, “You do not realize until a crisis hits just how important your values are in making really hard decisions.”
Liz Fedor is the Trending editor of Twin Cities Business.