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Steven J. Bell: Making Cabinets, Changing the World

Steven J. BellSteven (Steve) J. Bell is CEO and owner of Pacific Crest Industries in Sumner, Washington. He started building cabinets in a garage and now employs 185 people in a multimillion-dollar cabinet business. In 2006, he moved his business into a new factory with almost 200,000 square feet, tripling his space and enabling future growth. Pacific Crest currently ships products throughout the 12 Western states through a network of independent kitchen and bath dealers and national merchandisers. In addition, they also sell in the Western Washington region to licensed new-construction contractors and high-rise condominium projects.

Bell was named Washington state’s Small Business Person of the Year in 2005 by the U.S. Small Business Administration.

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Ethix: You have a very successful business now, but your business career started with some very difficult experiences. Tell us what happened.

Steven J. Bell: I launched my business with a little company called Bell Specialty Woodcraft in the late 1970s. I was basically a handyman-type guy who would do anything that was honest and legal having to do with carpentry. I started remodeling houses, and then I built a couple of new houses. I was introduced to a dentist by my plumber and started remodeling this dentist’s home. He seemed to have a lot of money and was spending it. He introduced me to one of his friends who owned a dental supply company in Seattle and in a very short period of time, I was into the dental office business, building new dental offices and remodeling old ones. We incorporated as Belcon Construction and Development Corporation in September of 1980. By 1981, I had seven or eight employees, and we were doing dental-office work all the way from Everett to south of Olympia.

I thought I was God’s gift to the world of business. Here everybody was in recession (remember at this time interest rates were about 20 percent) and I was just booming and making the best money I had ever made in my life.

Then in the spring of 1981, I got a phone call from my attorney one morning and he said, “Steve, are you sitting down? Did you read the paper? Your dentist buddy is on the front page. He was just arrested in a sting operation with a briefcase full of cocaine.” My whole world came crashing down around our business and our family. My wife, Carolyn, and I were left holding the bag for over $100,000 worth of bills associated with the dental clinics, and at that time it seemed like a pretty substantial amount of money. We had two small children, and the third child was on the way. We had no medical insurance and a ton of medical bills. Life became very desperate.

A Lot of success comes through the fear of failure.

When I look back on that situation, I realize my role in this was very significant. I was naive, very inexperienced, and had no business training. I was headstrong and arrogant. These guys took advantage of me, but I should have seen it coming.

Just months before, I was having coffee with a very successful retired businessman who had become one of my mentors. He asked me, “Steve, have you ever gone through any really hard financial times?” I admitted I had not, and he said, “Well, be prepared, because you will. I hope that you can trust God as much then as you do now.” He told me about his career in the trucking industry and some of his strategies for keeping his current business going while building in new areas. He died of a heart attack a couple of months later, before all of this happened with my business.

Filing for Bankruptcy?

What came out of all of this?

My client had been involved in drug smuggling and money laundering schemes, and the IRS and the drug enforcement agency seized all of the assets. I remember sitting down at a conference table with my attorney and accountant, and they said, “Steve, you have just been had. We don’t see any option for you except to file bankruptcy.”

All I could think about was my dad, who had taught me to be a man of my word. “Your word is your bond,” he told me. “The only thing you could carry through your whole life is your name.”

So I told my attorney I had made a commitment, and I couldn’t take the easy way out. He responded, “Son, son, you just don’t understand. Within months you will have a dozen lawsuits filed against you. You have to file for protection.” But I said, “Perhaps I do, but first I am going to try it my way.”

I wrote a letter to every single person I owed money to, and then followed up with a personal visit or a phone call and just asked them to trust me.

We spent the next six years of our lives paying off these bills. We never asked for a dime of discount and paid every debt with interest. The only thing I asked from people I owed money to was to trust me and let me pay them on my terms and not theirs. So, every month for six years, every single person I owed money to heard from us either in the form of a check or a phone call. I owed Continental Hardwoods $5,000, and I can remember writing them a check for $5 one month because that was all I could afford. But every month they got something from me, and I paid that debt off in about five years. Today I do a substantial business with them on an unsecured open line of credit.

Not one person ever sued us. If they had, it would have forced us into bankruptcy. Some of them were irritated, some of them were hurt, but once they realized that I was chipping away at it, they stuck with us. Today, I have some great fans in this local industry right now who were partners during that time. There isn’t one of them who would not do business with us today.

Building the Business

This was quite a foundation for your business. How did the lessons from this time shape the way you do business today?

It was a very important lesson, though I would never ever want to go through it again! It was very hard. In fact, the fear of that is the impetus for our growth, I believe. A lot of success comes through the fear of failure, and whenever there is an economic downturn or some change in the climate, I get this survival instinct that kicks in that I can’t even explain.

I had never had any formal business training, but after going through that difficult time, I became a student of business. I took some correspondence courses in business management and financial management. I still have some of the textbooks here in my office. I couldn’t afford to go to school, so I had to teach myself. I guess I am a DIY — a do-it-yourselfer — and I taught myself business. I vowed that if I ever had a chance to do business again, I would do it right.

Over the next several years I got back into the kitchen- and bathroom-remodeling business. I found out that I could get a deposit from a customer, buy my materials, build the cabinets, do the kitchen remodel, and get progress payments. If I did a really great job and did it quickly, I could get paid, and I could do it again. For three years, I didn’t have any credit accounts. I didn’t have a credit card, didn’t have any open lines of credit at any lumberyards. If we didn’t have cash in the checkbook, we didn’t purchase anything. That’s where we learned the concept of lean manufacturing.

We recently had 20 Boeing Company engineers come to our factory to look at our lean manufacturing practices. They asked me, “What was your impetus for going lean?” I simply said I never had an impetus to go lean, it was just that I had no money. We buy only what we need, process it on a just-in-time basis and get it out the door, get paid for it, and we do it again. It’s the only thing we have ever known. We still do business that way. Everyday at 7 o’clock in the morning there is the lumber truck out here with our day’s order of sheet stock stacked in the order that we want to put it on the panel saw. It was ordered the day before at 2 o’clock in the afternoon. It goes from their truck to the factory and out the door as cabinets. We have a little bit of emergency inventory, but that’s it.

Today, we are in what some are calling a recession. This time, the hardest hit area seems to be the housing market because of the subprime lending problems. How does this affect your business?

I have a lot of people asking me that question. The housing industry really is in pretty tough straits right now nationwide. I am on the board of directors of our national trade association, the Kitchen Cabinet Manufacturers Association. We submit some key financials every month to an independent third party, a trend of business report, and the industry is off more than 15 percent. It was off 15 percent in 2007 from 2006, and now it’s off again in 2008 from 2007, although it’s starting to flatten out. Our business was up 26 percent last year, and right now we are running at a pace that is up over 25 percent over last year, and we are ranked, if not the fastest growing company in America, within the top two or three. We hit record sales in the first quarter, and had our all-time biggest month in April. The incoming orders are at record sales pace, all this when the economy and when the housing industry is on a down swing.

To what do you attribute that?

I attribute that to two things. One is having the right product at the right time. We started building this frameless European-type cabinet in 1987, and now that contemporary styling is all the rage. It’s exactly what everybody else is trying to get to, and we have been doing it for more than 20 years. So a lot of it has to do it our product being the right product, but it is also about our mission.

We want people to fall in love with the process of continual improvement.

Simply stated, our mission is to develop the most loyal customers in the cabinet industry. We do this by being the reliable supplier, and we have a relentless pursuit of perfection in that area. We can never be good enough. It’s first and foremost on everybody’s brain that we have to improve. It’s a continual process of improvement. We know we can get better, and we become a reliable supplier to our customer base, even though their business may be off. We are getting the higher percentage of the market share of what we are selling because we have the right product and we have been a good supplier.

Vince Lombardi, when he first started coaching the Green Bay Packers, had a great quote: “We are going to pursue perfection, knowing full well that we will never reach it.” In the pursuit of perfection, we are going to attain excellence, and that’s what we want to live. That’s our passion absolutely. Pacific Crest Industries strives to be an excellent company. Our vision is to be a socially responsible, profitable, growing cabinet company. We recognize that our purpose for being here is not just to make cabinets and not just to make money. It’s to try to make the world a better place. So our business has grown because our customers have embraced this cause, our employees embrace this cause, and our vendors embrace this cause. These are very exciting times.

Has it been all smooth sailing over the years?

Oh, no! In 1988, I sold my business, tired from the struggle. But in 1995, I mortgaged everything I had to buy it back. In 2000, we had a very hard year at Pacific Crest. We had been doing significant business with Eagle Hardware & Garden. They had 40 stores when they sold out to Lowes. Lowes had its own set of suppliers and wanted to do business with us in a way that didn’t fit our skills, so we had to close out that work and go through extensive cutbacks. That was a major transition year where we almost went under. So it certainly has not been all smooth sailing!

Pacific Crest cabinet factory in operation.

Pacific Crest cabinet factory in operation.

Applying Technology

You have incorporated a lot of modern techniques in your factory, from lean to computer controlled manufacturing to mass customization. How do you learn all of new ways of doing business?

We become students of business. You look on my desk here you will see a lot of trade magazines. We go to all the machinery shows. We go to the cabinet-industry shows. We are always pursuing knowledge. We’ll buy equipment that we don’t know how it works just to learn from it. So, it’s all about pursuit of knowledge. Most of what we know about panel-processing technology comes from Europe. So, you’ll see all of our equipment is European made. The Italians are fabulous with design, and we have learned a lot from them. We have also learned a lot from the Japanese, and we have learned a lot from the Chinese.

The Chinese are now, and will continue to be, very formidable competitors in this industry. We recognize that the only way to stay ahead of the Chinese curve is to use and embrace technology and become better and better at quality. We also need to be able to react quickly to changing customer needs.

One of our greatest strengths, which can also be a weakness at times, is our lean manufacturing philosophy. We don’t have any premade inventory. If we can figure out how to make any request from a customer, we will make it. We’re not stuck with a bunch of pre-panelized end panels and face-range stock and doors that need to be put on a cabinet. Everything is from scratch, everything one off.

Dealing With Growth

How does the culture of excellence that you personally believe in, get translated to all of the new people you bring in as you grow?

Great question. We are always hiring. We are always looking for good people. We may not always be putting them in the plant at the time, but we try to hire based on a target of alignment of values. We have a set of core values and that’s the bull’s eye, trying to align with values, aptitude, and attitude. So we try to hire people with these attributes. We would rather hire a person with great attitude and no skill and give them the skills, as opposed to hiring a person who is experienced and has a bad attitude.

We have six core values:

  1. Integrity
  2. Respect
  3. Excellence
  4. Growth
  5. Profitability
  6. Stewardship

It’s those first two, integrity and respect, that keep people here. We have zero tolerance for disrespectful attitudes and behavior toward anybody’s race, religion, sexual orientation, ethnicity, or anything. Everybody here deserves to live in a world where they are respected. You probably saw a little bit of that going through the factory today, a lot of smiles.

I enjoy going out there and talking to people. We have a lot of energized and motivated people, and we talk with them about our vision and our mission and our passion and our goals. We communicate this daily, weekly, and monthly, over and over again, so people out there on the floor can recite the vision and mission statement of the company. They know where we are going and are glad to be a part of it.

We usually bring people into the plant for three months on an interim, temporary basis working through a temp agency. That gives us the opportunity to really watch people for 30, 60, and 90 days before we put them on our payroll. We will pretty much know in that time whether or not they are going to fit into our culture. We have an employee-orientation day every single month. We get employees enrolled in our Pacific Crest University as quickly as possible so they can start learning and falling in love with the processes.

In manufacturing, it’s not so much the product you fall in love with, you have to fall in love with the process. The product changes everyday; it’s here one day and it’s gone tomorrow. So we want people to fall in love with the process of continual improvement. We are not always successful.

We have turnover like everyone else, but one of our primary goals is to reduce turnover; every year we have a new goal of reducing our turnover rate because only when we retain employees can we build this world-class manufacturing system.

Every month, we have a lunch to honor people with milestone anniversaries of one, three, five, 10, 15, and 20 years. We have a “Pay for Performance” bonus plan where people know where they are at, tracking through the year, and if the company performs well, everybody gets a bonus at the end of the year. We also have a 401K contribution plan; if they will do something for themselves, we will do a lot more for them. We have over 80 percent participation in our 401K, which is almost unheard of in manufacturing. It’s a whole culture of respect.

Developing People

Say a bit more about Pacific Crest University? What do you teach, who does the teaching, and how often do you have classes?

“Pacific Crest University,” as it has come to be called, is an in-house training program for our employees. All the subjects are taught by our management staff. We train on a variety of subjects covering the gamut of cabinet manufacturing. Everything from wood-species education to cabinet assembly, basic woodworking skills, finishes, materials, and hardware to basic kitchen layout. The course is designed to take about a year to complete all the classes.

In addition, we use the “university” setting to discuss vision, mission, and values with our employees. And we meet there with our customers and dealers, training them as well.

How do you select people for promotion?

Every new position gets posted. So, everybody has an opportunity to vie for any position that opens up. We prefer to hire from within, but when we have a newly created position where we just don’t have a skill set, we will look on the outside. People who come into Pacific Crest know that if they have a great attitude and want to work hard, they can climb the ladder. Literally, every single person in our production support came from the factory floor. This gives them a good opportunity and provides great support for our customers.

Our two production managers are from within the company, and nearly every one of our top managers is homegrown.

Going Green

You mentioned your green program as we walked through the factory.

Everybody here wants to be green. It’s on our brochure, and green is what we live by. Pacific Crest believes in a holistic approach to environmental sustainability. Our wood products come from sustainably managed forests. All of our board products have the Environmentally Preferred Product (EPP) stamps that come from the Composite Panel Association. Our lumber comes from SFI, Sustainable Forest Initiative, or FSC, Forest Stewardship Council boards. We use only materials that come from reputable and environmentally sustainable manufacturers. Our hardware comes from companies that have ISO 14000 certification.

But that is just the start. Green is about our whole environment, including the quality of our air and how efficiently we run our factory. Every single light bulb in the factory is high-efficiency lighting, every single machine is a high-efficiency machine. We recycle the heated air, bringing it back to reheat the building. We recycle all of our cardboard. We recycle all of our wood waste. We recycle our spray finishes, protecting the air from the finish spray through a shield that captures the excess spray and recycles it. We recycle our spent solvents. Nothing is wasted, and nothing toxic gets put into the environment.

In everything we do, we feel that we are stewards not only of the creation, but also stewards of the resources that we have been given. So another big part of our environmental sustainability approach is our social responsibility. We feel we have a responsibility: “To whom much is given, much is required.” So we give back to our community locally and abroad and we encourage our employees to do that as well. We just initiated a volunteer day in which every single Crest employee can get paid for doing one day of volunteer work every year. We have a process to qualify nonprofits for being eligible for this program. We want to encourage the attitude of giving.

Reaching Out

And you take teams out to developing countries as well, don’t you?

I was introduced to Agros (see sidebar) in 2001, and I agreed to go down to El Salvador on a vision trip with two of their principals, founder Skip Li and Executive Director Greg Rake in November of that year. I have been in a lot of Third World countries, but I am not sure that I had ever seen such depressing poverty as I saw in the slums of San Salvador. It was really heart breaking. We visited several Agros villages in the Suchitoto area of El Salvador, and I was impressed by the attitudes of the villagers. They had nothing materially, but they had hope — the one thing that makes all the difference in the world. With smiles on their faces, they were so proud of the beans, corn, sesame seeds, and chili peppers they were growing and the goats and cows they were raising.

When I came back I told my wife, Carolyn, that this is something we really need to get involved with. A month later, Greg asked me if I’d put together a team to go down to the village of San Diego and rebuild a school that had been destroyed during their civil war. That was my first company trip to El Salvador with eight Pacific Crest employees.

We worked hard in the hot sun and we put a roof on this little school. We cleaned up the inside and outside. We put a chain-link fence around it and, at the end of the week, they were ready to hold school classes.

The government had promised if they would get the building fixed up, they would send a teacher, and now there are 50 or 60 kids going to school everyday in a little three-room school house. We quickly got bit by the bug.

When we came home, we had eight ambassadors, not just me. It was a very rough experience comparatively speaking. We slept in tents and had no place to take showers, but each of us came back changed. That’s when Carolyn and I decided to sponsor a village. Greg Rake and the head of finance at Agros met with us in a little Mexican restaurant and said, “We are so excited that you want to sponsor this village.” Then they gave me the spreadsheet and my eyes just went to the bottom line, and it just took my breath away when I realized what I had committed to. This was 2001, just after the difficult period when Eagle Hardware sold to Lowes, and the annual commitment for this village was easily 20 percent of our net pre-tax income. We were a small young company, starved for cash, and yet I knew it was the right thing to do. We have been very encouraged by the village work over the years, and it has worked out well. In 2007, that same commitment was less than 3 percent of our pre-tax income.

How has this work affected employees here at the company?

It’s given them another cause beyond the passion we have for our own business. People work harder for a cause than they do for money. Chuck Schilling, our customer service manager, has become our village champion, and he coordinates all the trips. We have a new group of people going almost every year. Pacific Crest pays half of the travel expenses and half of their week’s wages, but those going take some vacation time and they have to raise the money for the other half of the trip. We teach them how to do fundraising letters and we have never been short on a trip. People are proud of the fact that we are doing something for someone else.

And didn’t you have something started in the Congo as well?

My wife and I have been supporting some Christian missionaries who are working in Eastern Congo for a number of years. It’s one of the most insecure places on the planet right now. They run an orphanage called New Hope Center, and they are also involved with a little woodshop they had set up to create employment and also profits to run the orphanage.

They asked me if I would help them with their woodshop because it was struggling, and they thought they would have to close it down.

In the final analysis, they have decided to sell the woodshop property and start a university. This fall I’m going back with two pastors to do work on pastoral training, English teachers to hold English classes, electricians to bring power to New Hope Center, and handymen to work on the mission houses. We look forward to being a part of something that could bring real hope to the peoples of Eastern Congo.

Small-Business Honors

In 2005, you were selected as the Small Business Person of the Year in the state of Washington. What went into that, and why was that given to you?

That was just an incredible honor to be awarded Small Business Person of the Year by the Small Business Association (SBA). They judge by five criteria:

  1. Longevity. (We qualified here since we have been in business since the early ’80s.)
  2. Financial stability. (We had to submit P&Ls, balance sheets, and cash-flow statements and all for the last five years. They could see our growth and the improvement of our financial position.)
  3. Overcoming obstacles. (We were able to talk about overcoming the obstacles of near bankruptcy and Lowes buying out Eagle Hardware and recessions throughout the last 28 years.)
  4. Employee growth. (In the last 11 years, we have gone from 22 employees to 185 employees.)
  5. Community involvement and community service. (I guess our community service speaks for itself.)

Personal

You mentioned earlier about starting your cabinet company, but what got you started in the cabinet business?

I would call it survival. I was working for my father-in-law from 1974 to 1980. Our daughter was born in 1976, and we needed a little extra money because of added expenses with the baby and because my wife wanted to be home with the children. So I bought a table saw and a radial arm saw and thought, I am a cabinet maker now. The only training I had was high school woodshop.

But I became fascinated by cabinets. My wife was embarrassed because every time we went to someone’s house, I was opening the cabinet doors and drawers and checking them out. That’s how I learned. I built cabinets for my father-in-law throughout the rest of the ’70s, in addition to my own business on the side, and earned enough money to keep my wife from having to get paid work outside the home. And then, in 1979, we went through a pretty severe recession, with a downturn in housing. When the interest rates went up to 20 percent, the building business came to a screeching halt. My father-in-law didn’t really have enough work to keep me busy, so I launched out of my own, working first from my garage. A very strange time to start a business!

Incidentally, we are still learning about cabinets. You have seen the “soft” closing trunks on some of the more expensive cars? You don’t have to slam the trunk to close it, but rather you gently put it down, and it pulls itself tight. We now offer this feature on our higher-end cabinets, and it is very popular.

What do you see in the next 10 years for Pacific Crest?

I see Pacific Crest continuing to grow. We are a growth company, and we are putting together a plan to transfer the ownership of the business to our children. We have been offered a lot of money for this business and we have decided as a family that we are not going to sell the business, because the business really is our outreach. The business is how we can touch the world, more so even than having money. We can actually make the world a better place by owning the business.

I also see myself gradually moving out of day-to-day activities of the business. We have a transition plan, so over the next 10-year time period, I will be taking a lot of baby steps away from running the company. I want to spend more time with my volunteer projects and allow my sons and daughter to take on more of the responsibilities. My daughter will direct our family foundation, and my sons will run the business.

We have great employees here, and I don’t want to underestimate their big, big part of this. They will play a huge role in this whole transition plan. That’s our dream.

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