CEBC IN THE NEWS

Coffee with retired Toro CEO Kendrick Melrose

Published Monday, May 23, 2005 in the Star Tribune.

By Larry Werner

On March 15, Melrose retired as CEO after 22 years in that position and after 35 years as an employee of the Bloomington-based manufacturing company. He took over when the company was on the brink of bankruptcy. In 2004, Toro had the best earnings year in its history.

What are your emotions after retiring from a job you've done for so long?

Mixed. Obviously, 35 years in this one company is a long, long time. It's more than a job: It's a marriage. So now I'm going through a divorce, to some extent. It's painful to think that all the things that were such a part of my life -- coming here, interacting with people, working on issues, seeing the company going through bad time as well as good times -- gives you reason to reflect on what it meant to you. It meant a whole heck of a lot. This is my extended family, and my management style was to create a family environment based on the philosophy that if we really care for each other we're going to enjoy our work more and be more productive. I am executive chair. I've still got an office, and I'm still employed here. That'll last for another year, probably.

So what comes next?

I don't want to just go off and play golf. For me, it's a time to give back. I've been so focused on Toro, and I've reaped tremendous benefits -- personal, emotional and certainly financial benefits -- from my career here. So now it's time have the focus of what I do next as not receiving but giving.

How are you going to do that?

I have a real passion for the philosophy of servant leadership. For me, it's based on Christian principles, but it's also very good business to think about turning the organization upside down and serving, mentoring, coaching employees. There's so much focus in corporate America on the heroic CEO where the CEO gets all the credit and has all the stock options, made all the money. And it's almost as if he did it or she did it herself. And I've tried to say, "Here, it's the employees who did it."

So what I'd like to do is promulgate this notion of servant leadership. I talked yesterday to one of the professors at St. Thomas business school, Ken Goodpaster. He teaches a course, "Spirituality in the Workplace." So we talked about my teaching a course or working with him and other professors there. I will be chairman in October of the Center for Ethical Business Cultures, which has become a part of St. Thomas. So I have a role now to play to help lead ethics in business through an organization.

Where does your interest in servant leadership come from? Was there an epiphany?

There was, indeed. My parents were strongly spiritual, so I had that kind of foundation. The epiphany for me was an opportunity to run a small Toro subsidiary called Game Time Inc. In 1972, Toro bought this little subsidiary in Litchfield, Mich. Very small, rural, farming-community town. We bought this playground equipment company with the idea that we sold commercial mowers to cities, and cities also buy playground equipment for their schools and their parks. It turned out that the synergy was ill-conceived and we ended up selling.

But in the meantime, I was asked to go there. The way the company had been run is the fellow that was running it was a benevolent autocrat. He was a good guy, liked everyone, but he liked to make all the decisions. They were pretty comfortable doing what Bob said. So Bob would say, "This is how much steel you should buy for the swings, and this is what orders you should fill."

So when I got there people started coming into my office and started saying, "How many tons of steel should I buy?" I'd say, "I don't have the foggiest idea. I'm not Bob. Why don't we get the production manager in here and find out how many swings he's going to build and then we can figure out how much steel we need for that. We'd better get the inventory guy in too because maybe we've got some steel in the yard and maybe we better get the sales guy to come in and tell us what the forecast is for the next few months."

Since they had very low self-esteem, they figured if they made a decision and failed they would get fired. It was such a different environment from [Toro] or at Pillsbury where I started. They began to see how to make a decision as a team.

So that experience was instrumental in shaping your management philosophy?

That was a transformation.

What was the result of that transformation?

It builds self-esteem. It builds innovation, creativity, risk, ownership. I'm free to be accountable because I know if I make a mistake I'm not going to get hammered. It's not about who's to blame or who made a mistake. It's how can we get better together.

We sold the company, and I came back to be in charge of the consumer division and I said, "I'm going to try to do this kind of management style." I didn't call it servant leadership by name, but I said, "The idea is I'm a coach. I'm a mentor. My role is to help the employees as a team make decisions."

Five years later, you were at the top of this company having to make some tough decisions, which included firing people.

In 1981, it was looking like we were going to go bankrupt. Here I am trying to be a leader that's supporting and coaching and mentoring and giving them a vision and saying, "You're really important here." All of a sudden the president gets fired, the CEO leaves the company, a lot of the officers leave, and I get tossed into this role. So the banks came in and said, "We're pulling your line of credit."

So I'm thinking, "I've got to build a culture, but we've got to survive first." How are we going to do that? Well, we've got 4,200 employees. What is the right size for the company to survive? It was about 1,800. We closed most of the plants. We had to let over half of our employees go. People were coming into my office and they'd be crying. It was really a dark period because I don't consider myself a hatchet guy. We had all these snowthrowers and it didn't snow and that was our primary profit driver.

How did you deal with that emotionally?

There's a sign up there that became my beacon. It said, "God intends you to be here now." I kept thinking, "What am I doing? Why am I in this job? I was happy running a division, and I have all this burden, and I can't do it. This is not what I was supposed to do." So my friends would say, "You're there for a purpose." So I began to think maybe there's some message here. So I made that sign in 1981 and I put it on the wall by my telephone. It took three years of losses. In 1983, we began to see the light at the end of the tunnel, and that's when I decided we need a different culture here. We needed the Game Time culture.

You're talking about changing the culture, but wasn't it the diversification of your product line that really turned the company around?

In the '80s, the focus was on the culture. Let's get this company turned around by going back to the basics. We had gotten into some things we should never have gotten into. We were way too dependent on snow. We needed to build our other businesses back up. Let's go back to the basics and let's do that as a team. So the whole period of the '80s was that. In the '90s we did this dramatic shift from being a consumer products company to a commercial and professional products company.

What did you do to make that change?

In 1990, about two-thirds of our sales was homeowners -- lawnmowers and tractors and trimmers and snowblowers and things like that. The golf course market, the professional commercial market for cities and highways and commercial turf areas, sports fields, playgrounds, landscape contractors, the whole irrigation area was about one-third of our business. We realized that weather and the economy affected the homeowner business a lot more. A golf course [manager] still has to buy product even if he's not getting as many players or if the weather is really bad.

So we said if our portfolio was just reversed and we had a bad-weather period or bad economy, we wouldn't go into the tank the way we did in the early '80s. And by 2000 it was just reversed. Two-thirds professional and one-third consumer.

How many employees do you have now?

5,300.

Looking back on those dark days and the good days that followed, what are your thoughts?

It's very gratifying to step back and say, "Look what these employees have done." I don't like it when people say, "Ken, one of your legacies is you turned the company around." I didn't do that. When Dave Lilly [former CEO and board member of Toro] asked me to take over the leadership in '81, he asked me, "Can you turn this company around?" I said, "No. But I know some people who can. And they're these people. So we'll have at it."

How did you do?

I was off-key.

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