TRANSFORMING TEAMS

COMPENSATION 101

WHAT DO THOSE BORING TERMS MEAN ANYWAY?

------------ BY SUSAN PALÉ

WELCOME TO Compensation 101, where we define and give examples for those boring compensation terms we throw around all the time. You’ve heard a lot of them recently and probably experienced some of them too, as we navigate through a volatile, often unexplainable, labor market. Let’s begin with the basics!

Compensation Strategy

Developing and implementing a compensation strategy means making decisions regarding how your organization will pay employees compared to the external market. Most large organizations have developed comprehensive compensation strategies; many small organizations have not. A key component of any compensation strategy is determining how you want to set compensation levels relative to the external market.

LEAD – An organization may determine that it wants to LEAD the market. This means that the organization decides to pay more than competitors. That might be 10% more, 20% more, etc. The idea is that you will be known as the “best payer” in your competitive markets. This strategy works well when an organization is growing rapidly and successfully, has $$$$ to spend on recruitment and retention, or faces particularly stiff competition for talent.

MATCH – Most organizations decide they want to MATCH the market. To do this effectively, it’s necessary to gather compensation information about pay levels for specific jobs and geographic locations. This strategy works well for most organizations as long as salary information is regularly reviewed and updated as the market changes. For example, pay levels for entry level employees have increased more than 10% in 2022 in some geographic areas. Salaries that matched or even led the market a couple of years ago may now lag the market.

LAG – Some organizations determine that their pay will LAG the external market. Sometimes this happens by accident, but it can be a successful compensation strategy. Pay is important to employees, but often “perks” such as flexible scheduling, remote work, and generous PTO can be equally important. Some Affinity HR Group clients pay the full premium for family medical coverage—that cost can easily exceed 15k annually.

It’s important to remember any of these approaches—lead, match, lag—can work for you if they’re well developed and maintained.

More Terms Defined

Successful compensation programs are both externally competitive and internally equitable.

EXTERNALLY COMPETITIVE means that an organization’s jobs are valued appropriately compared to jobs in the external market. Think of it as a deeper dive into the idea of matching the market. To be externally competitive, an organization must understand who their competitors for talent are and that these can vary significantly by job type and geographic location. For example, it’s important to know what industry pay standards are for certain positions, but if your new hires usually come from other industries and employees leave to take jobs in other industries, that information may be less valuable than information specific to a geographic area.

And employees in Accounting, Human Resources, IT, and Customer Service can easily find jobs in other industries. Entry-level employees also can choose jobs in different industries, so if you regularly hire entry-level employees, it’s critical to understand who else is looking to hire them.

INTERNALLY EQUITABLE means that employees in similar positions with similar skills are compensated similarly. That’s a lot of “similars,” but similar doesn’t mean same. In organizations with formal compensation structures, internal equity is achieved by assigning specific jobs to a specific salary “grade” and salary “range” and paying individuals within that range based on performance, skills, length of service, etc.

In organizations without formal compensation structures, these same factors are frequently used to determine individual rates of pay.

SALARY COMPRESSION occurs when the pay of one or more employees is close to or even exceeds the pay of other employees doing the same or similar work. Salary compression can occur throughout an organization, but is most common when new hires (hard to come by in this labor market) demand salaries higher than incumbents with more experience and when salaries for new entry level employees (also in high demand) equal or exceed salaries for lead or supervisory employees.

It’s easy to blame salary compression issues on COVID, The Great Resignation, The Great Reprioritization (Fast Company), The Great Recognition (U.S. Department of Commerce), or whatever best describes this crazy labor market. The reality is that salary compression has been a problem organizations have faced for many years. It’s a complex issue that occurs over a long period of time and, as a result, doesn’t have an easy fix. Regular reviews of paid salaries and salary adjustments based on these reviews are critical steps in addressing salary compression.

PAY EQUITY – The term pay equity is sometimes used interchangeably with internal equity. In the past, the two were pretty much the same, but pay equity has recently taken on a different meaning. The term now refers most commonly to legislation (primarily at state levels) requiring employers to pay men and women equally for “substantially similar” work. Some states have expanded this legislation to include fair-pay requirements for race and other protected characteristics. The recent labor agreements for equal pay for the U.S. men’s and women’s soccer teams represent the settlement of a pay equity lawsuit.

SUSAN PALÉ

Susan Palé, CCP, is vice president for compensation with Affinity HR Group. Reach her at (877) 660-6400 or contact@affinityhrgroup.com.

One. Stop. Shop.

Q. With rising costs, I want to give my employees a gift card to reward them for their hard work. What should I consider? Q. Acknowledging an employee’s contribution to the company is almost always a good thing. Making the effort to recognize an employee’s hard work helps reinforce their commitment to the company.

When you give a gift card (or any monetary benefit) to an employee, you should consider the tax implications. Some bonuses may be taxable and therefore must be reported accordingly. Usually discretionary bonuses—those that are given “just because”—are not taxable. However, if they become expected or a regular occurrence, then they may be.

Conversely, non-discretionary bonuses—those that are given regularly or as part of a compensation plan (such as performance or holiday bonuses)—are usually taxable.

Regardless of type, timing or value of the reward, give it with the right message. Just handing someone a gift card will not have the same impact as giving it along with a personalized conversation or note about their contribution to express how much you value them.

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CULPEPER PURCHASES NORTHEAST TREATERS

US LBM has reached a definitive agreement to acquire Foxworth-Galbraith Lumber Co., Plano, Tx.

Founded in 1901 by W.L. Foxworth and H.W. Galbraith, the chain today operates 28 locations across Arizona, Colorado, New Mexico, and Texas under the Foxworth-Galbraith banner and two locations in Oklahoma under the Forest Lumber brand. Its primary customers are pro builders, commercial contractors and homeowners, which Fox-Gal serves from its building materials yards, distribution centers, home centers and manufacturing locations, which are focused primarily on floor and roof trusses and structural beams.

Upon completion of the acquisition this fall, US LBM will operate 80 locations in Texas, 13 in Arizona, nine in New Mexico, five in Colorado, and four in Oklahoma.

“US LBM shares Foxworth-Galbraith’s principles of service, integrity and providing solutions for customers and a great place to work for our people,” said Fox-Gal CEO/

Culpeper Wood Preservers, Culpeper, Va., has acquired Northeast Treaters of Belchertown, Ma., and Athens, N.Y.

With the deal, Culpeper now operates 16 treating plants, further strengthening the distribution coverage area for its pressure-treated wood into markets that stretch from the Southeast to the Northeast and through the Midwest.

“We are thrilled about the acquisition and adding Northeast Treaters to our company. Culpeper Wood Preserver’s continued growth highlights our commitment to excellence for our customers, suppliers and employees,” said president Jonathan Jenkins. “The combination of these two companies strengthens our ability to provide greater value and service to our customers and expands our geographic reach.”

“Northeast Treaters, Inc. has grown to be a strong regional supplier of pressure treated wood to New England and New York State over the past 35 years due president Jack Foxworth. “We’re excited for the many new opportunities this partnership will create for our employees and customers.”

“Over the past 120 years, the Foxworth and Galbraith families and generations of associates have built one of the most widely respected and successful building materials distributors in the industry, and we are proud that they will be joining US LBM,” said US LBM president and CEO L.T. Gibson. “The addition of Foxworth-Galbraith augments our already robust network in the Southwest, expands US LBM’s reach and reinforces our strong position in several key housing markets, including the growing Dallas-Fort Worth and Phoenix metro areas.”

US LBM’s existing locations in the Southwest go to market under multiple locally recognized brand names, including R&K Building Supply, Higginbotham Brothers, Parker’s Building Supply, and J.P. Hart Lumber and Components.

to the hard work of our employees and a company-wide commitment to our customers and vendors,” said David Reed, CEO of Northeast Treaters. “In return, our customers have rewarded us with their support through both good and lean years. The acquisition of Northeast Treaters by Culpeper Wood Preservers will now bring the breadth and resources of a much larger organization which will greatly benefit our customers, vendors, and employees.”

McCOY’S TO SELL 4 STORES TO CNRG

McCoy’s Building Supply has agreed to sell its four stores in Mississippi and Arkansas to Central Network Retail Group (CNRG).

CNRG is a multi-format, multibrand retailer currently operating 140 hardware stores, home centers, and lumberyards in 16 states, including locations in both Mississippi and Arkansas. The McCoy’s locations—in Greenville, Vicksburg and Laurel, Ms., and Searcy, Ar.— will be operated by CNRG under McCoy’s Building Supply,

San Marcos, Tx., has acquired 12.8 acres in Lockhart, Tx., for a future store.

Ferrara Lumber, Seneca Falls, N.Y., was destroyed by a July 3 fire of undetermined origin. The company is operating at its sister location and hopes to rebuild.

Ace Hardware, Aurora, Oh., has been opened by Jason and Shana Wallenstein.

Curt’s Ace Hardware opened

its first store July 20 in Bristol, Tn. (Kyle Geffers, store mgr.). Owned by grocer Food City, the hardware chain will follow up with openings in Piney Flats, Gray (a rebrand of the recently purchased Mize Farm & Garden Supply), and

Erwin, Tn.

True Value Hardware

has been opened in the former Rainbow Home Center, Rice

Lake, Wi., by John and April Habas. Carlson Hardware, Nisswa,

Mn., has been sold by Kari and Greg Carlson to Mike Wiebolt, who renamed the business Nisswa Hardware.

the brand Home Hardware Center.

McCoy’s president and CEO Meagan McCoy Jones explained, “We have learned in recent years the importance of managing our own distribution for core products, and we have made big investments in growing our distribution capabilities to serve as many stores as possible. These four stores are outside the reach of our distribution network, and as we plan our growth, Mississippi and Arkansas are not in our target geography.”

Separately, McCoy’s announced it will be forced to close its Corsicana, Tx., location due to an expansion of a highway project by the Texas Department of Transportation. The Corsicana market will continue to be served by surrounding McCoy’s locations.

After deal closes on Aug. 2, McCoy’s will operate 85 stores, three distribution centers, and two millwork plants in three states.

KOOPMAN LUMBER owners (l-r) Dirk Koopman, Tony & Denise Brookhouse.

MASSACHUSETTS’ KOOPMAN EXPANDS WESTWARD

Ten-unit eastern Massachusetts dealer Koopman Lumber, Whitinsville, Ma., has acquired Boilard Lumber, another family-owned and operated retail lumberyard providing quality building supplies to western Massachusetts since 1936.

Based in Indian Orchard, Ma., Boilard Lumber adopted the Koopman name on June 27. All Boilard employees were welcomed to remain on staff and Robert Boilard, vice president, will remain as general manager.

“We’re excited about the opportunities this merger presents,” said Dirk Koopman, COO. “It’s an honor to partner with a business as well-respected as Boilard Lumber, and to expand our business into western Massachusetts. We have an experienced transition team, and our goal is a smooth transition for every employee and customer. We’ll offer additional product lines, enhanced capabilities and greater resources, all in the capable hands of the same staff who know their customers and their business needs.”

“After 86 years of continuous family ownership, we are happy to have found another business that shares our history and values to continue our legacy in western Massachusetts,” said Mike Boilard, president, Boilard Lumber. “It was important to us to turn the reins over to people who are as committed as we have been to both our customers and employees. The Koopman family fits that bill.”

Koopman Lumber offers three full-line lumber, hardware, paint, lawn and garden stores in Whitinsville, Uxbridge and North Grafton; one lumber, hardware, paint and design center in Sharon; a full-service paint store in Milford; lumber yards and kitchen design centers in Hudson, Andover and Fairhaven; and distribution centers in Uxbridge and Sutton.

TIBBETTS ADDING MANUFACTURING LOCATION

Tibbetts Lumber Co., St. Petersburg, Fl., has purchased a building on three acres in Crystal River, Fl., that it will convert into a window and door manufacturing facility.

Expected to open Sept. 1, the new location will be Tibbetts’ ninth in the area.

L&W Supply acquired the assets of American Building Materials, Wadsworth and Hebron, Oh.

Kennebec Lumber Co. lost its Greenfield, N.H., sawmill in a June 25 fire, cause unknown. The office, dry kilns, and inventory were unscathed.

Teal Jones Group, Surrey, B.C., has begun construction on a $110-million southern yellow pine sawmill on 235 acres in Plain Dealing, La. When completed in fall 2023, the facility will produce a wide range of dimensional and specialty lumber products with a production capacity of 300 million bd. ft. annually.

LP Building Solutions has begun converting its Sagola, Mi., mill from OSB to LP SmartSide engineered wood trim and siding.

Gutherie Lumber Co.’s sawmill in Cecil, Ga., was destroyed by a June 22 blaze.

Baldwin Pole & Piling Co. has begun production

of UltraPole NXT with DCOI in their Wiggins, Ms., plant. Baldwin’s facility in Bay Minette, Al., continues to produce DCOI-treated UltraPole NXT wood poles, as it has since last August.

Coastal Forest Products, has expanded its

IronWoods hardwoods facility in Charleston, S.C., into a wholesale supply business for multiple brands, including Derby Building Products’ full line of

Tando products—TandoStone, Beach House Shake, and TandoShake.

Palmer-Donavin, Columbus, Oh., is now distributing RISE Building Products’ synthetic

wood siding and trim products.

L.L. Johnson Lumber Mfg. Co.’s locations

in Charlotte, Mi., and South Bend, In., will distribute Tropical Forest Products’ full line of Black Label brand tropical hardwoods throughout its network of warehouse and retail locations.

Oldcastle APG has completed its $1.9-billion acquistion of Barrette Outdoor Living,

Middleburg Heights, Oh. The acquisition bolsters Oldcastle APG’s portfolio and expands opportunities for customers to access end-to-end architectural solutions.

Firestone Building Products, Nashville, Tn., is being renamed the Holcim Building Envelope

division of its Solutions & Products Business Unit. Firestone’s iconic brand is now Elevate.

Andersen Corp. broke ground on a second expansion of its Renewal by Andersen manufacturing operation in Cottage Grove, Mn., which will double the size of its 360,000-sq. ft. Value-Add Center.

USNR, Woodland, Wa., has acquired Timber Automation, Hot Springs, Ar., manufacturer of the LogPro line of log yard equipment, plus optimization, edgers and lumber processing equipment.

Hammond Lumber Co., Belgrade, Me., has grown to 22 locations with its acquisition of Brock’s Building Materials, a third generation, family-owned company located in Rochester, N.H.

Hammond is a fourth generation, family-owned building material retailer established in 1953. With the acquisition, Hammond now has nearly 900 employees and 22 locations across Maine and New Hampshire.

“We are incredibly excited to welcome the Brock’s family and team,” said Mike Hammond, president and CEO. “Brock’s shares many of the same family-owned values as Hammond Lumber Co. and both companies are excited for this new growth opportunity. Scott and Connie Brock felt there was great compatibility between Brock’s and Hammond Lumber Co. as both companies’ success has been built on providing exceptional customer service and taking care of their employees and customers of Hammond.”

Brock’s is a third generation, family-owned and operated business established in 1961 by Maurice and Anne Brock. Former owners Scott and Connie Brock will become branch manager and assistant branch manager of Hammond’s new Rochester location.

“During the initial phase of integration, our goal is to operate as ‘business as usual’ for all employees at both companies,” Hammond said. “We will work collaboratively with the Brock’s team with the goal of a seamless integration process for all our employees, customers and vendors. We expect there to be minimal changes to day-to-day operations.”

Pacific Woodtech Corp., Burlington, Wa., has acquired Louisiana-Pacific’s Engineered Wood Products division for $210 million.

Set to close in early August, the deal includes LP’s LVL and I-joist manufacturing facilities in Wilmington, N.C.; Red Bluff, Ca.; and Golden, B.C.; associated timber license assets; and the SolidStart brand.

The acquisition comes as PWT expands its North American engineered wood product offerings while maintaining its reputation as an industry leader in unrivaled customer service and dedication to innovation and quality. PWT looked to LP’s premier building solutions when identifying the ideal product mix—one that meets the evolving needs of the current building market and answers the call for more sustainable building products.

“Adding Golden, Wilmington and Red Bluff to PWT’s existing EWP business will propel the company into new growth,” said president and CEO Jim Enright. “PWT continues to drive positive change at the cutting edge of engineered wood products, and this acquisition will provide a more streamlined and focused resource for the industry.”

“We believe that Pacific Woodtech is well positioned to invest in and grow the SolidStart brand, and its acquisition of LP’s EWP business marks another important step in LP’s ongoing strategic transformation,” said LP chair and CEO Brad Southern. “We will work with Pacific Woodtech to ensure a smooth transition for our EWP employees, customers and suppliers.”

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POST-COVID PLAYBOOK

A SPECIAL SERIES FROM NAWLA

------------ BY DONNA WHITAKER

FOR THE PAST couple of years, lumber companies have had to play the game by COVID rules. We spent much of the pandemic in defense mode, reacting to one challenge tossed our way after another—all while the goalposts seemed to keep moving. Circumstances meant closing the pages, at least temporarily, on a playbook of tried-andtrue business practices that have helped shape this industry over the decades. New strategies necessarily emerged to fill the gap, keeping the ball in play despite the public health emergency.

With the brunt of the pandemic now behind us, however, it’s time to stop playing defense and start playing offense! And by that, I mean returning to the basics: the processes and ideals that this industry was built on and that we know run our businesses effectively. That doesn’t mean giving up the approaches that got us through the worst of the crisis, but perhaps finding a happy medium to accommodate both the old and the new.

Running It Back

Let’s not forget that the wood products industry was built on relationships; this is a “people” business to its core. While COVID took some of that away from us, technologies like Teams and Zoom helped to preserve it to some extent. There’s no doubt they’ve earned a place in our operations going forward. Indeed, they’ll likely prove useful in helping regain control over our costs again (i.e., playing offense) by using video conferencing to save on unnecessary travel, for instance.

At the same time, there’s no real substitute for face-to-face interaction; and that’s an underlying value we would do well to re-focus on. Live attendance at trade shows is back and restrictions on visiting customer sites are gone, providing a perfect opportunity to start rekindling old relationships. It’s also a chance to elevate budding relationships formed during the pandemic and cultivated primarily through online meetings.

Seeing contacts in person, some of them for the first time ever, breaking bread with them and talking about family and other matters important to customers—these capture a certain kind of dynamic that is particularly strong in our industry. We’ve missed bonding with our people, but I believe that’s something that we should—and will—see renewed as we move forward.

That goes not just for clients but for each other, our colleagues and teams. Remote work was absolutely a necessity during the pandemic… but it also threatened to erode the family-like atmosphere so common among lumber companies. Now that COVID is hopefully in our rearview, the lumber industry should spend some time on strategies to rebuild what we’ve lost in terms of culture.

As a leader, you must continually challenge yourself to think of ways to make work fun for your people, to make it so they’re excited to get up and do their job every day. At Interfor, I made a point during the COVID shutdown to arrange after-hour activities to routinely engage my team, from online escape rooms to virtual wine tastings. With occupancy in the office trending back up across the industry, it’s important to keep seeking ways to fellowship and bring workers together to foster the cohesiveness that has defined lumber companies from the start.

Passing the Ball

Even as we work on getting back to our foundation, we must look to the future. Who’s minding the store? Labor continues to represent a major challenge, and attracting plus retaining quality workers is critical.

Interestingly, I found that the pandemic heightened management’s sense of who was interested in carving out a career and who just wanted a job to meet their needs at that moment. Aside from better evaluating existing employees, Interfor also tweaked the interview process for prospects. Recruiting activities and interviews moved online during COVID, forcing managers to assess candidates from a different angle. Although we’re getting back to normal, we’ll likely continue to hold periodic virtual events even as we visit colleges in person and resume in-person interviews.

Meanwhile, it’s not just about getting new people—it’s about attracting

the younger generation as well. This industry is undeniably maturing, making it all the more important to address the transition to the next generation. Where do we reach our eventual replacements? What will make jobs in lumber more appealing to young people? How do we hold on to high school graduates who might be interested in a truck driving career but can’t legally take the wheel of a semi-truck until they turn 21? How do we keep from “losing” them during that three-year interim? These are the kind of questions we should be thinking about now.

One possible answer is to promote the best of what this industry has to offer. At Interfor, that means environmental stewardship, emphasis on safety, and care for our people, among other attributes. We regularly review practices and procedures to monitor and report on environmental performance; this is the kind of commitment that appeals to younger generations, who are hyper-conscious about the environment and sustainability at the corporate level. Forward-thinking companies understand that not only can we learn from their passion in this area, but we can also leverage this mentality and take it to the next level by grooming them as future leaders.

Another “selling point” at Interfor is the focus on safety—not only in our mills but in the offices and on the road, too. Safety comes first in everything we do every day. That’s only one way that we care for our employees—who we want to position for a career where they are able to contribute, grow and prosper. Our team defines our culture! We take care of each other, value each other’s opinions, and are committed to our communities and customers.

Playing up these and other strengths helps not only younger prospects, but any prospect, see beyond flashier vocations to recognize the value of the wood products industry. It’s also important that the industry keep its eyes open to diversity. Speaking for Interfor, I can say strides have already been made, but more must be done across the board to not only welcome more women and ethnic minorities into the fold but also to coach and promote them in leadership roles.

The End Game

That’s the industry I envision for the foreseeable future: one that is grounded in the bedrock principles underpinning how we do business but that is improved by certain changes demanded by the pandemic. Admittedly, we’re still wrestling with remnants from the crisis. Supply-chain disruptions, questions about the most efficient way to get product from Point A to Point B, labor shortages and other challenges persist as we chip away at the second half of 2022. However, I think it’s safe to say that COVID is no longer calling the shots. Once we stop playing “D” and start quarterbacking the game, we can return our focus to building a better future.

DONNA WHITAKER

Donna Whitaker is VP of sales & marketing for Interfor (www.interfor.com).