The State of the Industry panel touched on key topics and solutions to prickly issues.
By Dianne M. Pogoda
Business is good, propelled by a vibrant housing market, but creating a corporate culture that engages workers is paramount to attracting employees and keeping the industry humming.
These were among the key takeaways from the annual State of the Industry panel discussion, which also offered some solutions to pressing issues at KBIS 2018, Jan. 10 in Orlando.
Moderated by Fox News and Fox Business anchor Melissa Francis, the panel included top executives from three main sectors of the kitchen and bath industry: David Kohler, president and chief executive officer of Kohler Co.; Rick Hasselbeck, chief commercial officer of GE Appliances, and Scott Culbreth, senior vice president and chief financial officer of American Woodmark cabinetry.
The standing-room-only crowd of more than 400 was rapt as Francis led the discussion on the economy, the skilled labor crisis, smart technology, corporate culture and responsibility, and more.
The executives agreed that the strength of the housing market bodes well for kitchen and bath remodeling and the overall economy.
“The economy’s recovery and strength of market is very good, not overheated. In the last 72 years, this is the third-longest recovery — 101 months,” said Kohler. “New-construction for single-family homes is very strong, but the real strength is in remodeling and repair, which has been growing at 6 percent a year. It’s projected to grow more than 7 percent in 2018. Within remodeling and repair, consumers still prefer to remodel their kitchens and baths. We’re in the best place for capitalizing on that growth.”
Hasselbeck concurred.
“We’re seeing 5 to 6 percent industry growth and we project that will continue,” he said. “Multifamily home construction has seen epic growth, the highest we’ve seen in a while — it will slow down a little, but it’s still going to be good. Single family looks very solid. The tax change — 40 percent discount on corporate tax rates — will allow businesses to invest — we’re investing in new technology, new infrastructure, new distribution centers — we’re hiring. So, that should help an industry that’s already looking pretty good.”
Multifamily and single-family building are “two different stories,” noted Culbreth. “Multifamily is more of a flattening curve, but single-family has still been growing nicely for a number of years, with 8 to 10 percent growth projected next year.”
He added that most likely, for the next two or three years, “we’re still well off the pace of new home construction in the U.S. — we can’t meet the demand. Repair and remodel is a little different in our space — we’re seeing some of those growth rates of 5 or 6 percent.”
But Culbreth said the business is not spread evenly across all sectors. “Wealthier consumers are pulling the trigger on projects more rapidly and making the investment, but we still see hesitancy among lower and middle-income consumers. There’s still some concern out there, whether it’s wages or jobs, even though all the reports are very positive.”
Turning to a subject that has been troublesome for a number of years, Francis asked the executives about the dearth of skilled labor.
“It’s a massive issue for this industry,” said Kohler. “Over 80 percent of builders can’t find enough skilled labor. From a manufacturing standpoint, we have facilities all over the U.S., [and all of those] markets have unemployment below 5 percent – maybe 4 percent, 3 percent — we believe this country is at full employment. But at our headquarters in Wisconsin, we can’t find enough people at well above market wages.”
Hasselbeck added, “Education is going to become even more critical. We see it as a team sport. You’ve got to make sure you’re involving local manufacturers, local industry and local government. [We’ve built] training programs at the college and high-school levels, as well as at the manufacturing level.”
“One of the challenges is that manufacturing in general has a negative stigma,” Culbreth asserted. “In high schools, when you talk about professions and jobs, manufacturing is not typically at the top of the list. So how do we change that discussion? How do we make it an exciting place to work, how do we improve technologies, innovate robotics, etc., to get them into the facilities and get people interested in [these jobs]? Too often, students hear they must go to college. That’s not the solution for every student, not everyone needs a college degree to be successful. So how do we pivot that to the skilled trades?”
Hasselbeck offered a solution: “You have to help people find what they like to do – what they’re interested in. You can’t force people into the pipeline if they don’t want to do that kind of work. Help them understand what they’re interested in…what they want to do with their lives. It’s not just the technical things, it’s psychological, too.”
Kohler added, “We have to teach young people about the great opportunities, financially as well as career-wise, to enter the construction trades, and also to start their own business. But it’s not a short-term solution. These are longer-term projects. A lot kids are not waking up and saying they want to be in manufacturing, or be a plumber. They’re very important jobs and they’re very lucrative, but we have to change the perception — and it’s going to take some time.”
Then, Kohler tilted the discussion: “All of the work that’s been focused on education and vocational schools and getting more people into the skilled trades jobs is very good, but the issue that isn’t being discussed is immigration. The building industry runs significantly on immigrant workers, and we have to get to a point where we can have a dialogue about legal immigration and its importance to the building industry. That’s reality. We’re in a country that was built by immigrants. Our company was built by immigrants. But we’re not talking about immigration and its importance to society.
“We need the best minds to build the future of this country,” he added. “We’re not just looking to just block people out… what the U.S. has always stood for is people who want to come to a safe place, build a family, build a career, build a life.”
Francis asked the panel if they feel they have a partner in government.
Hasselbeck said working at the local and state level, and adopting a team approach to building education in these fields, is critical to encouraging young people to pursue these trades. “[We need to] give our children more exposure to more things. It’s a challenge,” he said. “They’re missing out on making things, putting things together, tinkering and trying to find an education – if they explore more things, they’ll find out what their interests are. And I think we’ll have more people opting to go into those types of trades.”
Kohler also said business and government aren’t having a dialogue about the right issues. “How do we build a workforce for the future? How do we drive the infrastructure that we need? How do we make sure one of the most important industries in our economy — the housing market — is well-supported for the future?” he countered.
Culbreth also pointed to the responsibility held by manufacturers to make the jobs more attractive. “How do we do that? With good benefits, good company culture, someplace you’d be proud to work… these are difficult jobs, it’s not fun, so we need to find tools to automate the processes and make these jobs more attractive.”
Turning to technology, the panel agreed that connectivity and smart home software have had the most impact in the past decade, on product development, shopping and business-to-business relationships.
“E-commerce is our fastest-growing channel of distribution in the U.S. and in China, and growing at a significant rate,” said Kohler. He added that the company introduced a full suite of Kohler Konnect bathroom products at KBIS and concurrently at the Consumer Electronics Show in Las Vegas.
GE’s connected appliances, said Hasselbeck, all work with home assistants like Google Home and Alexa. But as with any emerging technology, “People are still trying to figure out what to do with it. Yes, I can start my oven while I’m driving home, but there needs to be more to it than that.”
For example, he suggested going from simple utility-based functions to how to diagnose and fix products or update technology remotely, or if a technician has to go to the house, he already knows what part to bring. “We have to think about partnerships that add value to consumers’ lives as they use their appliances. Not just ‘what do I not have in my fridge,’ but ‘what I could make with what I have’ — and then teach me how to make it. There’s a lot of room for growth and partnerships… we’re really just scratching the surface.”
Culbreth said smart technology is a little different for the cabinet business, for example, thinking about making it easier to integrate lighting solutions in cabinets. “Looking ahead, we’re starting to see TV screens in panels on cabinet doors, and there are devices that tell you what’s in the cabinet. But we’re in an ideation phase — tools that help a consumer visualize, understand and identify what a kitchen can really look like. Our focus is there today.”
The executives acknowledged, however, that as important as technology is and how it is infiltrating all spaces of the home, there’s still nothing like dealing with a person.
With online research, owners can better articulate what they want, said Hasselbeck. “People are very visual. More pictures and more access will make the designer more important, and this helps the designer make the owner thrilled with the end result.”
As Culbreth pointed out, “Design is important, but measuring is critical. Consumers are not comfortable measuring. The iPhone or iPad can help, but at the end of the day, you need a real person!”
Similarly, brick-and-mortar retailing and service is still important, they agreed.
“We believe in the omni-channel experience,” Kohler said, but he noted there’s a limit to what the consumer can do online. “Nothing is really going to beat the assisted selling experience when you go into a showroom and see everything that’s possible. Just looking at snippets on the Internet doesn’t give you the full immersive experience”
Kohler has 23 Kohler stores in the U.S., more than 600 showrooms, and seven Kohler Experience Centers over 10,000 square feet, where consumers can work with an expert team, see what’s possible, and use the product.
“In this industry, with CKBDs, nothing beats working with someone on a local, physical level. You have to have an Internet presence, but that directs [consumers] to the design expertise to execute the kitchen or bath of their dreams. This isn’t ‘plug and play’ — kitchens and baths are complicated, from design to installation… Companies that do well provide value-added service to consumers. This is a local business, and a relationship business, and I don’t see that changing.”
Francis asked the panel about the biggest challenges facing the industry and how companies are addressing them in the year ahead. Among them, they cited:
- The tight labor market;
- Worker retention;
- Rising commodity prices;
- Changing trade policies;
- Greater energy efficiency requirements.
“Protectionist policies will exacerbate inflation,” said Kohler. “NAFTA being re-negotiated this year is a major concern. Canada and Mexico are the U.S.’s two biggest trading partners, and we can’t mess up that relationship, for a lot of sectors of the economy — including ours.”
Responding to a question from the audience about worker retention and satisfaction, Hasselbeck said, “We have to build a company that has a purpose, and meaning. People want to work at a place that they feel is connected to what’s important to them. We’ve spent a lot of time trying to figure out our purpose as a company, and making sure we live it, and find people who have a common desire and common link to that purpose. If you start with that, it will lead you to what you do as a company as relates to health care and everything else. You’ve got to have a purpose that has meaning, that’s more than just making money.
Kohler added, “Income inequality is a big issue in this country, and it’s not really being dealt with. Health care is at the center of that discussion. In the end, companies that want to attract and retain the right people have to offer a highly competitive employment-value proposition, and that’s health care and all the other factors. As the baby boomers start to leave the workforce in droves. It’s going to get harder and harder to find experienced people, and you’ll see much more pressure on this labor market, and hopefully, you’ll see proper movement on wages and benefits to help companies retain good people.”
“Company culture is important,” said Culbreth. “Folks have to feel like they’re part of a bigger initiative, a bigger effort that’s going somewhere. If you can build that in an organization, you’re going to retain people.”
Lorenzo Marquez, president of Market Group and NKBA’s chairman, asked the panel what association members can do on a daily basis to make our industry better.
Hasselbeck responded: “One of the things I’ve learned is that people are always trying to sell you something. One thing we can do is be a really good listener. Understand what the owner wants. Elevate the owner experience. The owner is the boss. The consumer has more control than ever, so understanding what it is they need so you can delight them is what we need to improve collectively.”
