Executive Word -- Stay Focused On Mission, Employees, Customers

This manufacturing philosophy of William R. McLaughlin, president of Select Comfort Corp., has led to improving fortunes for this mattress manufacturer.

William R. McLaughlin President and CEO Select Comfort Corp., Minneapolis Age: 47 Education: MBA from Dartmouth Amos Tuck School. Undergraduate degree from Dartmouth College Career Highlights: Joined Select Comfort in March 2000. Beginning in 1988, he served as an executive with Pepsico Foods International, most recently as president of Frito Lay Europe, Middle East and Africa. Before that he was president of Grupo Gamesa, a Mexican cookie and flour company within Pepsico. Family: McLaughlin is married and has three daughters.

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Founded in 1987, Select Comfort Corp. manufactures and markets adjustable firmness, air chamber mattresses. The most popular mattress set, a queen-sized, pillow-topped model, costs $1,699. The company has factories in Salt Lake City and Irmo, S.C., and sells its products through 328 company-owned stores across the United States. For its 2002 fiscal year, Select Comfort posted revenues of $335.8 million, up 28% over 2001. Net income bounced back to $37.5 million, compared with a $12 million loss the year before, as a result of operational improvements and a re-energized marketing program. The company's stock price has risen from a monthly average of less than $1 in April and May of 2001 to around $15 per share in mid-May 2003. IndustryWeek's David Drickhamer recently spoke with Select Comfort Corp. CEO William R. McLaughlin about the management and manufacturing philosophies that have led to the company's improvements. IW: Describe your personal leadership and management philosophy. McLaughlin: Have a mission-driven business. There has to be a clear objective and a cause that's more than just going to work every day. At Select Comfort that was established before I got here, but it's one of the reasons I joined the company. The mission of Select Comfort is to improve people's lives by improving their sleep. That's pretty powerful. The second part is getting the right people on the team. In my experience that means a diverse group of people. I'm in the consumer business. I need to have people that represent all of the customers that we're dealing with. Third is being consumer oriented. I translate that to being front-line oriented. Our front line is those people who interact with our consumers every day, be it in our stores or on our phones, and the people who are making the product in the plants every day. I find that a lot of times business processes are built to help management make decisions. I see it differently. Our whole job is to make these processes work so that our front-line people have the information they need to make the right decisions for the customers and for the company. If we can orient the company to make that front line successful and help them succeed with our customers, the rest will work its way out. IW: Why did you decide to join Select Comfort? McLaughlin: I had to come back to the United States. I had been working for Frito Lay for 12 years outside of the country. My children were getting to senior high school age and had never gone to school in the States, and I'd made that commitment to my family. I was intrigued by Select Comfort because of its mission. Sleep I saw as a good long-term consumer trend; sleep is increasingly being understood to be important for health. And Select Comfort had a unique product that had a unique set of benefits but a very low awareness. My background is both turnaround businesses and marketing. IW: Why does the company own and operate its own stores? McLaughlin: In our business, the advantage of being vertically integrated is that we talk to our customers every day. We hear what we're doing well, we hear what we're not doing well, and what they would like to see us do better. That is a huge advantage, to be able to talk to the consumer every day. The other advantage we have in vertical integration is our ability to keep our costs low so that we're providing great value to our customers. We do not make product to go into inventory. We take an order, we make the product, and send it directly to the consumer's home [within 10-15 days]. That's a very efficient system without a lot of middlemen, so we can provide a fairly sophisticated, very high quality product to consumers at a reasonable cost. IW: With so much international experience, are you planning to keep manufacturing and your market focus in the United States? McLaughlin: We have many components that are internationally sourced, but we do the final assembly here in the States, and the sewing of the covers is all done here in our plants. We don't have any international sales at this time. That's an opportunity down the road. That's another management philosophy. I think you have to have a simple set of objectives and strategies, and do them well. Right now, our highest priority is to capitalize on the opportunity we have in the United States. Eventually we will look internationally because the product makes sense for that market. IW: What are you doing to ensure that the company's successful financial performance in 2002 will be sustained? McLaughlin: We will continue to work the programs that we've been doing: Consumer awareness [and] distribution expansion. In my first couple of years here, we actually contracted the number of stores. Now we're going to start expanding the number of stores. Third is continued product improvement and innovation. Fourth is improving our processes so that we leverage our cost structure so that we don't let our costs expand at the same rate that growth is going. The fifth is developing people, investing in training and systems to help them. E-mail nominations for Executive Word to Editor-in-Chief Patricia Panchak at [email protected].
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