• Contractingbusiness 533 Winnordyne Execs

    Winair's Formula for Success

    April 1, 2009
    WinWholesale and its Winair companies have established a business model that gives distributors what they want, while consolidating into a shared-services format those functions that they would rather leave to someone else.

    If you're an HVACR wholesaler distributor, you probably didn't get into the business because of your passion for payroll or for your love of configuring IT systems. There's a better-than-even chance that you're in this business because you know HVACR and you like working with customers and suppliers. You also have the entrepreneurial spirit — that is, you like making money.

    WinWholesale and its Winair companies believe that this reflects the outlook of most HVACR wholesaler distributors, and they've established a business model that gives these distributors what they want, while consolidating into a shared-services format those functions that they would rather leave to someone else. In other words, you run your own show without the administrative hassles. The 57 Winair distributors throughout the United States are owners operating as presidents of their own corporations and sharing ownership with WinWholesale.

    They become equity partners with the WinWholesale organization, which also manages seven other separate wholesale distribution operations in such industries as electrical equipment, plumbing, waterworks, fastening and industrial pipes, valves and fittings. Also under the WinWholesale umbrella is the Noland Company, a plumbing and HVACR distributor with nearly 80 locations in the southern and eastern United States.

    “We want to partner with people who know the local markets, are well-qualified and have knowledge in the specific industries, and are willing to invest in and run their own business,” says Richard W. Schwartz, president and CEO of WinWholesale, based in Dayton, OH. “We are a unique model in that we are an entrepreneurially based company.” Indeed, its guiding philosophy is “The Spirit of Opportunity.”

    This “Spirit of Opportunity” is part of WinWholesale's DNA. Its roots go back to 1875, when Nils Olas Nelson founded the N.O. Nelson Mfg. Co. in St. Louis as a manufacturer and distributor of plumbing supplies. Recognizing the difficulties of being both a manufacturer and distributor, the company decided to focus on distribution, and by 1954, it had a net worth of about $6.8 million, 22 branches, 20 regional sales offices and 450 employees in 15 states.

    Following a serious fire at the Pueblo, CO, branch in 1958, Nelson's management decided it would be too much trouble to rebuild and offered to sell the burned inventory for its book value. A company named Primus, founded two years earlier, stepped in and worked with three N.O. Nelson employees — who offered to invest their money in reopening the business. They established a profit-sharing plan, with Primus keeping majority control of the Pueblo company but the local employees receiving all the benefits of partial ownership. That's the spirit that lives strong today.

    By 1972, it had grown to about 50 companies. Today, there are more than 470 Win locations across the country that carry the collective identity as the Win Group of Companies. In 2005, the company adopted the WinWholesale name.

    Having a diverse group of businesses with a rich collection of shared services is beneficial to all of the Win distributors, particularly during a softening economy, Schwartz says. This helps to keep costs low. “You're running your own business while eliminating some administrative tasks, which allows you to focus on serving your customers,” Schwartz says. Investments in standardized accounting, IT equipment, fleet management, and health insurance and payroll administration are all part of the benefits of being a Winair dealer. Common operating procedures, called pattern management, are integrated into a procedure manual supported by finely tuned automated systems and processes to create the framework that binds the companies together.

    Yet there is incredible autonomy for the local presidents, as WinWholesale refers to the owner of each wholesaler distributor, to call their own shots. “This is an organization that is built on concepts that ownership is the best way to build wealth over time, and local people make the best decisions and are justly rewarded for results,” says Monte L. Salsman, WinWholesale's chief operating officer. From how each business goes to market and how they sell their products to how much inventory they maintain to serve their customers, the local president is in charge.

    For high performers, the benefits are unlimited. “Throughout the company, there is a complete desire to pay people based on the results they produce in an unlimited fashion,” Salsman says. “Whatever a local president can produce, they get paid on. Under the WinWholesale model, the local presidents buy stock in their own company. I believe the WinWholesale model has created more millionaires than any company that has branch managers,” he says proudly.

    While the local presidents of Winair stores are as diverse as the markets they serve, Schwartz says the Win model does attract a certain type of person. “They're people who have made a career decision to be in HVACR distribution,” he explains. “They're mid-career professionals who know what they're doing, they have great customer and leadership skills, and they wake up and say, ‘I want more for my family and myself.’” But that person also needs to be a risk-taker. “Like most risks, getting ownership requires an initial financial commitment.”

    Another profile of a Winair distributor is a smaller distributor who is looking for someone to acquire his business. Salsman says an independent distributor who owns his business but wants to get cash out while still staying in the business could be appropriate for Winair. That business owner can build up the company again, and when he or she is ready to retire, they sell the shares back to WinWholesale.

    Noland became a wholly owned subsidiary of WinWholesale in 2005, and it is gradually integrating into the company, says Jean F. Preston, chief operating officer of Noland. The goal, he says, is to take the Noland businesses and offer the people within the branches ownership opportunities. “It's nice to have a company like this and offer opportunities to people who can be directly rewarded for their efforts.”

    Preston says Noland is a much different culture than Winair and WinWholesale, but he says adapting to the new model has been beneficial for its employees. “Some of our guys were skeptical early on, but with some encouragement they've been taking to it,” he says. Noland, which had been a family-run company for three generations until 2005, was a top-down organization, Preston notes. With the acquisition by WinWholesale, Noland has become much more entrepreneurial.

    He credits WinWholesale's procedure manual and processes with playing a major role in “unlocking potential” in Noland. The procedure manual, delivered online to employees, represents the collective wisdom gathered over WinWholesale's existence. Continually updated, it is the definitive source on how to run a WinWholesale business.

    Every Winair company has a board of directors made up of the local president and three WinWholesale executives. Having representation from the corporate level is important, helping to provide a more global perspective for the individual companies, says Salsman. This allows for the sharing of best practices as well as better integrating the Winair companies with one another.

    The annual WinWholesale meeting and other companywide meetings throughout the year also provide opportunities for local presidents to get together and share with one another. According to Salsman, it's the informal networking during these events that really enhances the relationship among the Winair and WinWholesale businesses. “Win presidents are extremely supportive of sharing their ideas and going the extra mile to help one another,” Salsman says. He cites examples of Win presidents who have come to the assistance of other businesses following floods or other disasters. “The local Win community is there to help during those rough times,” he adds.

    In addition to the annual meeting, a company intranet and newsletter also help to foster a spirit that they are part of the larger WinWholesale community. As the marketing manager for Winair, Stan Reznicek works with vendors to secure deals that provide maximum benefits to the dealers. He also works with an advisory council of Winair presidents to identify trends and make product decisions.

    In December 2007, Winair announced that it would partner with Nordyne to exclusively carry the NuTone Heating and Cooling Products line at all of its Noland branches and participating Winair distributors. The partnership has been successful for both companies: Winair and Noland distributors stock high-quality HVACR equipment, including a full range of energy-efficient products, and NORDYNE gets new opportunities that have the backing of two leading distributors.

    “We did extensive due diligence on all the companies out there, and we believe that we've aligned ourselves with a very progressive and innovative company,” Salsman says of NORDYNE. He praises the people on its management team and describes them as some of the best in the industry. “They're very, very committed to not only growing their product line and gaining market share, but they are very distributor-friendly.”

    NORDYNE has designed programs around the Noland and Winair distributors, and this has paid off. “It's a tough economy and market right now, but we're pleased with progress of the NuTone line. Our dealers are very satisfied with the products,” Preston says of the sales of NuTone products. Part of the appeal for dealers is that they enjoy being the only NuTone dealer in their territory. “They're not pitching the same equipment as everybody else,” Preston says. A yearlong marketing campaign had generated significant interest and awareness among dealers about NuTone's products.

    With the marketing campaign and the success that the NuTone line is enjoying, Winair is growing. WinWholesale continues to look to add new distributors and is actively seeking additional locations in Florida, says Salsman.

    Being part of HARDI has been a valuable way to meet wholesaler distributors and get them interested in joining the Winair team, he adds. For Reznicek, membership in HARDI has been an important way to maintain relationships with manufacturers and other vendors, and stay on the cutting edge of industry trends. “With respect to products, it helps us keep up-to-date, and we encourage our people to take advantage of the training programs,” he says.

    Michael Maynard is a business writer in Providence, RI, who writes on issues related to HVACR, construction and architecture. Contact him at [email protected].

    WinWholesale at a Glance

    President & CEO: Richard W. Schwartz Board: President Noland Company: Jack Osenbaugh
    Chief Operating Officer WinWholesale: Monte L. Salsman
    Chief Operating Officer Noland Company: Jean F. Preston
    Chief Financial Officer: Jack W. Johnston Headquarters: Dayton, OH Operations: Private business-to-business wholesale distribution of plumbing and water heating supplies; industrial pipes, valves and fittings (PVF); heating, ventilation, air conditioning and refrigeration equipment; electrical equipment; electronics; industrial and commercial fastening hardware; waterworks supplies; and pumps. Employees: 4,487 Annual Sales: $2.4 billion at the end of the fiscal year Jan. 31, 2008. Website: www.winwholesale.com Year Founded: 1956

    Best Practice

    Pattern management

    Definition and example: WinWholesale believes successful wholesalers operate in a similar way and tend to follow the same operational “patterns.” They do roughly the same things at the same time, whether daily, monthly or annually. WinWholesale delivers the pattern management concept to its more than 550 local companies through a common set of operational procedures. For example, one procedure describes how to perform annual inventory and auditing. All companies carry out inventory and auditing in the same manner on the same timeline. At the end of the timeline, every company has fully audited financial statements.

    Significance: WinWholesale's pattern management concept provides local companies with a greater opportunity for long-term success if they follow the operational procedures. At the same time, they can still maintain relative autonomy with local decision-making to meet local market conditions.

    Benefits: Because of pattern management, WinWholesale can assume all Win local companies share similar goals and operate in a similar way. As a result, WinWholesale can provide centralized services and solutions, such as accounting and IT, designed to achieve those goals.

    Procedure: Most WinWholesale operational procedures have been in place for many years. However, we review and refine them as necessary. New procedures can be suggested from anywhere in the organization. We assign the review of current procedures and creation of new ones to the area of expertise and then go through a coordination process to the executive level.

    People involved: The people involved in review or creation of operational procedures vary depending on the nature of the procedure.

    Contact: Bruce Anderson oversees the review and creation process for WinWholesale's operational procedures.