Peter Ganahl: Exemplifying Passionate Leadership

Anaheim, CA
Chair: Rich Knauss
Vistage member since 1976

“[Peter’s] managed the company through a shrink-down and coached his managers through it. He continues to learn and grow and push himself to get better, and he coaches people around him in the same way.”
—Rich Knauss
Chair/mentor to Peter Ganahl

“I got this job in 1973 when I was 27 years old,” deadpans Peter Ganahl, president and CEO of Ganahl Lumber, a full-service, independent building supply retailer in Southern California. “But it turned out to be a dead-end job—I haven’t had a promotion since.”

When he got his first (and last) promotion in 1973, Peter was thoroughly unprepared to shepherd the family lumber yard. So he learned on the job, in the midst of considerable internal tumult. “We had done no planning organizationally, estate-wise or tax-wise. It probably took me a couple of years just to fully understand what we were doing and why,” he says. “I had one thing going for me at the time [I started]. The company was small enough to where I could at least make some things happen.”

It would have been a dangerous time to backpedal much—massive industry changes were underfoot, and the shift was not in favor of the little guys.

By the 1980s, right outside Ganahl Lumber Co.’s doors, giants Home Depot and Lowes were already overtaking the small family-owned retailers in the neighborhood. Those that survived were forced to restructure, diversify, or sell out to chains, permanently changing the industry landscape. Today, Home Depot is the second-largest retailer in the world, behind only Wal-Mart.

And yet the 126-year-old Ganahl Lumber Co. isn’t just surviving, it’s thriving—and profitable. In 2006, Peter drove company sales from $3 million to $300 million. There are eight retail branches in the Los Angeles metropolitan area; a ninth will open in Pasadena this spring. And late in 2010, Peter’s extraordinary leadership was recognized with a Member Leadership Award from Vistage International Inc. for Passion.

He has been an active member of Vistage, a CEO leadership organization with more than 14,000 members worldwide, for almost 35 years. His unflagging desire to push himself and continue learning, combined with his commitment to coaching and guiding his people through the downturn, are two primary reasons Peter won for Passion. It's not always easy to remain a passionate, interested leader in those circumstances, but Peter has and continues to exemplify passion. Rich Knauss, who Chairs Peter’s Vistage group, explains, “They’re going through the recession and the building industry is just horrendous, and he’s managed the company through a shrink-down and coached his managers through it,” he says. “Peter continues to learn and grow and push himself to get better, and he coaches people around him in the same way.”

Peter is a tactical and highly meticulous leader; nothing about Ganahl Lumber has not been scrutinized, from the physical layout of store aisles to the way bonuses are calculated. He has been methodically reshaping Ganahl Lumber from the inside out since those first turbulent years. In 1976, for example, he made the then-radical decision to establish an Employee Stock Ownership Plan in a business that had, for close to a century, been entirely family-owned.

And when the big box stores moved in, Peter didn’t flinch. Ganahl Lumber has succeeded by catering their business mostly to contractors, at Peter’s insistence.“We try not to stand in front of the giant bulldozer called Home Depot,” he says. “We have not and will not focus on homeowners.”

His adaptability, especially under duress, is notable. Unlike other harried leaders, Peter seems unruffled by the most recent recession, which has again battered competitors—and Ganahl. Since the most recent downturn began, sales dropped to $160 million; Ganahl Lumber downsized from 900 to 500 employees.

“This business is highly cyclical,” says Peter. “The bottom part of the cycle is what I call the opportunity zone. We’ve been in the opportunity zone for years. One of the reasons it’s an opportunity is some of our competitors quit because they haven’t planned for it. Inside the business, when things are bad it’s a good time to grow in terms of locations because you’re not so busy and real estate prices are down. Inevitably in the good times we’ve hired more people that aren’t so good. When it heads down, it’s time to say goodbye.”

He adds, “Maybe this is counterintuitive, but if we make a hiring mistake and hired a real dud, we’ve gotta get the dud out as quickly as we recognize it. If there is a department of 10 people, the other nine are watching, saying, ‘I wonder when that knucklehead Ganahl is going to notice.’ We need to respect the nine by saying goodbye to the tenth.”

This firm but fair approach is a hallmark of Peter’s leadership: passionate, visionary and deeply respected. His irrepressible urge to perfect his own business—to spot the duds first—compels him to constantly evolve his strategic business plan. Quite literally, in fact: he writes and rewrites The Intelligent Lumberman, a 19-page strategy document now read industry-wide. And lest you think it’s packed with esoteric industry knowledge, Peter takes cues from every leader he admires—among them Danny Meyer, the Manhattan restauranteur.

Leadership is an ongoing passion project for Peter, not a put-on, and today the Lumberman serves as both core credo and roadmap for the future, along with a leadership pamphlet he uses to train managers. The document’s purposeful tone underscores one of Peter’s most distinctive traits—he is extremely precise. About everything, but especially about words. 

Exercise extreme caution when describing what Peter and his employees are good at. Forget “customer service.” “When someone says service, I’ll stop them 100 percent of the time and say, ‘What’s your definition of service?’ I love it when Home Depot buys time talking about how good their people are—you and only you decide how good the service was,” he says cheerfully.

He prefers to call the Ganahl approach “hospitality,” a holistic concept he’s developed based on years of experience and voracious reading. “Ganahl Lumber only has a limited number of tactical areas where we can consistently outperform Home Depot and Lowes,” Peter writes in The Intelligent Lumberman. “One of these is the face-to-face and voice-to-voice hospitality we give to our customers thousands of times every day.”

Everything at Ganahl can be boiled down to hospitality. It’s even the reason each store is immaculate. “I think people respond to a clean and orderly environment,” he explains. “But the thing they respond to most is good leadership.”

To wit, a central tenet of Peter’s leadership philosophy is maintaining a clear-cut meritocracy, and connecting with his employees personally and often. “They’re not associates, by the way,” he says. “They’re people. If you want to see me bristle, talk to me about companies that call their people ‘associates,’” he says. As such, Peter takes great pains to foster connectedness and cultivate a small business feel. A bi-weekly company newsletter enforces a sense of family; personal letters from Peter commemorate special occasions. And wooden plaques, engraved with the date of hire, mark five and 25-year “Ganahler” anniversaries. Former employees have even started a Facebook group to keep in touch and cheer on the company’s progress.

Peter strives to earn that kind of loyalty by staying approachable. He refers to his office as “the isolation chamber.” If he isn’t on the floor shaking hands or talking to his people, he can’t develop management—or teach management to develop others—to model the very basics of hospitality. “We’re not some remote leadership located on the 14th floor in a tall building in a distant city,” he says. “The management team has to be highly visible.”

What’s in the company’s future? A new store in Pasadena is just part of a bigger story, which Peter is keen on writing in real time. At the close of the current iteration of the Lumberman, Peter compares the business’ momentous growth to the turning of a giant flywheel that builds its momentum from cumulative effort over time, an analogy he borrowed from Jim Collins. “Even though sales are falling right now, our flywheel is still building momentum,” writes Peter. But he emphasizes the need to remain vigilant about the future in order to stay ahead of the curve. “Have we lost our passion for our primary flywheel?” he writes. “I have not, but when I or anyone else does, it is time to chase our next dream.”