This post is part of the “Small Business, Big Ideas” series, in which business leaders, entrepreneurs, and innovators share their stories of overcoming obstacles and achieving success. “Small Business, Big Ideas” is sponsored by Chase.
When Hurricane Sandy struck six months ago, IceStone, a Brooklyn based green countertop manufacturer, was hit hard. The company’s 38 employees were hoping to get back to business once the storm blew over, but found instead that the 5,000 electrical components that made up their modest factory were covered in five feet of water.
“I thought it was game over, I thought there is no way we can recover from this. It’s like dropping your mobile phone in the water,” says IceStone’s president and CEO Dal LaMagna.
A few rough patches
LaMagna says he owes the company’s survival to his employees. While LaMagna was ready to give up, his coworkers carried him through and insisted they begin the long and arduous process of manually drying out every piece of equipment that had been damaged.
“The first part took us almost two months. We had to take apart every electrical component, every single motor, every single part of the machinery and dry it out…And then we had to determine which [components] were fried and then replace them,” the CEO shares.
Here’s what one of the machines looked like before Sandy:
Courtesy of IceStone and Sarah CoreyAnd here’s what it looked like after the hurricane:
Courtesy of IceStone and Sarah CoreyHurricane Sandy wasn’t the only challenge IceStone has come across. In fact, when Dal LaMagna first began investing in the company in 2004, it was barely scraping by.
When the financial crisis hit in 2008, IceStone fell into an even deeper state of crisis. Still, employees stood their ground and fought for the company’s survival. That’s when LaMagna, inspired by their perseverance, decided to help the company transition and went from being just an investor to taking over the company as president and CEO.
LaMagna didn’t join the company because he needed the money. He had already made his fortune with Tweezerman, one of the world’s largest tweezer manufacturers, which he founded.
“When I sold Tweezerman I started investing in companies that had a social benefit connected to it. And IceStone basically recycles glass that ends up in landfills and puts them into a product … IceStone is considered a green building product, it doesn’t have any toxins in it that could enter into your home,” LaMagna shares.
“I thought that I could come out of retirement and try and turn [IceStone] around …The 38 employees who were here, it wasn’t their fault the company wasn’t working. The entire market had collapsed and I wanted to help them,” LaMagna explains.
With experienced guidance and employee willpower, the company experienced their first turnaround. It was short lived. “In 2012 this company went from losing a quarter of a million dollars a month to practically breaking even, but then the hurricane hit us,” the CEO reveals.
The business model that saved IceStone
Despite hitting a few bumps in the road, IceStone employees still weren’t convinced that it was time to throw in the towel. Encouraged by his coworkers, LaMagna applied for a government loan through the Small Business Administration (SBA) department. They were granted $989,000 to bring the factory back to life.
This past Friday, IceStone was running at full capacity, for the first time since Sandy destroyed the factory.
The loan was definitely a big help. LaMagna says that without out it “we wouldn’t have been able to do it.”
But there was another major reason why the company didn’t go under. According to LaMagna, the key to their survival is rooted in IceStone’s corporate culture. The company practices what he calls “responsible capitalism.” This business model is based on the principal that “employees are as important, if not more important, than the product or the service that the company is making,” the he explains.
According to LaMagna, the company’s first turnaround was made possible because the owners allowed employees to work side-by-side with them, running the company together.
“The strategy was to empower the employees that were here … the investors as a group agreed to give 10% of the company to the employees,” LaMagna explains.
A series of other measures were taken to ensure that the employees got a fair salary and benefits. The company, which was not yet profitable, was still able to cover 70% of the worker’s health care costs.
“Then we paid a living wage to the employees who work in the factory itself … Some people were making $10 an hour, we raised it to $15,” LaMagna says.
The importance LaMagna and the investors place on salary and benefits had a simple explanation: a well paid worker is a better worker. The way LaMagna sees it, “I expect you to come to work everyday and focus and give me all your energy, I don’t want you to be worrying about how you’re going to feed your family.”
The third measure they took, the CEO shares, “was embedding the employees in all levels of decision-making.”
To make sure the employees working on the factory floor were actively involved in running the company, they asked an elected representative from the shop floor to become one of the three managing partners who monitored the decision-making process. LaMagna personally taught classes for the 22 workers on the factory floor on how to run the company and read its financial statements.
While LaMagna’s strategy can be easily applied to small businesses like IceStone, maintaining a close relationship with your employees becomes increasingly difficult when a company grows.
“Generally if you talk to any entrepreneur whose company is growing, there is a point when they realise they can’t do everything themselves. They realise they have to start delegating,” LaMagna explains.
Still, IceStone’s CEO believes it’s possible to scale up and continue to have workers play an important role in how the company is run. The secret, he says, is to ingrain that principle into the company’s culture.
“As [your company] gets bigger, you should make it part of your company’s culture to emphasise employee empowerment so that everyone can play a leadership role. In other words, emphasise team work, be close to the employees and understand employee needs,” LaMagna explains.
The CEO isn’t the only one at IceStone who lives by this mantra. All 80 investors unanimously decided to double the amount of ownership the employees had in the company to 20% as a token of their appreciation for saving the factory after Sandy hit.
LaMagna says that his investment in IceStone is more personal than anything else.
“There are people that I know and love here who work here, and I’d like them to have successful, productive lives, and this company can exist indefinitely so that they’ll have jobs that pay them a good wage and they will all have jobs that they love doing.”
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