CEO Steers Mower Manufacturer Into the Tall Green
With snow blanketing the usual cold spots and even touching down in the South this winter, the prospect of clearing sidewalks and driveways has a lot of people filled with loathing.
Ken Melrose, however, loves the snow. He sees prosperity and growth in those piles and drifts.
Melrose, chairman and chief executive of Toro Co., got a warm feeling as strong snow blower sales boosted his company’s most recent fiscal-year earnings by 65% and pushed overall revenue to a company record $932.9 million. It was the third straight year of solid growth for Toro after struggling through the early part of the decade.
It also was a sign of Toro’s success in becoming more than just a lawn mower company under Melrose.
“They’ve continued to expand their product line and try to . . . become more of an environmental company. That’s basically all taken place on Ken’s watch,” said Kenneth Salmon, an analyst for C.L. King & Associates in Albany, N.Y.
Besides its snow-clearing machines, Toro makes a variety of lawn care equipment--including tractors, trimmers and blower-vacuums--for residential use and for commercial use on larger grounds such as golf courses and parks. It also makes fertilizers and irrigation equipment.
But to Melrose, Toro’s most important developments have been its environmental products. Those include pollution-reducing electric mowers and fertilizing systems that feed grass in more frequent but smaller amounts, making it easier for the grass to soak up and minimizing runoff waste.
Toro also was the first to develop recycler mowers, which cut grass into smaller pieces that serve as a natural lawn fertilizer and eliminate the need for bagging.
“Toro has consistently been the leader in new product innovations,” said analyst Maureen Pettirossi of Dain Bosworth Inc. in Minneapolis.
Melrose said he’s been able to foster innovation and growth in the Bloomington, Minn.-based company by encouraging new ideas allowing mistakes in the pursuit of progress.
“In the ‘70s at Toro, if you tried something new and it failed, you got canned. So not many people wanted to try anything new,” he said.
Melrose joined Toro’s marketing department in 1970 after a business he had run with friends went bankrupt. He now admits that at the time, he was as excited about joining Toro as, say, a teenager told to go out and mow the lawn.
“I thought, ‘Well, maybe I can sell lawn mowers for a year or two until I find a real job,’ ” he recalled.
Eleven years later, Melrose was named Toro’s president. He became CEO in 1983 and chairman in 1987. While moving up the ranks, he knew the prospect of simply building and selling lawn mowers wouldn’t inspire Toro’s employees, just as it didn’t inspire him at first.
“They’re a lot more excited to think of ideas about the environment than to think about lawn mowers,” Melrose said. He set out to allow them to do that.
As an example of how things have changed at Toro under his management, Melrose recounted a story about some engineers who were working on a golf course mower and came up with a plan to cut costs. The plan looked encouraging but failed when it got into production.
“Because we’re a seasonal business, if you lose a few months that’s like losing a whole year--you’ve got to wait till the next fall or next winter to introduce your new product. So it had some pretty negative consequences,” he said.
But instead of firing the engineers, Melrose said, he congratulated them for their efforts in working as a team and trying new ideas.
“It was a great precedent,” he said. “The technology that they worked on failed in that application, but . . . they’ve used what they learned many times over.”
Melrose himself has not been above mistakes, a fact he readily admits. When he came on as president, Toro was hovering near bankruptcy. The company rebounded and cruised through the late 1980s, acquiring two other well-known names in lawn mowers, Wheel Horse and Lawn-Boy, to augment its venerable line.
But earnings began to slide in 1990 as Toro tried to absorb its new businesses and deal with a recession. The skid forced Toro to close some plants and culminated in a $23.8-million loss for fiscal 1992.
“It was really a fault of mine in not dealing with this issue early,” Melrose said. “I waited too long and the recession forced us to do it in a more grandiose way, and we lost a lot of money.”
After the loss, Toro’s profits steadily began to rise. In addition to developing new products, the company has tried to make its manufacturing processes more flexible to avoid being by hurt again by economic cycles.
Now, the company would like to make another acquisition. Melrose considering a business that would strengthen its commercial operations or an information systems concern that concentrates on environmental management.
He also is involved in another search--for his successor. He will retire in 2000, when he turns 60, under Toro’s management succession plan. Melrose’s eventual replacement will fill the currently vacant president or chief operating officer position.
“The two of us work together,” Melrose said, “. . . and at the appropriate time I would fade away.”
