Child’s play Featured

8:00pm EDT April 25, 2007
Steven Dunn is not at all bashful about the competitive drive he encourages at his company.

“My license plate says GET2468,” says Dunn, president and CEO of Munchkin Inc. “Two, four, six and eight are even numbers, so it means ‘Get Even.’ If a competitor steals some category or some spots from us, I like going after them.”

In an industry dominated by giants, Dunn has leveraged Munchkin’s relative agility and quickness in breaking into the big box retailers and stealing shelf space from some mainstays of the infant products market. He has also instituted a program that allows employees — fork truck drivers included — to submit ideas for new products, and pays bonuses for those products that reach the market.

By stressing innovation and quality, Dunn helped grow Munchkin’s revenue to $74 million in 2006. Smart Business spoke to the head munchkin about the benefits of maintaining a start-up mentality.

Q: How would you describe your management style?

I’m very hands-on in certain areas and I’m very hands-off in other areas. I pick my spots to jump in.

Even though we’re a 17-year-old company, I’ve tried to maintain our start-up status. If you think about whom we compete with — Gerber, Playtex, Evenflo, 50- to 100-year-old brands — even though we’ll do $90 million in revenue next year, I still try to encourage us to look at ourselves like a start-up company.

We’re kind of a David and Goliath underdog against much bigger companies. My style tends to be to pick certain projects, certain goals, certain key opportunities and make sure everybody is aligned at making those goals, making those presentations and choosing which ones can really affect this year’s revenues or next year’s revenues or our relationship with key customers.

Q: What are the benefits of maintaining a start-up mindset?

The benefit is staying lean and not creating too much bureaucracy or too many different levels where it slows down our process or our speed to make decisions when speed is a real benefit.

With respect to the infant industry, there are just much bigger competitors. We like looking at the financials of some of the bigger, public companies we compete with. We like looking at their key business ratios and we like being better than them on every key ratio that makes sense.

It’s knowing your competition. It’s saying to my group, ‘Hey, XYZ company’s inventory turn is 7.2, and ours is 6.4. Why can’t we be ahead of them?’ It’s continuing to challenge my guys and challenge them in a way that they see someone else is doing it and asking why we shouldn’t be the best in every aspect of our business.

Q: How can a leader motivate his or her employees?

In a lot of companies, people come to work and they don’t know how the company is doing, they don’t have a clear strategy, and they get their paycheck and they hope they get a bonus at the end of the year.

Here, everything is very open. We pay fair salaries. We also put 12.5 percent of our pretax profits in a bonus pool. We don’t pay a penny more and we don’t pay a penny less. If we make $800,000 in a month, a little under $100,000 goes in our bonus pool for that month that we all share in, and that goes down to fork truck drivers, warehouse people, everyone in the organization, and nobody has a set bonus. It’s all based on what you contributed.

A significant number of our employees own options in the company or have stock in the company. What that tends to do is get everyone focused on really growing our revenue, reducing our costs and making good key hires.

When we bring a new person in, the real question is, ‘Is that person paying for themselves?’

Q: What is the danger in growing too fast?

Especially if you’re a creative group, sometimes you get sucked in with, ‘Gosh, we’ve invented a great product for the houseware industry,’ but we’re not in the houseware industry. We’re in the infant and toddler and pet industry. It might be a great product, but it involves new buyers, new risk and it’s out of our area.

Part of it is just saying no to brilliant ideas that are brilliant products that aren’t in areas that we’re strong in. It’s important to set up those disciplines but also be flexible when the right opportunity comes along to perhaps move into another category or make an acquisition.

You have to stay focused and choose the opportunities to pursue or to add new products that are really within your strengths. Look at the core strengths of your business. Some of the best decisions you make are saying no to certain opportunities. You have to pick the opportunities that you have the best chance of success with and don’t jeopardize your company.

HOW TO REACH: Munchkin Inc., (800) 344-2229 or www.munchkin.com