Ron Kaplan’s very bad second day

Ron Kaplan had barely begun his new job when he learned how little time he might have to do it. He became Trex’s chief executive in January 2008. On his second day, he discovered that the company had breached its bank covenants. A turnaround assignment suddenly came with the possibility that the lenders might bring the whole exercise to an early conclusion.

Kaplan went to see a bank president. His question was direct enough to leave little room for a committee.

“Do you want to run the place, or do you want me to run it?”

Ron Kaplan, recalling his conversation with a lender

The bank let him get on with it. Trex had finished 2007 with roughly $329 million in sales, a $76 million loss and $134 million in debt. It had a recognizable name, established distribution and a product customers understood. It also had quality problems and a financial predicament that no amount of pleasant weather could cure. Kaplan’s task was to make the business behind the brand work.

A desk without drawers

There was a useful piece of office furniture in the story, although useful may be the wrong word. Kaplan described inheriting a $40,000 desk without drawers. When he asked where his pencil was supposed to go at the end of the day, his secretary explained that he could hand it to her and receive it back the next morning. Even the stationery apparently required an intermediary.

The anecdote accompanied an account of excess inventory and too many vice presidents. It makes a tidy miniature of his problem: an organization could provide the chief executive with an elaborate desk while making ordinary work unnecessarily complicated. The detail was funny enough for a civic lunch. The money tied up in unsold product was considerably less amusing.

Kaplan arrived with a long industrial apprenticeship. He had worked at Harsco from 1979 to 2005, becoming president of its Gas Technologies Group in 1994 and also serving as senior vice president for operations. After that came the chief executive’s job at Continental Global Group in 2006 and 2007. His education combined an economics degree from Alfred University with an MBA from Wharton.

Those earlier businesses dealt in industrial equipment and manufacturing. Trex offered a different audience: homeowners choosing how their gardens and back doors would meet. Kaplan already owned a Trex deck before joining the company. The appointment brought a familiar product into a career spent making factories and organizations perform. He could appreciate the purchase from the customer’s side and examine the machinery from the other.

The colleague who called to say congratulations

James Cline had worked with Kaplan before. When he heard about the Trex appointment, he called to congratulate him and mentioned that he had just retired. Kaplan asked whether he wanted to do another turnaround together. Retirement, in this instance, proved a rather brief administrative arrangement.

Cline joined as chief financial officer in March 2008. He later described a company with 11 vice presidents and incentives that encouraged people to pursue separate objectives. Kaplan had already removed more than half the vice presidents before Cline arrived. Cline asked that the finance department be kept intact because of the work ahead; research and development also escaped that first departmental shake-up.

For Kaplan, there was talent further down the organization that needed room to work. In 2011 he described capable middle managers weighed down by management layers. The incoming executives had to demonstrate that they could help those people, particularly in manufacturing. Giving orders would accomplish little if the people receiving them could see no practical contribution from the newcomers.

That account complicates the familiar picture of a turnaround executive arriving with a list of names to dismiss. Kaplan did make cuts. He also argued that the existing staff understood a great deal about the business. His job included removing obstacles between their knowledge and the decisions that mattered. Cline’s recollection placed the first stage of the recovery at about four years, a useful correction to the idea that a decisive conversation with a bank can finish the work.

A better board, and a better reason to buy it

The product needed attention alongside the organization. Trex launched Transcend nationally in January 2010. Its protective shell addressed fading and staining, while its surface aimed to look more like wood. The launch followed testing among 1,500 consumers. Here was a fairly practical brief for research and development: give people something attractive that would ask less of their weekends.

The accompanying 25-year limited fade-and-stain warranty made the promise concrete. A homeowner choosing decking was buying years of exposure to weather, spilled drinks and family use. Color samples could win an afternoon’s attention. The warranty attached a longer obligation to the sale. Under Kaplan, the company was asking customers to reconsider the product through both its construction and its stated backing.

The range widened. In October 2011, Trex announced Enhance for the 2012 season, positioning it between Accents and Transcend. The point was to offer a sequence of choices at different prices. A company that wanted people to replace wooden decks had to give them more than one route into composites, especially when the initial purchase required a larger commitment.

By 2014, Trex had completed its transition to producing only its high-performance composite decking materials. In the following year’s Builder Brand Use Study, it led the composite/PVC decking categories for familiarity, use and quality. The quality result mattered to a business whose earlier difficulties included the product itself. Advertising could bring the name back into a conversation; a board’s behavior after installation would decide how that conversation ended.

Kaplan also understood the peculiar economics of something people were free to postpone. In a July 2015 interview, he connected deck purchases to consumer confidence. Australia interested him as an overseas market, and Western Europe offered further possibilities. The common thread was a customer willing to spend on outdoor living. Even a well-run manufacturer remained dependent on someone looking at a backyard and deciding that this was the year.

The financial progression was visible before his departure as CEO. Net sales rose from $307.4 million in 2012 to $342.5 million in 2013 and $391.7 million in 2014. Operating income over those years rose from $12.7 million to $24.7 million and then $67.8 million. Sales were growing, and a larger portion of them was reaching operating profit. That second movement gave the recovery substance beyond a busy order book.

The factory learns a second language

As the business recovered, Kaplan began discussing what else its manufacturing knowledge could produce. In 2014, Trex started selling recycled polyethylene pellets to bag and film manufacturers. Material left over from its recycling operation could become a product for another factory. The first production line was already running that summer; the ambition extended beyond the familiar decking aisle.

By August 2015, the pellet operation had four production lines. Kaplan described the venture as a way to earn money from the company’s recycling and extrusion expertise. It was a different customer proposition, selling material to manufacturers rather than finished boards for a homeowner’s project. It also gave a more expansive answer to the question of what Trex knew how to do.

The consumer brand had been moving outward too. A 2010 licensing agreement with Poly-Wood introduced an outdoor furniture collection, with 26 designs across four product lines. Chairs, tables and seating could accompany the deck. The arrangement brought another manufacturer’s capabilities into the offer and opened additional distribution possibilities. Kaplan’s world now included the industrial process underneath the purchase and the collection of things a customer might want to put on top of it.

Handing over the keys

Kaplan’s interest in how people operated extended to hiring. He described conducting morning interviews, offering lunch and then handing the candidate his car keys. The applicant would drive while Kaplan supplied directions and continued asking questions. He wanted to see how comfortably a prospective senior manager handled competing demands. A résumé had already supplied the orderly version of events.

It was an unconventional test, and one that reflected his preference for observing behavior. A passenger seat gave him a different vantage point from an interview desk. His explanation centered on attracting capable people, motivating them and making them accountable. The same concerns recur in his account of Trex: whom to bring in, which existing employees to trust, and how to turn responsibility into results.

In August 2015, Cline took over as president and chief executive. Kaplan remained chairman. The company’s succession announcement credited Cline’s part in the recovery and presented him as the choice to lead the next stage. The colleague drawn out of retirement by a congratulatory phone call was now receiving the business they had helped repair.

Asked that summer why he was stepping down, Kaplan answered with a completed assignment: “I was asked to turn the company around. And we’ve done that.” He talked about taking other board roles, and about a life that included a convertible and club memberships. There was room for interests beyond the next production meeting.

His Trex involvement continued for another decade. He served as chairman until 2020, then vice chairman until his board retirement on April 28, 2026. That long coda belongs in the story alongside the urgent opening. The second day had forced him to persuade a lender to let him run the company. Eventually, he helped put it in a condition where somebody else could.