When Dal LaMagna first began investing in IceStone in 2003, the countertop manufacturer was poised for success. Within a few years, however, it fell victim to the 2008 economic collapse—which caused a meltdown in the construction industry—and by 2011, it was ready to close its doors.
But LaMagna and several other socially conscious investors saw a business worth saving. “The company had perfected the product, and the construction industry was reawakening, so I stepped in, and 58 of our 81 investors came up with another $1.2 million to provide a financial runway,” LaMagna says.
He also orchestrated the company’s transition and went from investor to president, CEO, and CFO. This wasn’t an unfamiliar role for LaMagna, who had retired from the business world after founding and running Tweezerman, a beauty products company, for 25 years. IceStone also was a passion project for LaMagna, who invests solely in companies with a social impact.
IceStone, which manufactures countertops from recycled glass, cement, and non-toxic pigments, is the ultimate sustainable manufacturing company: It pulls recycled glass from the waste stream and uses a low-heat manufacturing process with a greywater-recycling system that reclaims approximately 90 percent of the water used. Machines are lubricated with soy-based products to reduce dependence on petroleum. The factory is even daylit.
When he stepped in, LaMagna rallied the other investors to implement an aggressive employee-empowerment policy. Empowering employees, in this case, meant paying a living wage, making all employees owners in the company, offering profit sharing, and providing job and health security. IceStone raised its hourly wage to $15 and began paying for 70 percent of employee health-care costs (with the goal of upping it to 100 percent once the company became profitable). Investors unanimously agreed to give 10 percent of the company to employees.
LaMagna embedded employees in every level of decision-making. He and another investor, both managing partners, welcomed a third managing partner—one of the now-employee-owners who was selected by peers. It’s a powerful position, LaMagna says. If the initial partners disagree, the employee gets the winning vote. LaMagna also set up an executive committee of five department heads, including himself, to run the day-to-day operations and a steering committee of 11 employees to make other decisions.
“In those early days, I ran the company like a school,” says LaMagna, who taught classes about the company’s financials. “[Employees] came to understand that one reason the company was losing money was there was too much overhead, and in response, they started coming with all kinds of ways to save money.”
The environment changed dramatically. IceStone lowered its monthly breakeven from $600,000 to $350,000 within a year. By October 2012, it was losing just $10,000 a month versus $250,000 a month when LaMagna took over.
This wouldn’t last long, however. Another catastrophe was on its way. “We were at the door of becoming profitable,” LaMagna says, “when Hurricane Sandy slammed it shut.”
After the hurricane, IceStone’s Brooklyn manufacturing facility, including $6 million worth of equipment containing 5,000 electrical components, was under five feet of water. “I thought it was game over,” LaMagna says.
IceStone’s 38 employees, however, volunteered to manually dismantle every piece of equipment and examine the electrical components, determining which could be dried and which had to be replaced. LaMagna agreed to let them try and, for his part, guaranteed a $988,000 Small Business Administration disaster loan, which the company used to buy spare parts and pay employees while they were rebuilding the factory.
It took five months—a significant length of time for IceStone. “People don’t go around buying countertops like they buy tweezers,” LaMagna says. “They buy countertops months in advance, so we lost past and future business during that period of down time.”
The good news was that rebuilding the factory helped IceStone improve efficiency, particularly in its batching plant. In the old days, a mixer was operated by one employee, “a wizard,” LaMagna says, “who knew how much glass went in from his years and years of experience.” Now, the mixer is computerized, with glass and additives automatically fed into it. This made it possible to run multiple shifts, which has allowed IceStone to drop its prices by 30 percent.
The upgrades were crucial. Over the years, competitors have entered the market with surface products made from glue instead of cement in emerging markets such as China. “It’s essentially plastic, but it’s cheaper, and the big commercial developers were using it,” LaMagna says. “IceStone still isn’t as cheap as that stuff, but it’s not double the price, either, so we’re back in the business of being able to do big projects, and we’ve clawed our way back to almost breaking even again.”
After Hurricane Sandy, LaMagna and the company’s other investors agreed that when the investors recoup their investment in the company, the employees’ ownership will double to 20 percent. LaMagna expects that day to come within three years due, in part, to an increased desire in the United States to buy American-made goods, especially sustainably manufactured ones. Meanwhile, he says, “you have to continue to emphasize employee empowerment, turning every employee into an entrepreneur and many of them into leaders.” gb&d