Inside Tegu.com

::January 18, 2011::

Tegu Visit

We took a 45 minute trip outside of Tegucigalpa to visit a "For-profit" toy company named Tegu. It is a relatively new company built on a fairly simple product: wooden, shaped blocks with magnets embedded into them. Chris, a Stanford alumni and former consultant with Boston Consulting Group, met us at the production facility and gave us an explanation and tour of the operation, along with his perspective on the current business environment in Honduras and some of the future plans for Tegu. Tegu had its first, full scale and "successful" holiday season this past Christmas, and it has grown from a starting employee base of 12 to the current 80. Its current product line offers sets of 26 and 52 block pieces with several color schemes. Originally, they started with natural wood finishes, but they incorporated the colored blocks for the past holiday season. Chris and his brother partner to run the company, which has been incorporated in both the US (2007) and Honduras (2009). In his description of the benefits and challenges of operating in Honduras, he explained that though they started the process of incorporation at the same time in both countries, the process in Honduras took several months as opposed to the single day in the US. Additionally, he explained that there were several benefits for operating out of Honduras, such as not having to pay taxes, but it took over a year for Tegu to get the proper permitting to access those benefits.

Recruiting is performed via strong recommendations and referral. They conduct basic math and writing skills along with a magnet test where they give employees a set of the magnets that they use in the toys to see how they adjust to using it (because many people have not dealt with such magnets). The last part is done to evaluate the employee's ability to adapt and figure things out. They want people who are willing to ask questions on how to do it right, rather than allowing things to continue if they are not correct. To date, they've fired 4 people (out of their current 80) becuase they really are trying to maintain a team environment where people work with each other. They pay a competitive wage and provide transportation to their employees (he said that maybe 5 or 6 have cars or motorcycles). Their employees work 4 days, 11 hours a day, in two rotations, which amount to 4 days on, 4 days off. Tegu has identified several candidates within their employee pool that they are considering sponsoring to take either night classes or send them to university. Tegu has hired on upper-management personel from a neighboring apparel factory and a fish hook factory that had recently gone out of business. They effectively have absorbed that talent to strategically bolster their own workforce. Currently, Tegu pays into the Honduras social security system, which, in Honduras (as opposed to the US), allows the employees access to the nations health care system. Chris explained that the national health care system is not good and that they are looking into providing a private health care solution to its employees. Their overall hope when bringing people on, is to keep them and not treat them like commodities (like other companies might). They are looking into streamlining processes like painting and magnet installation, but he emphasized that, in doing so, the employees would be reallocated to more value-adding activities and not be cut necessarily.

Tegu's initial round of funding has come from friends and family, and, in some cases, mutual friends and/or referrals. Chris' brother runs the marketing and stateside operations, while he operates production on the Honduras side. Though they do work with local wood suppliers, the lag time with material delivery (which can be delayed as long as a month) means that Tegu imports wood from the US to keep the supply chain moving smoothly. They are working with local wood cutters to improve their process. However, he didn't go into much detail as to how they were doing this. He mentioned that future product lines might start to include other components like wheels and other moving parts. He explained the magenets that they used were the strongest magnets in the world and were sourced from China.