Lessons From a Turnaround CEO
When I agreed to come on board as the turnaround CEO of SKG, the exclusive dealer of MillerKnoll furniture in Central, South, and West Texas, I understood two things very clearly. First, there were problems to fix. Second, the potential for a great company was there.
Although I had not yet adopted the lens and language of an Evergreen® Business, I can tell you now that when I joined SKG, they had several of our principles solidly in place, but were in great need of improvement on the others. SKG has always been a people first company, they have always had a strong culture, they have always been highly focused on the customer experience, and they have always been private.
My explicit task when coming on board was to help advance the profit and growth of SKG. I discovered, however, that there were other issues that needed to be addressed to get the turnaround underway. SKG lacked a clear purpose, and they were not an innovative organization.
The fundamental problem with the purpose of SKG when I joined was that not everyone agreed on what it was. The founder had a purpose that drove her work – people first – and some key board members had a different purpose – growth and profitability. To me, those were all important but sometimes came into conflict. We needed to unify around one clear purpose. I started driving change from the articulation of our new core compass: At SKG, we are innovative, we take care of people, and we drive impact in our community, both locally and globally. As I stepped into the work of rebuilding this company, I led with this vision.
I started with people. I had some great people on my team and many of them are still here today. But the organization, down to the physical space of the office, was all wrong. I had to get the right people in the right places, both literally and on the org chart. The process felt like a shake-up to some and was further complicated by the fact that the company’s founder was still in leadership and very present. I don’t think there is any other place to start when you set out to re-build a company and it was hard work.
I am an operator, so after the initial reshuffling was underway, I turned my attention to the team that would drive the profit and growth. As a growth-focused leader, I was able to see where the market potentials were and I focused my attention on making the changes and setting expectations in the sales department that would set us on a path for the growth I was targeting. This work was no easier than the work on the people front and I found myself spending as much time and energy dismantling the structures that were in place as I did on the rebuild. It was effective and in just about three years, we moved from a $13M business to a $60M+ business.
Once I had the organizational structure, the physical office, and the sales teams where I wanted them, I started a systematic review and restructuring of each department. I found as I went that we had to break down almost everything and rebuild it, from our target focus to our marketing and branding, our core operations systems, our service platforms, our trucks, our uniforms–everything!
We came out of the rebuild strong, focused on our purpose, and in a great place. Around this time, I was able to become a majority owner, so internal friction with the founder finally eased as well. We were able to charge forward on the innovation front, inspired by our new purpose, and I was extremely proud of the progress we had made. Then, Covid.
Through the pandemic, we lost a lot of ground and in the last year or so, I feel in a way like I have had to do the work of rebuilding SKG all over again. But this has also afforded us some great opportunities, especially on the innovation front. Business looks different than it did, so we should be a different company. We not only have to think about the changes to our own work environment, but since we are in the business of creating work environments for our customers, we are also able to engage in exciting re-visioning of what “creating a workplace” means. Although it’s been frustrating on some levels to do it all again, I am grateful that we had the new opportunity to improve and I love the way we are emerging from the pandemic – refreshed, new, and stronger than ever.
I am extremely proud of the work we did and what we were able to achieve, but hindsight allows me to see areas for improvement if I had it to do over. Our work meant a great deal of change for our employees, and it was tough. I assumed that as we re-structured, the culture and purpose pieces would naturally fall into place, and they did, but slowly. I spent an enormous amount of time and energy managing people in the early phase of the turnaround. In retrospect, if I had I brought on my HR Director right at the beginning, it could have helped us be more intentional about that work and lay out the vision before we started moving everything around. As soon as everyone came on board and understood the why behind the changes we were making, things got easier.
Aside from learning a lot about rebuilding businesses through this process, I learned a lot about myself. I am a charger. In some ways, coming in as a turnaround CEO is harder than starting a company from scratch. Before you even get to the building, you first have to dismantle a great deal. But I love it. The rewards are immense. I am invigorated by this work.
Leading for Innovation
Innovation at Michelman is unique; we do it highly collaboratively, both with outside partners and within Michelman, using the three elements of creativity, connection, and execution as drivers. Furthermore, innovation doesn't happen by accident; it begins with leadership.
Michelman is a people-first, purpose-driven, Evergreen® family business built for long-term sustainability. We are a global developer and manufacturer of specialized sustainable chemistry used in agricultural and architectural coatings, digital printing, foodservice packaging, and advanced composites for automotive and aerospace. And innovation is central to who we are; our purpose is Innovating a Sustainable Future. So, what does this look like?
Creativity is the Big Idea
It starts with creativity, and it starts at the top. At the leadership level, we set a strategy and identify areas of the industry we are poised to win or areas where there is a need or a problem to be solved. This strategy sets up guardrails for our teams to keep them pointed in the right direction. Once they have direction, they are free to imagine and create. We have worked hard to establish a culture where new ideas are welcomed and encouraged. Above all else, we want to make sure our associates share all great potential ideas. We know that innovation is not a linear process, so there has to be room for ideas that fail and ideas for which the markets are not quite ready.
In addition, we have found that building cross-functional teams helps problem-solve in the early phases of innovation. For example, a group of chemists may approach a problem from one angle, but then someone in HR or marketing might come in and see a possibility or an issue that was not obvious to the chemists.
I call these "cold eyes." Having someone who hasn't seen it before–who has cold eyes–study an idea is a highly effective way to identify and solve problems quickly before getting too far into the innovation process.
Connection answers the question ‘Why does it matter?’
Once we have a great idea and have developed it to a point where it is practical, we enter the connection phase of the process, which involves collaborating across functions and business segments at Michelman and with other stakeholders in the industry. As an Evergreen company, we are in an advantageous position because of our commitment to Paced Growth. During the connection phase, our focus on the long term inspires confidence in potential co-collaborators and partners. Furthermore, it assures both internal and external parties that we will devote the time and effort necessary to bring the innovation to fruition.
We have found that bringing partners in at this early stage of innovation is the best way to move the process forward efficiently, identify and solve potential problems, and create a competitive advantage. A powerful example of this was our innovation in the digital printing space. Digital printing emerged as a highly customizable and rapidly moving market, but the technology did not provide excellent print quality to a wide range of plastic film and paper types. So, we set to work innovating to develop advanced material and technology to improve ink receptivity, rub resistance, and image quality on paper and film material for labels, packaging, and other commercial printing. Early on, we reached out to partner with Hewlett Packard and developed the idea together; they produced the digital print presses while we developed the print-receptive technology. Together, we quickly positioned ourselves as leaders. The connection in this particular case was that the industry wanted high print quality with variable printability, such as the Share a Coke campaign, where each can has a different name.
Overall, Michelman's six corporate values of curiosity, collaboration, giving, integrity, respect, and success outline our highest priorities as a company. Our goal is to maintain and develop long-term, fair, and trusting relationships, and this culture of trust and respect allows innovation through collaboration to happen. We also utilize nondisclosure agreements (NDA) and other partnership agreements to protect innovations and other trade secrets to remain sustainable and Evergreen.
Execution facilitates commercialization
Finally, the execution phase is where the idea's value is realized. Provided that the market is ripe for innovation, we lead our teams to manage the details of the production, supply chain, distribution, and sales. Execution allows consumers to gain value from the innovation, resulting in Michelman's revenue growth. We find that our partnerships formed during the connection phase enable us to execute reasonably quickly. The right partners can help solve any logistical issues and help commercialize the innovations.
At our Evergreen company, which is driven equally by Pragmatic Innovation and our strong sense of Purpose, collaboration is a critical element of all three phases of innovation. In the creativity phase, the cross-functional teams ensure that a new idea will add value in the real world. During connection, collaboration is the driver. And during execution, the closer you can work with the partners you need to bring your product to market, the better and more efficient your execution will be.
Innovation is not a product. Nor is it simply an interesting idea. As leaders of Evergreen companies, our job is to create the right environment, characterized by a culture of curiosity, room for experimentation and collaboration, and clear guardrails. Once this is in place, there is no limit to where innovation can take you.
One Size Does Not Fit All
I joined my family’s irrigation supply business in 1985, just as they opened their 12th location, and the first outside of California. I guess you could say that expansion was part of my story at Ewing Irrigation & Landscape Supply from the very beginning. As the 3rd generation President & CEO of an Evergreen® family business that now spans 30 states, expansion–through organic growth and acquisition–has been the order of the day and has taught me a plain but profound lesson: one size does not fit all.
Irrigation supply is, in its simplest form, a low margin business. We stock about 3,500 different parts in each branch to enable us to have enough inventory to supply an average job. In California, we found that the population supported locations as close as a 20-30 minute drive apart, and the level of population density dictated how we transported our products, organized our teams, and stocked our warehouses. Our core customer valued proximity and the inventory moved quickly, so that drove our expansion within the state. When we set out to grow into Arizona, our California business model was working well, so we thought we had a solid plan.
Some businesses can just replicate themselves from location to location and it works. Think of Starbucks or Walmart. We quickly learned, however, that this didn’t work for our business.
As it turns out, Arizona is not California. The population density is significantly less, and we found we had to adjust our models at just about every level. The products that worked well in California did not work as well in Arizona and the population couldn’t support stores so close together, so we had to change the way we stocked our supply centers and how we transported material. When we moved into Texas, the population density was more like California, but there were other significant differences. The target customers were bigger, the jobs were bigger, the equipment had to be bigger, and we had to adjust.
Since then, we’ve moved into many new markets, and we are getting better at being market adaptable. We evaluate a new market based on the following criteria of a Metropolitan Statistical Area (MSA): population, Gross Domestic Product (GDP), and above all else, housing growth. What we’ve come to expect is that markets that appear similar by the numbers reliably turn out to be unique.
Not all the surprises created difficulties; we hesitated for a long time before moving into “cold climates,” or ones that experienced the four seasons, imagining that they were not candidates for the type of irrigation systems we had been installing all over the west and southwest. It turns out that this climate created many repeat customers for us; when the pipes froze, as some of them did every winter, the customer would call us in the spring to re-install some of the equipment we had installed just a season before! It’s just part of the process in that climate. This continual base-maintenance has proven profitable and reliable, so we are looking at the East Coast as an area ripe for further expansion.
Up until 2018, most of our growth had been organic, with just a few small acquisitions. In 2018, we made our first significant acquisition of a company that focused on hardscapes, instead of irrigation. Water supply was starting to become an issue and, as a result, customer demands were shifting. Before, everyone had to have a green lawn. Suddenly, people were creating outdoor spaces that used less water.
We spent time learning how to adapt to this business, which proved to be quite different from irrigation. For irrigation, we typically stocked our inventory in warehouses that were 8,000 -10,000 square feet, sitting on roughly an acre of land. For hardscaping, we realized that we needed more land but could get away with fewer buildings, as a lot of the product could be stored outdoors. The product is also much less varied; we stock only about 120 items in an average yard to supply an average job, which simplifies many aspects of the process.
The most significant advantage of acquiring the hardscape businesses and entering this new market is that, as we look to expand, we already have a well-established and extensive customer base through our irrigation businesses in many areas of the country. Thanks to our name recognition and the great relationships we have with our customers as an Evergreen® company, we have found that when a customer decides to shift toward hardscape, they turn to us.
As Ewing grew organically, we learned that moving into a new market requires firepower and a willingness to tweak our model. When the firepower or the changes required appear too great, we make the call to stay out of that market for now. When we started making acquisitions, adaptability and willingness to reimagine established practices were again the keys to success.
Despite, or maybe thanks to all these learnings, we are looking toward the coming years with optimism. Between the expansion of the hardscape business as we develop it in parallel to our irrigation business and the organic expansion that now seems promising in colder climates, we see a path to future growth that has us excited. But if I have learned anything through the last 15 years, it’s to never get complacent, and to expect that even the brightest of futures will require that we stay nimble, open to change, and willing to roll with the surprises.
A Business Built on Reciprocity
It may go against what we’ve all been taught about business, but I have come to believe that collaboration, not competition, is the key to business success. There are guidelines and limitations, of course. For me, the most important one is finding like-minded people, who share a vision of the right way to live and conduct themselves, and who are eager to contribute something of value to the world. I recently learned a new word for this– Evergreen®.
My story started like many, with a chance meeting. I was running my home repair business, Redeemers Group Inc., in Memphis and, through some friends in the East, I was contacted by a product supplier in Connecticut who was seeking a partnership. They had a basement waterproofing business and some high-quality products and wondered if I might be interested in learning their method for reaching new customers and their process for waterproofing. In exchange, as my business increased, I would sell their waterproofing products to my new clients. We didn’t have a contract, but it made sense and I trusted them, so I agreed. It led to significant growth for my business and, as a result, increased sales for them. Our customers got great service and great products. It was a win-win-win. This experience opened my mind to a new world of possibilities.
A few years down the road, I had the great fortune to meet Greg and Dave Thrasher, from Omaha, NE. Greg founded Supportworks Inc., a foundation repair (and today, a Certified Evergreen®) company, and his son Dave is now President. In the Thrashers, I recognized the kind of kindred spirits I was looking for, and although none of us had become aware of Tugboat Institute® yet, we became fast friends. We struck a deal similar to the one I had made with the company in Connecticut – Supportworks taught us their foundation repair process, and as my business grew, I sold more of their products. Another win all around.
Now I had two collaboration partners who were suppliers and I loved the growth the partnerships had created. My inclination for collaboration was growing stronger and I found myself looking for opportunities to collaborate further at every turn. My mindset had shifted, and I was ready for more.
My next opportunity took me back to Connecticut. One best practice I had learned from the basement waterproofing company in Connecticut was to share materials – about our company, our products, and the repair process – with a new client in advance of the first site visit. Among other items, we provided a book the company had created that explained the specific repair process in detail. I noticed over time that their guidance was great, but that there were gaps; most notably, we were doing a lot of mold remediation, and there was no book for that. So, I wrote one. I took it back to the supplier and asked if they’d be interested in buying it and in offering it to the other contractors they worked with and they said yes. It is now sold all over the US, Canada, and Europe.
By this point I was a true believer in this type of supply chain collaboration and was highly inclined to innovate further. When working on one job, trying to problem-solve the process of lifting a house off a certain kind of foundation, I had a Eureka moment and imagined a device that would help the process. I had a friend create some CAD drawings and took them to Dave and his team at Supportworks. They thought it looked great, we got it patented, and now they sell it to all their dealers.
Private equity has come knocking several times in recent years and it’s easy for me to send them away. I know that without remaining Private, among many other things, I would not have the freedom and the independence to pursue Pragmatic Innovation collaborations like these with industry peers. Innovation requires the freedom that being an Evergreen company provides. My experience collaborating with like-minded supply chain peers - notably those with Evergreen companies - has helped my business grow and succeed, and it’s helped me approach my work with even more joy and creativity. I can’t wait for more.
Getting Back to Built to Last
Every leader carries a toolbox filled with tools they collect over time. I have been on my leadership journey for some time now and have filled my toolbox with the tools that work best for me. They include Stephen Covey’s Speed of Trust, a focus on communication and organizational effectiveness, the marriage of disciplined decision-making and objective critical thinking, Jim Collins’ Built to Last, and most recently, Tugboat Institute’s® framework of the Evergreen 7Ps®. And through my work with each of these tools, there is one more that I have developed myself, over time. I call it the Six Lanes of Logic.
I joined Schaeffer Manufacturing Company as President with the objective of ensuring that this 183-year-old company was in position to last another 180 years or more. My first step was to assess Schaeffer’s readiness to meet this objective. During my first four months, I embarked on a listening tour, and I assessed that trust throughout the organization was low. There was a lack of clarity of roles and no clear communication. As a result, organizational effectiveness and engagement were low. Employees did their jobs without a clear understanding of the larger purpose of the company and how they fit into it. Schaeffer was not in a ‘Built to Last’ position. Thanks to my toolbox, I had the tools to address these issues, so I set to work.
I used these tools to work several initiatives in parallel: re-establish trust, leaning heavily on The Speed of Trust, clarify roles, and re-open the channels of communication. My focus here is the use of the Six Lanes of Logic.
The Six Lanes of Logic is a tool I have had in my leadership toolbox for 20 years, tweaking it and adapting it as I go. It’s a disciplined process for problem solving and decision making. This tool would enable the work of re-establishing organizational effectiveness at Schaeffer, engaging employees across departments, improving our ability to think creatively, and setting a structure in place that would protect what needs to be preserved for the next 100 years, all while leaving space for innovation and growth. The process gathers a representation of all stakeholders involved in the issue at hand and, as a result, touches every aspect of the organization.
The First Lane is where we assemble a representative group of stakeholders to define and agree on what the problem or objective is, agree on key criteria that any solutions must have, and defend why this must be solved with 3-5 logical reasons. This part seems simple, but I find that most of the time, people walk around with a hammer looking for a nail to hit. In other words, they come into the conversation with a solution and are just looking for a problem to apply it to. So, in this first lane, all stakeholders agree what we are coming together to accomplish and get to the ‘how’ only after that is done. At this stage, importantly, we also identify who has decision rights.
In the Second Lane, the group brainstorms options that could achieve the stated objective, but with no critiquing to assure openness, inclusion, and creativity. We have identified the problem we are trying to solve – how might we fix it? With our team, we collect any ideas people want to share, and because we have a group of stakeholders, we have a variety of perspectives represented.
Once all options are identified, we move into the Third Lane. In this lane, we evaluate the options against the criteria we established in Lane One. We lean heavily on data here, because it’s necessary to making sound, solid decisions. There is no room for opinions in this lane.
In Lane Four, we select a path forward and finalize the decision, again as a group. Lane Five operationalizes the decision with metrics to track results. We build our team, our action plan, and our plan to measure the success of the initiative. We get to work.
Lastly, in Lane Six, we a look back at the results of the initiative and examine the process from start to finish. As a group, we aim to understand what we did well and what could be done better. I find this process is key to enabling a critically thinking organization and helps ensure that we learn and improve our processes as we go.
When I first present the Six Lanes of Logic to people, they think it will slow us down. In the early stages, it is indeed slower than processes they have used in the past. But like the Speed of Trust, taking the time to walk through the process carefully from the beginning to the end contributes to improved effectiveness overall. We are less likely to leave gaps in our process, we are more likely to imagine potential problems before they arise, and, best of all, because the process is so collaborative, we engage all stakeholders. When people are contributing ideas to solutions, they have a stake in the outcome and are much more engaged. Every aspect of the process is better.
My philosophy and belief are that organizational structure is the key to building a long-lasting Evergreen® company and the Six Lanes of Logic have helped us set a solid and enduring structure. The discipline behind my tactics at Schaeffer is something the stakeholders have had to work to learn, but now it is becoming automatic. Schaeffer is experiencing a significant increase in trust, it has rediscovered its clarity of purpose, and it is experiencing empowerment across the organization through critical thinking. It is no longer just my initiative; our whole team is now engaged and committed to ensuring that Schaeffer Manufacturing Company is Built to Last for at least another 180 years.
How Old-School Apprenticeship is Shaping Our Future
As an Evergreen® Company, we cherish our independence, our flexibility, and our autonomy. It might, therefore, seem obvious that a partnership with such a structured and bureaucratic organization as a trade union is something we would take great pains to avoid. In fact, the opposite is true.
Chula Vista Electric started in 1925. Like many successful 97 year old companies, we have learned how to react to our environment and adapt as we grow. CVE started as an appliance retail store. As people bought appliances, they needed electricity in their homes to power these devices; this spawned our electrical division, which has been the company’s focus ever since.
In 1945, the need for trained electrical workers was growing in San Diego and so, along with others in our industry group, we started running apprenticeship classes. In 1976, we formalized a partnership with the union; The San Diego Electrical Industry Training Trust was created with equal representation from management (the company owners or NECA) and labor (the union or IBEW). Today, the trust governs our apprenticeship program, which is recognized by the State of California and sponsored by Palomar College. This allows all of our students to not only learn a trade but also to earn college credit towards their Associate of Arts Degree.
Our program has grown and thrived over the years, providing apprentices for 56 electrical contractors in San Diego and Imperial County and has approximately 600 students participating. It’s a unique collaboration. The contractors, who are signatories to the collective bargaining agreement, fund the program. Through the collective bargaining process, we have agreed that for every hour that one of our employees works, 87 cents is invested in a training fund. With this funding, we have been able to build a high-quality, comprehensive program that none of us would have been able to create on our own.
To be accepted into the program, applicants must have a high school diploma or a GED, a year of algebra, and they must take a few basic aptitude tests. If they meet these basic criteria, we invite them to interview. Our program has become so popular that we average 300 applications for every 30 positions available.
Once in the program, apprentices spend five years attending classes two nights a week and working one-year rotations at four or five different companies. There are large shops, small shops, some that do high rises, some that do underground—all the different facets of electrical. Spending time at a variety of companies gives apprentices a deeper and more thorough understanding of the industry. Ultimately, the idea is that they get the theory and science at school, and then practice the hands-on by day out in the field. One of the best parts and a piece of what makes this so valuable is that their school is tuition-free. We call it “Earn While You Learn.”
The impetus for this apprenticeship program has not changed much from what made it so powerful and unique in the early days. Contractors need electricians. We need them to be trained well, uniformly, and thoroughly. It is in the interest of the customers, apprentices, and contractors alike to ensure that we are producing a pool of highly qualified electricians.
It’s a win for our apprentices too. The jobs we create are great middle-class, upper middle-class jobs, with pensions and health care. I'm able to offer not just a job, but a career. We have several people who have been with our company for 25 to 30 years. They are not just employees, but friends.
The risk, of course, is that we put effort, money, and time into training these apprentices, and then, at the end, there is no guarantee we won’t lose them to a competitor. But this is where being an Evergreen company plays to our advantage; we believe we treat our people better than the competition, so we have had great success in recruiting and retaining employees. In addition, we like to promote from within, so the growth doesn’t stop after the apprenticeship is over. Regardless, contributing to something that ensures we will have a deep pool of qualified, talented electricians is easily worth the risk of losing a few people here and there.
Amid the Great Resignation, the value of this program has come into sharper focus than ever. This is an excellent vehicle for developing the talent pool we need to keep growing and thriving. And it just so happens that we've had it up and running successfully for decades, so we're in better shape than most firms today.
My father started his apprenticeship in 1965 and would go on to become sole owner of Chula Vista Electric. A decade ago, he passed the reins on to me—a move that wouldn’t have been possible without my graduation from this same apprenticeship program in 1989.
My role with the apprenticeship program is deeper than most. I’ve been an apprentice, an instructor, and I currently serve as the committee chair overseeing the program. I look back and think that I was very lucky—being accepted to the program myself and getting to do what I love. So much that I encouraged my son-in-law to get involved. He's been through the program and he's now a foreman for my company. My youngest son is currently a fourth-year apprentice for one of my competitors. It’s that rotation part of the program, to make sure he gets a well-rounded training experience–I'll get him back, too. I attribute everything that I have to this program, and everything at our business is built around it. Now, I'm trying to pass down my passion for this unique partnership to the next generation in our company and within our industry group more broadly.
People First Drives Pragmatic Innovation
When you have employees working on oil production platforms and you are committed to People First, every person in your company must be serious about safety.
People First came naturally to Danos when my grandfather and his brother-in-law started the company in 1947; the initial team was almost all family members. By the time the company got big enough to hire from the outside, the culture of care and connection was firmly set. As an Evergreen® company, People First defines and drives everything we do today. It’s in our DNA.
We are in a high-risk industry: operating and maintaining oil platforms, many of which are over 100 miles offshore. We have 2,500 employees today, working across Texas, the Gulf of Mexico, and other remote parts of the country. We attribute much of our success – on the safety front and elsewhere – to the way we lead from a culture and values standpoint. We do this while tapping into our team’s insights, creativity, and ideas and encouraging experimentation with new technologies to bolster safety through Pragmatic Innovation.
Although our early innovations were not technological, they did have a notable impact on safety. The first one that comes to mind happened in the early 1950s. During that time, crew members boarded boats using ladders attached to a vessel's exterior, which was very dangerous. So, we designed and built a tugboat with an innovative safety feature – an interior ladder that brought workers from the pilothouse to the galley and the engine room without going outside.
In the early 2000s, we began hosting Safety Focus forums. These intensive, one-day safety events happen throughout the year in key locations where our employees live and work. The day kicks off with a few safety presentations from management to set the tone, but the event mostly focuses on group work, breakout sessions, and time together. The format allows our employees to experience our culture of collaboration through open and honest communication and relationship building. We teach at these forums, but more importantly, we listen. From experience, we know we can learn as much from our employees on the ground about where we can improve on safety as they can learn from us.
One of our first true technological innovations came years ago as an improvement to something that existed already in our industry called Behavioral Based Safety (BBS). We track near misses–incidents where small changes in conditions could have caused injuries. For example, a common interaction with equipment might result in a brush burn, but the incident makes us realize that the potential for serious harm is there, so we enact changes to the way our people interact with that equipment. Although this practice is standard across the industry, it has always been inefficient and slow. So, we decided to start collecting feedback on forms that we could read with a scantron (a technology innovation at that time) to process more information faster.
More recently, with smartphones, we figured out a way to use a simple app to collect and share the data in real-time, which we use today. All near misses are recorded on the app and reported company-wide immediately; notifications pop up on everyone’s phones. We didn’t invent BBS, but as far as I know, we were the first ones to use an app to create instant push notifications. These experiences with the Safety Focus forums and the app reinforced for our leadership team the importance of involving the entire team in Pragmatic Innovation.
In 2015, we decided to try something new by opening an innovation lab in Louisiana. We bought a drone, virtual reality (VR) goggles, and a 3D printer. We invited employees to explore the new tech tools. No one was sure what we were after at first, but eventually, our team came to understand that this lab was about unleashing their creativity. Their ideas started emerging.
As we began understanding the potential for tapping into our team’s creativity, our IT department took the initiative to help us innovate in safety. They developed a whole new platform to capture, organize, and analyze our safety-related data – near misses, serious accidents, and proactive efforts to prevent incidents. As a result, we ended up with a unique, fit-for-purpose platform that has significantly improved accountability, helps identify risks, and generates risk mitigation actions that keep our team even safer.
More recently, we’ve been working on an exciting technology-enabled safety innovation that leverages VR. We built a virtual oil platform – just like the ones we service and maintain — for employee competency testing and training. So instead of having an experienced trainer and new employee meet at a shore-based heliport, fly out to an oil platform in the middle of the ocean, and verify the new employee’s competency on-site, we can do all of this in our virtual oil platform. It’s much safer and has the added benefit of allowing us to test and train every employee on a much wider variety of equipment and different platforms.
We have taken this program even further by creating animation that allows users to “peel back the layers” of the equipment and see inside to better understand the components and how they function. I did this virtual “peeling of equipment” myself, and it helped me understand the processes we manage in ways I never had before. This innovation has made the training experience for new and returning employees much safer. And it all started with placing a few VR goggles in our innovation lab and creativity being unleashed.
If you are committed to being People First, as we are at Danos, safety is a value. We are proud of the success we’ve had on this front. Our OSHA rate, or rate of accidents per 200,000 employee hours, is among the lowest in the industry. We attribute this success to our 75-year history of People First values and strong culture, enabled by our safety programs and Pragmatic Innovation. When you take care of your people and tap into their energy, ideas, and creativity, things can take off in exciting and unexpected directions. For us, it was safety first. We’ll see what’s next.
Tugboat Institute Gathering of Teams 2022
It took both perseverance and a dedication to purpose to make the 2022 Tugboat Institute® Gathering of Teams possible, but last week we managed to pull it off, and it was outstanding.
At this hybrid event, over 60 people virtually joined the 300 in-person attendees. Between challenges presented by the lingering Omicron surge and supply chain issues that threatened to delay the delivery of materials, we had our work cut out for us, but the dedication and extraordinary care of our entire Tugboat community overcame it all. We are so proud of the efforts of all attendees, and of the fact that our event was such a safe and joyous one. For two and a half days, our members and their teams shared learning, ideas, experiences, and fun and emerged inspired to pursue their Evergreen® goals with renewed passion and energy.
Throughout the event, which was comprised of a mix of TED style talks and smaller, group workshops, we structured our learning around the framework of the Evergreen 7Ps® principles.
After an evening of exploring mini-games and the philosophies behind the Great Game of Business with Steve Baker, Dave Whorton opened the series of TED style talks with a reflection on Purpose. Dave’s talk built on the conversations about Purpose from our visits to Edward Jones and Clase Azul last fall, as well as Hubert Joly’s book The Heart of Business about the improbable, and very Evergreen value-aligned, turnaround of BestBuy.
Borrowing from data shared at Edward Jones, Dave showed the powerful cultural trend of employees working for and customers buying from, referring to, and protecting companies with an authentic Purpose. He spoke to why he believes non-Evergreen companies--whether public, venture-backed, or private equity owned—might state an explicit, noble purpose, but in practice cannot truly be driven by Purpose due a number of dynamics, including their ownership’s expectations of high returns when push-comes-to-shove. His belief is that authentic Purpose can only be protected and honored through all seasons and over decades in a company that remains forever Private with aligned, concentrated ownership.
Dave used his presentation to unveil our new definition of Purpose, grounded in our collective learning as a community over the past eight years: Having a compelling reason for existing--a north star above all else.
Having set the stage for the learning for the rest of the week, Dave introduced five more TED style talks that further expounded on the power and importance of high performance teams, Pragmatic Innovation, leadership lessons, communication strategies, and the Evergreen 7Ps principles.
First, Bryan Papé shared his powerful personal journey founding and scaling MiiR, a company driven by Purpose and undeniable proof that a great consumer products company can be built and scaled without venture capital. Kristi Tacony Humes, 3rd generation CEO of Tacony Corporation, spoke to the importance of continually asking why and seeking ways to continuously improve oneself and one’s company. Rorke Denver, a former US Navy SEAL commander and acclaimed author, actor, and leader shared wisdom on the dynamics and qualities of high-performance teams. Rich Ledbetter, CEO of Guarantee Electrical, shared Simple Tools for leadership and business success gleaned from a variety of thought-leaders throughout his career. And finally, David Bradford, Lecturer Emeritus at Stanford’s School of Business, encouraged us to be more honest than we might have thought possible with our teams, families, and all important relationships.
The afternoon and the morning of the next day were dedicated to workshops that brought together peers from across many different industries. The conversations were rich and offered insight and ideas that energized and inspired the participants. The enthusiasm and energy of the groups, fueled by new connections and the opportunity to share and brainstorm together, were palpable.
One evening, the group headed to the River Ranch Stockyards for a night of festivities. The venue, which included a paddock of long horn steers, cowboys swinging lassos, and burros offering refreshments in their saddle baskets, was the perfect place to enjoy new friendships, reconnect with old friends, and make some memories.
The two and a half days were full, busy, and inspiring. As is the case every time Evergreen company leaders come together, the energy and joy that fuel our unique Evergreen paths exceeded our hopes and expectations. There is no doubt that our movement and our collective commitment to the Evergreen 7Ps principles are steadily gaining momentum, and that our trusted community is profoundly important to our members and their teams.
Teaching Leadership Skills for Success at Work and in Life
At Ayers, an Evergreen® company, an unskilled laborer with minimal education and no management skills can advance, in less than five years, to managing and leading a production team.
There are two critical ingredients for this kind of rapid progress: an eagerness and a willingness to learn, and a grounding in the values of our purpose-driven company. We can’t teach the former, but we can teach the latter, and we do.
In 2019, my son Zack, who is currently our VP of Operations, had just completed a masters-level course in Entrepreneurship and we were looking for ways to handle the pressures of constant hiring and training for our very niche market as we scaled the company. Zack’s experience in the program gave us cause to discuss the leadership lessons he had been studying, and to be reminded how much good leadership is actually grounded in simple skills and old-fashioned values. We came up with the idea of creating a course at Ayers to teach employees these basic life and work skills.
I am a fan of Patrick Lencioni’s The Ideal Team Player, and knew that if we could get people who were “hungry, humble, and smart,” we could tap their potential and help them, and us, create our next line of supervisors and even managers.
With Zack as my partner, we created our Leadership Immersion program. The first course was 13 weeks long, and the homework before the first class was to read Lencioni’s book and do some reflective writing on Ayers’ values and purpose. My son and I taught it ourselves, and we had our whole management team go through it with the first cohort. The lessons were focused on leadership and life skills that not only make employees better leaders, but also better people.
Our curriculum is about professionalism and instilling values and habits which underpin effective leadership. We ask that students come dressed professionally and most wear a coat and tie. Lessons include basics such as time management, success principles, and being a solid team player. But they also include how to run a small team, how to be a good neighbor or spouse, how to budget, and how to be better with money.
Each week, there is homework, reflection, and preparation to do. Joining the program is a significant undertaking and this fact alone helps cultivate a sense of responsibility and dedication to quality that are core values of both Ayers and effective leadership in general. It encourages participants to see themselves in a new light, and to aspire to something greater.
Each session, we admit eight people. We’ve found that a small group allows for more meaningful group discussions, which make up about 50% of the class time. And it doesn’t take too many people out of their usual jobs and leave us overly shorthanded. In terms of who gets into the program, we target junior leaders, most without any education beyond high school, who have been with us for about a year. It feels important to have time to get to know them as human beings, and once we have identified the people with the willingness, ambition, and disposition to grow, we invite them into the course.
For the length of the course, which has grown to 17 weeks, they spend every Friday, from 9am to 3:30pm, in class. Why 17 weeks? The objective of this course is to transform the students into more effective employees and people, and conventional wisdom tells us it takes 17 weeks to create a new habit!
At the end of each course, we host a celebration, and this is the greatest joy for me. Everybody brings their spouse or significant other and we share the growth that has resulted from the course. Typically, not only do course members share how they’ve changed internally as people, but also their families share how much their lives have changed at home. It’s quite profound and can be life changing. Although we are clear that joining the program does not guarantee a promotion, many of them will end up being promoted.
Creating this course has meant a big investment. It’s expensive; after people and the benefits program, it’s our biggest expense. But it’s paying off in spades. Especially in today’s tight labor market, investing in our people has never proven more worthwhile. We know our employees who have been through this program are skilled, aligned with our purpose and values, and exceptional team players. It’s one of the best investments we’ve ever made.
Zack still runs the program, but increasingly, the classes are taught by members of the management team who went through the course in its first cycle. Zach now sits in the back and observes, which I love because that’s a sign it’s working. We are producing leaders who produce leaders.
It’s been so successful in fact, that we’ve just announced a new initiative that is an extension of the Leadership Immersion program. In February 2023, we will launch our first Leadership Immersion Master class for employees ready to look to the next level of leadership within the company.
For anyone thinking about offering a program like this, I think there are two important things to keep in mind. First, there has to be a multiple-year commitment. It takes time to dial in a program that’s a fit for your team. Secondly, as a leadership training program, the buy-in has to start right from the top. Even now, I still attend the class for the first 30 minutes every week, share a story, and draw a connection to the content of the lesson for the day. With this level of commitment, there is no limit to how high that laborer-turned-manager might climb.
Win the Talent War by Investing in People First
Amid the Great Resignation and an overheated talent war we haven’t seen in decades, finding ways to put People First is a vexing question for entrepreneurs in almost every industry. Before I share how we’ve answered it in our Evergreen company, it makes sense to start with a brief history.
My father started Hoffmann Brothers back in 1988. He was a mechanical engineer at the time, working here in St. Louis for Anheuser-Busch, and he worked closely with a mechanical contractor to air condition several of their facilities. He really loved the exposure to the HVAC space. He’d wanted to get in business for himself for some time, so he put in his two-week notice with Anheuser-Busch, joined a small, four-person heating and cooling shop, and enrolled in a local trade school at night—making him the first mechanical engineer with a professional engineer license to enroll in this trade school and complete the program. From the start, the business focused on delivering superior service, and my father realized early on that in order to deliver maximum value, it was essential to attract—and equally important, retain—the right people. The roots of our People First philosophy were there right from the beginning.
My chapter at Hoffmann Brothers began in 2016, when I left the Marine Corps and used the G.I. Bill to attend business school. After graduating, I joined the company along with my brother, who is also a mechanical engineer. As a Marine, I learned what it means to be a servant leader. I was inspired by Simon Sinek's Leaders Eat Last, and I hadn’t just read about it, I had gotten to use it and develop my skills through my time as a Marine. As a result, when I stepped out of the Marines and entered our family business, I had an acute sense of the importance of taking care of one’s team.
During my transition from the Marine Corps to the for-profit world, I quickly learned that the latter does not overly concern itself with the personal lives of team members. Except perhaps when personal lives begin to have a negative effect on productivity in the workplace, “Leave your problems at the door,” whether stated or implied, is a mantra familiar to many businesses.
In the Marine Corps, being “mission ready” meant that your Marines were fully prepared for what was to come, both with respect to the professional competencies that have been honed through rigorous training, and with respect to personal affairs on the home front. As a leader of Marines, I loved that my role meant that I was holistically responsible for the people I led. Leaders of high-performing private businesses must take a similar approach if they wish to persevere in the face of the talent challenges that we face in 2022.
Compensation, Benefits, and Culture
Guided by this mindset, when my brother and I joined the company, we doubled down our father’s value of putting our people first. What does that look like? For starters, we’ve incorporated some traditional techniques, like offering competitive salaries and benefits, but we’ve taken them to the next level. We pay 100% of health insurance for employees and their entire families. Among our peer group in the national market, we are the only company that does this. For family coverage, that's over $16,000 per year per employee. We also offer an 8% 401(k) match and a generous paid vacation, starting on day one. These benefits are expensive, but that's what gets people talking and helps us attract and retain the best talent in the market.
We're a service business, which traditionally means demanding, on-call, 24-hour-service work schedules. But we want to protect our employees’ weekends and late hours as well, so we did something counterintuitive in our industry: we eliminated 24-hour on-call and scheduled calls on Sundays.
As we evaluate expansion markets in new geographies, we consider the opportunity created by the current pay and benefit landscape within a given market. For example, given that our largest constraint to growth continues to be access to the best and brightest talent in the skilled trades, as we look for opportunities to expand, we target markets where the benefits we can offer are not currently offered by existing employers, like our 100% paid health benefits for employees and families. This approach has allowed us to quickly build a strong reputation among the candidate pool in new markets, and therefore we are able to rapidly scale with team members who can meet our high quality and customer service standard.
Internal Talent Pipeline
As the talent pool of skilled trade workers has become increasingly tight, we are asking ourselves the same question a lot of businesses are asking: How do you find really good people? To address this, we’ve taken our People First mindset a step further. Over the past two decades, our society has encouraged people to attend four-year universities, where they walk away up to $150,000 in debt, rather than pursue trade careers that pay incredibly well and come with a significantly lower cost of education. But even the cost of trade school, which can be around $20,000, is prohibitive for some, especially for 30- and 40-somethings with families who want to switch careers. The result is that there are not enough HVAC technicians, plumbers, or electricians in the country right now. Rather than fight for a finite number of workers, we’re digging our own well.
How? We are building our own school. Our approach is simple: we've identified a minimum set of competencies that are necessary to create a technician capable of producing independently. If you come to our school, we will equip you with that set of competencies and we are going to do that in just 16 weeks. And we're going to pay you $18/hour while you're doing it. When you graduate, you're on the path to an $80,000 or $90,000 job within four years. While it appears to be an expensive investment, I find it a highly attractive program for finding, developing, and retaining great new team members who I hope will make a career out of working at Hoffmann Brothers.
Another part of this initiative targets employees at the leadership level. In 2022, we are investing heavily in leadership development in order to allow leaders at every level of our business to reach their full potential. Our leadership program was developed through a comprehensive design process, which began with the identification of our ‘core business drivers.’ We then mapped these core business drivers to a specific set of leadership competencies at all levels within our organization. For example, the “executive” leadership competency model will look different than our “field manager” leadership competency model. Having identified the competencies, we can now shift our focus to curriculum design and delivery. It took our field managers over ten years to become masters of their trade, and as they transition to their new leadership roles, we must be just as intentional about their leadership development as we have been about their technical skills progression.
Signs of Success
We are, of course, interested in evaluating how well our efforts and investments are working, and how they are paying off. On the employee satisfaction side, the statistic I am most proud of is our retention rate. Pre-COVID, our retention rate was 96%. Despite all the madness in the job market now, we’re still at 88%. In light of the challenges we’re facing, including the intense competition for talent, we feel great about that number.
In 2016, we had 50-55 employees and we were a $10 million business. Today, we have expanded into Nashville and grown locally, we have 300 employees, and we ended 2021 as a $55 million business. We’ve experienced 30% organic growth each year since 2016, and in 2022 we are budgeted to reach $78 million across our St Louis and Nashville markets. It appears to be working.
Evergreen® Takeaways
What we know and what we have learned as an Evergreen company is that employees today are not just looking to clock in and out and collect a paycheck. There must be Purpose behind the work that they are doing and the company that employs them. They have to feel that they are part of a collective effort, working in a place that cares about them and develops them, and where they can make a difference.
Every business in the world likes to say they’re People First. It’s easy to say. Find me a business that doesn’t say it. But how does People First actually show up in your business? For us, it’s several good, caring ideas executed well.
