By Bill Caton
The secret to success in the construction industry is simple really: Train your employees, engage and involve them in the company, look to the future, adapt to change and set audacious goals. Simple to say, that is.
So said retired Sundt CEO J. Doug Pruitt when he visited with Alabama AGC members in April at the Chapter Headquarters in Irondale to discuss the construction giant’s return from near disaster in the 1990s to become the dynamic industry player it is today.
Recapping his book entitled Level Headed: Inside the Walls of One of the Greatest Turnaround Stories of the 21st Century, Pruitt got right to the point:
· “We are an industry that does not like to adapt and make change and that’s bad.”
· “Operations people were the most resistant to change. They are just after the next job and make bad decisions.”
· “An (Employee Stock Ownership Plan) is the essence of Capitalism because employees who are involved and take interest are the key.”
· “Some people in this business make a lot of money because they believe they should make a lot of money and they figure out how to do it.”
What went wrong at Sundt?
“We lost discipline,” he said. “Lack of discipline is at the heart of everything you do poorly. We were highly leveraged and had very little cash. We didn’t share financial data well.
“We took a 10-year look at it. We had a division that had never made money. I’d hear: ‘Doug, you don’t understand. This is just a market condition.’ I was working for a wonderful gentleman (Wilson Sundt) who did not like bad news and didn’t want to make hard decisions. To make changes we had to start from the bottom up. We had full disclosure of all problems at a meeting of all managers. We had 10 years of P&L for all divisions. And we said to them, ‘You’ve seen the numbers, what are three things you can do now to change?’
“They could see the numbers but they didn’t understand the problem. We were such a silo-driven company that people didn’t understand.”
And that meant that management had to “face the brutal facts:”
1. Previous success and the accolades that came with it became part of the problem because management became arrogant.
2. That led to a lack of discipline and a lack of policies and procedures.
3. Sundt lacked planning. No strategic plan. Core business always struggled because resources, including key people, were spent on odd projects.
4. Sundt was no investing in its future by not training and developing people, lack of succession planning and lack of investment in technology.
5. Poor utilization of assets.
6. Paradigm paralysis.
“I drew a line in the sand and said to the group, ‘Who’s going to join me on this side of the line?’ Wilson Sundt, who had said nothing, got up and everybody wanted to join him. He was revered. He said, ‘This is too great a company that my grandfather started. Do not let this company fail.’ He had passed the baton.”
So, how does a stale, failing company change?
Set a Goal
“You have to spend a lot of personal seat time around the people,” Pruitt said. And in just 24 months:
1. We sold two companies that were not part of our core business.
2. We closed two divisions and that was tough.
3. We changed management in two divisions.
“You have to become chief cheerleader with employees, not just with the management team,” he said. “You have to be out, selling to your employees. And you have to set goals.”
“Set a stretch goal, a target everyone can shoot for,” Pruitt said. “Then we set a big goal -- $1 billion in revenues and $100 million in net worth in 10 years. Most believed the (big) goal was unreasonable and demoralizing. People will rise to the occasion if you tell them it’s achievable and show them the way; in fact, get out of their way.”
1. “In 1998 we asked ‘What will 2008 look like? Are we structured to take advantage of what we think 2008 will become?’ (This will create) significant changes in management and how you operate.”
2. “We would true up the first year of the 10-year plan and add a year and so on. Never get under five years. Where is the world going and how are we going to be able to take advantage of changes coming our way?”
3. “Become a learning organization – train people.”
4. “Formal succession planning. Leadership development – personal awareness, team-building and communications.”
5. “Invest in technology accelerators. Employees in their early 30s to early 40s.”
“You can change a company better from the middle up than you can from the top down,” Pruitt said. “Employees, especially younger people, want to work for a company that makes a difference. Move them from disengaged to engaged.”
1. Focus on growth strategies
2. Concentrate on operational excellence
3. Continue building for the future
4. Look at cash and investment management
Pruitt said Sundt did not use an outside consulting firm, but did have “an outside advisory board that we used a lot.
“We also were active in AGC and used a lot of seat time with AGC members. Did I get a lot of advice? Yes.”