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FMI Quarterly/June 2013/June 1, 2013

From College to CEO in 21 Years: Mike Heitmann, Garney Construction

workingplans14_imageOur attention to integrity has allowed us to stand out from the crowd and it has proven to be a huge component of our success.

Garney Construction is a 100% employee-owned construction company specializing in water and wastewater pipelines, treatment facilities, water storage tanks and industrial water systems. Garney builds these systems throughout the United States through traditional and alternate-procurement methods.

2013q2_interview_MikeHeitmannMike Heitmann joined Garney Construction in March 1990, a couple of months before receiving his degree in architectural engineering with an emphasis in construction management from the University of Kansas. Twenty-one years later, he was promoted to president/CEO. FMI Quarterly spoke with Mike about his transition to CEO and how he has continued to maintain some of Garney’s main philosophies, including embodying integrity and encouraging employees to reach their full potential.

Chisholm: Mike, tell us about your transition from when you first joined Garney Construction to becoming its CEO/president in 2011.

Heitmann: I started with Garney right out of college in 1990 and spent about three years traveling around the country building projects in northern Virginia, Arkansas, Florida and Alabama. At the end of that time, we found a niche in industrial water/wastewater projects that we were building in Florida, Alabama and Georgia. I set up a new office for Garney in southern Alabama and stayed there for 10 years running our southern operations and building industrial water/wastewater projects. In 2004 I moved back to Garney’s headquarters in Kansas City.

Chisholm: What were you doing when you moved back to Kansas City?

Heitmann:When I came back to Kansas City, our office in southern Alabama was not logistically convenient for traveling, so we closed that office and opened one in Atlanta, which was a better location for the Southeast region. We hired a regional vice president to run our Atlanta office. My role continued to be that of overseeing our industrial operations as well as overall company marketing and business development.

Chisholm: How long did it take Garney to start grooming you for your current position, and did you know that was going on at the time?

Heitmann: I don’t know that I was necessarily “groomed” for the position. A number of individuals were all viable candidates for the position of CEO/president, but I don’t think any of us necessarily were groomed for it. In the end, the officers went through a fairly lengthy process of preparing for that transition. We had a group of upper-level officers who were all retiring at the same time, so they spent about two years preparing for that and talking to the various candidates. In the end, they really let the new officer team come together to choose who they wanted to lead the company. I was fortunate enough to be chosen; but, really, there were a number of us who could have been chosen and it would have been just fine.

Chisholm: What were your biggest challenges for making the transition to CEO?

Heitmann:We manage our company a little differently than most companies of our type. Being 100% employee-owned, we try to reach consensus with the entire officer team on many issues and major decisions, because we all own the company. We do not want a small group of people or any one person making decisions that affect everybody’s ownership stake. We try to achieve consensus on all of our major decisions.

I think the most difficult part is there are times where you cannot reach 100% consensus; nevertheless, you need to move forward. That can be difficult, challenging and a little stressful at times. Our process may be a little slower than that of most companies in terms of the decision-making and processes we go through strategically, but we believe getting consensus and buy-in from everybody is more important than moving forward without that buy-in.

Chisholm: How many people are on your officer team?

Heitmann: Twelve.

Chisholm: You mentioned that Garney is an employee-owned company. How does that affect your retention rates?

Heitmann: It greatly increases them. We have extremely high retention and low turnover. It is a direct result of being employee-owned. It is unique in any industry, particularly in heavy construction, to have field resources and crews that have been with you for many, many years. That is a huge component of our success.

Chisholm: How does that impact productivity at Garney?

Heitmann: Again, it increases it. Our pipe-laying crews and concrete crews have been working together for years and, in some cases, decades. They work together like a well-oiled machine. We know we have some of the highest production rates in the industry due to that.

Chisholm: When you are searching for new hires, since you are employee-owned, how do you ensure that they’re going to fit into your culture?

Heitmann:We do not do any type of behavioral or personality type testing. It is really just a normal interview process and gut feel on whether or not we think individuals will fit into our organization. And not all of them do; but for the most part, people want to be part of something that is successful, and they want to be part of something that has a purpose. We feel we have that at Garney. People will adapt and engage in the culture once they understand it. I think if you put people in the right situation, they are going to buy into it and commit themselves to it 100%. Like I said, not everybody works out. But for the most part, it is not difficult to find people who want to be part of a culture like this.

Chisholm: Which brings up a question: Where do you go to recruit new employees? Besides on your website, do you advertise on any of the big Internet jobsites? Are you going to universities?

Heitmann:We do the majority of our recruiting out of universities. Most employees, in terms of project management and superintendent positions, are hired exclusively out of universities. We do very little advertising on recruiting websites and we do not use recruiting or hiring services.

Chisholm: Once you bring somebody to Garney, what is the onboarding process like?

Heitmann: Most of our new hires are recent college graduates. Whether they follow the project management track or the superintendent track, we want them to spend some time in the field, laying pipe or pouring concrete.

After they have learned the basic safety aspects of the job, we want them to get their hands dirty and perform the crafts, because we feel that they are not going to become good project managers, superintendents or estimators if they do not understand what it takes to do the work in the field. We have our people spend time in the field initially, right out of college, and then after that they transition into more of their project management or superintendent roles. But the field experience is key for a successful onboarding process.

Chisholm: How much time do the new hires spend in the field?

Heitmann: It varies, but a minimum of three months. On the superintendent track, we try to keep them longer, maybe six months or more. On the project management side, it is usually less, usually between three and six months.

Chisholm: Garney’s mission statement mentions allowing all employee owners to realize their full potential. How is this achieved? What sort of training and development opportunities do you give your employees?

Heitmann: That philosophy was something that Mr. Garney developed, and his intention was to encourage all employees to think like entrepreneurs. He always encouraged us to venture out and find ways to satisfy our customers, be profitable and improve our operations —to do whatever it takes.

Mr. Garney was always open to new suggestions, new ideas and new technology, and he always wanted us to spread our wings. If an employee felt he or she could go somewhere and run a profitable profit center, his reaction was, “Let’s go do it. Let’s set up an office.” He was proactive about that and encouraged us to go out and be successful.

I think that is the intention behind that philosophy, but it also boils down to not holding people back, but empowering them to be successful by pushing down decision-making and keeping the organization flat. It is more of a mindset, from the top of the organization, to give our employees the freedom to be successful.

Chisholm: When it does come to employee training and development, is that done at each individual branch, or are you doing it at a central location?

Heitmann:We do both. In our six offices, we do regional training twice a year. And then once a year, we bring everybody to Kansas City and have training workshops for the entire company.

Chisholm: That must logistically be fun to plan, because you have so many employees.

Heitmann: Yes, it’s a big effort. The training is important, but just as important is getting the people around each other, developing trust and relationships. Our crews and people move fluidly around the country. If they do not know and trust each other and don’t have a good rapport, it is just not going to work as successfully. Spending time together and getting to know each other is a more important part of the training workshop than the training itself is.

Chisholm: What happens if an employee is not reaching his or her full potential?

Heitmann: The expectations are high at Garney. Occasionally, people have not lived up to that and moved on to other companies. The one thing that we are trying to convey is that we want people to perform and excel in their particular roles and take great pride in their work. Whether you are a backhoe operator, an accounts payable person or a project manager, as long as you’re performing at your best, then Garney’s going to perform at its best.

When employees are not performing at their best, we try to counsel them like any company would. But fortunately, we don’t encounter that problem a lot. It’s interesting that when you develop a great culture, people want to perform well, not only for their own sense of accomplishment, but also because they do not want to let their peers down. It’s a culture of knowing that everybody you work with owns the company. When you’re spending money, you’re spending their money. When you’re making money, you’re making money for them. Our employees want to do really, really well for the company, but also for each other.

Chisholm: When people come onboard, is there a formal mentoring program?

Heitmann: It’s not extremely formal, but we do have a program. Each person who comes onboard goes out in the field and is assigned a project manager who will become his or her mentor. The mentors act as a sounding board, because most of them have been through the exact same thing coming out of college and they understand everything that the new employees are going through. It works really well.

The key is finding the right mentors. We have many great employees, but not all of them are great mentors. So we must keep finding those people who like to teach, talk and listen, and match them up with the new, young talent.

Chisholm: What about interns? Do you offer internships?

Heitmann:We love interns. It allows them to get a feel for Garney and it allows Garney to get a feel for them. I estimate that 75% of our college hires are people who interned with our company.

Chisholm: What sort of projects do the interns work on?

Heitmann: Our focus is water and wastewater construction, so pipelines, treatment plants, pump stations, tanks; we have them working on all those type of projects.

Chisholm: And does that happen in all of the branches?

Heitmann: Yes.

Chisholm: Your mission statement also talks about integrity being the shortest path to success. Tell us about integrity at Garney.

Heitmann: Integrity is another one of Mr. Garney’s main philosophies that he drilled into us when we started with the company. He told us that, particularly in our industry, it is easy to take shortcuts. He always said you’re going to be tempted and have opportunities where you can choose to make a decision that is without a high integrity. You may obtain a short-term gain with that decision, but in the long run, you and the company are going to lose. Therefore, choosing integrity is going to be the shortest path to success, because, ultimately, shortcuts will hurt you in the long run. And that is a huge part of Garney’s brand.

If you ask owners and engineers in the water/wastewater industry what they think about Garney, we believe they are going to say that we have tremendous integrity. We have great experience, skills and know how to build pipeline and plants, but I think more importantly, they’re going to say, “They treat us fair. They do what they say they’re going to do. They don’t take shortcuts.” That is the type of quality that gets us repeat work, that gets us qualifications-based selection work. It really boils down to making the highest integrity decision that will always be the best decision in the end.

Chisholm: I assume you have ethics training for new hires, as well as the entire company, from time to time?

Heitmann:We don’t necessarily have “ethics training,” but we have it as a topic in our workshops. Again, it gets down to the culture. Once people understand our culture and that this is the way Garney does business, they quickly realize that if they don’t follow that to a “T,” they’re not going to be at Garney.

Chisholm: That was going to be my next question, if there are any repercussions for not following that.

Heitmann: Yes. Any employee who does not embrace our philosophy of integrity will no longer work at Garney. Vendors want to work with contractors that have high integrity, as do owners and engineers. In our industry, this attention to integrity has allowed us to stand out from the crowd, and it has proven to be a huge component of our success.

Chisholm: With the economy supposedly beginning to rebound, do you see any specific challenges ahead?

Heitmann: In most areas of the country, the municipalities just do not have the funding to build projects that they need. That’s the biggest problem. Projects are not being built and that is creating downward pressure on pricing, so it’s still a very, very tough market. It looks like it is going to be very tough for at least a couple more years. We don’t see it really starting to pick up until 2015 when we think municipalities will start getting their funding back.

Chisholm: During all of the recession, did you have to lay off anybody?

Heitmann: No. In fact, our company is bigger today than it was at the peak of the economy in 2007. Our employee count has not gone down at all. It’s increased.

Chisholm: When your market does start to rebound, have you thought about attracting talent? Because that is going to be another big challenge, with so many of the baby boomers retiring.

Heitmann: It is. There is going to be a huge shortage of talent in the future. We think it is going to be less of a challenge for us than other companies because of our employee ownership. We have a lot less turnover and greater retention, so we think it’s going to be more of a problem for our competitors. But nonetheless, it will be a major challenge.

We call it the accordion effect. Our resources will compress when we have less work. And then when the workload increases, our accordion stretches out. The reason we can do that well is that we have people that will do anything that they need to do to make the company successful. If their roles in the company change in order to keep everybody busy, then that’s what they’ll do.

Chisholm: You mentioned earlier that, when you became CEO, Garney was looking to fill a number of positions because a lot of people had retired. Looking at your website and the ages of some of key management, it’s not going to happen soon, but it will happen again. Have you started thinking about who will replace you, or is it too early?

Heitmann: It’s really too early. We just went through that. It’s not that we don’t have to worry about it, but it’s certainly not a top priority for us right now because we’ve got a pretty stable officer team right now. But the time’s going to come, as you said.

Maybe 10 years from now, we will seriously need to be starting that process. But I don’t think it’s anything we necessarily worry about. We certainly will plan diligently for it, but we’ve got such a strong foundation of talent below us and coming up through the ranks of Garney that we have 100% confidence that they will be able to transition into the new leadership team in the future without any problem at all. In fact, we have more of a concern of providing enough opportunities for our people.

As I previously mentioned, being 100% employee-owned, we have very low turnover, so one of our biggest challenges is finding opportunities for people and ways that they can be successful through organic growth. We’ll be ready for the next succession.

Chisholm: Have technological advances played a big part in Garney’s success in any way?

Heitmann: Yes, to some extent. It probably hasn’t had as much of an impact in our industry as others, but the biggest technology advances in our industry primarily deal with water treatment processes and types of filtration systems, etc. We continue to try to maintain a strong résumé of the latest technology installations. The new plants that are built want the latest and greatest types of filtration technology, and when we can show them that we’ve installed those systems, then it’s a great benefit for us to have that experience.

In terms of the actual means and methods of installation, there are a few technological advances in terms of equipment, speed and fuel efficiency. But when it comes to laying pipe, we’ve laid it pretty much the same way for the last 50 years.

Chisholm: Do you do any work outside of the United States?

Heitmann: No. We’ve built two projects in the Bahamas —that was back in the early ’90s — but that’s the extent of it.

Chisholm: Do you have any plans to go global?

Heitmann: Not at this time. We do not want to deviate too far from our core expertise. When you are dealing with difficult ground conditions, deep excavations and all types of unknown factors, it is very risky. To go into areas that you are unfamiliar with and to venture into new territories is something that you just don’t do as quickly and easily as you may in other types of construction. So we don’t have any plans right now to go outside the U.S.

Chisholm: Thanks, Mike, for your time and insights about Garney Construction. We hope your values and philosophies continue to make the company successful.


Kelley Chisholm is the editor of FMI Quarterly. She can be reached at 919.782.9264 or via email at kchisholm@fminet.com.

 

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