Price of success



They say that success comes at a price and certainly on a personal level there are commentators aplenty ready to question whether it’s one worth paying. But what of a company that has successfully grown year on year – surely then the price is right? Well perhaps so but, I contend, it is worth knowing and understanding the price before starting down the road to success.
In June I had the privilege of presenting at the OPI eurOPe 2007 conference and looked at this topic under the title Growing Pains. Using Rok as a case study, I showed the challenges faced by a company that has over the last seven years grown rapidly year on year. Its growth has been achieved in a number of ways: by focused organic growth from all of its area businesses; by merger with a company slightly larger than it was at the time; and by the acquisition of a number of smaller operations in order to buy a local presence and customer growth.
While Rok is in the construction industry, its growth and the challenges it faces are similar to those faced in the OP industry. International OP distributors such as Staples, Office Depot and Corporate Express have all grown their market share through the acquisition of local resellers, and most recently Antalis has acquired MAP Merchant Group. In the UK, the recent takeover of ISA and Kingfield Heath has substantially increased the size of the latter. Each of these growth strategies brings new opportunities and challenges, so the lessons from Rok really are transferable.
Let me start with some background on Rok. Formed as a carpentry company in 1939, it had grown into a sleepy and underperforming West Country building company by 2000, when the new chief executive arrived. Garvis Snook had been in construction all his life (well not strictly true – he’d had a spell in demolition) and had come to realise that many of the woes of the construction industry could be put down to the way that people were treated. In particular, a spell running an underperforming team and transforming it into a really high performing one convinced him that setting clear objectives, getting people to own their own destiny and then letting them loose was key to real customer satisfaction – and therefore repeat business.
So Snook set about transforming Rok (or EBC as it was then called). In seven years Rok has gone from a share price of 79p to one that as recently as May was over £12, a turnover of £65 million ($130 million) to one approaching £1 billion, from five offices to 51 and from 450 employees to nearly 4,000! Success indeed but how did it happen and what were the pitfalls along the way?
Snook’s first act was to throw away many of the company manuals and empower the teams – an act he came to regret as people assumed they were free to spend money as they saw fit, without understanding the wider financial picture.
His next move was to get a team together that produced (after much soul searching) a set of company values. These were, and have remained, the guiding principles of the business ever since.
The vision, on the other hand, has undergone some changes. Initially setting out as a solutions provider proved to be too vague a strategy, so Rok set its focus firmly on being "the nation’s local builder", combining both local presence and the supply chain advantages of a plc. Such an approach is clearly an option for the OP industry.
Snook has also collected a fine team around him. The financial director (Ashley Martin) had considerable acquisition experience when he arrived, he ‘poached’ a brand director from BA (Sue Moore) and he has an operational director (John Samuel) who complements his own entrepreneurial approach with a
no-nonsense pragmatic style. Together they are taking Rok into unknown territory and at the same time are transforming the industry. So against that backdrop, you might ask what can be learnt?
The setting of a clear vision, a set of values, creating a strong team at the top and then setting a simple strategy – well that’s all obvious. But the challenges Rok has faced along the way are where the real learning has come from.
Its experiences have shaped its approach. The knocks (and there have been plenty) have provided a corporate resilience that, in my estimation, sets it up well for the future.
Perhaps the biggest hurdle that it has faced is getting the leadership right, and as the company continues to grow, this remains a challenge because what it wanted from leaders last year has already changed.
And the delegates at the eurOPe conference were happy to share another problem – that perception of builders isn’t entirely rosy! Known for their late delivery, shoddy workmanship and ability to lift the price throughout a contract, the building industry in this regard doesn’t mirror the OP industry. However the challenge of leadership does. I liken Rok’s difficulty to fishing in a carp pond, but wanting to catch salmon or sea trout. The construction industry has a common background; finding a leader who has a different outlook has been difficult.
While it is possible to bring someone in from outside (or to fish in a river to continue with my analogy) they need considerable support (or oxygen) when they are then dropped into the carp pond! Getting leaders to own their own business, approach their customers in a totally different way and change the culture of the industry has been a continual challenge and probably will remain so for some time yet. Rok has invested considerably in the development of the leadership capabilities of its business managers, and this summer I have been discussing with the company how it can give its regional leaders the necessary skills to coach and develop its area leaders. The task goes on. It is a task that, I suggest, faces the OP industry. How are you going to get leaders with the right industry experience on one hand, but who have not become so versed in the way that the industry currently runs that they are set in their ways? A look at the sort of B2B services provided by some of the US players suggests that significant change may well be on the way in Europe (as if there hasn’t already been enough change) so your leaders had better be capable of reacting.
I mentioned earlier Snook’s act of throwing away the company manuals, something that he did literally in front of a couple of hundred people at a meeting. Manuals are necessary though, particularly as you grow, so that there is a degree of consistency across the company. Manuals are now back in vogue but instead of being prescriptive, they are used as guides.
Rok likes to consider that all of its employees have "freedom in a gilded cage". This means that they are free to use their best judgement but have a set of non-negotiable guidelines to fall back on. Rok seeks to keep the balance between control and empowerment, and of course the freedom staff have means that they are better able to respond to change. So within the typical metrics-driven organisations that are around, just how do you give your employees freedom to respond to the unusual without having to always ask for permission?
Talking of change, it really is true that the only constant in Rok’s life is change. The further out from the centre of Rok you go, the harder it seems to have been to respond to change. It’s not that the people are any more resistant to change – people react in different ways wherever they are in the organisation. However, by and large those closer to the centre have more time to absorb the change. Communication
The board and the operations team meet regularly to discuss and debate proposed change. They have the time and the opportunity to consider the pros and cons, to look at the impact on the business as well as the customer and, as a result, by the time the change is announced, they are happy(ish) with it. Not so the troops at the coalface. The first they tend to know about it is when either they hear about it at a briefing session or a message comes down the line. But when that happens the change is instituted almost immediately and the employees are expected to sign up on the spot – no opportunity, by and large, to reflect, discuss and debate. So communication to the troops is of key importance. A lesson perhaps for all of us?
There was a time (early on in the growth) when Snook was able to visit each of the offices once a month and was therefore able to speak to almost everyone. He was able to get his message, his passion, his dreams and hopes across on a personal basis. That is no longer possible given the size of the business.
Communication now comes through a diverse collection of layers of management, each of which will have a natural tendency to put their own spin on things. Communication has accordingly assumed a far greater challenge and getting it right is far more difficult – and important. Perhaps the biggest challenge faced by Rok as it has grown has been the recruitment and induction of people. Typically over the last two years, 80-100 new people have joined every month – and that’s not counting the people who joined through acquisition. Keeping the culture right (one of teamwork, customer focus, financial prudence, being mould-breaking in its approach and on-time delivery) means that considerable effort has needed to go into ensuring that the right people join, and that they understand what is expected and required of them.
Each new recruit now goes through a 48-hour centralised induction process where the vision, values, strategy and business objectives are explained, not through dry "chalk and talk" presentations but by interactive sessions involving everyone.
Getting the balance right
Everyone from the latest director to the youngest trainee attends as they join. This is a process which, allied to a real effort in recruitment, has paid dividends. Not only has the culture remained despite the rapid growth, but staff turnover dropped by seven percent in the first year of this induction process. The bottom-line savings have more than paid for the actual cost of the programme so it is an opportunity for all of the larger organisations in the industry.
Getting the balance right between the heart and soul of the business and the necessary process and procedures in any organisation is never easy, and it is more difficult in a rapidly expanding one. Rok certainly hasn’t always got it right and there has been, and remains, a tension between getting the immediate task done at maximum profit, and investing in the future. What Rok has proved is that by getting the basics right, investing in its people and having the resilience to stick at it in the face of much criticism from within its industry, both its immediate business performance and long-term future has been secured. That consistent focus has helped employees cope with the pace of change and the growth of the business. Another lesson perhaps?
Perhaps the biggest accolade has come from the City. Not only has Rok been the best performing construction stock for the last six years, it has had record returns year on year as well. Two recent large acquisitions (Tulloch in Scotland and Sol in the Midlands) have been financed because the institutions have faith in the leadership, strategy and business acumen of the Rok leaders.
It hasn’t been an easy ride at times working alongside Rok, but it is always fun!