Here’s an unusual management situation: At Cascade Acoustics, Inc., based in Tualatin, 11 miles south of Portland, Ore., Brent Fulbright, 41, has begun his executive apprenticeship program—he started in his first upper management position by becoming president. On the other hand, Robert E. Burgess, who had been the company’s president since 1987, has demoted himself to CEO.
Actually, this is not as unusual as it might first appear. Rather it’s an apt illustration of the company’s long-time policy of nurturing employees and providing them a career ladder within the company, as opposed to going outside to hire expertise.
Fulbright started with the company about 15 years ago as a drywall finisher and worked his way up to carpenter, job foreman, field superintendent, project manager and estimator. This was somewhat similar to Burgess’ own history. The company was founded in 1957 by Jerry McGee. Burgess went to work for McGee in 1969, worked his way up, started purchasing shares in 1974 and completed the purchase in 1987.
In the current situation, Burgess says that he and Fulbright “have been working on a transition plan for several years. We looked at all the partial ways of transferring shares, but today it’s all convoluted, both business and tax-wise. So we decided that I should transfer all the shares at once, which creates a tax benefit for both of us. Also, I’m not ready to retire and he’s not yet ready to take over, so we have a contract for my continued employment over the next five years, during which time I will gradually phase out and leave the business in his capable hands.”
This transition plan, as it’s worked out, simply reflects the company philosophy. “We have grown rather slowly through the years, made mistakes, took on some spurts too big, stumbled a little bit, but were able to land on our feet and continue moving forward,” Burgess says. “We found a key was promoting from within, rather than going to the outside. We kept growing our inside force with the power to build more, larger and more complicated projects, and tried to maintain a steady growth at a reasonable volume. We’ve learned that more volume does not necessarily mean more profit. All we have is our service and people. Our focus has been to increase the skill knowledge of our people. When they become capable, you can increase volume. If you do it the other way around, you’d better be careful.”
The company started primarily as an acoustical contractor, gradually branching out into drywall, steel stud framing, insulation, fireproofing, plastering and gypsum wall board systems. “We’re now a package contractor that can offer the full range of services,” Burgess says.
One way of measuring the effectiveness of this philosophy of growing the business through growing internal expertise is to take a quick look at the four Project of the Year Awards that the company has received from the Northwest Wall and Ceiling Bureau. These are granted primarily for high craftsmanship while often also taking into account the difficulty of the job.
Just Rewards …
In 1986, in Portland, the 21-story One Financial Center office building was erected. Notable was its extensive diamond entry layout. At each corner of the building, which took up a city block, was an entrance that led down a corridor at a 45-degree angle to an elaborate lobby. Cascade did the layout for the floor, and did the lath and plaster for the large columns, cornices and suspended ceiling. It also did the drywall, curtain wall framing, fireproofing and insulation. The building, at the end of the Morrison Street Bridge, had limited access.
In 1991 the award went for work done on One Thousand Broadway, also in Portland. Unlike the other three projects in which Cascade did virtually everything, this one saw the fireproofing done by a competitor. This office building had 30 stories, which had 10 movie theaters underground. Elevators in the lobby took people either down to the theaters or up six stories of parking garages to the start of the offices on the seventh floor.
One of the challenges was that the outside apron had a metal pan ceiling, made by an East Coast manufacturer, so the panels were not enhanced for seismic protection. Cascade had to design a progressive system that would be permanently anchored and would provide earthquake protection.
Twin difficulties were the design effect that extended over the edge of the building as well as the top of the rotunda, which was a round penthouse that had to be plastered. The solution? Burgess says, “We cantilevered the scaffold off the structure and built it up two stories to do the plastering.”
In 1996 the project was a law library at Louis and Clark College at Oswego Lake, Ore. This was a three-story building that had large areas treated acoustically so the students were able to lounge around and read. “There were more acoustical panels in this project than most, but there were not any real challenges,” Burgess says. “It had a very clean architectural design, so all we had to do is follow the design.”
… And Some Pitfalls
Not so easy was the Nike Tiger Woods Conference Center built in 2001 in Beverton, Ore. This $4 million building was basically built on three levels, the main auditorium 45 feet high, with small 15 feet high conference rooms set up around it. “There were custom stainless steel suspended ceilings and about 5,000 linear feet of highly ornate layout in the wall structure in the form of Fry Reglet wheels,” Burgess says. “And the schedule was very difficult.”
In fact, this was the first of about 12 previous buildings on that campus that didn’t end up in litigation. The previous subcontractors who took on these buildings couldn’t keep the schedule, went to court and lost. The one that attempted the first three, an established subcontractor, had to close its doors as a result.
“We were the low bid on the first three,” Burgess says. “But when we sat down to negotiate the final contract, in a room full of Nike lawyers, we couldn’t come to an agreement on the scheduling. We saw we were over-scheduled and would spend too much in costs trying to accelerate.” For the building he completed successfully, Burgess says he teamed up with a tough general contractor with whom he worked well, and together faced down the Nike team so the latter agreed to a reasonable schedule.
Burgess believes in maximizing the expertise of his employees, but then staying within realistic limits of what he can do well and on schedule.
“We have a solid enough relationship with general contractors and builders in the industry that we have been called upon several times to complete projects that our competitors have failed to complete,” Burgess says. “For instance, in the Veterans Hospital in Portland, another firm failed to complete the work on time, so we were hired to finish up on a $22 million job on a time and material basis for exterior to interior plaster as well as acoustical ceilings and other aspects.”
Why do others fail in this respect?
“Most of the time what happens is they don’t have their costs covered,” Burgess replies. “They run out of money and can’t complete their projects. We’ve established a computer program on what our costs will be in terms of money, time and material. We don’t bid based on the market, but our estimating. Therefore, we’re not always the cheapest. When the economy is down and prices drop, we don’t want to go down there. There’s no sense in being both tired and hungry. We’d prefer to just be hungry.”
Burgess’ wisdom in this area, he admits, was hard earned. “We’ve had some very good years, and some not so good years,” he says. “1992 was especially tough. It was a combination of too much volume, a labor strike and poor management.”
The year started with an estimator bringing in about $8 million worth of work within three weeks. “It was, I discovered, a poor estimate, and I should have fired him after the first job, but I waited until the third, when I fired him and his superior who approved the estimates,” Burgess says.
This was combined with a labor strike that resulted in the company getting behind schedule two to three weeks. “The management mistake here again was mine. I should have stood firm against keeping the general contractors who pushed me into keeping the schedule. I should have just said that circumstance required that I need more time. I gave into their pressure, but the dollars were not coming out of their pocket, but mine. Our number of employees went from about 180 to 300 trying to catch up.”
It was out of this experience that Burgess determined to evolve a computer system that put the cost factor on a sound basis. He purchased the construction estimating and construction accounting packages from an Oregon software manufacturer but developed his own proprietary databases.
“We also have a log in which we have developed written processes, ways to organize and build projects,” Burgess says. “We try a lot of things, and document what works. We keep reminding each other with horror stories about the things that really fail.”
Cascade has 13 employees in the office. Field workers vary from 100 to 200. When Burgess took over in 1987, annual volume was $3 million. Now it’s $13 million.
While his once 70- to 80-hour work week has now tapered off to 50 hours, and will continue to taper over the next five years, Burgess still looks for ways to inspire his customers to better their own prospects with the company, and so improve the company. “We’ve recently started a field foreman incentive program, which is tied to the profitability of the job. The higher the profit margin, the larger their incentive award.” Since the company takes on projects from $500 to $4 million, the range of incentives checks vary, but they go from $500 to $10,000 depending on the size of the job and the amount of the margin.
“We feel it works well. It gives a foreman a reason to manage all aspects of the job because he is getting a piece of his efforts instead of just doing it for someone else,” Burgess says. “As a result of this program, our company’s margins doubled in 2003 over what they were in 2002.”
