David Noël: Welcome to the Manitoba Business Podcast, featuring interviews with business leaders and entrepreneurs based in this great province. I’m David Noël.
Today’s guest is another incredible Manitoba success story. When he was only 27 years old, he scraped together enough money to purchase a struggling truck dealership with a partner. He turned it around almost immediately, and has since grown the company from one location to 17 across Canada, along with several subsidiaries. Our conversation walks through the entire story, together with what he would call his keys to success.
I hope you enjoy this episode. If you do, please consider adding a review on iTunes. I would also encourage you to spread the word about this podcast—the website is www.manitobabusinesspodcast.com
Without further ado, here is Doug Harvey:
[to Doug] So, Doug, thanks so much for taking the time.
Doug Harvey: My pleasure.
David: Maybe to get started, if you could just tell us a little bit about yourself and what you do.
Doug: Okay. So, my name is Doug Harvey, born and raised in Winnipeg. I started Maxim, actually, April Fool’s Day 1981. I have a commerce degree from University of Manitoba and went to work for Ford Motor Credit coming out of university, had 18 months there. Absolutely hated it, but I learned because I grew up in a nice middle class family so I thought everybody told the truth and paid their bills. So that was a great opening into the fact that there are some people out there; there’s a small percentage that can make your life very difficult. They’ll find ways of trying not to pay you for the services they bought. Kind of a cute story. I had left at Ford Credit. I had a manager, and I was due to be promoted; somebody was being promoted above me. I was the logical one, and the manager called me in the office and he said, “Doug, I’m not giving you the job because you don’t like working here.”
David: Good boss.
Doug: He was a great boss. And I’ve told that story throughout my whole career of somebody being honest. The easiest thing in the world, “I’m a nice guy. I worked hard. Why wouldn’t you promote me?” Because he knew that I hated being there, so why would you promote…and so, of course, I was young and sassy so I go “What the hell do you think you are telling me what I want and what I don’t want?” Stormed out of his office, went home, thought about it, and thought, “Boy, did he call it right.” Went back in, apologized for my behavior, thanked him for his honesty, and handed him my resignation. I got a job at International for less money, but I loved the business. When we were little boys, we had Tonka Trucks in the sandbox. I get a bigger sandbox and bigger trucks, but have loved the industry. But it was a great lesson for me on be honest with people and call a spade a spade.
David: That guy was smart. He was doing you both a favor and taught you a valuable lesson. There’s no use carrying on a sugarcoated relationship.
Doug: No. He could see I didn’t like what I was doing, and so why create another problem for him that he’s going to have to deal with but just cut it off at the knees.
David: It looks like it ended up working out pretty good for you, too.
Doug: I don’t know how it did it for him. I assume Ford Credit is still in business, so it worked out for them, and it worked out very well for me.
David: Absolutely. Very cool. One of the things that I’ve realized as I’ve done the interviews that I wished I had asked at the beginning, because things seem obvious to me and then I make assumptions that are stupid. Can you explain the business model of what Maxim does today?
Doug: So, what Maxim does is we are providers of services to the transportation industry. What our niche is, is that we can sell you a truck; we can rent you a truck; we can full service lease you a truck; we can sell you a new one; we can sell you a used one. Same for trailers, we can sell you new truck parts; we can sell you new trailer parts. So we really look after everything from the front bumper of the truck to the rear taillights of the trailer, and we do it in multiple cities across Canada. So, our model is very different. We have competitors in every facet of the business, but we don’t have a single competitor that does the breadth of services over the breadth of geography.
David: Interesting. Okay.
Doug: So, for instance, if we have a customer who’s head-officed in Chicago and they have need for services in Canada, they can call us and we can do everything for them. They don’t have to go to a truck provider, a trailer provider, a full service leaser for trucks or a full service leaser for trailers. We do the whole thing.
David: I see. And do you offer maintenance as well?
Doug: Absolutely. So, really, in our model, it’s like a location like this. It’s just like a car dealership except we sell heavy trucks, and next door we sell heavy trailers and we have a body shop.
David: Okay, interesting. What do your customers look like? Are you doing fleet management type stuff?
Doug: Our customers are varied, very varied. We sell school buses, so we deal with school divisions and bus operators. We sell cement mixers. We sell sewage wagons. We sell water trucks. We sell tractor trailer units. We sell refrigerated trailers. We sell dump trailers. So, our customers are pretty varied from a guy coming in to buy a $20,000 dollar used truck with mud on his boots, to a guy buying 50 trucks that’s a very professionally managed type business and everything in between. Anybody that needs a truck or a trailer is our customer.
David: I see. Okay, interesting. And you said you started in 1981. Before that, you were working for International, so your boss gave you that lesson and then you left and you went to International?
Doug: I went to International.
David: What did you do there?
Doug: I was a field rep, and that was in the late ’70s. International had a lot of financial issues at that time, and throughout North America they owned all their branches that were in the retail business and major markets. So, in Winnipeg, it was a company-owned branch that would do what we’re doing today. And Winnipeg was their losingest branch in Canada. So it’s actually kind of a cute story because…I was 27 years old. They put me in a “here, just sit in the branch. Just don’t do anything stupid while we get it sold.” And so there was a guy, a fellow by the name of Jack Kirby that was originally from Winnipeg but had a dealership in Kitchener, and he was interested in buying the branch. He was going to have a partner, and the partner was from Toronto.
So the partner brought his wife out on a beautiful January day. It was about 400 below zero, the wind whipping across the tarmac. She says, “If you think I’m going to live here, you’re nuts.” So Jack phoned me and he said, “My partner’s getting cold feet.” Pardon the pun. And he said, “Would you be interested?” and I said, “Absolutely, I’d be interested.” And he said, “I’m gonna tell my partner to shoot or get off the pot. I’ll phone you the next day.” Phones me the next day and says, “You’re in.” It was wonderful for me, because I love living in Winnipeg. I never wanted to leave Winnipeg. And here I had this opportunity to be my own boss and to chart my own path. So Jack gave me that opportunity and so we started as 50% partners. And at that time we each put in $75,000. And I’m 27 years old.
David: No kidding. That’s a lot of cash.
Doug: I could raise 50, but I couldn’t get to 75, so he loaned me 25. He said he thought it was important that we were 50/50 partners, so he loaned me 25. When we went to the bank, the bank manager was polite enough to wait till I left the room before he ripped up my personal guarantee, because I was tapped out. But away we started. So I went home and told my wife that I had this wonderful opportunity to buy a business that had lost a quarter of a million dollars a year for three successive years, and interest rates were at 20% and we were putting everything we owned on the line. And to her credit, she said “We started with nothing. What do we have to lose?”
Doug: And we’re not married anymore, but her saying yes worked out very well for her as well.
David: No kidding.
Doug: So anyways, it was just neat. I always say it was too stupid to say no, and I love…I tell the story that I realized very early in life that I wasn’t going to have to work for myself. Because I can remember my dad meeting me at the driveway when I’m about 14 years old and grabbing me by the ear, and dragging me up the driveway, giving me what-for because the football coach had phoned and said that I was talking back to him and I wasn’t listening to him and stuff. And I said, “Dad, I’m not going to listen to somebody that doesn’t know what they’re talking about.”
And so I realized very early on that I was going to have to probably be my own boss, because I don’t suffer fools lightly and you have a path that you want to follow and I don’t want somebody standing in the way of it. So, anyways, all those kinds of things lead to the fact that I was given an opportunity, and whether I was too dumb to say no or just was fired up that I couldn’t see the reality of the situation. You know, “I’m going to be an owner.” I was all excited. And away it went. It’s been a great journey.
David: No kidding. We’ll go back to the risk you took in a second because that’s really interesting. But going back even a little bit more to what you just said about growing up and knowing you weren’t going to be able to work for someone else, and then you went to school for commerce, and then you did go out and get a job for a bit, did you know right away when you were going into Ford Credit and then later at International, did you know that those were stepping stones for you?
Doug: No, no. It was interesting because my dad, who I always had a ton of respect for and was just a very good father, he told me at the time I took the job at Ford Credit…and why did I take the job at Ford Credit? All my friends are making $700 to $800 as articling CA students. I’m making $1,200 and a company car. I am the man. So, what do you know coming out of school unless you’re taking in some sort of chosen profession like a CA, or like a doctor, or like an architect or whatever? I’m in general business, so I’m just trying to understand the world. And if some guy wants to pay me 500 bucks more than my buddy, I’m in.
And my dad, I remember him saying that’ll be the greatest experience you ever get, because if you can sell a guy on giving you money as opposed to him having to give the money to somebody else, that’s, A, a great sales job and you’ll be awoken to the real world. I’d lived a sheltered life just because, as I said before, I assumed everybody told the truth and paid their bills. That’s what we did in our house. And my friends, it was the same with the people that you hung around with. And you just get exposed to a side of the world that I wouldn’t have been exposed to otherwise. So, in retrospect, great stepping stones. At the time I was doing them, not a flipping clue. It was about the dough and the car.
David: Totally. Okay. Was it even in the back of your mind, this thing that you wanted to get away from having a boss, or was it you were just skating?
Doug: I think in the back of your mind, you’ve gone through a business school. And I think in the back of your mind, everybody thinks “Wow, working for themselves, that’s really cool,” because you don’t know what working for yourself is all about, so you think that’s kind of utopia. And you still hear young kids today, “I want to work for myself.” “Okay, well, do you know what that means?” It sounds nice but they don’t really know the true significance of it, good or bad.
David: Sure. And so now let’s jump back to the risk you were taking. You said the company was losing a quarter million bucks a year for three years running, and you were pumping your life savings into getting on the train.
Doug: Yeah. And that is just one of those ones you seize the moment. And I can remember a number of different times where there was an opportunity to…I remember a gas station in Birds Hill. I was driven towards working for myself, but I just didn’t know in what. And so here you have this presented to you. I worked for International for three years now. I liked the industry. I liked the business. And that’s always a lesson I would teach anybody, is that you’ve got to have a passion for what you do. And if you don’t, it’s going to be a job forever. And so I love what I do. Not that you don’t have shitty days or not that you don’t have great days, but still, for over the course of time and over the course of a year, I just love going to work. I love the people. I love what we do. So, it’s easy, right?
David: Yeah. When you were jumping into it, did you have any plans for how you were going to curb the bleeding, or did your partner have any plans? What was the thought process there?
Doug: I’ve always been a people person, and my theory has always been those with the best people win. Everybody sells, especially today, they sell good products and they do good service and all the rest of it. But it’s people, and it’s fostering that sense of wining, creating that competitive spirit, creating that people that want to serve people. I just even look at it and say, at the time when I started – and we started with 26 people, today we have 850 or whatever – you just have to have people that want to win, that want to be better than others.
So, to me, we didn’t have anything, no magic, International, which was our truck brand. They didn’t change the trucks. They didn’t have any other tools that the other guys didn’t have. But somebody told me early in life, they said, “What you need to be able to say is, ‘David, if you’re not dealing with me, then if you deal with the competition, you don’t get me.’ And if that’s not meaningful to the customer, then we’re not very good at what we do.” And I think there’s all sorts of different buyers, but for the most part, people want to deal with people, people that they trust, people that they respect, people that say thank you for the business.
If you’re going to spend your day with somebody, make it a pleasant experience, so somebody will a smile on their face, somebody that says “thanks you,” somebody that goes the extra step to find that one question that they can’t answer. And so, to me, all we did was change the people. We got people in that cared.
David: How do you do that? So, when you first came on, were you specifically looking to change the team and did you do personal changes right away?
Doug: Absolutely. We had an accountant, and I won’t mention his name, that worked for the branch at the time. So, I’m in there. I’m an excited guy and I’m enthusiastic. I’m creative and so I’m doing deals. And this branch accountant would come and say, “You can’t do that.” And I said, “Why can’t I?” And he says, “Do you know how much paperwork that’s going to create?” I can remember that like it was yesterday. And so he was a little bit surprised when I didn’t keep him.
David: Get off the bus. No kidding.
Doug: Go on. And brought in people that wanted to win, that wanted to serve customers. And so I’ve always said that our task is I want this to be a great place for people to work. You don’t have to love us here, but you better respect each other in the work place; you better work for the common good of the customer, the supplier, the community, and the internal customers; and you got to have that mindset. And if you don’t have that mindset, then it becomes a job and it just becomes one of many other jobs that are available, so try and differentiate ourselves.
David: So that was the main focus right from the get-go, was that you wanted to change the team and you wanted to have a team that stood out in the industry?
David: And so how did you actually go about doing that? Cutting the chaff is one thing that I can imagine you can identify the low performers, how do you bring in the high performers?
Doug: Well, I have a three-prong…and at that time, of course, I was doing the hiring because there was only 26 people, so we didn’t have the luxury of an HR department or whatever. I always said the very first thing I looked for was, A, there was always a persona. I mean, how do you judge the person? Does that look like somebody I’d like to buy from and stuff? So, the intrinsic characteristics. But I always ask if you grew up in a farm. You move to the head of the line. Why? Because farmers know what work means.
When a cow is calving at 3:00 in the morning, it doesn’t matter what time you get home from the barn; you’re in the barn. So there’s no timeline. And so you have to be able to have people that are willing to do what needs to be done, when it needs to be done. Second thing I look for, did you play competitive sports? Why? Because business is a competitive sport. And our P&L statement is, “Did we get an A? Did we get a B? Did we get a C? Did we get a D?”
David: It’s a scoreboard.
Doug: “Did we get an F?” That’s our scoreboard. And you work together. We have 850 employees. The receptionist at our building may not be the most highest paid person in the building, but if they’re not committed to being the very best receptionist they can be, if they hang up on them, are rude to them on the phone, we don’t get an opportunity to weave our magic. So, everybody has to be bought in. If the ship or receiver puts the wrong part in the right box and sends it out to a guy in Swift Current and it doesn’t fit on the truck, we’ve all failed.
So that whole teamwork aspect is very, very important. And then the third thing I always looked at was, do you have balance in your life? Do you volunteer? Do you work in whether it be youth camps or…do you do other things outside of work? Because I don’t want people that say…if people say, “I work 16 hours a day, seven days a week,” I don’t want them here. I want people that are well-rounded, well-balanced, good balance between home life, community, social life, work. That’s important to me. We work hard on the people process to create an environment that people want to be here, want to do the things that we expect, and want to do them better than everybody else.
David: Right. Was there any special recruiting stuff that you had to do to get people in the door? You just described the filtering process, but did you just put up job ads and have people come in?
Doug: That’s some of it. Different times in my career, when we’ve expanded, when we decided to get into the trailer business, I went around to four or five customers in town and said “Who’s the best trailer guy in the city?” So I went and found him, and it was unanimous and went and got him, and made him come on board. When we got into the body shop business, I did the same thing. So, some of it is word of mouth but there’s not a lot of people that grow up saying, “I think I want to sell trucks.” It’s an industry that not a lot of people…you’re driving to the lake and a stone comes up and “Oh, those stupid trucks.” It’s not something to say, “I didn’t realize there’s a life in this industry and one I’d like to participate in.” If you go through school, there’s a financial side, there’s an accounting side, but there’s not a lot of glamour in the transportation industry.
I realized very early on in my life that until they can send the load of lumber over the internet, they need us. How we do business has changed, but the fact is, they don’t land ships at my house; they don’t land airplanes at my house. They might bring it overseas in a plane then put it on a train and then put it on a truck, or they might truck it from the port, but a truck is always involved. Now you can buy things on the internet. Well, until they get the drone working, they still bring it in a truck. Everything that we eat, touch, feel, is involved in our life, came on a truck at some part of the journey. So they need our industry.
David: Yeah. It’s a good industry to be in. It just occurs to me, actually thinking back to those three filter questions, did you grow up in a farm?
Doug: No, no. But I just love what farmers stand for and that ability. And the other thing, of course, they have to be able to fix on the fly. They’re running a combine at one in the morning, the dealership isn’t open and they have to figure out how to get that combine working by themselves. So they tend to be very ingenuous, very hardworking, very industrious, and the ability to solve problems because they often times are on their own.
David: Absolutely. So, in a business where people are very important and where relationships are very important, especially at the beginning when your staff is turning over a bit and you’re hiring some new people, how did you build or maintain those initial customer relationships?
Doug: Well, the lucky part is, when they lost a quarter of a million dollars a year, they didn’t have a lot of customers.
David: Okay, so no worry about maintaining.
Doug: So there was some to maintain, but really there was no opportunity to go out and get new customers. And that takes time because our customer, they buy their product to make money. It’s not a consumer driven product. A guy doesn’t go by and say, “I love that red truck. I have no idea what the engine is,” right? I might buy a car that way, but I would buy a truck that needs to be up to spec, to be able to do the job that I need to make money. So it takes a while to build the confidence of the customer that you have the right product doing the right thing at the right…
David: And they’re fairly large investments and your customers are already generally spending money somewhere else, so you’re convincing them to shift a large segment of their budget, a significant portion of their budget over to you.
Doug: Big time. But to do that, you do that through time. You do that through earning their trust and earning their respect. And then of course there’s always new entrants coming into the business that aren’t pre-biased as to where they’ll do business.
David: Right. Did you seek those out to start with? Was that a good place to start?
Doug: I sought everybody out. They had a pulse and a wallet, we sought them out.
David: How did those initial conversations go? You would call someone up and just say…?
Doug: Well, it was pretty funny because the branch was downtrodden and they had had very good market share a number of years ago, and they had just let it lapse. So you had to go out and you had new people that had to be introduced. And to go up to customers and say, “We’re different now,” how? But if you go out and say, “Hey, we have a different service manager. We have a different parts manager. Here’s our new sales staff,” you had a story to tell. I always think it’s good to have something to be able to tell a customer, something new that’s gone on in the business, a reason to go and touch that customer. So, we certainly have lots of those reasons.
David: Even if the customers were no longer customers of yours or customers of International before you bought in, a lot of them would have still been on the books from previous relationships.
Doug: Sure. Yeah, absolutely.
David: That would have been helpful, too, in terms of having another excuse to get in the door.
David: Okay. How, if any, has the process changed since then?
Doug: Well, I would say what’s changed is as we’ve grown we’ve had to become more specialized, and certainly you want an HR department, partly to keep you out of jail, partly to make sure that you have good processes in place, that we do performance reviews, we do performance coaching. In the old days, you might have gotten disappointed with somebody and walked them out the door. Nowadays, you’ll end up in court without a good documented process for why somebody shouldn’t be here anymore. So that certainly has changed. I would say the courts are much more in favor of the employee than they are of the employer.
I think it’s just good process. If you want to have the best people, you need to have very good people processes – benefit programs, holidays, fairness, fun in the workplace, all of those kinds of things, and obviously an HR staff. And we’re in multiple jurisdictions, multiple provinces, and so you need to know the laws of those provinces and you need to have the right processes in Calgary as you do in Montreal. So you just can’t do it by the seat of your pants as we did when there was 26 employees.
David: How many locations do you have now?
Doug: We have 19. Nineteen on the Maxim side. We have a company out of Edmonton, called Summit Trailers. And we have two locations. And then we have a company here in Winnipeg called Ernie’s Welding. And Ernie’s is a standalone manufacturing company, and they have one location here in Winnipeg. So I guess the group as a whole would have 22 locations.
David: Perfect. I’m going to get back to that in a second, but before I do, it just occurred to me, I forgot to ask something that I should have. When you initially took over the company and it was losing money, how long did it take you to turn that around before the company is profitable?
Doug: One month.
David: You’re kidding.
Doug: No. It was oftentimes when you buy, you have some concessions from the manufacturer that helped you in those first few months, interest free periods on the equipment on floor plans and some those kinds of things. It was funny because you just changed the attitude, and it was okay to go sell things. I go back to that original example of somebody saying to me, “You can’t do that because it’s going to create a bunch of paperwork.” “Okay, well, I won’t create any paperwork, I won’t sell anything. That’ll make it easy, won’t it?” So just changing that mentality just goes a long, long way. We were profitable in our first full year.
David: That’s incredible. What did the competition look like then and what does it look like now? You mentioned a little bit that you differentiate by providing a broader set of services and products than your competitors, but in general, where do you fit into the landscape? How big of a player are you compared to your competitors, etc.
Doug: Well, as I say, we have a number of…we have very good competitors in all facets of our business, some better than others. We’re very unique in how we go to market, both, as I said, in breadth of product and in geography. So we don’t really have any competition per se. Certainly the industry is going very similar to the car industry in the fact that they’re going to much larger dealer groups, and so one group or one person will own multiple locations. That wasn’t the case 31 years ago, 32 years ago. It was mom and pop, one guy owned one. I’ll you a cute story. We bought the business in Thunder Bay from International, and I’m going to say in about 1988 or whatever. It was my first foray outside of Winnipeg, first secondary location.
And we didn’t do very well at it. We weren’t very good at it. Systems weren’t what they are today and what not. So at the end of three years, primarily driven by a union issue that we had, they wanted this massive increase and we weren’t making any money. And so I went to a guy who was the Mac dealer, competitive dealer, and I said, “We’re looking at pulling out. Would you be interested? I think it’s a very good franchise.” So he said, “Yes.” So we exited Thunder Bay and the Pilon family took on International on Thunder Bay. And 26 years later, we bought it back from the sons of the guy that I had sold it to. That was a year ago. I went down to see the staff and I said, “Twenty-six years later, I’m back.” So that was kind of funny because it was hard to admit failure and exit, and so it was fun to be able to come back into that marketplace.
David: What changed about that? How did you get better at multiple locations?
Doug: Infrastructure, such that you’ve got VPs, where before everything was done by me and the seat of the pants. And so we’re just that much more sophisticated. And you’ve got an HR director, so you have policies that are uniform throughout. Our CFO was capable of running multiple branches, computer systems, talk to each other, and much more integrated than they were back then. And so we’re just much better suited to do multiple locations than we were back then.
David: So between the change in the organization itself in terms of the people and with better infrastructure, computers, and stuff, it made it easier too?
Doug: Yeah, absolutely. You would hope that the leaders of the company have improved their capabilities at the same time, right? So I’d like to think I’m a little smarter today than I was when I was 27.
Doug: May not be, depends who you ask.
David: So, in general, what does your involvement look like in all the different locations? What kind of approach do you take to managing an organization that spans an entire country?
Doug: I’m very hands off. I really firmly believe in hire the best person that you can, train them, set goals and objectives, measure those goals and objectives. I always tell our guys, “If you need me to come to a particular branch because you have an employee issue that you think I can make a difference on, you have a customer issue that I can make a difference on, I’ll be on the next plane.” But to just have me come and spend three days and have everybody running around saying, “Can you take him to go…do something with him,” I’m not interested in that.
So, all of our branch managers are paid on the profitability of their branch. I’d like them to believe that they have a vested interest in it without having any risk. The risk is job security. We have a holiday plan here that we let all our key people, all of our senior managers, including branch managers, in on, and that’s basically I say, “Hey, your holiday’s at the end of the year. You get whatever holidays you want. The end of the year, you’ll sign a form saying that you have taken all holidays that you are entitled to,” so that we don’t end up in court after seven years or whatever.
“You need to take 6 weeks, you need to take 5 weeks, you need to take 20 weeks, that’s your prerogative. You have a business to run. You get paid on the profitability of it, and you have way more of my money at risk than me saying, ‘Did you go away yesterday? Were you there yesterday afternoon?'” So I like to treat them as if they are owners and that they have a vested interest in the business, manage it accordingly, and we’ll measure your performance on your results.
David: It seems like it’s working in general. Was that a learning process too, figuring out how to make that work?
Doug: Big time. You experiment because everybody has…there’s lots of business books written on incentives and the Toyota model that just pay everybody well and expect them to do a good job and don’t pay them many incentives. And some incentives, if you don’t do it well, work against one of your coworkers because if I’m paid on what I do and you’re paid on what you do and if I go to buy it from you and you charge me too much. So there’s all that kind of stuff. So a lot of that is big time learning curve, what works, what doesn’t work.
David: And so you’ve moved to an incentive structure with your senior management, including the branch managers.
Doug: I would say everybody that has manager in their title is on some kind of an incentive.
David: I see. I don’t know how much this applies to your industry, but I’ve seen in general, the sales parts of an organization are often also tricky to get the right incentive structure set up. Are your guys paid on commission? Or how does that structure work?
Doug: We have three different pay plans, depending on where that employee is. My dad, he worked 56 years in Investors Group, and so he always thought the world should be paid on incentives. Because you want to make more money? Go sell more. It’s not complicated. We’re byproducts of our family environment, and so that’s always resonated with me. But in today’s world, to take a young person who has two kids at home and a spouse, and say “You’re on straight commission,” well, probably you’re not going to get those guys. So we bridge that or we pay some with a higher base and a lower commission. The best earners are the guys that are on the lowest amount of base and the highest amount of commission, because those are guys that have bought into the fact “Hey, I get paid on what I produce. I get paid on what I kill, so let me go and start killing.”
David: Is that usually something that needs to be developed? Like, you said with especially more junior employees, you’ll give them maybe not more of a base but you’ll give them enough of a base that there’s reduced risk for them. Do you find that as sales people progress through their career they get toward a point where they want to take on more risk because they’re more confident and want more of the upside?
Doug: It’s a little bit of a bell curve. So you start off the person wants to have more base. As they get more, they can say – it doesn’t take them long, and believe me, they’re figuring it out every month – “If I hadn’t been on this pay plan, I would have been here.” Because if it had been less than their base, they tend to not be here very long, if they’re not paying for themselves. And we look at every sales person with a return on investment. So you cost us this, and salary, benefits, and commission, and you return this in gross margin. So, we measure. We’re big on measurement here.
And so you start up that curve and you go from “Okay, I’ve got a base salary. I’m not going to get rich on my base salary but at least it pays the mortgage and whatnot.” Then they measure against what they could have made. And then they want to get more into the commission base. And then they get at a certain place in their career where “I made a good living. The kids are out of the house. I don’t want to work as hard.” Those are challenging for us, because they’ve been good long term employees and we don’t want to throw the baby out with the bath water. But we’ll go to them and say, “You know what, Fred,” Bill, John, whatever, “why don’t you go to straight commission, take these 7, 8, 9, 10 accounts that you’ve nurtured over the years, you do a good job with and just look after that. Because if you’re not out hunting anymore, we need to bring somebody in that’s hunting for those new customers and new opportunities.”
Doug: Yeah. We have one fellow with us. I know we have one guy in his 70s. We have a couple of guys in their late 60s. I really believe in loyalty, and I like to reward loyalty. And so if you want to be here, let’s just find the plan that fits for us and fits for your lifestyle. Just because you worked hard and you did all that good hunting and you reaped the rewards, now you don’t want to work as hard, I still want you here but I need to find where you were 20 years ago in your career.
David: Interesting. But that also fits really well with your model of having good customer relationships, because you’re able to keep these people in place that are part of the network.
Doug: Absolutely. People are huge.
David: Actually, two things, but let’s go back a second. In terms of your branch managers who are obviously very important pieces of the organization, based on your low touch approach, how do you find people like that?
Doug: You don’t go to the Yellow Pages or the internet and say, “Branch manager.” You find the way you find many people. You post the jobs. We have some that have been promoted up from within. We’ve had some that we’ve taken from competition. I believe we owe it to everybody in the organization to get the very best person that we can get. So we post the jobs both internally, every job gets posted internally and externally, and we find the best candidate. I love to promote from within. I really think that’s a great selling tool. We have a number of people that have started in shipping and receiving in the parts department that are parts managers today, and that were technicians that are service managers today, and etc. We love the ability for people to promote themselves.
David: Very cool. Now, the other thing you mentioned was that you’re very big on measurement. What does that look like here?
Doug: I would say that we do performance management, so everybody has goal setting at the start of the year. And then we have a formal mid-year review and we have a formal year-end review. So there’s no grey area. If I said I was gonna do X, and I’ve done X minus Y, well there’s no big surprise about why we’re sitting down having this conversation. And then obviously there’s financial goals. There’s people management goals. There’s community goals. We measure most everything that we can. In the inventory game, there’s turnover and there’s obsolescence.
And then we sit down every month with each of the VPs, so the VP of parts, VP of service, VP of sales, and “Here’s what you said you were gonna do. Here’s what you did. Why the difference? Good or bad. But most importantly, that month is gone. What are we gonna do going forward to get our performance on track or improved or whatever?” So we’re big on performance management and big on measurement of goals.
David: Cool. We’re getting close to time here, so I don’t want to go over. But I’ll wrap up with one question, which is maybe two kind of in one.
Doug: You’re cheating.
David: And this is something I like to ask everybody. Are there people in your life, either people that you’ve met, or mentors of yours, or people that you read about or saw on TV or whatever, that influenced your approach to business?
Doug: Well, I would certainly say that there are, and if you’re in my mind, you should always learn something from everybody and from every situation. I’m not a yeller and a screamer, so if we do something that was really stupid, I don’t yell and scream at somebody or fire their butt out the door, but I’d like to learn from that. The second time around, well then shame on us if we didn’t take that and use it as an education. My dad, growing up at home, that was his value system. He always said, one of his great lines was “You only get one reputation,” or “I used to steal, but I don’t really anymore,” or “I used to be a prick but now I’m a nice guy.” You know what I mean? So that was always a very governing factor at home. You get one reputation. How do you want to be known? Guard your reputation with your life. So, deal with integrity and sincerity and call a spade a spade. Don’t lie.
I would say my dad was very good at that. He was also a sales guy in his life, so he believed everything should be results-driven, whether it was school. We got a number in school, right? And the guy that got 90 and the guy that got 70, the 90 guy was better. I think there’s lots of different people on the way. I go back to that example of my first boss at Ford Motor Credit. The easiest thing in the world was to promote me. I’m a nice guy. Just put him in there, he fills the spot, and away he goes. The hardest thing was for him to be honest with me and tell me something I didn’t want to hear.
And so I think along the path, you’ve had my very first partner, who still is a wonderful man, gave me an opportunity, saw something in me that he was worth risking his money on me. I’ve done that same thing with a number of different people in my career. He took a chance on me and it worked for him. So I’ve done the same. So there’s lots of different people along the way, and I try and look at every opportunity as the opportunity to learn. The first guy you run into that says “I’ve got all the entire answers” is the guy you want to stay away from.
David: No kidding.
Doug: Because the world changes on a continual basis, people change, and you can always learn from a situation from a person. I’m not big on motivational books or whatever. I’m pretty self motivated. I don’t need somebody to tell me to get out of bed and go charging. Many of our customers are people that have become good friends. The one thing that’s always interesting is, it’s lonely at the top, in many respects. I can’t go down to a technician on the floor and say, “Holy mackerel, I don’t know if we’re gonna make payroll this week.” And so my job everyday is to come in and to be uplifting and to be a positive leader and a positive influence on, not just the business, but on people’s lives. Because oftentimes, people come to work. This is their best eight hours of the day.
They’ve got sick kids, going through a divorce, banks foreclosing, whatever the case is, and so my job is to make this the best eight hours that I can possibly have for people. How do you do that? You do it by creating an engaging environment, by being polite to people, by thanking people for a job well done. And then you deal with lots of different personalities. And I learned from lots of the people that work here, and we have some tremendous people. We’ve had some disappointing people, but that’s what people are, right?
People will say “What do you like best about the business?” and I always say “the people.” “What do you like least about the business?” “The people.” But that’s the nature of life. So you come across lots of people that you enjoy and lots of people that you take a path around them. I think you better always be learning and you better always be looking at how you can learn from a situation or from a person, and I’ve luckily had lots of wonderful influences in my life.
David: Right. Very cool. Well, thanks so much for the time, Doug.
Doug: Thank you for yours.