Bellwether

January 4, 2010

Source: Joe Boomgaard
Department: MiBiz
Phone: (616) 726-6909

KALAMAZOO - Even though general contractor Miller-Davis Co. is a mid-market company by definition, that doesn't stop it from pulling in the best practices from corporate America to use to its benefit.

"In our industry, we're a mid-market company, but we conduct business like a larger corporation. We conduct our business to a higher standard," said Rex Bell, Miller-Davis' eighth president in its 100-year history.

As such, he said Miller-Davis places an acute focus on talent, the pursuit of new business and maintaining a long-term perspective. All three facets work together to drive the company's success, and an outside board of directors comprised of "knowledgeable" businesspeople keeps the company's executives grounded and focused on those goals.

The firm specializes in commercial, education, healthcare, industrial, institutional, religious/nonprofit, specialty and sustainable construction in Michigan, Indiana and Illinois, although it has completed projects for clients in 17 states. Those industries and states have seen better economic times than the present, but Bell is no doomsayer.

In 2009, the company saw annual revenues grow compared to 2008. Sales were in the ballpark of $50 million. Estimates for 2010 are fairly flat, but he expects some growth in sales despite the industry's predictions for more contraction.

"My guess for 2010 is that we'll go up there some. Not a lot, but a little bit," Bell said. "The question on everyone's mind is how do we deal with a prolonged recession."

These days, projects are slow to develop and a tight credit market has limited the new developers coming onto the scene with new projects. Bell said the credit fallout hasn't had a tremendous impact since Miller-Davis is a well-capitalized firm and it does business with similarly situated companies, but the tangible significance can be seen in the trickle of new projects and the difficulty growing the business. Moreover, the situation has put many subcontractors in great financial stress.

"For us, it's more the overall economy and getting inventories sold off and getting them down. The factories need to produce more and take care of their buildings. We're still suffering from an economy that's shrinking rather than growing," Bell said. "We have begun to see some industrial work come back -maintaining plants and additions and building new facilities. We're beginning to see plants call us and say they need a repair done.

"It's just a trickle right now -it's nothing great. But again, traditional values and good business practices come into play now more than ever. (Businesses) need to manage cash well, don't get into debt, make sure they get paid in a timely manner, and work safely."

With the credit squeeze, business for Miller-Davis is moving in the publicly funded direction and with more institutional work. Some bonded educational projects -including for the Bridgman and Decatur school districts and the Kalamazoo Regional Educational Service Agency -will help keep the company busy through 2012.

"We need all of it to be successful and grow. That's one of the challenges during recessionary times," Bell said. "We're down substantially (from our peak). We'd like to see volumes be around $100 million, but we're not volume driven. We're bottom line driven.

"We have to have those projects as a base, but the industrial work will come back and we continue to have opportunities for proposals. I'm optimistic things will turn around and start to grow from there. I have seen it worse. I've seen it where there really weren't any opportunities for work, (when) there wasn't work to look at. We have to continue to find projects to make proposals on and make bids, and we're consistently pursuing other business -it's not going to walk in the door."

Transitional survival

Bell relishes in Miller-Davis' longevity. He's been with the company for 33 years - a third of its existence -and has served as president for the last 13 years.

Not only did the company survive that transfer of leadership, but it's also weathered seven other changeovers before he took the helm, a testament to its long-term mindset and the importance leadership has always placed on developing the company's next leaders, he said.

The company started as a construction and retail lumber sales business and eventually focused on paper mill projects and the post-war college and university building boom.

Bell said management succession has plagued many construction companies, a trend his company has found a way to break.

"It's very hard to make that transition. Few survive one, let alone seven or more," he said. "We try to hire knowledgeable, talented experts in construction, and that's key to our growth and learning. Another big part of it is avoiding complacency."

Even as he took over the company's leadership, he assumed his role of grooming the company's next leaders and fostering "that attitude and culture and giving people the opportunity to grow."

More often, all people at the company have to become involved as a new business developer. In effect, everyone has a sales function.

"One of the biggest things right now is the relentless pursuit of new business and new opportunities," Bell said. "I don't want to say that all we do is sell, sell, sell, but we have to be persistent in pursuing new work. It's vital to the survival of the company. One of the challenges when you have someone trained as an engineer or architect, where the focus is more technical than PR or marketing, is realizing our limitations and knowing when to get counsel, to get help from outside the company. Identifying strategic partners has been a big part of that. When you look forward, as a CEO, as a leader, it makes you realize the value of that business development piece and to not ignore it."

Keeping the talent pipeline flowing

Bell and his leadership team have struggled with balancing the realities of this economy with the need to continue adding fresh recruits to keep the talent flowing into the company. Miller-Davis currently employs about 60 people including office and field staff, "about a half or a third of what we'd like it to be." About half are salaried positions.

"(The economy) makes it difficult to add the staff that will be the leaders of the future. We're maintaining in terms of profitability and we have no debt, but this is not the mode we're used to," he said.

In an ideal year, the company would add at least a couple of new engineering graduates from Western Michigan University, but the economic pressures being what they are, that hasn't been the case for the past couple of years.

Again, Bell is staying positive.

"We are going to hire five or six people next year. We need some people. And that's a very big deal for us. It's a positive thing for us, and we couldn't say that last year," he said. "In all this doom and gloom, I'm not that way. This is a great opportunity for young people to advance quickly if they have the right attitude and enthusiasm. Some people will get hired and contribute quickly. They'll have the opportunity to perform right away."

More and more, those opportunities to excel will come in new services and offerings perhaps not core to the traditional construction industry model. Building on Miller-Davis' commitment to sustainable construction, the company has begun to offer facilities optimization and energy and air quality assessments.

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