The President and the Future of Masonry
By Brendan Quinn
President Barack Obama visited Ernest Maier on October 8th to deliver a speech about the September employment report and the state of the economy. Most questions that I have received from that visit center on my politics or the politics of the company. Those questions could not be further from the most important aspect of this visit - the President endorsed Ernest Maier's story and our industry's products.
He spoke about the story of fixing Ernest Maier. It is in that story and his words about "bricks and blocks" that will be a guide to changing our industry for the better. Through the "Great Recession," Ernest Maier has more employees in 2010 than in 2007, built a new manufacturing facility, started a new company, paid 100% of the individual's health insurance, maintained a retirement plan, invested in plant and equipment, given to charity, and preserved the soul of the business.
How did this happen given what you hear in the news or see every day in your business? It is a story about faith. It is a story about people. It is a story about resolve.
Everyone assumes that faith has to do with God only. Faith is a belief in something for which you have no empirical evidence. At 23 years old in June of 1995, I became the interim Chief Executive Officer of Ernest Maier. I had to figure out how to save a company that had a block plant and a building materials store. In two weeks, I shut down the store, reduced the staff from 33 to 15 and secured a small term loan and a receivables financing line of credit.
Ernest Maier had 3,000 8x8x16 block on the ground and no sales backlog and no money. With $50,000 and faith, I had to fix the company. The customers did not prove to be the hardest people to convince but rather the employees and the owners. No one thought that I knew what I was talking about because of my age and lack of experience in "the business." Making people believe in something for which they have no evidence is tough, especially, when they are there every day seeing the lack of evidence.
With my experience in the banking industry, my father and I convinced Suburban Bank that Ernest Maier was a great candidate for their new receivables financing business. Faith inspired by credit gave the most important person "faith" - me. Now, I had to lead. It meant shoveling material under cubers, cubing open bottom bond beams by hand, delivering block in a pickup, dispatching at 5:30am, making deposits, cleaning up the general ledger, going on sales calls, writing every memo in Spanish and English and getting to know each and every employee.
My example made them believe. That belief saved the company. Faith had gotten us out of the hole. Now, we had to learn how to walk.
In recent commercials by corporations, they talk about the "human element" or "human capital." What does that mean? It means that faith carries you to a point; people carry you to the finish line. Investing in people will always yield more return than investing in a new block machine or new scaffolding or a new forklift. They all rely on the human element.
A block machine only runs well when the people who work with it make it productive. Productivity, especially, in the masonry trade is a function reliant on the people more than the machine. The scaffolding may move people more quickly up and down or "swing" them around faster. The people will determine the profit more than the scaffolding.
What we did at Ernest Maier directly contradicted everything that the Maier family told me. Don't give them more money. We need to cut our coverage on the health insurance. We don't do a retirement plan. We give turkeys for Christmas. I told them that we were going to pay 20% more than anyone else in the industry. We were going to cover 100% of the individual's health insurance. We needed to start a retirement plan which we did. We were giving cash instead of turkeys.
Investing in people meant increasing the expected return. Our return would exceed the industry average. Our people would perform tasks such as delivering material, collecting money and taking blame that other company's employees would not have to do.
Today, our block plant produces more block per hour than it did in 1996. Everyone in that plant makes 40% more per hour than they did in 1996. The same people paid 40% more make more per hour fourteen years later and fourteen years older. Their leader, Mohammed "Wahied" Modiwiryo, came here on a chef's visa from Surinam. Who would put their largest asset in the hands of a chef named Wahied? Hank Keeney said I should and he could not have been more right.
Paying people less and expecting less is a recipe for disaster. This industry has spent the last fifteen years saying it does not matter how heavy a block is or how much you pay a bricklayer. You hear that the bricklayers are not like they used to be. Ignoring productivity and human capital investment translated into big profits ironically.
Decreased productivity created "labor cost" inflation in estimates (e.g., laying less brick per day or block per day created more bricklayer days). Estimating departments applied "overhead and profit" percentages to inflated labor costs. Those overhead and profit dollars exceeded all office expenses and allowed for big profits. I gave a speech in March of 2008 at a Masonry Institute Board meeting about Icarus. Icarus flew too close to the sun and fell to his death. Much like commodities at the time and bloated labor costs due to decreased productivity, all things that go too high too fast burn out and fall back to reality.
It means that we all have to look at our people daily and ask, "are we investing in them or in ourselves?" If the objective of a business is to make "me" money, it almost certainly will have only limited, short-term success. That success must be shared if it is to become a long term success.
All that glitters is not gold. Our faith and our commitment to our people does not mean that business over the last two years has been easy. It has been even more difficult than saving the business. Everything is easier when you have nothing to lose.
A masonry contractor asked me in May 2008, "what should I do?" I said, "buy a submarine." The analogy that I explained was that the market due to Icarus and other factors was going to get ugly. Fear and paranoia are destructive and deflationary forces. Shut it all down and raise the "periscope" every six months to see if the water is clear. If you see burning warships, go back under water and wait a little while longer.
Ernest Maier did not have that choice. Our mortgage payments are $50,000 per month. We go under water. We drown. I had to decide if my people were more important than our bottom line. That plan that I wrote in June of 1995 at its core was either right or wrong. Should it be scrapped for a new one? I always go back to multiple choice tests in these situations. My first answer was usually right and I spent a lot of going back and screwing it up. Have the resolve to stick with your plan.
I tell everyone that the hardest part about resolve is that we live in the short term and believe in the long term. Each day is a crisis but those crises should be teaching points for me or my employees. I learn more about my company when "we lose" than when "we win." Those losses should inform your decision making, amend weak parts of your plan and strengthen your resolve to persevere through tough times.
Teddy Roosevelt encapsulated all of this in his quote: "It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat."
As long as I can remember, no sitting President has ever visited a block plant and talked about our industry as the "bricks and blocks of our entire economy." At a time when we are losing to glass curtain walls, tilt-up concrete construction, wood construction and steel stud construction, the President highlighted our business. We must use this press and momentum to effect change in ourselves and in our trade. You fix things one block at a time. We must do the same.
It is a call to transform the marketing and promotion of our products and trade. It is call to invest in educating our labor force and making them more productive. When people ask who we compete against, I always answer with - "ourselves." When we fix our house, we then need to go out and beat the crap out of our competition whether it is tilt-up, glass, siding, precast panels, or steel. The President wants us to do it.