April 18, 2023 • 34 mins
Our third episode of Built-In delves into what it takes to create a successful branch expansion strategy and how to build teams that thrive. Lithko Contracting CEO Rob Strobel talks with us about his perspective on leadership, creating processes that set teams up to excel and how to think about approaching geographic expansion.
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Episode Transcript
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(00:00):
Hello and welcome to Built In, the FMI podcast for the built environment.
(00:07):
I'm Scott Winstead, president of FMI Consulting.
I'm really excited to share my conversation with Rob Strobel with you.
It's a masterclass on geographic expansion and the keys to running successful branch
office strategy and a whole lot more.
We touch on a range of topics, including how to scale an at-risk construction firm, what
does it mean to be a field first culture, and what he thinks about the myth of parochial
(00:29):
sites.
Rob is the CEO of Lithco Contracting, a $1.8 billion a year concrete contracting firm with
22 offices across the US.
That's right, I said 22 offices across the US.
Rob is a unique leader with a unique point of view.
Lithco was recently named a best managed company by the Wall Street Journal in Deloitte, and
Rob personally was named regional entrepreneur of the year by EY.
(00:52):
And once you hear the conversation, you'll know why.
Well, Rob, thank you so much for doing this and welcome to the podcast.
Yeah, glad to be here.
Well, I'd love to just to orient our listeners, we'd love to have you take a moment and give
a thumbnail of Lithco Contracting and kind of what you guys are all about.
We are what we call a middle market total package concrete contractor.
(01:15):
So focusing in the commercial space, we have 22 business units from Salt Lake City through
the Midwest, Texas down through Florida and up the East Coast.
Those business units, we call them bergs, business units running great.
Our budget this year is $1.8 billion top line.
(01:36):
I started with this business 22 years ago now, and we were $40 million at the time.
So it's been an interesting ride.
That's a mouthful.
You say middle market and then you say $1.8 billion 22 bergs.
That's a new definition of the term middle market.
But I'd love to hear you unpack your origin story and how you got to where you are at
(01:59):
that $1.8 and then we'll kind of get off into a number of different areas.
Yeah, for sure.
We started in Ohio.
So Cincinnati, Ohio is our headquarters and 20 plus years ago, we were really focused
on keeping folks home, our workforce at home every night.
So we really worked to understand a business model that was diversified enough competency
(02:23):
wise where we could have continuity of work for our teams.
So we really looked at kind of a 90 mile radius of a town and what would the mix of work look
like to have continuity in commercial concrete construction.
So we devised a model that said, you know, we need to do some light commercial retail,
(02:45):
some middle market, light industrial warehouse, office building, and some structural work,
car garage, medical, and really developed a business model that was primarily focused
around people and talent.
And you know, the origins of it were at the time, there were some large automotive projects
(03:05):
and other things where competitors were traveling for work and it was really hard on the family
and really hard on people in concrete construction.
So we wanted to create a model to keep folks at home.
What we learned then is, okay, if you're going to be town based, and you want to grow and
you want the best talent, you got to figure out how to replicate this.
(03:27):
Because if not, you just keep growing in work complexity or size, and there becomes this
geographic constraint to growth.
And our primary desire for growth is related to getting and retaining and developing the
best and the brightest.
It's a great backstory.
And this being a conversation about geographic expansion, and this is an area where a lot
(03:48):
of firms and a lot of leaders really struggle.
How do we crack the code?
How do we do what we've not done before?
And you talk about these 22 burgs.
I would love to come back and talk about how you've scaled it.
And so maybe we can talk there, but I'd like to at some point just clarify, of the 22,
and by burgs, you're talking about offices, geographic markets, but we'd love to talk
(04:10):
about how many of those were acquisition versus organic.
But first things first, I would love to kind of hear a little bit more about how you've
scaled.
Yeah, so going through all of that, of the 22 burgs, seven of them are acquisitions.
The vast majority of our business units are organic, meaning we've grown them through
(04:31):
growing talent, growing people, and moving them to new geographies.
Early on, when we were two towns, we thought we need to recruit and develop talent.
But if we do it from University of Cincinnati and Ohio State, the problem will be we're
recruiting from towns where we are instead of towns where we want to be.
(04:55):
So we focused on Kansas City and Oklahoma and Allentown, Pennsylvania, and places where
we desired to be, recruited folks out of universities in those towns, brought them into our towns,
and then grew them up knowing that we would want to go back to those towns.
And we still implore that strategy today.
(05:16):
We recruit about 100 PEs and interns on an annual basis, some in towns where we are,
many in towns where we desire to be in the future.
So we're bringing those folks in, growing them up through our business units, and then
they are part of launching and going to that next town.
(05:38):
You asked the question around cracking the code on geographic expansion.
This industry is built on unique people.
There's 30,000 competitors in the commercial concrete construction space.
Most of them are baby boomers, owner-operators, many of which are decent-sized companies,
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but 29,000 of them are under $100 million.
And they're really organized around unique people.
One of the things we've sought to do over the years is figure out a unique system, a
unique approach to lessen our dependency on unique people.
(06:20):
We always want talented people.
And we find that, you know, if you're building a model just around unique people, and a lot
of people say, we want to go to a new town, and who are we going to hire, and who are
we going to put in there?
That is part of it.
And if it's just a unique person, you have to find the top 5% type person to put in that
(06:41):
town, where if you have a system, a program, processes, information, structure to go along
with that, we believe we can take the top 20% of talent, attach them to a system, an
approach, and launch into that new town.
So as we've had these 17 organic additions, geographic additions, what we do is take our
(07:04):
more mature towns and expect them once they've reached kind of optimal market share in their
town, which we believe is 25-30% market share.
Once you start pushing more market share than that in a town, you start to cannibalize margin.
In our business, it's hard bid, you know, you hope to get last look, you hope to have
(07:27):
relationships that give you an opportunity.
But it's really a hard bid environment.
So there's going to be competitors.
So instead of pressing and pressing in a town to get more and more market share, we expect
those towns to grow and develop people and then be the part of support to add new towns.
It sounds like what you said is that you don't have the philosophy of we're going to send
(07:50):
a leader from the home office, you home grow it.
So I'd love to know what informed that strategy early on.
Yeah, it's really this bring the talent up from within, you know, and we have some fundamental
philosophies around push information down to the lowest level and engage the individuals
(08:12):
in making decisions.
So whether that be at the field inside the field at a phase of a project or at the field
level for the project or within operations within a town or at the town level, we're
pushing information down and engaging folks in making decisions every day.
I think about us as the the top golf of concrete construction.
(08:36):
Many construction firms ask their co workers to go to the driving range and hit golf balls,
but they don't get to see where they go.
And how motivated are folks going to be to continue to hit the golf ball?
And somebody comes back to them two weeks later, a month later and said, hey, you're
slicing it.
You know, you're hitting it off to the left.
They're like, well, I've been here doing this for a month.
(08:58):
Now you're telling me I'm off point.
So we want to provide the information at the point of impact.
We want them deciding, am I using a six iron or seven iron or driver to accomplish this
and then learn real time.
So let's connect that all the way back to growing towns.
So if we're engaging folks to grow through the project here to the operations tier to
(09:22):
the business unit tier, and then we want to start a new town, the team in that town that
has pre construction capability and operational capability, we look at something geographically
close.
That's the next logical expansion of a town and expect that mature town to start securing
work in that new town.
(09:45):
Don't rent an office, don't buy office space, don't put up a banner, don't start advertising.
People will let you work, they will award you work in a new town.
If you if they believe you have the ability to execute that work.
So our mature towns secure work and walk out that next step.
(10:07):
We've walked out from Tulsa to Oklahoma City.
So we have a young person that's grown up through our organization, hired them out of
college into Columbus.
They went early to Tulsa were part of that Berg expansion.
They then wanted to move to Oklahoma City, started that Berg expansion grew folks backfilled
themselves, moved again to Dallas, and we've gone from zero to our budget this year in
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Dallas is $200 million in four years, we've gone from zero to 200 million in Dallas.
Now no one individual does that, that is growing and developing teams, bringing teams along,
you know, getting operational capability boots on the ground capability before you have big
overhead nuts to cover.
(10:55):
So Rob, you just touched on it, but I would love for you to talk a little bit about how
you view parochial markets, and what that does to inform your strategy of where to go
and where not to go.
Yeah, you know, we aren't, we aren't too worried about the nature.
Some folks say, oh, you have to be from Allentown, Pennsylvania, or you have to be from Texas
(11:16):
to operate in Texas.
We haven't found that to be the case we, you know, there are customers that want to be
in those towns as well and we have customers that we work with nationally.
We didn't our launch into Texas wasn't buying somebody in Texas our launch into Texas was
growing and developing teams recruiting out of universities of in Texas, bringing them
(11:40):
to Oklahoma growing them up and then going back and starting to secure and execute work
in Texas.
So there are relationships that folks have and they certainly have them.
Sometimes those relationships, build some kudzu into them and, you know, an efficient
price or an efficient opportunity can can get you a job, and then work to perform and
(12:04):
execute and we've been able to grow now, are there nuances in Dallas as compared to Orlando,
Florida as compared to Salt Lake City, Utah, absolutely.
Excellent dynamics in each place but fundamentally, securing work, executing work with excellence,
putting a quality product in place every day will get you work.
(12:26):
Well, and to your point earlier, I mean, and having homegrown talent that has that is from
there or adjacent to there has got to be a big proponent of that as well.
I'm a military guy.
So my early years I left high school early and joined the military.
So when people want to take or keep ground, they will work awful hard to take or defend
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that ground.
And, you know, if being a town based contractor, finding people that desire to be there and
providing them systems.
When we talk about systems, we're talking about information, driving information down
to the lowest levels.
We work very hard on daily productivity tracking units, linear foot, square foot, cubic yards
(13:15):
on a daily basis.
When you hit the golf ball, you know how far it went on a daily basis.
We provide that the entire budget of the job, the units, the cost down to that job level
every day.
So if you provide folks good information, good processes, let's not be creative on how
(13:38):
we have a concrete log or how we have present submittals or RFIs.
Let's have a standard approach to that.
And let's be creative about how we solve problems.
So in this business, there are things that you can standardize and things that you don't
want to standardize.
You want to allow people the opportunity to have creativity in solving solutions for the
(14:02):
construction or the schedule.
You want people to have creativity about solving unique customer challenges.
But let's not reinvent information that we need on a daily basis to know where we're
at or to project or to make sure we're efficient with billings and collection and cash.
So zooming out, 1.8 billion, 22 markets or 22 burgs.
(14:27):
I'm reminded of a quote.
There's a guy named Josh Wolf, who is one of the co-founders of Lux Capital.
And he's got this thing, he calls it 3P, the triple failure.
So failure comes from a failure to anticipate failure.
So when you're running an enterprise of that scale and you empower the workforce and the
(14:49):
troops to the level that you've just described, how are you ensuring quality and that things
aren't, obviously it's construction stuff happens, but how are you ensuring quality
to the level that you can deal with the issues as they come up?
Yeah, a system has multiple threads.
So if you think about threads like threads of yarn, that's strategy, structure, talent,
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process information.
And you can't push these threads, they'll all end up in a pile.
So you really need to think about your strategy and your structure, process, information and
talent.
So part of how to ensure execution, how to know status, how to anticipate is part of
the structure.
(15:33):
So information, we call them by tiers, whether you're talking field tier, project tier, operations
tier, burg or business unit tier, regional tier, company tier.
The structure needs to overlap such that somebody is in the two foot space to facilitate development,
to facilitate understanding status, to use the information to coach and develop.
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So part of how we know is not because I know, I mean, we have five regions, I know what
the region's mission is, I know the scope they have responsibility for, I know the expected
outcome, I know the desired movements and growth they want within each of the regions.
Those regions need clarity with their burgs, their business units within that region of
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what they're dealing with, what are their priorities, what are they trying to accomplish?
Are they trying to enhance competency and capacity and add structural capability because they're
warehouse competency primarily or are they working to get better at information and project
management?
(16:43):
That regional tier needs to work with the burg tier, that burg tier needs to work with
the operations tier in the field.
One of the dynamics that happens in construction, instead of thinking about tiers with succinctly
different roles, people think of tiers as more experience to the same thing.
(17:04):
I didn't come from construction and it's fascinating to me in this industry where junior project
manager, project manager, senior project manager, project executive, when I look at those roles,
it's all the same role.
The only delineation is years of experience.
They're not actually different roles and one of the fundamental problems with organizational
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structures is there's truly distinct roles by tier.
It's not just being more experienced of construction knowledge.
That doesn't make you a higher plane.
In this industry, people get promoted because years of experience of construction knowledge,
not because they actually operate with a different tier or plane of management and leadership
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skills.
When you get to the business unit leadership level and the regional level, there's some
concrete science, there's some technical skill set you must have around project management
and concrete science, but that becomes a smaller portion of what you need to know.
What you need to know is about the cross-functional nature of talent and safety and pre-construction
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and operations and IT, finance, cash flows, many elements of the business.
When you get up to the regional tier and you're working with geographic disparity, disparate
geography, there's a whole different skill set of leading leaders that it takes.
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Yes, there's some concrete knowledge, there's some concrete science, some project management,
but this tier of leadership is about being able to provide clarity of scope, expected
outcomes, team alignment of resources, meeting people where they are in those business units
to help them walk out their annual strategic initiatives.
(18:59):
The planes and tiers of leadership to scale a business are about many, many more things.
Your original question is around how do we ensure execution?
How do we stay?
How do we know?
Even though we're pushing information down, how do we stay abreast of knowing that we're
executing every day?
(19:20):
This structured thread of the job architecture, words that aren't going to mean a lot to a
lot of folks, but the job architecture in our organization, what are the differences
in the roles and responsibilities?
Not years of experience, true differences in responsibility.
What's the information that's needed at that tier or plane?
(19:41):
How do those interlink through the organization?
I'd love to come back to, we started this conversation talking about geographic expansion
and trying to get a little bit inside your head as to how Lithco has done what it's done
over the last 20 or so years.
As you think about some of our listeners who might be considering geographic expansion,
(20:02):
whether it's organic, M&A, or what have you, we'd love your perspective, Rob, on if you
had to narrow it down to what are the top three or four lessons learned, whether you
learned them the hard way or the easy way.
If you were giving advice or counsel to folks thinking about it, what would that list look
like?
Yeah, it's interesting.
(20:22):
There really aren't silver bullets that the situational reality becomes very important.
Thinking about an organization with what I call the threads, so not just the people,
but also the structure, the process, the information, those become very important.
(20:43):
Green fielding has its challenges of you're bootstrapping it, you're trying to bring it
to bear, and you think, man, in acquisition, I'm going to surround all this talent and
this capability.
Yes, super.
However, it's raised by wolves.
We've learned the behaviors of the wolf pack that they came from, and how close are those
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behaviors to our behaviors?
Do they value information?
Do they value a process?
Do they value being prepared every day?
So when you have an acquisition and you go to surround that and bring it online, it's
different challenges.
That the challenges are, that wolf pack, does it act like our wolf pack?
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When we go meet each other, do we even like each other or are we busy sniffing each other
here?
So what does it really take to surround an acquisition is very situational.
So really getting in there, putting our systems and processes in place in a way where we're
engaging them to author what this means to them.
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Are they truly excited about utilizing information and making decisions or are they scared of
that?
Are they scared of somebody keeping score?
So my advice would be really seek to understand what you're going into.
Think about it in a comprehensive way.
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It's not just send a unique person that is wrought with risk.
A lot of people have been successful with that.
And if you can time a unique person and time the market, we see a lot of people achieve
a success for a while in growth.
That particular market shifts or that one unique individual has a health problem or
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drags up or whatever, now you're susceptible.
You've talked a number of times about this whole concept of the unique person, unique
person susceptibility.
And that's something we certainly see as an Achilles heel of a lot of firms because it's
on two fronts.
It's certainly a constraint to growth and scale.
It's also, as you talk about baby boomers and demographics being what they are, it's
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a constraint to succession.
It's a constraint to be able to, am I going to be able to transition this business to
a next generation, be it family or internal operators?
But having that sort of, it might help to optimize in the moment, but in terms of future
opportunities and aspirations, it's a pretty big limiter.
(23:19):
Yeah.
And sometimes it's hard.
It's hard to see how you actually operate and how much is because of a unique person.
And that's been a learning for me.
There's been at least three major step changes from 40 million to 1.8 billion, one we're
in the middle of right now, where even I had to fundamentally change my actions and approach
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at least on three major points in time where you come to realize, I call it the helicopter
parent syndrome, where you're going into this next phase of organizational need and you're
sending your kids off to college and you're watching them and you're like, oh, I really
thought I had them prepared to live on their own and make these decisions on their own
(24:08):
and be able to be independent.
And you find out once you're there.
Once the kids are off to school, you find out how well did I do of really preparing
them or how much did I try and stay out in front of all their needs and didn't really
have them deductively reasoning through these things.
Same thing for us as an organization and for me personally, to really understand what you're
(24:32):
doing to enable in a good way or enable in a bad way, the organization.
There's no one right answer.
Awareness is the key.
I was reading a book the other day that said the major factor of intelligence has less
to do with IQ or EQ.
(24:53):
It has more to do with self-awareness because it's the constraint to actually being able
to transmit or receive with and to others.
So I'm not the smartest guy, not the sharpest tool in the shed, but if we can operate as
a team in a way where we can share information and really deal with winning and losing together
(25:16):
and understand the why and deal with other people's perceptions and talk about it until
we come to agreement of what is causing good outcomes or patterns or whatever those things
are.
Having a leadership team you can work with that's truly as self-aware as they can be
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and trying to work together, that makes all the difference in the world.
It's funny, I was reading a quote the other day.
There's a gentleman named Shane Parrish who has a podcast and has a blog and it's actually
really well done.
It's all about mental models and how to make better decisions.
But he talks about knowledge certainty and his philosophy is that generally the more
(26:02):
someone knows about a subject, the less certainty they talk about it.
And so you hear the experts talk about probabilities or it could be this or it could be that, but
not like certainty.
So I think there's a lot of what you just said that I think would, there's evidence
to back that up.
Yeah, that makes sense to me.
(26:23):
You talked about the three step changes that you've had to personally make as you've made
these shifts over your journey.
To the extent you can remember what those were, I'd love to know.
I always think about executives and what does the filtering process look like with respect
to how do you spend your time?
So I'd love to think about the first transition, the first step change, how are you spending
(26:46):
your time, what were you doing and what did that look like for those three steps?
Yeah, I can clearly capture two major within the three steps, but two major ones is we've
always been an operationally driven company and that's been part of our success.
Thinking about how we do what we do through operations, whether we're trying to enhance
(27:09):
our ability to financially forecast or improve on safety or improve on talent development,
being focused through operations.
Now that's a pendulum or continuum and you got to watch where you're at on that because
there's expertise that can be brought to bear to get better at that, to have inputs from
(27:30):
others that can help you become better at doing what you do every day.
Now sometimes there's a tendency for them to say, well, we need to do this for you and
you don't want that either.
But one of the major things is allowing and bringing expertise to bear around areas you
want to improve and bringing the right ones that will embrace the mindset of doing it
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through what we're doing and not building a society down the river or a separate silo
or I think about organizations like CUDZU, the creepy crawly vine that's down in the
South that grows up all over all the trees.
I worry about these particular functions being CUDZU that grows all over operations.
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At the same time, you got to figure out that harmony where that expertise can come to bear.
So that's a major one, organizationally, and then being a military guy and just valuing
outcomes allowing for that evolution to take place.
And then the second major one is how much hand on the wheel do I personally have of
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each piece of this evolution, the strategy, the structure, and how much am I engaging
others to author that?
That becomes very important at scale, and we're 1.8 billion thinking about five and
10.
How much of people actually exercised?
I think about driving a car and when you're sitting in the passenger seat and somebody's
(29:03):
driving a high performance car, they can talk about watch my angle of entry and watch how
I feather the brake and watch how I accelerate at the crown of the turn and all those things.
They're words, they don't mean anything until you have the steering wheel and you go into
that turn a little too fast and you're not feathering anything, you're slamming on the
brake and spinning out.
(29:24):
So where are we truly engaging at a real executive level for the needs of the future so somebody
has the steering wheel?
So sometimes even if you think you know, you should convert what you think you know into
scope and expectations, expected outcomes, and a timeline and then provide clarity to
(29:52):
that expectation but not exactly the how.
And then have others author that how.
Have them take a cut, grab the steering wheel of what that is and you know that's at all
levels and all kinds of items depending upon age and stage of where you are as a business.
I found myself with the steering wheel telling folks watch how I feather, watch where I turn,
(30:19):
watch where I accelerate and then if you make the mistake of saying okay here's the car
I'm gone, you find out, you look back and you're like what the heck just happened I
just showed them that and they're spinning out and in the sandbank you know.
Well you've brought up a number of really quality visuals, the kudzu which I can relate
to being here in Raleigh, North Carolina as well as the society down the river but two
(30:44):
quick final questions I'm curious Rob just at this stage of the game at the size and
scale you are I'm curious what keeps you up at night at this point?
Yeah, you know it's making sure that when I move on and I don't intend on too quickly
I hired a president in 22 and moved myself to CEO we've promoted from within we're working
(31:10):
on evolving our work structure to make sure that when I move on whether that be moving
to chairman and promoting a CEO and president all those things or you know I'm going to
retire someday seeing that this thing can continue its path and trajectory you know
it would be a huge failure for me if the organization stumbled when I if I wasn't there that's
(31:39):
no badge of honor for me that would be you know my greatest failure that wouldn't be
I wouldn't look at that as a success or oh this organization needed me.
My responsibility is to the organization it's not to me it's to putting things in place
for the opportunities of the growth of our people and if that falters that that's you
(32:04):
know I'm 52 I'll be 53 in July you know when I took over the business I was 30 years old
when I became president 22 years ago that's flown by so if I think about 52 to 62 and
if it goes half as fast as the twice that long it's it happens quick so I need to figure
(32:31):
out how to make sure it's not rob dependent.
Yeah makes a lot of sense and certainly true to the philosophy that you've talked a lot
about here today in terms of the unique person susceptibility and the last question I'll
leave you with is if you could go back and talk to your 25 year old self what's the one
piece of advice you would offer.
(32:52):
It's kind of like less sure of the answer the the older you get it's absolutely around
that you know like there were times and I have mentors in the industry and I was young
and but as he always called it you're batting 300 and leading the league and I'm trying
to tell you you got a hitch in your swing and doesn't matter what I'm telling you you're
(33:13):
not listening until you figure out hmm they figured out I can't hit the curveball so
it that awareness and understanding there's there's way more that I don't know than I
do know and I don't know if at 25 or 30 when I took over the business if I'd have been
that would have made me you know too smart to do some of the things we've done but that
(33:38):
certainly would be a perspective to have earlier in my career.
It's funny you know I started with FMI 22 years ago as well and I knew a heck of a lot
then at least in my own mind Rob thank you so much for doing this I really appreciate
your time and and have a great trip.
All right great seeing you Scott.
Thank you for listening and please join us again next month for a conversation with Russ
(34:00):
Becker CEO of API Group number five on the most recent list of top specialty contracting
firms having recently eclipsed the six and a half billion dollar a year revenue mark
for fiscal year 2022 API epitomizes what it means to successfully build a company around
acquisitions and round numbers API has done about 50 acquisitions under Russ's leadership
with nearly 500 locations worldwide.
Hello and welcome to Built In, the FMI podcast for the built environment.
(00:07):
I'm Scott Winstead, president of FMI Consulting.
I'm really excited to share my conversation with Rob Strobel with you.
It's a masterclass on geographic expansion and the keys to running successful branch
office strategy and a whole lot more.
We touch on a range of topics, including how to scale an at-risk construction firm, what
does it mean to be a field first culture, and what he thinks about the myth of parochial
(00:29):
sites.
Rob is the CEO of Lithco Contracting, a $1.8 billion a year concrete contracting firm with
22 offices across the US.
That's right, I said 22 offices across the US.
Rob is a unique leader with a unique point of view.
Lithco was recently named a best managed company by the Wall Street Journal in Deloitte, and
Rob personally was named regional entrepreneur of the year by EY.
(00:52):
And once you hear the conversation, you'll know why.
Well, Rob, thank you so much for doing this and welcome to the podcast.
Yeah, glad to be here.
Well, I'd love to just to orient our listeners, we'd love to have you take a moment and give
a thumbnail of Lithco Contracting and kind of what you guys are all about.
We are what we call a middle market total package concrete contractor.
(01:15):
So focusing in the commercial space, we have 22 business units from Salt Lake City through
the Midwest, Texas down through Florida and up the East Coast.
Those business units, we call them bergs, business units running great.
Our budget this year is $1.8 billion top line.
(01:36):
I started with this business 22 years ago now, and we were $40 million at the time.
So it's been an interesting ride.
That's a mouthful.
You say middle market and then you say $1.8 billion 22 bergs.
That's a new definition of the term middle market.
But I'd love to hear you unpack your origin story and how you got to where you are at
(01:59):
that $1.8 and then we'll kind of get off into a number of different areas.
Yeah, for sure.
We started in Ohio.
So Cincinnati, Ohio is our headquarters and 20 plus years ago, we were really focused
on keeping folks home, our workforce at home every night.
So we really worked to understand a business model that was diversified enough competency
(02:23):
wise where we could have continuity of work for our teams.
So we really looked at kind of a 90 mile radius of a town and what would the mix of work look
like to have continuity in commercial concrete construction.
So we devised a model that said, you know, we need to do some light commercial retail,
(02:45):
some middle market, light industrial warehouse, office building, and some structural work,
car garage, medical, and really developed a business model that was primarily focused
around people and talent.
And you know, the origins of it were at the time, there were some large automotive projects
(03:05):
and other things where competitors were traveling for work and it was really hard on the family
and really hard on people in concrete construction.
So we wanted to create a model to keep folks at home.
What we learned then is, okay, if you're going to be town based, and you want to grow and
you want the best talent, you got to figure out how to replicate this.
(03:27):
Because if not, you just keep growing in work complexity or size, and there becomes this
geographic constraint to growth.
And our primary desire for growth is related to getting and retaining and developing the
best and the brightest.
It's a great backstory.
And this being a conversation about geographic expansion, and this is an area where a lot
(03:48):
of firms and a lot of leaders really struggle.
How do we crack the code?
How do we do what we've not done before?
And you talk about these 22 burgs.
I would love to come back and talk about how you've scaled it.
And so maybe we can talk there, but I'd like to at some point just clarify, of the 22,
and by burgs, you're talking about offices, geographic markets, but we'd love to talk
(04:10):
about how many of those were acquisition versus organic.
But first things first, I would love to kind of hear a little bit more about how you've
scaled.
Yeah, so going through all of that, of the 22 burgs, seven of them are acquisitions.
The vast majority of our business units are organic, meaning we've grown them through
(04:31):
growing talent, growing people, and moving them to new geographies.
Early on, when we were two towns, we thought we need to recruit and develop talent.
But if we do it from University of Cincinnati and Ohio State, the problem will be we're
recruiting from towns where we are instead of towns where we want to be.
(04:55):
So we focused on Kansas City and Oklahoma and Allentown, Pennsylvania, and places where
we desired to be, recruited folks out of universities in those towns, brought them into our towns,
and then grew them up knowing that we would want to go back to those towns.
And we still implore that strategy today.
(05:16):
We recruit about 100 PEs and interns on an annual basis, some in towns where we are,
many in towns where we desire to be in the future.
So we're bringing those folks in, growing them up through our business units, and then
they are part of launching and going to that next town.
(05:38):
You asked the question around cracking the code on geographic expansion.
This industry is built on unique people.
There's 30,000 competitors in the commercial concrete construction space.
Most of them are baby boomers, owner-operators, many of which are decent-sized companies,
(06:00):
but 29,000 of them are under $100 million.
And they're really organized around unique people.
One of the things we've sought to do over the years is figure out a unique system, a
unique approach to lessen our dependency on unique people.
(06:20):
We always want talented people.
And we find that, you know, if you're building a model just around unique people, and a lot
of people say, we want to go to a new town, and who are we going to hire, and who are
we going to put in there?
That is part of it.
And if it's just a unique person, you have to find the top 5% type person to put in that
(06:41):
town, where if you have a system, a program, processes, information, structure to go along
with that, we believe we can take the top 20% of talent, attach them to a system, an
approach, and launch into that new town.
So as we've had these 17 organic additions, geographic additions, what we do is take our
(07:04):
more mature towns and expect them once they've reached kind of optimal market share in their
town, which we believe is 25-30% market share.
Once you start pushing more market share than that in a town, you start to cannibalize margin.
In our business, it's hard bid, you know, you hope to get last look, you hope to have
(07:27):
relationships that give you an opportunity.
But it's really a hard bid environment.
So there's going to be competitors.
So instead of pressing and pressing in a town to get more and more market share, we expect
those towns to grow and develop people and then be the part of support to add new towns.
It sounds like what you said is that you don't have the philosophy of we're going to send
(07:50):
a leader from the home office, you home grow it.
So I'd love to know what informed that strategy early on.
Yeah, it's really this bring the talent up from within, you know, and we have some fundamental
philosophies around push information down to the lowest level and engage the individuals
(08:12):
in making decisions.
So whether that be at the field inside the field at a phase of a project or at the field
level for the project or within operations within a town or at the town level, we're
pushing information down and engaging folks in making decisions every day.
I think about us as the the top golf of concrete construction.
(08:36):
Many construction firms ask their co workers to go to the driving range and hit golf balls,
but they don't get to see where they go.
And how motivated are folks going to be to continue to hit the golf ball?
And somebody comes back to them two weeks later, a month later and said, hey, you're
slicing it.
You know, you're hitting it off to the left.
They're like, well, I've been here doing this for a month.
(08:58):
Now you're telling me I'm off point.
So we want to provide the information at the point of impact.
We want them deciding, am I using a six iron or seven iron or driver to accomplish this
and then learn real time.
So let's connect that all the way back to growing towns.
So if we're engaging folks to grow through the project here to the operations tier to
(09:22):
the business unit tier, and then we want to start a new town, the team in that town that
has pre construction capability and operational capability, we look at something geographically
close.
That's the next logical expansion of a town and expect that mature town to start securing
work in that new town.
(09:45):
Don't rent an office, don't buy office space, don't put up a banner, don't start advertising.
People will let you work, they will award you work in a new town.
If you if they believe you have the ability to execute that work.
So our mature towns secure work and walk out that next step.
(10:07):
We've walked out from Tulsa to Oklahoma City.
So we have a young person that's grown up through our organization, hired them out of
college into Columbus.
They went early to Tulsa were part of that Berg expansion.
They then wanted to move to Oklahoma City, started that Berg expansion grew folks backfilled
themselves, moved again to Dallas, and we've gone from zero to our budget this year in
(10:33):
Dallas is $200 million in four years, we've gone from zero to 200 million in Dallas.
Now no one individual does that, that is growing and developing teams, bringing teams along,
you know, getting operational capability boots on the ground capability before you have big
overhead nuts to cover.
(10:55):
So Rob, you just touched on it, but I would love for you to talk a little bit about how
you view parochial markets, and what that does to inform your strategy of where to go
and where not to go.
Yeah, you know, we aren't, we aren't too worried about the nature.
Some folks say, oh, you have to be from Allentown, Pennsylvania, or you have to be from Texas
(11:16):
to operate in Texas.
We haven't found that to be the case we, you know, there are customers that want to be
in those towns as well and we have customers that we work with nationally.
We didn't our launch into Texas wasn't buying somebody in Texas our launch into Texas was
growing and developing teams recruiting out of universities of in Texas, bringing them
(11:40):
to Oklahoma growing them up and then going back and starting to secure and execute work
in Texas.
So there are relationships that folks have and they certainly have them.
Sometimes those relationships, build some kudzu into them and, you know, an efficient
price or an efficient opportunity can can get you a job, and then work to perform and
(12:04):
execute and we've been able to grow now, are there nuances in Dallas as compared to Orlando,
Florida as compared to Salt Lake City, Utah, absolutely.
Excellent dynamics in each place but fundamentally, securing work, executing work with excellence,
putting a quality product in place every day will get you work.
(12:26):
Well, and to your point earlier, I mean, and having homegrown talent that has that is from
there or adjacent to there has got to be a big proponent of that as well.
I'm a military guy.
So my early years I left high school early and joined the military.
So when people want to take or keep ground, they will work awful hard to take or defend
(12:49):
that ground.
And, you know, if being a town based contractor, finding people that desire to be there and
providing them systems.
When we talk about systems, we're talking about information, driving information down
to the lowest levels.
We work very hard on daily productivity tracking units, linear foot, square foot, cubic yards
(13:15):
on a daily basis.
When you hit the golf ball, you know how far it went on a daily basis.
We provide that the entire budget of the job, the units, the cost down to that job level
every day.
So if you provide folks good information, good processes, let's not be creative on how
(13:38):
we have a concrete log or how we have present submittals or RFIs.
Let's have a standard approach to that.
And let's be creative about how we solve problems.
So in this business, there are things that you can standardize and things that you don't
want to standardize.
You want to allow people the opportunity to have creativity in solving solutions for the
(14:02):
construction or the schedule.
You want people to have creativity about solving unique customer challenges.
But let's not reinvent information that we need on a daily basis to know where we're
at or to project or to make sure we're efficient with billings and collection and cash.
So zooming out, 1.8 billion, 22 markets or 22 burgs.
(14:27):
I'm reminded of a quote.
There's a guy named Josh Wolf, who is one of the co-founders of Lux Capital.
And he's got this thing, he calls it 3P, the triple failure.
So failure comes from a failure to anticipate failure.
So when you're running an enterprise of that scale and you empower the workforce and the
(14:49):
troops to the level that you've just described, how are you ensuring quality and that things
aren't, obviously it's construction stuff happens, but how are you ensuring quality
to the level that you can deal with the issues as they come up?
Yeah, a system has multiple threads.
So if you think about threads like threads of yarn, that's strategy, structure, talent,
(15:13):
process information.
And you can't push these threads, they'll all end up in a pile.
So you really need to think about your strategy and your structure, process, information and
talent.
So part of how to ensure execution, how to know status, how to anticipate is part of
the structure.
(15:33):
So information, we call them by tiers, whether you're talking field tier, project tier, operations
tier, burg or business unit tier, regional tier, company tier.
The structure needs to overlap such that somebody is in the two foot space to facilitate development,
to facilitate understanding status, to use the information to coach and develop.
(16:00):
So part of how we know is not because I know, I mean, we have five regions, I know what
the region's mission is, I know the scope they have responsibility for, I know the expected
outcome, I know the desired movements and growth they want within each of the regions.
Those regions need clarity with their burgs, their business units within that region of
(16:23):
what they're dealing with, what are their priorities, what are they trying to accomplish?
Are they trying to enhance competency and capacity and add structural capability because they're
warehouse competency primarily or are they working to get better at information and project
management?
(16:43):
That regional tier needs to work with the burg tier, that burg tier needs to work with
the operations tier in the field.
One of the dynamics that happens in construction, instead of thinking about tiers with succinctly
different roles, people think of tiers as more experience to the same thing.
(17:04):
I didn't come from construction and it's fascinating to me in this industry where junior project
manager, project manager, senior project manager, project executive, when I look at those roles,
it's all the same role.
The only delineation is years of experience.
They're not actually different roles and one of the fundamental problems with organizational
(17:27):
structures is there's truly distinct roles by tier.
It's not just being more experienced of construction knowledge.
That doesn't make you a higher plane.
In this industry, people get promoted because years of experience of construction knowledge,
not because they actually operate with a different tier or plane of management and leadership
(17:50):
skills.
When you get to the business unit leadership level and the regional level, there's some
concrete science, there's some technical skill set you must have around project management
and concrete science, but that becomes a smaller portion of what you need to know.
What you need to know is about the cross-functional nature of talent and safety and pre-construction
(18:14):
and operations and IT, finance, cash flows, many elements of the business.
When you get up to the regional tier and you're working with geographic disparity, disparate
geography, there's a whole different skill set of leading leaders that it takes.
(18:35):
Yes, there's some concrete knowledge, there's some concrete science, some project management,
but this tier of leadership is about being able to provide clarity of scope, expected
outcomes, team alignment of resources, meeting people where they are in those business units
to help them walk out their annual strategic initiatives.
(18:59):
The planes and tiers of leadership to scale a business are about many, many more things.
Your original question is around how do we ensure execution?
How do we stay?
How do we know?
Even though we're pushing information down, how do we stay abreast of knowing that we're
executing every day?
(19:20):
This structured thread of the job architecture, words that aren't going to mean a lot to a
lot of folks, but the job architecture in our organization, what are the differences
in the roles and responsibilities?
Not years of experience, true differences in responsibility.
What's the information that's needed at that tier or plane?
(19:41):
How do those interlink through the organization?
I'd love to come back to, we started this conversation talking about geographic expansion
and trying to get a little bit inside your head as to how Lithco has done what it's done
over the last 20 or so years.
As you think about some of our listeners who might be considering geographic expansion,
(20:02):
whether it's organic, M&A, or what have you, we'd love your perspective, Rob, on if you
had to narrow it down to what are the top three or four lessons learned, whether you
learned them the hard way or the easy way.
If you were giving advice or counsel to folks thinking about it, what would that list look
like?
Yeah, it's interesting.
(20:22):
There really aren't silver bullets that the situational reality becomes very important.
Thinking about an organization with what I call the threads, so not just the people,
but also the structure, the process, the information, those become very important.
(20:43):
Green fielding has its challenges of you're bootstrapping it, you're trying to bring it
to bear, and you think, man, in acquisition, I'm going to surround all this talent and
this capability.
Yes, super.
However, it's raised by wolves.
We've learned the behaviors of the wolf pack that they came from, and how close are those
(21:09):
behaviors to our behaviors?
Do they value information?
Do they value a process?
Do they value being prepared every day?
So when you have an acquisition and you go to surround that and bring it online, it's
different challenges.
That the challenges are, that wolf pack, does it act like our wolf pack?
(21:30):
When we go meet each other, do we even like each other or are we busy sniffing each other
here?
So what does it really take to surround an acquisition is very situational.
So really getting in there, putting our systems and processes in place in a way where we're
engaging them to author what this means to them.
(21:50):
Are they truly excited about utilizing information and making decisions or are they scared of
that?
Are they scared of somebody keeping score?
So my advice would be really seek to understand what you're going into.
Think about it in a comprehensive way.
(22:11):
It's not just send a unique person that is wrought with risk.
A lot of people have been successful with that.
And if you can time a unique person and time the market, we see a lot of people achieve
a success for a while in growth.
That particular market shifts or that one unique individual has a health problem or
(22:34):
drags up or whatever, now you're susceptible.
You've talked a number of times about this whole concept of the unique person, unique
person susceptibility.
And that's something we certainly see as an Achilles heel of a lot of firms because it's
on two fronts.
It's certainly a constraint to growth and scale.
It's also, as you talk about baby boomers and demographics being what they are, it's
(22:58):
a constraint to succession.
It's a constraint to be able to, am I going to be able to transition this business to
a next generation, be it family or internal operators?
But having that sort of, it might help to optimize in the moment, but in terms of future
opportunities and aspirations, it's a pretty big limiter.
(23:19):
Yeah.
And sometimes it's hard.
It's hard to see how you actually operate and how much is because of a unique person.
And that's been a learning for me.
There's been at least three major step changes from 40 million to 1.8 billion, one we're
in the middle of right now, where even I had to fundamentally change my actions and approach
(23:45):
at least on three major points in time where you come to realize, I call it the helicopter
parent syndrome, where you're going into this next phase of organizational need and you're
sending your kids off to college and you're watching them and you're like, oh, I really
thought I had them prepared to live on their own and make these decisions on their own
(24:08):
and be able to be independent.
And you find out once you're there.
Once the kids are off to school, you find out how well did I do of really preparing
them or how much did I try and stay out in front of all their needs and didn't really
have them deductively reasoning through these things.
Same thing for us as an organization and for me personally, to really understand what you're
(24:32):
doing to enable in a good way or enable in a bad way, the organization.
There's no one right answer.
Awareness is the key.
I was reading a book the other day that said the major factor of intelligence has less
to do with IQ or EQ.
(24:53):
It has more to do with self-awareness because it's the constraint to actually being able
to transmit or receive with and to others.
So I'm not the smartest guy, not the sharpest tool in the shed, but if we can operate as
a team in a way where we can share information and really deal with winning and losing together
(25:16):
and understand the why and deal with other people's perceptions and talk about it until
we come to agreement of what is causing good outcomes or patterns or whatever those things
are.
Having a leadership team you can work with that's truly as self-aware as they can be
(25:38):
and trying to work together, that makes all the difference in the world.
It's funny, I was reading a quote the other day.
There's a gentleman named Shane Parrish who has a podcast and has a blog and it's actually
really well done.
It's all about mental models and how to make better decisions.
But he talks about knowledge certainty and his philosophy is that generally the more
(26:02):
someone knows about a subject, the less certainty they talk about it.
And so you hear the experts talk about probabilities or it could be this or it could be that, but
not like certainty.
So I think there's a lot of what you just said that I think would, there's evidence
to back that up.
Yeah, that makes sense to me.
(26:23):
You talked about the three step changes that you've had to personally make as you've made
these shifts over your journey.
To the extent you can remember what those were, I'd love to know.
I always think about executives and what does the filtering process look like with respect
to how do you spend your time?
So I'd love to think about the first transition, the first step change, how are you spending
(26:46):
your time, what were you doing and what did that look like for those three steps?
Yeah, I can clearly capture two major within the three steps, but two major ones is we've
always been an operationally driven company and that's been part of our success.
Thinking about how we do what we do through operations, whether we're trying to enhance
(27:09):
our ability to financially forecast or improve on safety or improve on talent development,
being focused through operations.
Now that's a pendulum or continuum and you got to watch where you're at on that because
there's expertise that can be brought to bear to get better at that, to have inputs from
(27:30):
others that can help you become better at doing what you do every day.
Now sometimes there's a tendency for them to say, well, we need to do this for you and
you don't want that either.
But one of the major things is allowing and bringing expertise to bear around areas you
want to improve and bringing the right ones that will embrace the mindset of doing it
(27:55):
through what we're doing and not building a society down the river or a separate silo
or I think about organizations like CUDZU, the creepy crawly vine that's down in the
South that grows up all over all the trees.
I worry about these particular functions being CUDZU that grows all over operations.
(28:16):
At the same time, you got to figure out that harmony where that expertise can come to bear.
So that's a major one, organizationally, and then being a military guy and just valuing
outcomes allowing for that evolution to take place.
And then the second major one is how much hand on the wheel do I personally have of
(28:38):
each piece of this evolution, the strategy, the structure, and how much am I engaging
others to author that?
That becomes very important at scale, and we're 1.8 billion thinking about five and
10.
How much of people actually exercised?
I think about driving a car and when you're sitting in the passenger seat and somebody's
(29:03):
driving a high performance car, they can talk about watch my angle of entry and watch how
I feather the brake and watch how I accelerate at the crown of the turn and all those things.
They're words, they don't mean anything until you have the steering wheel and you go into
that turn a little too fast and you're not feathering anything, you're slamming on the
brake and spinning out.
(29:24):
So where are we truly engaging at a real executive level for the needs of the future so somebody
has the steering wheel?
So sometimes even if you think you know, you should convert what you think you know into
scope and expectations, expected outcomes, and a timeline and then provide clarity to
(29:52):
that expectation but not exactly the how.
And then have others author that how.
Have them take a cut, grab the steering wheel of what that is and you know that's at all
levels and all kinds of items depending upon age and stage of where you are as a business.
I found myself with the steering wheel telling folks watch how I feather, watch where I turn,
(30:19):
watch where I accelerate and then if you make the mistake of saying okay here's the car
I'm gone, you find out, you look back and you're like what the heck just happened I
just showed them that and they're spinning out and in the sandbank you know.
Well you've brought up a number of really quality visuals, the kudzu which I can relate
to being here in Raleigh, North Carolina as well as the society down the river but two
(30:44):
quick final questions I'm curious Rob just at this stage of the game at the size and
scale you are I'm curious what keeps you up at night at this point?
Yeah, you know it's making sure that when I move on and I don't intend on too quickly
I hired a president in 22 and moved myself to CEO we've promoted from within we're working
(31:10):
on evolving our work structure to make sure that when I move on whether that be moving
to chairman and promoting a CEO and president all those things or you know I'm going to
retire someday seeing that this thing can continue its path and trajectory you know
it would be a huge failure for me if the organization stumbled when I if I wasn't there that's
(31:39):
no badge of honor for me that would be you know my greatest failure that wouldn't be
I wouldn't look at that as a success or oh this organization needed me.
My responsibility is to the organization it's not to me it's to putting things in place
for the opportunities of the growth of our people and if that falters that that's you
(32:04):
know I'm 52 I'll be 53 in July you know when I took over the business I was 30 years old
when I became president 22 years ago that's flown by so if I think about 52 to 62 and
if it goes half as fast as the twice that long it's it happens quick so I need to figure
(32:31):
out how to make sure it's not rob dependent.
Yeah makes a lot of sense and certainly true to the philosophy that you've talked a lot
about here today in terms of the unique person susceptibility and the last question I'll
leave you with is if you could go back and talk to your 25 year old self what's the one
piece of advice you would offer.
(32:52):
It's kind of like less sure of the answer the the older you get it's absolutely around
that you know like there were times and I have mentors in the industry and I was young
and but as he always called it you're batting 300 and leading the league and I'm trying
to tell you you got a hitch in your swing and doesn't matter what I'm telling you you're
(33:13):
not listening until you figure out hmm they figured out I can't hit the curveball so
it that awareness and understanding there's there's way more that I don't know than I
do know and I don't know if at 25 or 30 when I took over the business if I'd have been
that would have made me you know too smart to do some of the things we've done but that
(33:38):
certainly would be a perspective to have earlier in my career.
It's funny you know I started with FMI 22 years ago as well and I knew a heck of a lot
then at least in my own mind Rob thank you so much for doing this I really appreciate
your time and and have a great trip.
All right great seeing you Scott.
Thank you for listening and please join us again next month for a conversation with Russ
(34:00):
Becker CEO of API Group number five on the most recent list of top specialty contracting
firms having recently eclipsed the six and a half billion dollar a year revenue mark
for fiscal year 2022 API epitomizes what it means to successfully build a company around
acquisitions and round numbers API has done about 50 acquisitions under Russ's leadership
with nearly 500 locations worldwide.
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