Schlouch: Culture Creates Value

By Frank Raczon, Senior Editor | June 22, 2016
Schlouch: Culture Creates Value

When you enter Schouch, Inc., Blandon, Pa., you sense it is a different type of workplace. It’s a bustling workplace, where the employees greet each other by name no matter how brief the encounter, and brightly colored artwork adorns almost every wall.

Bring employees together for a discussion and the camaraderie stands out. Everyone shares their thoughts, and it’s apparent you’re looking at a genuine, interconnected team.

Schlouch is the medium-fleet winner of the 2016 Fleet Masters Award. The awards are presented each year by Construction Equipment and the Association of Equipment Management Professionals, and are judged on categories such as finance (financial management, acquisition, warranty, and performance guarantees); information management (benchmarking, life-cycle costing, specifications, and technology); policies (safety, employee training, environmental, and human resources); and controls (outsourcing, parts management, preventive maintenance, and shop and facilities management).

“We think differently—about building something that lasts beyond our generation. We’re really about creating a John Deere-type story. John Deere is 180 years in business. We’re about building that slow, deliberate culture of care, trust, and helping one another,” says Barry Schlouch, CEM, president, Schlouch, Inc.

“We take time to get to know each other, take time to talk about what’s working and what’s not,” he says. “We believe our people and their skills create value, and the revenue will come after. We’re not like companies that stretch to go after big jobs and shoehorn people in after they get them. That doesn’t bring people together to create value. Our people have to be the right fit.”

Skill building and finding the right mix of employees are two of the reasons why Schlouch aims for slow, steady growth in the neighborhood of 10 to 15 percent per year.

“We’re going to hit the schedule every time,” Schlouch says. “When we say we’re going to do something, we do it. We’re good at saying ‘no.’ Like Steve Jobs said, you make your money on your ‘no’s.’ If it’s beyond our capabilities, even though it could lure you because it’s a big job with a lot of revenue, we won’t do it if we don’t think we have what it takes to make that schedule with safety, quality, and profitability.”

Safety is a major component at Schlouch. Don Swasing, CEM, the company’s COO, tells a story that’s typical of the employee involvement and innovation tied to safety. “There was a young pipe foreperson we challenged during a safety audit,” Swasing says. “What we had found was a storm box with a 12- to 15-foot drop, which was a fall hazard, but it was necessary to survey to the bottom. We asked him, ‘What if you fall in and break your back, what will we do differently the next day?’” The foreperson took the challenge to heart.

“He comes into the next meeting with a sketch of a platform, a way to engineer the hazard out of that work,” Swasing says. “Then a welder joins in with his ideas on how to make the platform, then a site foreman. Pretty soon you have a solution.

“Everyone’s got the power to make change,” Swasing continues. “We’re not looking at consequences [for an individual]; we find, fix, and move on. We support those who know the answers. As soon as he realized there was no fear, out came the sketch. The magic is that in the absence of fear, the solutions come forward. Going down easy street is simply making an incident report, discipline, and we’re out.”

Every level of the company is engaged, without the emotion or dread about being “written up.” “It’s the employees accepting accountability instead of holding them accountable,” says Kevin Reimert, CEM, fleet coordinator.

“We don’t just send rogue emails that say ‘here’s the policy,’” Swasing says.

Like many contractors that survived the recession, there are fewer employees at Schlouch than there were in 2005, but the company has made changes to become more efficient. Fleet is a prime example.

“During the recession, we defleeted,” Swasing says. “We became masters of disposal. For many years, the model was do a good job in acquisition, operate it well, take care of it, and trade it for another one.

“At that time, the dealers were unable to provide us with good trade numbers, so we had to go out into the world and explore online auctions and other areas,” Swasing says. “We had to learn to dispose on our own, and write guaranteed [buy back] contracts. So we still maintain the fundamentals, but we also have enough information in house to know depreciation and its effects on business decisions.”

CFO Rich King says, “We dismantled 40 percent of the fleet for recession. Those were the toughest decisions. Do we sell? What if we get that big job? Do we go to this auction or wait one more? Thankfully, most of the time, we didn’t wait.”

In addition to disposal, the company took the time to fully implement some other changes it had been considering. There is more of an emphasis on preventive maintenance, and it has done more renting, particularly for larger jobs. Telematics use has increased. Interestingly, rental and telematics go hand-in-hand.

“We track rentals like a hawk [with telematics] because we pay a premium for it, so we make sure we get utilization,” Reimert says. “Especially on long-term rentals; we treat them as if they were our own.”

Swasing says, “We understand that if there’s a catastrophic failure, there’s only one thing that happens: Our prices go up. Our dealers are partners. If we see something we don’t like [in telematics data], even if it’s a rental, we encourage them to take a look and avoid a failure.”

Schlouch has gone completely away from a fix-when-fail model. “We made the change from a failure and then fix model to a scheduled maintenance model,” Barry Schlouch says. “Some people here were very comfortable, they liked to fix things, they were good at it, and didn’t necessarily understand the switch. We had to make some adjustments. But the old model really wasn’t good for us as a business, because it costs more. Some people, when you took the wrench out of their hand and gave them a diagnostic tool, they didn’t know what to do. We went through that cultural change. It was a good thing in the long term.”

The company also embraced public work, because the recession saw its traditional private sector business opportunities drop by 50 percent. “We’ve also got more outsourcing going on than what we did,” Schlouch says. “We’ve taken a different approach in that we don’t have to do everything ourselves. We can partner with other subs and suppliers that may have a niche and be really good at it. We’ve left that public door open, thanks to our experience. We’re more prepared for the next blip, the next recession. We’re leaner and more efficient.”

But still maintaining the culture.

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