As Time Goes By: A Celebration of Business Resilience and Strength
For businesses of long standing, remembering one’s anniversary is a piece of cake, especially when their top executives recall what it took to stay alive through generations of challenge. The lessons of history not only apply to nation-states, but to the lives of companies that share a national experience, whether it’s war, recession, recovery, or boom.
Those business lessons offer an explanation for longevity, and it’s that longevity that IB celebrates each January with a nod to area companies that will observe milestone anniversaries. In 2013, there are hundreds of them in Dane County alone, a testament to the sustained level of business performance here.
But unless the business is iconic like Harley-Davidson, significant business anniversaries tend to go unrecognized beyond employees and clients. Those who recall Harley’s 100th birthday bash in 2003 know that it was a once-in-a-lifetime event, celebrated with a massive motorcycle ride to Milwaukee’s Summerfest Grounds, where Elton John entertained a gathering of 150,000, some of whom were revved up because the main act wasn’t, as had been rumored, the Rolling Stones.
Sir Elton might have to live with that slight, but longtime businesses in Greater Madison deserve their “propers.” So in what has become an annual feature, IB not only compiled a listing of business survivors, we also spoke with the chief executives of four local companies that will celebrate significant anniversaries in 2013. In so doing, we found that while their corporate histories are very different, they have at least one thing in common: They have leaned on business practices that stand the test of time.
Michael F. Simon Builders: Kitchen Table Sense
Philip Simon still remembers the home designs his father, Michael F. Simon, would discuss with prospective customers at the kitchen table, often carbon copies of what the elder Simon had built for their friends, only painted a different color. “People would come to meet at the kitchen table after supper and talk about what they wanted in a new house,” he recalled. “We had to be on our best behavior because that was the family business.”
It still is, though by necessity, Philip Simon, now president of Michael F. Simon Builders, is a more detailed custom homebuilder than his father was. Rather than a handshake, the minutest specifications are spelled out to the home-buying family, from the plumbing fixtures to soffits.
For Phil, the youngest of five siblings, it’s about meeting client expectations. Although the company is 120 years old, it learns from every project. “If we are doing a poor job of communicating, if our clients are pulling their hair out, then we’re pulling our hair out,” he stated.
The business was in hair-pulling mode in 1980 and 1981, when interest rates of 18% had ground the residential building industry to a halt. It was time to think out of the box, and the result was an innovation called the one-year land contract. Knowing that interest rates could not remain that high forever, Michael F. Simon would build people a house, but they would not go out and secure permanent financing until rates moderated.
“My wife and I are examples,” Simon explained. “In 1981, we built our first house when interest rates were 18%. We had a one-year land contract, and a year later, we locked in at 12% on a 30-year loan, and we were as happy as can be. Today, if rates were 12%, people would say ‘you’re nuts. Housing is going to stop.’”
Michael F. Simon Builders would not be stopped, also diversifying into light commercial projects beyond its Waunakee base, which paid dividends then and now. It has fought the most recent economic sluggishness with more remodeling work. In 2006, the company’s strongest year in terms of dollar volume, “we were at 80% new construction and 20% remodeling,” Simon noted. “Two years ago, we were at 80% remodeling and 20% new. Today, we are about 50-50.”
Asked whether green building has helped pick up the slack, Simon opined that “green” is a misused term. He said so much of what we think of as green building is actually the most common-sense way to build, including things such as adding insulation to the foundation wall. Years ago, builders were not required to insulate the foundation wall, but more heat could be lost through that one foot of concrete than in an entire attic.
“Green is the most common-sense approach no matter what,” Simon stated. “If not, you have a drafty house, and a house with more volatile organic compounds. There are so many features in green that are common sense, but they are not the bells and whistles that customers are going to see. They are the nuts and bolts of the house.”
The family’s business lineage begins with company founder Michael Simon, the father of Michael F. Simon, whose oldest son, Michael P. Simon, became president of the corporation in 1973. In 1997, Michael P. Simon turned the company over to his two younger brothers, Philip and Peter Simon, and appointed Philip president. Peter retired in 2003, and six years later, Philip’s son Paul Simon started full time in project management.
Since the fall of 2010, a family tragedy, the death of Philip’s 22-year-old son Brad, has made it more difficult for him to arrive at the office with his usual sunny disposition. Parents are not supposed to bury their children, or make the gut-wrenching decision to pull a son off life-support, but that’s exactly the call the Simon family faced three Octobers ago.
Brad was following in brother Paul’s footsteps and pursuing a construction management degree at UW-Stout, and he also planned to join the business. Two men were charged in connection with his death; one was acquitted, the other received a reduced sentence. A wrongful death lawsuit ended with a $591,000 judgment in favor of the Simons. It does nothing to diminish the famly’s emotional pain, but it might start a healing process.
To this day, Phil Simon’s biggest business challenge is trying to remain positive when dealing with the emotions of losing a son. “For a construction company today to be 120 years old is phenomenal, and we should be planning to celebrate all year long,” Simon noted. “Instead, it’s about trying to balance emotions from a loss. When people come to our door and want to build a house, I can’t be a grieving father. I have to be upbeat.”
State Bank of Cross Plains: Dolphin in a Tuna Net?
Some of America’s largest banks – Bank of America, JPMorgan Chase, and Wells Fargo – recently found out they faced additional lawsuits for selling substandard mortgage securities. The role of large banks in the nation’s financial meltdown is well known, leading to new regulatory thrusts like Dodd-Frank, but what about community banks?
Jim Tubbs, president and CEO of State Bank of Cross Plains, which will celebrate its 105th anniversary this year, understands why the big boys face a new regulatory environment, but he doesn’t understand why community banks are being dragged into the same regulatory net. They weren’t at fault for the nation’s financial meltdown, but their biggest challenge is keeping up with resulting regulations – not only the regulations already imposed, but what’s still coming down the pike.
The regulations have been especially difficult in residential lending. Tubbs knows of two community banks that are no longer in the residential mortgage business because the regulations are so imposing. Realtors have criticized the higher-than-necessary credit scores required to secure mortgage loans; for Tubbs, it’s the sheer complexity of administering the regs. “It’s absolutely daunting for a bank our size,” Tubbs stated. “We have got six full-time people that do nothing but compliance stuff. It’s very unfortunate and it could be the demise of smaller institutions that don’t have the resources to dedicate toward regulation control and regulation monitoring.”
In addition, a new global standard for bank capital, established under the international framework known as Basel III, would apply to all banks, raising the bar for bank capital requirements. “It [Basel] is an international committee that creates capital requirements for the largest companies in the world,” Tubbs noted. “That this would be imposed on community banks in the U.S. is very disheartening. We’re waiting to see how that plays out.”
To those who complain that banks are not lending, Tubbs noted that banks make money by lending money, but they also are under additional scrutiny from federal regulators who have established new parameters for what qualifies as a “good loan.” On the flip side, he said some businesses simply aren’t as credit-worthy as they once were, leading to the perception that credit is too tight.
As Tubbs explained, community banks take people’s deposits and lend them out to local hardware stores, grocery stores, churches, and homebuyers. There are no complicated financial instruments, and the successful banks stay true to their roots and play to their strengths.
In the past decade, State Bank of Cross Plains has acquired three other Dane County banks, but has limited expansion to the market it knows best. “Many banks failed because they got involved with things they weren’t familiar with, or they tried to expand into markets they didn’t understand,” Tubbs explained. “If our banks would have expanded into another part of the country like Arizona or Florida, we would have felt the same distress those banks felt.”
That’s not to suggest the most recent recession wasn’t felt. Tubbs has experienced several recessions, but this one cut faster and deeper than most. Looking back at the carnage, it was clear the banks that closed had struggled due to a lack of capital, so Tubbs went to market this summer and raised $12.5 million of new capital for the institution he leads.
Since nobody can predict how long the slow-growth economy will last, the bank decided it had better improve its capital position. “We know the interest rate environment will remain constant until 2015, but one of the concerns we have is the longevity of high unemployment,” Tubbs said. “As companies have scaled back, high unemployment is a great concern for getting the economy growing strongly again.”
Their holding pattern is primarily due to the stunning nature of the past recession. Tubbs said that in the years before the recession hit, many employers added to their staffs but then suddenly had to cut their workforces, including family members, an incredibly painful thing to do. Now, he said, “their feeling is, ‘I don’t want to do that again. I don’t need to expand. I’m making an okay living for the people I’ve got working for me right now. I can stay status quo until I see things have really turned around.’”
Hooper Corp.: Simply Electrifying
In some ways, the growth of Hooper Corp. mirrors the growth of Madison. In the 1910s and 1920s, much of its work centered on growth at UW-Madison, particularly the construction of steam tunnels that heated campus buildings and the Capitol.
The 1920s were a boom period for Madison, as the Progressive movement launched a renewed commitment to the university and state government, not to mention a significant building period that benefitted Hooper and others.
Even in the 1930s, after the Great Depression staggered the American economy, the company was able to spread its wings geographically with mechanical work for the military, including Langley Air Force Base in Virginia. In that period, President Franklin Roosevelt’s Rural Electrification Act was the beginning of Hooper’s involvement in the electric power industry, primarily in the Midwest, and led to the founding of an electric power division. By the mid-1940s, Hooper began working for industrial utilities.
Founding partner Charles A. Hooper believed in partners who were active participants in the company. “The Depression was really a setback when you look at some of the board minutes from that era,” said Hooper President Fred Davie. “Salaries were dramatically cut among the two or three partners here at that time. There were reductions in staff, but they made it through.”
The company still is serving UW building booms and growing industries like health care, but Davie cited an unwavering commitment to creativity and independent thought as key reasons for the company’s longevity. The latest example is Hooper’s involvement in the wind and renewable energy market, which fits with the company’s provision of infrastructure services and is largely dependent on tax credits. Among its recent projects is the Granite Reliable Wind Farm in New Hampshire.
Hooper’s mechanical and electric power construction divisions combine to serve nine industries, including all of the piping trades via the mechanical division. Hooper also has a custom metals department and a wholly owned subsidiary called General Heating and Air Conditioning. On the electric power side, Hooper provides transmission lines, distribution facilities, and substations, and it has a separate division called United Signal, which is in the railroad signal business.
A union shop, the company employs about 390 full-time people, with close to 600 people in the field between the parent company and its subsidiaries. When the recession hit in 2008, Hooper began to focus internally with new initiatives, many of which involved employee orientation training to bring young people into the company. A lot of this training now is done in a blended learning environment, where the orientation occurs as new employees experience a day of software and other training with mentors to guide them.
“We’ve used that blended learning approach quite extensively,” Davie said. “We want everybody to have the same baseline. It’s very much oriented to the field, but it’s very important that all our administrative staff, everyone that works in this company, is basically in support of the activities of folks out in the field. You may be in accounting, but a smart manufacturer will send you to the floor for two weeks or a month and learn what the business is all about.”
In the aftermath of Hurricane Sandy, authorities had difficulty restoring electric power to thousands of homes in the eastern United States. That has led to calls for picking up the pace of modernizing the U.S. electrical grid, including placing power lines underground so they are less vulnerable to such powerful storms.
Davie cautioned that economics always come into play, and the most economical use for underground systems, which have reliability issues of their own, is in new construction. “It becomes very difficult to go into densely populated urban corridors with overhead distribution systems and convert them to underground,” he noted. “It can be disruptive, with lots of tree removal.”
In commemoration of the company’s centennial, Hooper history is being researched for a book written by historian Ellen Langill, a professor at UW-Milwaukee. As the company delves into the minutes of Hooper board meetings dating back to 1928, the project has been instructive. “We’re learning a lot of things about Hooper prior to 1940, which was kind of a lost era because a lot of those folks are gone now,” Davie said. “It’s kind of fun having a professional historian dig in.”
M3 Insurance Solutions: The Fountain of Youth
Michael Victorson, president and CEO of M3 Insurance Solutions, is the leader of a youth movement, and he certainly wouldn’t mind if you call him “kid.” When you’re in the insurance and risk-management business, and your clients include your fellow businesses, staying young doesn’t necessarily put a company at a disadvantage, especially when all that youthful energy is mixed with a strong foundation.
Formerly Mortenson Matzelle and Meldrum in recognition of three partners that joined forces along the way, each bringing a unique expertise, the independently owned commercial insurance agency has shortened its name but hasn’t lessened its impact. Victorson said the agency has survived by honoring its origins, establishing a sustainable brand and culture, and by continuing to bring in new talent with new ideas and energy to build upon its foundation, even if not all of that young talent has grown up in the insurance industry.
“We’ve been a company that has found an ability to continue to perpetuate itself,” he said.
Victorson is eager to continue in that vein because he is a beneficiary of this multi-generational principle. He became president of the company at age 32, so he understands the connection between youth and a culture of innovation. “We allow people to stretch their entrepreneurial wings to addess the direction that we should be taking in the market,” he said.
For M3, the fruits have been an expansion of its risk-management tools. For property-casualty and employee benefits, the company has invested in actuarial modeling and underwriting, both from a software standpoint as well as through people and their technical abilities. Victorson believes this helps business clients understand what drives cost and what influences an insurance program – “the why behind the what” – and it helps form risk strategies to manage cost.
The three Ms in M3 pertain to the men who shaped the agency. Loren Mortenson launched it in 1968, concentrating on life insurance and financial planning. As the agency added partners, it added capabilities. Richard Matzelle came onboard in 1970, offering employee benefits expertise. Fifteen years later, Charles Meldrum and four other property-casualty professionals added another dimension.
In its 45 years, the agency has never gone backwards, Victorson said, growing revenue in every year of its existence. That’s been true even during several tough economic climates, when M3 and other insurance agencies benefited from the reality that employers can’t, as part of painful cost-cutting, simply stop insuring their employees with workers comp and other coverages.
While M3 has grown to more than 120 employees and has opened offices in Milwaukee, Wausau, Green Bay, and Eau Claire, the agency prefers to remain as entrepreneurally nimble as possible so it can quickly get its solutions to market. ”We really are working our tails off to make sure we don’t become something that looks, feels, or smells corporate,” Victorson stated.
Finding young talent is a constant challenge, but M3’s most pressing business concern at the moment is helping business clients prepare for the full implementation of the Affordable Care Act. Calendar year 2013 will be a crucial year for companies with over 50 employees (full-time equivalency) because they have to decide whether they will pay or play when it comes to providing their employees with health insurance coverage.
M3 has developed an impact modeling tool to help clients sort that out, and Victorson said it’s not as simple as dropping group coverage (and perhaps increasing salaries), dumping employees onto a health insurance exchange, and paying a penalty that appears to be a less-expensive option. There are employee recruiting, retention, and tax variables to consider.
The modeling tool was developed to factor in things like enrollment and payroll data, employee contributions, and medical premiums so that clients can analyze various scenarios. “It’s a complicated law,” Victorson stated, “and probably the biggest thing they are learning is that it’s not as simple as how many employees do I have, and can I just cancel my health insurance policy so that people can go buy from an exchange?”
That’s especially true, Victorson notes, because the concept of employee benefits is having a resurgence in terms of the time and attention paid to it by executives as an employee attraction and retention tool. “I guarantee you this much: after Jan. 1, 2014, prospective employees are going to ask prospective employers, ‘Do you have a health insurance plan, or do your employees buy it from an exchange?’” said Victorson, before expounding with an unintentional pun. “Health insurance as a percentage of employee benefits is going to take on premium importance to employers.”
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