Growth
Planting ideas
How R. Douglas Cowan took The Davey Tree Expert Co. from a $60 million acorn to a $470 million oak
By Matt McClellan
Smart Business Akron/Canton | June 2007
There’s an inside joke at The Davey Tree Expert Co. that most
people come there to work until they find a real job..
That was R. Douglas Cowan’s plan when he joined Davey in 1974. He considered Davey a stopover until he could find something better.
Eleven years later, Cowan was president of the company. By
1988, he was also CEO.
In 1979, Davey had revenues of $60 million and 2,800 employees. Today, the company has 6,000 employees and revenue of about
$470 million. The growth has been consistent as well, with revenue
increasing 46 percent since 2002.
Cowan’s been there through the company’s tremendous growth,
he was there when the Davey family decided to sell the company,
he was at the table when the ESOP [employee stock ownership
plan] agreement was signed 25 years ago, and he’s instilled a commitment to train the next generation of leaders to make sure the
company’s success keeps on going.
Cowan stepped down as president and CEO at the end of 2006,
remaining as chairman.
Now, he jokes that after 32 years, he has finally decided Davey
Tree is a good place to be.
Here’s how Cowan has approached some of the challenges he’s
faced in building a successful company.
Careful acquisitions
Despite Davey’s tremendous growth, Cowan doesn’t spend time
worrying about revenue numbers.
“I’ve never been terribly enamored with top-line growth,” Cowan
says. “I know a lot of CEOs — particularly of public companies —
are hell-bent on it. They grow at double-digit growth rates, year
after year, even to the point of doing like-kind mergers with companies their size to double their size.
“I’m just not into that. I’m much more into cash flow and the bottom line. Can we live within our cash flow so we don’t go terribly
into debt to grow?”
Over the last four years, Davey has grown through acquisitions,
purchasing 15 to 20 small companies.
Davey’s growth process involves acquiring companies that are
located close to an existing Davey operation.
Having a strong Davey operation near the target company is a
prerequisite for the deal. Cowan says Davey gives its managers
“wingspan” — the authority to make big decisions throughout his
or her area. The best managers get the most wingspan, and Davey
will only make an acquisition if the local Davey manager will be
able to take control.
“One of the worst things you could do would be to buy a good
company and put it in with a mediocre manager because he’s just
going to fall on his face,” Cowan says. “If you take one operation
doing $1.5 million and you bought one doing $1.5 million, now
you’ve doubled that guy’s size. If he doesn’t have the wingspan to
manage that new $3 million operation, you just made a huge mistake.
“We’ll buy a company that might double a guy’s territory only if
we know he’s one of our best managers, and we know he can handle the next couple of years. So we pick managers first, then we
pick the city we want to expand in.”
Cowan says that company culture is another important factor
when deciding whether or not the acquisition should be made.
“Too many companies make big mistakes by acquiring companies that are too big,” he says. “The cultures don’t mix. Our culture
is so unique, I don’t know that there’s a company out there that we
could indoctrinate quickly enough to make it profitable. So, we’re
going to grow within our opportunity to manage it.”
The role of the CEO
After many years in top executive positions, Cowan has learned
a few things about what makes a good leader.
“The higher up you go, the less you should be involved in the dayto-day operations. But you should be involved in the people aspect.
You’ve got to know where the talent is and you’ve got to keep nurturing the talent.
“Frankly, the higher up you go, the more vague your job gets.
You’ve got to be more into long-term visions, management succession and development of the next generation. It becomes a lot less
hands on, and a lot more abstract.”
The CEO should have zero input on the day-to-day operations to
be effective.
“Instead, he’s got to be the chief cheerleader,” says Cowan. “He’s
the person who has to convince all the employees that he’s honest
and genuine and what he says can be taken at his word. His role is
to develop the next generation of managers. He’s the people guy.”
As the company’s chief cheerleader, the CEO is responsible for
keeping those people happy. The most important key to that,
Cowan says, is creating an environment where employees feel valued. However, he says efforts to directly motivate employees may
not be the best way to go.
“You know the old saying that all stress is self-induced? I believe
that all motivation is self-induced,” he says. “I’m not sure the leadership can motivate. I think leadership can create an atmosphere
where people can motivate themselves better than other places.”
To create that atmosphere, CEOs need to realize their power
doesn’t come from the select group of managers surrounding them
— it comes from the employees themselves.
“They need to put their employees and people as their first priority, their customer second, and their shareholders third,” Cowan
says. “The employees need to be No. 1. When you do that, people
perform incredibly well.
“All your authority comes from the bottom up. It doesn’t come
from the top down. The employee group will make you as successful as they can if they think you really believe in them also.”
Selling a vision
Getting buy-in from employees is key to executing any vision, and
the best way to obtain that is through solid communication.
Davey Tree’s operations are spread out across 40 states, which
can make it difficult to keep everyone on the same page. Cowan
says a leader can never communicate enough, and one of his solutions is the President’s Council, a rotating group of 12 field managers from around the country that meets to discuss business
issues.
Several times a year, Cowan and the other top executives at
Davey bring in all the members of the council and their spouses for
a meeting. The idea behind the council is to see what problems are
surfacing and how field managers are dealing with them.
“We listen to them and talk about what’s good for the company
and what they’re doing in Houston versus Boston versus Calgary,”
Cowan says.
Sometimes Davey representatives in one region have already
come up with an innovative solution for a problem that just
appeared in another region. The council strengthens the bonds
between the company’s various regions, and each field manager on
the council serves as a voice for his or her employees.
“These are now the people who are leading the company all over
the country,” says Cowan. “One of the things that comes out loud
and clear in these meetings is that these folks genuinely care about
the people in the company.”
But Cowan doesn’t just communicate by having people come to
him. He’s continually traveling the country to brand Davey’s strategic plan into the minds of his managers. The plan is called Vision
2010, because it entails where the company wants to be in the year
2010.
Every five years, Davey management from across the nation gets
together to design the plan.
“Clearly the CEO has the biggest input, but he’s got to have input
from all the key leaders or it doesn’t work,” Cowan says. “Unless
everybody buys in to it, you can’t possibly dictate it. So, once the
top management group decides where we want to go, why we
want to do it, and how we’re going to get there, all of us try to
spread the word. And as you go down the organization, hopefully
they’re all saying the same thing.”
After the long-term goals are created, the vision is tweaked every
year to allow for changes based on what’s happening with the market, technology or because of environmental issues.
“It has to be something that will take a stretch to get to, but it also
can’t be outside the realm of possibility either,” he says. “People
have to be able to achieve it, or it’s not going to be worthwhile. We
think at the end of 2010, we can be at $650 million in revenues. If
for some reason we’re faster than that pace or slower, we may
adjust it next year, but for right now, that seems like a pretty good
target.”
Once the top managers agree to the vision, they have to put a
plan in place to achieve those goals. If one section of Davey’s business is projected to grow at 20 percent each year, that section may
have to make some acquisitions to reach that benchmark — if it
can’t grow that fast organically.
The flexibility and authority given to management creates a feeling
of ownership. And if management believes in the company’s vision,
they’ll do a much better job of explaining it to the employees under
them.
“Once the top folks are comfortable, it’s a matter of selling it to
the next layer down and the next layer down,” Cowan says.
The next generation
Another important part of leadership is preparing the next generation of leaders. When asked to define success, Cowan laughs
and says success should be measured in the long term.
“Success is a journey, not a destination,” he says. “Do they have
the right folks in the right positions to succeed me, and do they
have the right people in position to succeed them? The corporation has to endure lots of us. You’re here for a short period of time,
and I hope that before I die, I see the company at 10,000 employees, 5,000 of whom own it, and we’re doing a billion dollars.”
Davey’s culture is very focused with the long view of things, so it
has made training future leaders a top priority. And that’s leaders
— not managers. Cowan says there are too many managers and far
too few leaders on the horizon, and so the training at Davey focuses on making leaders who can manage.
When searching for the next generation of leadership, Cowan
looks for several basic traits: honesty, hard work, perseverance,
positive mental attitude, caring for people and especially communication.
Communication is the one skill that Cowan says every leader
needs to spend time on, because public speaking, in particular, is
so difficult to improve. So the future leaders are pressed into situations that test their mettle at the podium.
“Public speaking is a talent that can only be developed one
way, and that’s by doing it,” Cowan says. “So we try to get our
future leaders into places where they have to speak. If they’re
close to the V.P. (level), we get them in front of the board of
directors. Most of us learn the hard way and learn from mistakes. So you try to get them into positions where they can
learn and make mistakes without hurting themselves or the
company.”
There is one other variable that is considered when picking
the next vice president at Davey, and it may be easy to see, but
it’s hard to measure.
“We really don’t promote the prima donnas,” Cowan says. “If
you’re not going to be a team player, you won’t like it here.
Only once has a person come in from the outside at a V.P. level
and survived. We’ve tried, but we’ve found this company is like
a giant white corpuscle — we kill everybody from the outside
that comes in.”
That type of culture may turn some people off, but it builds
loyalty throughout the organization.
“It reassures everybody on the inside that their pain and suffering and hard work is worth it,” Cowan says. “The board or
company won’t go to the outside and bring in a new CEO or
president that they don’t know.
“What we do isn’t rocket science. I don’t think you need
somebody that was groomed at GE to come in here and change
course or cut costs. It’s about the team. It’s not about the person in charge. We’re never going to go to the outside to look for
leadership. We have plenty of it here.”
HOW TO REACH: The Davey Tree Expert Co., (800) 445-TREE or www.davey.com
