Jerry Welty was enjoying a long overdue vacation in Florida to escape the pressures of running his nearly 50-year-old family business. He and his wife Emily were walking along a breezy beach when they struck up a conversation with a stranger-a business owner who had just retired. The stranger said his age had been sneaking up on him until his health demanded he retire suddenly. There was nobody to take over, so he closed the company.
That was seven years ago. Welty was 51 and had no partners, no relatives, no longtime associates in the construction company founded by his father. Returning to his Florida condo that afternoon, Welty felt like he’d had an ominous look in the mirror.
“I was trying to look around and see my options. I’ve seen many construction businesses where the owner gets up there in years and the company just closes its doors,” Welty says. “I didn’t want that to happen here.”
Welty Building Co. has risen from a small, post-World War II era home builder to a top commercial contractor that enjoys stature in Akron’s highest business circles. With a resume that includes Inventure Place, First National Bank Tower and the new BFGoodrich headquarters, it’s hard to drive for more than a few minutes in any direction in Akron without passing a Welty project.
But if this legacy was to continue, Jerry Welty realized he’d have to scramble to find a successor. He chose perhaps the simplest solution: He paid somebody else to help with the chore.
Today, with a quietly produced succession plan in place, Jerry Welty is comfortable that he knows who is going to take over the company and when.
An industrial arts teacher at Central High School, Henry Welty founded Welty Building Co. in 1945 to fulfill his passion to design and build fine homes. Welty operated as a one-man show until Jerry, his middle child, became the first employee in 1966 and invested $5,000 in the company.
The two built a modest business, growing to $750,000 in sales by 1969. Homes were built by day; paperwork was done at night.
Henry retired in 1969 at age 66 and turned the company over to Jerry, asking his son to abide by two simple principles: pay the bills on time to maintain integrity and receive better prices and service; and do the job right-and if it’s not right, tear it down and do it again.
The son agreed that those principles would form the foundation, but he wanted to take the company in a new direction. Homes would only take him so far, he decided. A short list of commercial credentials would create a future in larger, higher profile projects.
It took a full 10 years to break in, when Welty was recommended by executives at Myers Industries Inc. for the $3.5 million restoration of the old Post Office on Market Street into the new Akron Art Museum.
Not only did Welty complete the showcase project on time, but under budget. “We had $50,000 in contingency money left over and were able to give it back,” Welty smiles.
Big jobs followed quickly from there as the five-employee company grew to a staff of 16, plus dozens of other regular subcontractors, during the 1980s.
Among the highlights: The $1.2 million Ronald McDonald House in 1984; the $7 million Akron YMCA renovation in 1985; and the $14 million First National Bank operations center (now FirstMerit Bank) in 1989.
By the time that Welty secured the $32 million Inventure Place contract in 1991, Jerry Welty should have felt on top of the world. But the project coincided with his reality check about the lack of a successor for his then $13 million-a-year company.
As in most family businesses, Welty’s two children spent their share of summers working for Dad. Chad had worked in the field, Monica had worked in the office. But neither ever showed a serious interest in the business. Today, Monica is 25 and works in New York City. Chad served five years in the Army and, at 27, is an electronics student in Georgia. About five years ago, he told his dad, “I know you’d like me to come in the business because of Grandpa, but I’ve got my own path to travel.”
Welty recalls: “I said, ‘Well, I respect that. I don’t want you to feel obligated. I want you to be happy.’ “
But that left Welty with no obvious path to follow. “I realized I was having a lot of fun. This company was practically my whole life,” Welty says. “If I sold it, I’m out. If I sold it, I wouldn’t know what happened to the people or the name. “
It was the Inventure Place project in 1992 that forced Welty to bolster his management team. He had Bill Bennett, who’d joined the company in 1987 and had risen to executive vice president. Among Welty’s new hires was a 31-year-old construction manager, Donzell Taylor, who started as a project manager and had seven years prior experience at Dunlop & Johnston Inc. in Cleveland.
In his few first weeks on the job, Taylor gained respect from his new boss by landing two contracts, one worth a few hundred thousand dollars and the other a $2 million facility for The Little Tikes Co.
The new kid, it appeared, was a rainmaker and a leader. Welty began to take notice of Taylor’s interest in the business and ability to handle clients, co-workers and the scheduling headaches that are synonymous with construction.
Despite Taylor’s early success, Welty still didn’t know who, if anybody, could be readied to take over. In 1993, he enlisted help from Denver-based FMI Corp., a management consulting firm that focuses exclusively on the construction industry.
FMI consultants met with each Welty employee for 30 to 60 minutes to discuss each person’s vision for the company and to tally “votes” whether there were any internal candidates for president.
Welty said he suspected Taylor’s name would surface often, but felt it was worth the cost of several thousand dollars to have a third party figure it out.
“Your gut isn’t always right. At the time I thought it was a lot of money, but it was money well spent.”
FMI’s report pointed to Taylor as the top executive and Bennett as a co-owner, indicating the two together had the qualities and support of the employees to take over.
“I had always thought I might end up being an owner,” says Bennett, 49, “but I didn’t know what Jerry’s plans were.”
If Taylor and Bennett took over, Welty decided, it would have to be a long-term transition to mold the pair into owners and align them with his own philosophies.
Welty held numerous meetings with his accountant and attorney to discuss a seven-year transition-a number that simply seemed to make sense to Welty considering his age and what the two prospects needed to learn. “My attorney Sam Goldman said, ‘That’s a long time,’ and I said, ‘I know, but I want to continue working.’ “
Welty continued to bounce the idea around in his mind for nine months before he approached Taylor. “I was careful not to commit myself,” he notes. “I said, ‘Let’s give it two years. Let’s look at the chemistry. It’s got to be compatible.’ “
As Welty observed Taylor, he grew comfortable. “He had the entrepreneurial spirit that it takes to run an organization. That’s very rare.”
Welty wanted to announce the plan to the employees long before he was ready to retire to put employees-who have an average eight-year tenure-at ease. “We didn’t want them to wonder what was going on and start looking for jobs if they thought we might close.”
Taylor says it was also important so the company can continue to attract good new employees. “They need to understand the business is in it for the long term.”
The succession plan was finished in October 1994 and launched in January 1995, when Taylor and Bennett each contributed earnest money. The plan called for Welty to gift 7 percent of the stock each year for seven years. How the 7 percent is divided each year between Taylor and Bennett is based on their performance, Welty says, although the plan calls for Taylor to own a majority of the 49 percent.
Welty plans to retire at the end of 2001, at age 63, still owning 51 percent. Taylor and Bennett then will continue buying Welty’s shares at what
ever pace profits will support. There is no time line.
While Welty will get equity from his business slowly, he says he’s comfortable because he doesn’t want to strangle the business into failure. He won’t disclose the sale price but believes it’s modest compared to what he might have been able to get on the open market. “We can’t expect to get the last dollar out of this business. My goal is to see the business continue and thrive into the next century.”
Welty Building is now halfway through the seven-year transition. The focus has been on grooming Taylor into the next chief executive as he builds relationships and learns every aspect of the business.
Welty says he’s been introducing Taylor to clients and centers of influence and is helping him make headway with players in the banking, bonding and insurance industries.
“I’m working very hard to make sure they feel comfortable with me,” Taylor says. “I’m still working on the marketing and sales side of things. I still feel that’s an area I need to work on.
“Jerry’s been the chief rainmaker for the company for a number of years, but I feel it’s the president’s responsibility to get to know the players and close those deals. I need to work on my salesmanship.”
For his part, Taylor is working 65-hour weeks, often arriving to work at 4 a.m. like a student cramming for a final exam.
Welty is allowing Taylor to make more of his own decisions, even if that means watching him walk into mistakes.
“You knew that was going to happen, didn’t you?” Taylor has said to Welty on such occasions. “And he’ll say, ‘Yeah.'”
Welty believes experience is the best educator. “I think he needs to be able to spread his own wings. He needs to have that ability to think on his own.”
Welty knows that his company will change after Taylor takes over.
Already Taylor is introducing software to help calculate jobs (Welty acknowledges that such technology isn’t his strength). Taylor is also building management systems, cost-control processes and communication procedures from project managers, Welty says. Taylor also focused on new safety programs, which has led to two years without a single day lost to an injury. Welty calls that remarkable in his industry. “Don is largely responsible for that.”
“Like the old adage goes, the sure-fire way to fail is to continue doing what made you successful for just a little too long,” Taylor says. “But I don’t see that we’re going to radically change direction. Those are big shoes to fill.”
Today, Welty Building has 21 full-time employees to support its roster of regular contractors. The outfit has enjoyed 20 percent annual growth in each of the last few years. It recently has completed the Akron General Health and Wellness Center, the Main Street Gourmet plant, the Saltz, Shamis & Goldfarb accounting office and the new First United Methodist Church of Akron. The company has won two coveted Build Ohio awards from the Associated General Contractors of Ohio, for Inventure Place and the Wayne-Dalton Corp. headquarters.
With that momentum, Taylor’s appointment as president last July caused rumors to circulate that Welty had suddenly retired. That’s when Welty started talking about his succession process.
Though he still hears that such a long transition is unconventional, he believes it’s the best approach.
“It’s enjoyable and gratifying for me to see these two fellows taking over. And the business is growing. It’s not stagnant. We’ve accomplished what we wanted to do.
“There isn’t a week that goes by,” he adds, “that someone doesn’t tell me, ‘Boy you’ve done it the right way. I wish I had done that.’ “