A. Stucki Co. and Bill Kiefer grow its family of companies under one goal

 

In 2003, Bill Kiefer sold his company to a small engineering business, A. Stucki Co., which had been involved in the dynamic control of railroad freight cars for more than 90 years. Six months later, he stepped in as president and CEO of Stucki.

“When I started Independent Draft Gear, we were three people, and when I sold it, we were six or seven. I think Stucki then was 15 people,” he says. “Today, A. Stucki Co. is pushing 1,000 people. So in 10 years, it’s had phenomenal growth. We’re not Apple, Google or somebody, but for an old industrial company, yeah, we’ve grown quite a bit.”

As its primary customer, the rail industry, consolidated, Stucki found itself consolidating as well, because purchasing agents would rather buy more varied products from one supplier.

“We were somewhat forced to do it,” Kiefer says. “The days of being a small family-grown company in the rail business and having one or two products was gone; the industry was consolidated. But as our company grew, we became more and more dependent on suppliers.”

In order to better assure its supply, Stucki started strategically buying the companies who provided machine parts, springs or ductile iron. It also added businesses that allowed it to increase offerings in the rail industry.

The business now owns 14 different companies grouped into five different operation divisions, and touches almost every part on a freight car.

“Fifteen years ago, if you were building a new freight car, I think we could have built $215 on that freight car,” Kiefer says. “Today, we can build as much as $18,000 on a new freight car.”

The next step is to better use its divisions to grow the industrial side of business, outside of rail. But it hasn’t always been easy to manage this kind of rapid growth — Kiefer describes it as equally exciting and grueling.

Spread the ownership

The No. 1 rule at Stucki is: Check your ego at the door.

Kiefer encourages this by ensuring his management and key employees have the responsibility and pride of ownership.

“They should experience the sleepless nights. They should have their own capital committed,” he says.

About 45 different managers own more than 30 percent of Stucki.

This allows Kiefer to manage the business, not the people. He doesn’t have to micromanage expense reports or have a large HR group overseeing everything. This helps tremendously with managing growth.

“Most of my people work 60 and 70 hours a week because they want to — they are invested in the company,” Kiefer says.

He says he always tells younger people with companies to cut their people in so they’ll give their heart and soul, as opposed to just their time.

When they acquire a company, Stucki is also buying the management — their independence and way of thinking.

“That’s why when we buy a small company, if the owner is going to stay on or the people under him, we try to get them in a shareholder position,” Kiefer says. “It sure makes your life a lot easier.”

For instance, when Stucki bought Precision Roller Bearing, there were three owners. Kiefer says one was a silent owner, another was near retirement age, but the third was a younger sales guy who rolled a large portion of his proceeds into Stucki stock so he maintained an ownership position.

By keeping the entrepreneurial spirit strong, Stucki can compete with companies that are 10 and 15 times larger with better pricing power — through passion, better service and letting customers know they are all owners.

“I was out at the Union Pacific Railroad, the biggest railroad in the world, and I sat with the vice president of sourcing, and I said ‘You don’t need me to come out here — the few people you’ve been talking to are all owners. They make decisions based on their ownership,’” he says.

But as Stucki has grown, Kiefer says they did have to come up with another rule. Managers or employees were sometimes hesitant to take action because they didn’t want to step on someone’s toes.

“So, we came up with our second rule, and that is: We don’t hire people with toes,” he says. “We don’t worry about upsetting the other guy.”

It shouldn’t become personal because everyone has the same goal — generate wealth for the shareholders, and do that by providing the best service that you possibly can, Kiefer says.

Necessary integration

When acquiring companies, the first hurdle is to gain the confidence of the people you just bought, Kiefer says. That can be a cultural issue, which may or may not fit well with your current company.

However, their strategy of providing ownership stock has helped form connections. Stucki also is very well known in the rail industry, so its strong market presence allows small family companies to see tremendous growth.

“We try not to ruin the culture. We just try to instill some of Stucki’s culture,” he says.

The harder task has been integrating accounting and administrative systems.
Stucki’s companies sell to each other — a lot. These inner company sales are accounted for differently than if the business sold to an outside source. And with 14 different companies operating on 14 different accounting software systems, 14 different general ledgers and 14 different customer bases, the discrepancies become problematic.

“When you’re on an acquisition binge, like we were in order to grow, you don’t always have the administrative staff internally to go out and flip a company that’s eight states away onto your own accounting software,” Kiefer says.

In 2014, Stucki didn’t buy any new companies, even though it still experienced 25 percent growth. That breather allowed it to begin installing the same software in every location.

Kiefer says he’s put nine different people in charge of the implementation, which is multinational. Afterwards, the family of companies will all be the same system for engineering, finance, accounting, sourcing, purchasing, etc.

It’s very complicated and time consuming but it couldn’t be put off any more.

“We started talking about doing this three or four years ago,” he says. “It’s just one of those things. It’s like going to the dentist. There’s just really never a great time to go to the dentist.”

Fit management to the customer

To better manage its family of companies as they grow organically, Stucki also has restructured some operations.

In the rail industry, the Association of American Railroads, an industry trade group that represents the major freight railroads in North America, dictates and approves everything that goes on a railcar.

“It’s not like dishwashing soap where everybody buys it,” Kiefer says. “There are a couple hundred companies that buy rail products — that are certified by the Association of American Railroads — to work on rail cars, to buy or service rail cars.”

Therefore, Stucki is set up to facilitate a strong relationship with the Association of American Railroads, and it uses a direct sales staff to service those customers. The industrial side of the business needs a different approach.

Kiefer says they’ve started a product management division, where engineers will be responsible for one product line from inception to marketplace.

Independent sales representatives will work with the product manager to develop markets and new products within that product line. That same product manager also will be an intermediary to the rail side of the company.

He says the idea is to hire people with engineering degrees and backgrounds with an interest in business and marketing — a difficult combination to find.

“You don’t want the kid that graduated at the top of his class,” Kiefer says of their new product managers. “You want that C student who spent his time having a good time but learned engineering.”

And he suspects the hiring will continue, because as long as railcars are moving, Stucki is busy.

During the Great Recession, between 30 and 40 percent of the railcars in America were idle. Kiefer says there are very few cars parked today.

Along with the utilization of existing cars, experts are predicting 83,000 new railcars will be built in 2015. On average, between 40,000 and 45,000 are built.

And this isn’t just good news for Stucki.

Kiefer says he remembers watching a woman interview Warren Buffett on CNBC.

“She said, ‘Warren, if you were out on a desert island and could get one piece of information every day to understand how your businesses were doing, what would you want?’

“He said, ‘I’d want railcar loadings because we know how the economy is moving by how many cars are being loaded every day.’”

 

Takeaways:

  • Spread the ownership to better invest your employees.
  • Integrating processes is harder than integrating cultures.
  • Operations should be structured to fit customer needs.

 

The Kiefer File:

Name: Bill Kiefer
Title: President and CEO
Company: A. Stucki Co.

Born: Sharon, Pennsylvania
Education: Degree in engineering from Youngstown State University, and an executive MBA from Ohio University.

What was your first job? I was cutting 16 lawns when I was about 14 years old. That was my first job — I had my own lawn service business. I’ve been an entrepreneur since I was a young guy.

I then worked as a night watchman at The Herald, the local newspaper in Sharon. I was the most well read kid in high school. They would turn the heat down in the building, and as the night watchman/janitor, I would walk through the whole building. The warmest room was where the teletypes would come in. So, I would sit there and I would learn all the news. It was a great job.

Where did you learn your management skills? I actually learned most of my management skills working as a stock clerk; I worked my way through college as a stock clerk in a grocery chain. I learned how to manage people and set a vision because I worked for some really great managers and I worked for some really bad managers.

Has your leadership style changed over the years? No, not at all. It really hasn’t, and I think that I’ve influenced my managers to follow suit. The people here that are in my top management possess the same values that I do. We’re very respectful of our people. We really go out of the way to take care of our people.

If you weren’t a CEO, what would you like to do? I’d like to go back to the grocery store. I kid my wife about that all the time.

Actually, I’d probably be an engineer. That’s what I’m trained as and that was obviously my first love. I don’t act like an engineer and I don’t necessarily think like an engineer, but that’s what I’d go back and do.

Or be a race car driver.