Coastal cowboy

If Tom Murphy Jr. never signed another contract, he’d still have $650 million in business to put in place. And that is on top of the $450 million in projects at various stages his company is working on now.

But that wasn’t always the case.

A decade ago Murphy, CEO of Coastal Construction Group, happily ran the company as a $20 million lifestyle business.

Then he decided it was time to grow.

It was the moment that began a series of difficult decisions, including getting rid of some long-time employees, learning how to develop a vision for the company and then figuring out how to stay on course — things not easy for a self-confessed entrepreneurial gunslinger who had to learn how not to shoot from the hip.

Murphy began the transformation by adopting some of the corporate mindset he had learned at Turner Construction Co. After Murphy had worked on joint ventures with Turner for five years, Turner bought one of Murphy’s earlier enterprises, Monroe County-based Seaboard Construction Inc. After the sale, Murphy stayed with the company for about a year before he could no longer stomach the corporate lifestyle. Even so, he learned a lot.

“There were a lot of disciplines that you have to have in a company that size, just in order to manage the company, that you don’t have to have in a small shop where you can run out and see every job every other day,” Murphy says. “You have to be much more disciplined. I took a lot of discipline away with me mentally, as far as reporting and some internal controls that we obviously lacked.”

Murphy applied that newfound appreciation for structure when he founded Coastal, but only made it a major point of emphasis when growth became the main goal.

“We are very disciplined in all of our reporting,” he says. “We are very disciplined in certain meetings that we have at all levels of the company. There are five operating companies, so they’re all managed a little differently, but they have the same philosophy, the same culture. We have the same job-site meetings on a $1 million interior build-out as we do on $150 million, 55-story high-rise. We go through the same processes each month.

“It’s not having a meeting when we feel like having a meeting. Most of the meetings in our company, especially the ones with the management committee, are scheduled a year ahead of time. There’s no such thing as us missing a management meeting. It just doesn’t happen.”

Personnel
Murphy’s next move was one of his most difficult. More-experienced advisers told Murphy that growing his organization meant leaving some loyal employees behind.

“If you are going to grow a business – it’s all about the people,” he says. “Nobody does it by himself. The advice I got was, ‘Most of the people that have been with you for 15 years, they’re not going to be able to stay with you.’ The reason they were there was because they liked that family atmosphere. They liked that it wasn’t so disciplined and rigid, that it was more a good-old-boy attitude toward everything.”

The new approach to business had some older employees feeling left out.

“Those people, especially those in the field, don’t want to be reporting to somebody they don’t know and having to make this meeting every Thursday and this thing on a Wednesday, this report’s due in writing on that day, and you have to do this,” Murphy says. “Only a couple of people made it. I had to make that decision, and it’s good advice for anybody that’s really going to grow a company.

“If you’ve had a business of a small size for many years, the people with you probably aren’t going to be able to make it because you’re not going to have the same kind of culture when you become so much more disciplined.”

Murphy was so dedicated to change that he went ahead over the objections of his brother, a part owner of the company.

“We’ve been together our whole lives, (and he) didn’t like it,” Murphy says. “Some people would say it’s more like a corporate environment now. It’s not Wall Street, but it’s much more corporate than it was. He didn’t love it. We’re still together, but he didn’t want to be in the midst of the size company we’ve become.

“He made a decision that he wanted to stay on a job or two and be removed from what was happening. He liked it for the company, for his stock, but that’s not the way he wanted to live his life.”

Much of the turnover was self-selecting. Both Murphy and the employees realized the changes meant they no longer fit. But he still tried to find the right spots for people.

“It was obvious to them and to us that it wasn’t working for us and them,” he says. “A lot of them we kept trying different positions. The few that ended up working out were single-project guys and were probably the least affected in the transition.

“That was probably the toughest decision I had to make leading the company. I knew there were going to be some close people and some good friends that probably weren’t going to make this transition. But I made it with my eyes open. We talked about it amongst one another. I talked about it with them. I told them it’s probably going to be difficult on both of us, but this is the way we want to do things now.”

Getting rid of people who no longer fit was only half the battle; Murphy needed to replace them with the right people.

“There was a huge investment I had to make in ourselves, in the business,” Murphy says. “To build the platform, build the structure, you’ve got to have the right people, the right organization before we would go out and take on work. We’ve spent a lot of money in the last couple of years selecting and going after certain people. We identify somebody we know in a market and try to get them.

“We spent a whole bunch of time and money and made a lot less profit in a lot of years in order to get the people on board and build.”

In the case of Coastal’s president, it took five years. It was Murphy’s first and, perhaps, most important personnel change.

Dan Whiteman joined Coastal’s board of advisers in 1992 after he was courted by Murphy. Murphy had heard about Whiteman from sources including his son, who was taking classes from Whiteman. Murphy and Whiteman began meeting for lunches and eventually, Coastal’s leader asked the academic to join his five-person board.

“We shared a lot of the same philosophy and values,” Murphy says. “We thought we would compliment each other very well. Dan came to work with me, and we made a decision to go out and grow the business.”

Developing a strategy
With Whiteman’s help and the right people in place, Murphy was able to build the company to about $100 million in revenue. Then 9/11 happened, and Murphy saw three jobs cancelled in 30 days.

That’s when he called FMI, the country’s largest provider of management consulting and investment banking for the construction industry. Murphy had used FMI for seminars and training purposes, but following the terrorist attacks, he engaged the company on a whole new level.

“I immediately called FMI and said, ‘I want to talk to you. I want to go through this business top to bottom, inside out,” Murphy says. “They brought three guys in and spent the better part of a couple of weeks here.

“We did a strategic plan with them, the first one I ever did and the only one in my life. We spent three days – it was the toughest thing I’ve ever done in business in my life to spend three days from 7 in the morning (through) dinner, probably, 8 o’clock at night, locked in a room with 10 of us to form a diagram for the future.

“We came out with a strategic plan that was probably 2 inches thick with all the action plans. It was a huge volume of work. We met on some parts of it weekly and did a review of the whole plan. We’ve been doing that for four years. We still stay on top of it. We set financial goals — never tried to make giant volume a goal.

“We set a benchmark where we thought we should be, how we were going to get at it — everything from the organizational structure of our business.”

In addition to the strategic plan, Murphy asked the consultants at FMI to tell him more about his company.

“I told them, ‘Look in our shorts. Look up our dress. Find out everything,’” Murphy says. “They went through accounting; they went through estimating; they went through everything we do. They did probably 50 employee interviews. We tried to get the best cross section so we didn’t cheat ourselves. They came back and told us all about ourselves.”

The results were not what Murphy expected.

“What we thought we were the best at came out as absolutely the worst,” he says. “That was really an unbelievable experience. I wanted them to tell us all about our business. And a lot of things came out. Employees thought we were the worst at communicating with them. We thought we were the greatest communicators who ever lived. It was a total shock.”

Murphy immediately began a newsletter along with regular companywide emails. Instead of holding company meetings around Christmas and for an occasional picnic, he now brings all of the nearly 300 employees together six times a year, and he and other managers provide a state of the company address.

In 2005, Murphy brought FMI back to do a complete assessment. Three consultants interviewed an entirely new group of Coastal employees.

“They come back and benchmarked us against best-in-class,” Murphy says. “It took them six weeks to do the whole thing. It was a tremendous experience. We took the results of that and we gave the highlights — whether they were good or bad — to the whole company. We told them where we stood. We’re going to benchmark ourselves in all the major categories yearly at this point.”

Murphy says it is sometimes hard to quantify the benefit of having an organization like FMI come in. He will say that the company went from $100 million in revenue in 2002 to what he expects to be about $450 million in revenue this year.

“What this process does is keep us focused with our eye on the ball,” he says. “A whole group of people can be keeping their eyes on the ball – you can get the input of eight people in a company our size, you can convince yourselves that you’re doing what you’re supposed to be doing. It’s easy to get off track.

“It doesn’t mean that they walk on water. We don’t agree with and we don’t do everything they suggest we do, that’s for sure. We’ll argue it out. It’s somebody that understands the business we’re in and gets what we do every day and sees a lot of different ways to tackle certain situations and gives you a third-party opinion.”

Once a quarter, Murphy brings FMI consultants back in to assess the company’s direction. Between FMI’s fees and the time invested by his managers, Murphy estimates those meetings cost about $150,000 a year.

“We won’t stop doing that,” he says. “That gives us a third-party review every single quarter. I’m a big believer in that forest for the trees — you’re so close to it you don’t see the overall picture sometimes. You set the plan, you’ve got all these initiatives, then you’ve got to make sure you’re doing them.

“We work on trying to stay on the course. We work on that real hard.”

HOW TO REACH: Coastal Construction (305) 559-4900 or www.coastalconstruction.com

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