It was a simple mistake.
Instead of choosing among four East Coast housing projects to go after, executives at The Wallick Cos. decided to build them all — at the same time. It seemed like a great growth opportunity for the then-$135 million company. Instead, it financially crippled the Reynoldsburg-based builder and manager of affordable housing.
Thirty-seven straight years of profits went down the tubes, and revenue plunged by $50 million in less than 48 months. In addition, more than a third of the 1,000-strong work force had to be laid off. “I came in the middle of it, so I didn’t see it at its worst,” says CEO Tom Feusse, who began working with Wallick as a consultant in May 2005, about a year after the company sold its ill-fated developments in New Jersey and the Carolinas to cut mounting losses. Still, Feusse heard the stories and saw the numbers. “We were like an individual who is very healthy for a long time but then gets a serious illness,” he says. “The early part of that is very intense. You start in critical condition, then move to ICU, then to a regular hospital room. ... In this case, it took us two years to get well.”
Here’s how Feusse, who was hired as CEO in July 2006, is nursing Wallick back to health.
The diagnosis was fairly easy.
“We tried to do too much too fast,” Feusse says. “That was our problem.”
His prescribed cure: Add discipline and go back to basics.
That means reining in the geographic reach of the business to maintain more control. It means adding internal processes — specifically in human resources and finance — to better position the company for future growth. It means exploring only those opportunities that fall within Wallick’s established niche of affordable, multifamily housing. And perhaps most important, it means developing a clear strategic plan to map out the future of The Wallick Cos. “It is a journey,” Feusse says.
But before Wallick could begin that journey, executives needed to address an underlying, yet vital, condition within the business: ownership control.
Jack Wallick, who founded the company in 1966, maintained majority ownership of the business until his death in 1995. At that time, control of the company went into a trust, managed by The Wallick Cos. board of directors and a voting trust. “That’s pretty impersonal, and it’s pretty hard for employees to understand and identify what that means,” says Feusse. So when Jack Wallick’s children, Howard and Julie, regained family control of the company in May 2006, it helped in many ways. “Jack Wallick was very, very well respected,” Feusse says. “So the fact that it’s now in the hands of Jack’s family again is very positive. I think it’s more personal now. It feels like a family-owned business.”
It was a pivotal first step on Wallick’s road to recovery. Another step was hiring Feusse.
“They had things under control at that point,” he says “We still had a lot of work to do, but we could see the path and how we could successfully work through it.”
After the sale of the East Coast properties and after the Wallick family regained control of the company, the bleeding seemed to stop. The company returned to profitability in 2005 and was profitable again in 2006.
The next step was making sure the company remained stable.
“That’s where we are now,” Feusse says. “When I think of stable, I mean assuring the quality of our services and making sure we have our long-term capital sources in place.”
Along those lines, Wallick has put in place a long-term bonding facility with Travelers Insurance, so bonding is secured for the future.
Stabilizing Wallick also means adding structure and accountability where there wasn’t much before.
“The company has been run as a pretty small company — smaller than they really are — in terms of discipline and process,” Feusse says. “I’ve talked to people who have told me they’ve been here 16 years, and they’ve never had a performance review. It’s been run like a small business in that if I had something to say to [you], I would say it. I didn’t need to write a performance review. But there is value in the process.
“We need to be disciplined in the fact that people understand what their goals are, what expectations are, that those expectations are measurable, that they’re paid on performance, that they have feedback.”
Still, Feusse doesn’t want to bog down employees with too much paperwork and procedure.
“I think we can bring enough process that we can drive performance, but not so much process that it begins to feel bureaucratic,” he says.
The money side needed more structure, as well.
“Financial is the other place we need process in terms of providing the people running the business with good actual financial information that’s timely,” says Feusse, who previously served as CFO, corporate controller and senior vice president at The Scotts Co.
Monthly financial statements were typically distributed at Wallick about 30 days in arrears, Feusse says.
“For example, July’s would come at the end of August,” Feusse says. “That’s not so unusual in a business that’s been run like a small family business. But in a disciplined financial organization, you get statements within five days of the end of the month — and a financial analysis along with it.”
That’s the direction Feusse is driving Wallick now.
“And it’s not just financial statements,” he says. “There’s a reporting side, too. What’s the actual information people running this company need to make timely decisions? The underlying financial information driving the statements needs to be timely, too. And that doesn’t necessarily mean monthly. It could be weekly or daily.”
Feusse’s quest to add structure to the business is expected to culminate with the completion of a detailed strategic plan for the Wallick Cos.
“I’m a big believer in planning,” Feusse says. “It’s critical that people know where the company is heading and how we’re going to get there.”
Feusse uses a travel analogy to illustrate his point.
“Let’s say we’re sitting here in Columbus, Ohio, and we generally know we want to head west,” he says. “Everybody in the car knows we’re heading west. But it’s critically important to know if the destination is San Diego or if the destination is San Francisco or if the destination is Vancouver. Because along the way, you’re going to hit thousands of intersections and at every intersection you hit, you’re going to have to make a decision: Am I going to turn left? Am I going to go straight? Or am I going to turn right?
“If you’re just generally heading west, then at every intersection, you’ll have to pause and think. But if you know you’re going to San Francisco and everyone is energized to go to San Francisco, every intersection decision is clear. You’re all on the same page and, as an organization, you’re so much more efficient and so much more effective.”
Positioned for growth
With the worst clearly behind it now and stability achieved, Feusse says The Wallick Cos. is nearing a position to move forward again.
“The third step is growth,” he says. “Even in the short term, I think we can grow [revenue] probably 5 to 10 percent.”
In the long term, he’d like to see 10 percent growth per year, but he’s in no rush to ramp up. The company finished 2006 with about $100 million in revenue.
“We’re not trying to come in and triple the business in three years,” he says. “We’re not trying to be explosive on the growth side. We want to be consistent and meaningful in the growth we do.”
That’s why Wallick’s geographic focus will remain in the Midwest for at least the next couple of years.
“That’s where our core business is,” Feusse says.
Wallick operates facilities in Arizona, North Carolina, South Carolina, Kentucky, Indiana and Illinois, but 80 percent of its facilities are in Ohio.
“Longer term, in five years, we’ll be expanding into more warm weather regions,” Feusse says. “We need to be selective in where we go. There are a number of opportunities out there, so it’s a matter of being disciplined about it. Every business has scarce resources, so you can’t choose everything. You have to be careful what you work on.”
And he knows what he’s talking about.
“I believe that you’re more successful if you stay close to your core and you work on opportunities within your core before you go outside your core,” Feusse says. “I don’t see Wallick being a national player in five years. For us to grow 10 percent each year, if we compounded it, we’d be 50 to 70 percent larger than we are today.
“That’s not a national business, but it is substantial growth.”
HOW TO REACH: The Wallick Cos., (614) 863-4640 or www.wallickcos.com