Chambers, president and COO of NCI Building Systems, plays it close to the vest when seeking out growth opportunities. He’s not looking for the next big paradigm shift; he’s looking for a way to maximize NCI’s presence in its core businesses of metal coil coating, building components and engineered buildings, which he accomplishes through a combination of organic and outside growth.
“We are very knowledgeable and very good at our main groups of businesses,” says Chambers. “We stick to the knitting, to use that clich.”
NCI’s leaders focus on the company’s closely defined market, looking for new product opportunities, new product channels and, above all, acquisitions that fit the company’s criteria.
“It’s trying to find companies that fit our model and can benefit from integration,” he says. “We want to capture more synergies, more advantages.”
NCI has made 14 acquisitions and done a merger since the company’s inception in 1984. The most recent was the acquisition of Robertson-Ceco, a Chicago-based manufacturer of engineered buildings, completed this past spring.
NCI’s growth philosophy has produced substantial results. The 5,200-employee company posted $1.13 billion in revenue in fiscal 2005 and is on pace for $1.4 billion this year, solidifying it as a leading company in its industry.
In NCI’s case, Chambers usually lets acquisition opportunities come to him.
“We have people who come to us with ideas, whether they be internally, whether they be bankers we deal with,” he says. “We set parameters for what is acceptable from the standpoint of our strategy, from the standpoint of our geographic mix and from the standpoint of how it fits into what we do best.”
Regardless of whether a company seeks out acquisition opportunities, or lets the opportunities come to it, Chambers says a thorough research job is paramount. A company that doesn’t do its homework risks getting burned financially.
Chambers says that at NCI, the due-diligence team spends a lot of time combing through an acquisition candidate’s practices.
“We have a very long due diligence list that goes through everything from understanding their customer base, understanding their purchasing, their manufacturing processes, and things like how they manage their business, their approach to the community, to environmental issues and safety,” he says.
To Chambers, it is important to find a company that is not just a good match for NCI but that can provide one-half of a mutually beneficial relationship.
“Not to sound arrogant, but we have to feel that the company is as committed to things like community, environment and safety as much as we are,” he says.
Particularly on the issues of environment and safety, Chambers says that if an acquired company and the acquiring company don’t fit together well, it can open up a Pandora’s box of liabilities later on.
To try to avoid those problems, NCI’s leaders look at research and ask many questions, compiling a large file on the company. Usually, those questions spawn more questions. Chambers says it’s not until every question can be answered in a satisfactory manner, and the asking price is right, that a business’s leaders should decide whether to move forward.
He points to the fact that NCI turns down far more acquisition opportunities than it accepts.
“Frankly, we might look at 10, 15 or 20 deals and only pull the trigger on one,” he says. “We look at a lot of companies before we make a large acquisition, and I think you have to look at a small acquisition in the same way.”
Once NCI purchases a company, the focus shifts to integrating the acquired company’s culture and practices with those of NCI.
Chambers says the first lesson that business leaders needs to learn about conducting an acquisition is that their company isn’t the be-all, end-all of the industry. He echoes the advice of other established business leaders: The acquired company was attractive to you because it was doing something right, so it would be short-sighted in most cases to simply wad the acquired company’s practices up and throw them away without giving them so much as a glance.
NCI takes a best practices approach to integrating an acquired company’s culture into its own. Chambers points to NCI’s acquisition of Robertson-Ceco as an example.
“We found that some of their systems were superior to ours, so we’re migrating their systems into our company,” he says. “We find that some of their methodology is better, and we’re also providing them with some of the things we do better. So it is definitely a best-practices approach.”
Chambers says those in charge must maintain an open mind after acquiring a company and must be willing to learn from the acquired company.
“I’ve been on both sides of the acquisition equation,” Chambers says. “I’ve been in acquisitions where we’ve taken a ‘my way or the highway’ approach, and I can tell you that here, we want it to be much different.”
The willingness to integrate on equal terms is part of what has made NCI stand out to customers and investors alike.
“Our performance, compared to our competitors, has always been viewed as the top by Wall Street, by the banks, by our customers,” he says. “It’s this notion of always looking to see if you can learn something else. That comes through in the kind of genuine approach we have, the way we speak to companies we acquire, the way we behave, and they can see that they can have an influence on improving us.”
The open-minded approach is something Chambers tries to have permeate every level of NCI. He traces the company’s ability to accept outside practices to years of communicating the approach as part of the cultural values of the company. From the outset, employees are taught to be on the lookout for ways to improve the company.
“It’s so fundamental in the way we go about business every day,” he says. “It’s just sort of evolved over the years. It’s not really a mandated, top-down thing. It’s just a behavioral characteristic that has developed over decades. Frankly, we’re very intolerant of not being that way.”
Chambers says a company that is not open to outside ideas and concepts, especially during a time of change, can become detached from clients and customers, easily fall behind the cutting edge and ultimately write its own end.
He sums it up in one word: arrogance.
“It’s easy to become arrogant and insensitive, to think that because you’ve been successful, you imagine you will always be successful in everything you do,” he says. “That type of arrogance is something we try to nip in the bud.”
NCI nips arrogance with intervention. If Chambers or other company leaders see an attitude that is not focused on the betterment of the company, be it from an individual or a group, they pull those people aside and work with them.
Chambers says communication, maintaining the clarity of the company’s vision, is the most important aspect of keeping everyone on the same page.
“It’s saying it, putting it in writing, making sure the person understands what it is we’re trying to achieve,” he says. “We work hard on that. We want a person who needs help to ask for help, but if we cannot get that person back on board, we ultimately might have to separate them from company.”
Maintaining an open-minded approach during an acquisition extends beyond integration of practices. Chambers says a business leader also needs to be able to accept and sort through mounds of feedback in the immediate aftermath of a major change.
NCI has formal feedback channels in place, chief among them a quarterly review process that takes into account all the moves the company has made over the previous three months.
Chambers is also a proponent of informal, face-to-face feedback.
“We visit our plants,” he says. “We cycle a lot of our employee feedback into our reviews.”
The feedback from the ground troops gives management a first-person view of the effects of an acquisition, both what is going right and what needs to be changed.
“We learn things about our production and safety metrics,” he says. “We find out about near-misses of accidents, things that didn’t maybe produce an injury or accident but look like a systemic problem. We intervene in that just as quickly as we can to try to find the root cause and deal with it.”
Chambers says NCI’s leaders gets plenty of short-term feedback from reviews and by visiting company plants, but long-term reviews also paint a useful picture of how the company has adapted to a change over several years.
“One thing that is important is going back and checking in a year or two later,” he says. “You need to see if the assumptions you made and the things that you thought would happen have happened.”
Much like during the acquisition, a leader needs to be able to swallow his or her pride and take an objective look at a long-term review of an acquisition.
“You have to not be afraid to admit if something didn’t go according to plan,” he says. “At NCI, the analysis of an acquisition is kind of an ongoing thing. It’s not a one-shot deal.”
Keeping acquisitions a fluid, adaptable process is extremely important, Chambers says. Variables change, markets rise and fall, the unforeseen occurs, and leaders have to be able to step back and take a clear mental snapshot of where the company is positioned at any given time, then react accordingly.
“It’s not that we’ve made the model, we’ve pulled the trigger and now we’re done,” he says. “We constantly recycle back to see whether we’re performing to plan and whether our assumptions were valid.”
HOW TO REACH: NCI Building Systems, www.ncilp.com