Fear lurked in the back of Jon Monson’s brain and deep in his heart when he decided to join MV Transportation Inc. as president and CEO in 1999.
While it’s natural to feel anxious heading into a new position, Monson’s fears didn’t stem from questions of whether he could do the job. They came from the act of taking the helm of a family-owned business.
“I was fearful because I had seen it on the other side, where people go to work for an entrepreneur as a CEO, and they are promised, ‘You’ll have control,’ but then when it comes down to the brother-in-law and friend of the owner, those people can’t be touched, and you have all sorts of issues with that,” Monson says.
MV’s founders wanted to grow the company and had tried to do so, unsuccessfully, with a few different people. Now it was Monson’s turn, but there was an urgency to his task.
At the time, MV which provides bus and van transportation services for government agencies and private entities had about $24 million in annual revenue and had seven offices in the Bay Area. But as the industry experienced more consolidation, if MV didn’t establish a national presence, it wouldn’t be able to compete with these rollups and would get run over by its competition.
Monson’s initial fears about taking over a family-owned organization proved un-founded. Owners Feysan and Alex Lodde gave him a free hand to run the company, leaving Monson to face the problem of how to grow MV Transportation.
The choices were to do it by acquisitions or do it organically. Monson had previously seen a company he worked for pay about $100 million to acquire a business generating about the same in annual revenue. Three years later, it brought in only about $60 million.
He’d also seen companies eliminate key people after acquisitions, which inevitably eliminated customers that respected and had bonded with those people. Because of these experiences, he knew he would grow the company the hard way organically and he had to do it in a way to ensure success.
“The most important thing to do is grow in a way that you don’t risk the company by having too many assets or too many long-term commitments, like real estate, so that if your business starts to decline or your revenue starts to decline, you quickly become a company with a big loss,” he says.
He decided MV would target contracts that were less asset-intensive so it could achieve growth without adding debt. To get those contracts, though, Monson first needed the right people on his team. So he started by assessing everyone’s strengths and weaknesses.
“You have to spend time with them,” he says. “You have to look at their work product and see how they interact with their teams, and you have to look at what their priorities and values are.”
He spent much of his first 30 days reviewing the balance sheet with an outside auditor, which revealed that the debt-equity ratio was about 17-to-1 and the balance sheet was sometimes used to pump up earnings. Because of that, he didn’t trust the chief financial officer, so he let him go.
“I made that decision very quickly because having solid information is extremely important, especially when the company was as leveraged as this one,” Monson says.
Within the first six months he also replaced the chief operating officer and the executive in charge of business development.
“Those are some of the key people that can fuel growth, and in all three positions, I brought in people I had known for many years and trusted,” Monson says.
Doing so ensured that he didn’t have to worry about getting buyin for his strategy because the new people already had the same ideas as Monson, and they were able to move forward together.
Monson says all businesses are relationship businesses, and that proved true within six months when MV landed its first out-of-state contract in Portland, Ore., through a customer Monson had known from his previous firm. Through other contacts, in early 2000, it also picked up contracts in the Midwest, which eventually led the way for East Coast expansion.
Creating those external relationships and reputations is crucial to growing. MV’s founders travel throughout the year talking to customers to find ways to improve. But you can’t focus just on people already with you; you have to prove yourself to potential and new customers as well.
Two years ago, MV won a huge contract in Washington D.C., but as part of the transaction, the client wanted Monson to personally do the start-up. While many executives would say they don’t have time to do such things themselves, Monson spent six months in the nation’s capital developing strong relationships with the new customer and making sure things got done the way it wanted.
“That loyalty and that commitment will last for a long time,” he says. “There’s a certain amount of loyalty that you have to people that you do business with in a service industry, and it’s hard to buy that you have to earn it.”
As MV continued growing, Monson and the founders realized it was time to also build relationships with advisers.
“It used to be at our board meetings, ‘Well, we already know all of this stuff, so what good is it doing at this point?’” he says.
To become productive, three years ago they added another board member, and then expanded to seven members a year later to help MV prepare for the future.
“Look at balance and different perspectives, and have people that add value to the company,” Monson says.
One addition was a politician, who advised the company on how to better work with its customers governments. Another headed an insurance company crucial for MV because of its risks. One was experienced in financials and the other in organic growth.
“They’ve really helped us focus on how we would be viewed if we were a public company,” he says. “Because we’re privately held, we don’t have the same scrutiny that a public company does, so we’re becoming more public-like in our management as we grow, and that’s a good thing. If we do decide to do an IPO someday, we’ll be ready, and we won’t have as much of a trauma as we would otherwise in entering that arena.”
As MV competes for larger contracts, Monson sees people as the most critical factor to the company’s successful growth.
“Usually the most important factor in selecting a company [for a contract] is the general manager you propose to run that local office,” Monson says. “Finding enough general managers is a real key and is probably the biggest limiter to our growth. It’s not capital it’s just people.”
As the company’s employee base grew by 30 to 40 percent each year, Monson saw MV outgrowing some of its people’s capabilities.
“It became apparent to me as cracks started showing up in things like fringe benefits not being solid or excess amounts of complaints from employees about their benefits or payroll not being properly administered the person who was doing our human resources function was not a human resources professional,” Moultrie says. “While we certainly gave this person time to improve, it became clear to me about three years ago that this person was in over his head.”
With people being key, Monson hired a recruiter who helped him bring in a human resources executive with experience at much larger organizations, such as Charles Schwab and Avis.
“We started bringing in other people that I didn’t know but who worked for companies much larger than ours and knew the kind of systems and programs we had to have in place to be a larger company,” Monson says.
As he brought people on, he used an industrial psychologist to help evaluate personalities, strengths and weaknesses of candidates to ensure the company got a balanced fit and didn’t end up with a group of yes-men and yes-women.
“If you don’t have a diverse team in terms of personality and values, you tend to get this group-think, and you could go down a path that later, when you look back, you say to yourself, ‘Well, how could we make this strategic mistake?’” he says.
Additionally, Monson needs managers who genuinely care about and listen to their people.
“When you have a problem that develops and you call your boss, the first response they should receive is, ‘What can I do to help you?’” Monson says. “It’s not, ‘Oh crap, you have a problem,’ or getting angry ... it’s a culture of how can we better support our field offices and, in turn, they develop the trust to call us if they’re having a problem.”
To help foster that trust, employees have a toll-free line to dial if they need to speak directly to Monson or the founders about an issue. Listening to employees and collaboratively solving problems helps them feel valued.
“You have to have a culture where people are free to stretch their abilities, where people will make mistakes from time to time,” Monson says. “When they do make mistakes, how you react to a mistake is critical. If people believe they won’t get shot, then they’re more likely to come and tell you early on. If people believe that they’re going to have a blindfold put on them and tied to a stake if they make a mistake, then they’re going to hide things until they blow up and cost you more money and credibility in the market.”
Monson also gives his people the authority to make decisions by creating smaller business units within the company, each with its own management chain.
“It would be tempting to say, ‘We could have some synergy and reduce the level of middle management in our company,’” Monson says. “That would be a big risk because sooner or later, that would affect our customers and employees and cost us money.”
To know when to expand that span of control, Monson says to just observe.
“That’s just kind of having a feel for the business, and when you start seeing cracks come in the walls, you know it’s time to build a stronger wall,” he says.
And as Monson continues to build stronger walls, he sees the results of his construction all around him. His initial fears have long subsided as MV Transportation has grown from a local $24 million company in 1999 to a national transportation provider generating about $450 million in annual revenue, and Monson knows it’s only because he’s done for his people exactly what MV’s founders let him do.
“While we all engage in discussion about the future of the company, and they remain the majority shareholders here, they have lived up to their word to let me run the company, and that’s what I do.”
HOW TO REACH: MV Transportation Inc., (707) 863-8980 or www.mvtransit.com