March, 2007

Engaged Employees

ABC Supply finds its employee-focus translates into long-term customers and financial success.

By Cheryl Dangel Cullen

Although many companies talk about their focus on customer service, ABC Supply pays more than lip service to the idea. This Beloit, Wis.-based company maintains a constant scorecard on its ongoing activities, grading itself against stiff self-imposed standards of customer service and then measuring the results.

Interestingly, the company’s approach to world-class success—and world-class financial results—begins not with putting customers first, but rather, by putting employees first.

Employees First

"[Improving customer service is] a template for success that we institutionalized by putting our people first,” explains David Luck, president and chief operating officer of ABC Supply. "When we do that, they’ll put our customer first and that will drive our financial results.”

Today, the company has 338 branches in 45 states, and 5,500 associates nationwide. Sales for 2005 were $2.59 billion. It took the company 16 years to reach $1 billion in sales, but only six more to reach $2 billion. Forecasts anticipated $3 billion in sales in 2006.

To reach those numbers, the company works to develop engaged employees, who in turn attract loyal and devoted customers.

ABC Supply supports its employees with various programs and formally measures employee engagement in all business work groups twice a year. "Engagement” is key here, because for this exercise, the company is not simply measuring employee happiness or job contentment.

Instead, it probes its employees’ level of engagement in the business, which management feels determines the employee’s degree of satisfaction and loyalty to their work. All managers are responsible for constantly improving the level of employee engagement. ABC Supply believes that when employees are satisfied and loyal, they encourage customers to develop both rational and emotional attachments to the company. "We correlate those measurements to [our] ultimate financial success,” says Luck.

To measure customer engagement, the company talks to at least 40% of its customer base annually and tallies customer engagement scores twice a year. It also hosts 20 customer advisory panels a year to listen to customers in groups, and has a national customer satisfaction 800-number.

For Luck, finding and motivating engaged employees starts with the hiring process. ABC Supply prides itself on the quality of its hires, many of whom are attracted by the company’s above-average pay and preference for promoting from within. Once a new hire is on board, the company invests further in each employee.

Employees attend something called ABC University, which has a curriculum designed to support every job in the business.

"We make sure they understand what is expected of them, and that they can learn and grow with us. They know that they are required to be part of our business,” says Luck.

A Family Affair

The employee-centered approach has paid off for this family-owned business. Ken Hendricks and his wife, Diane, founded the company 25 years ago as American Builders and Contractors Supply. Hendricks remains the company’s sole owner and CEO, while his wife is the company’s executive vice president.

Five of the Hendricks’ seven children are also heavily involved in the company. Daughter Kendra Story is the company’s chief financial officer and treasurer. Son Kevin Hendricks is vice president of branch operations. Daughter Kim Hendricks is president of Mule-Hide Products, an ABC Supply affiliate that produces low-slope roofing systems, specialty coatings, and maintenance solutions. Daughter Kathy Murray is chief information officer. Son Brent Fox is director of merchandising and purchasing.

Most branches offer a wide assortment of exterior building products, including roofing materials, siding, windows, and gutters, as well as the tools and equipment professional contractors need. A few locations carry only roofing materials. All branches have outside sales teams that call on and service contractors, which comprise 98% of the company’s customers.

ABC Supply also has a Catalog Division, www.abccatalog.com, which gives contractors easy access to more than 6,000 items, from hand tools to power tools, fasteners, caulks, sealants, ventilation equipment, and specialty materials. Contractors can browse the catalog or shop online at their convenience, and their order is delivered to their local ABC Supply center for pick-up.

The National Support Center, which is what the company calls the Beloit, Wis. headquarters, serves as a resource for branch associates and customers nationwide. A contractor can walk into any ABC Supply location around the country and have access to all of the services, expertise, and national resources of ABC Supply.

The Customers’ Hot Buttons

ABC Supply makes it its business to know its customers, and one thing management has learned is that the customers love car racing. That explains why the centerpiece of ABC Supply’s national marketing efforts is the company’s involvement with IRL Indy Car Series racing.

"We sponsor the A.J. Foyt Racing Enterprises No.14 Indy Car, and last summer we sponsored the ABC Supply A.J. Foyt 225 Indy Car Series Race at the Milwaukee Mile. It provides some fun for our associates and seeing the ABC Supply name on the car builds a lot of pride,” Luck says. "It’s consistent with our character as a service business–a people business that is built on relationships.”

On the local level, marketing is conducted one-on-one. Branches host open houses and various special events for their customers, such as educational seminars on new products and tips for growing the customer’s businesses. Branches also have the option of exhibiting in local trade shows and advertising in local trade magazines, complemented by the company’s participation in national shows and trade publications. Both on the local and national level, ABC Supply’s message is service. "We believe we’re a service company, not a products company,” says Luck. "We can’t differentiate with our products any more; we invest a lot of money to make sure we can better service our customers.”

That means getting products to the customers where and when they need them by using specialized delivery equipment—conveyors, boom trucks, cranes—and all types of field delivery services. ABC Supply also offers direct mail programs for contractors who want to target a customer list. Contractors fill out a form to target a geographical area using templates provided by the company, and then ABC Supply’s in-house marketing department customizes a mailer for them.

Luck acknowledges that his competitors are probably doing the same thing, but believes his company still has an edge. "Absolutely [competitors] are, but we strive to do it better. Where we succeed, we win the business and where we fail, we lose the business. "However, if we can’t do the core business right, the extras don’t mean anything. Getting the price right, and getting it shipped on time and accepted is what is important. All the other programs are not important if you can’t do that right.”

Streamlining the System

After 25 years, Luck says the business still remains focused on constantly satisfying its customers.

"We have a $5-million project going on where we are defining a brand new, detailed customer service delivery system that we will execute,” he says. "We are identifying the best practices in the industry and trying to institute them across the country. It is a huge challenge to streamline the system but it is also the biggest opportunity. [That] is the No. 1 thing our customers want and if we give it to them, they’ll give us their business.”

Continuous improvement is a challenge for any company and this company is no exception. Five or 10 years ago, ABC Supply "had to develop information systems to give to our people and [to] move from a react mode to a plan mode,” says Luck. "We needed to move from a mentality of being a products company to understanding that we’re a service company. We’re selling a service associated with those products. When we were smaller, we could use more information methods to execute the business. As we grew, we had to formalize these processes.”

Poised for Aggressive Growth

ABC Supply is not content with the status quo, either. By 2010, the company’s aggressive plan is to have $5 billion in sales from 500 locations. The new locations will come from both start-ups and acquisitions where possible. This aggressive growth plan means the company must focus even more on serving its customers.

"If we continue to treat customers with respect, we will continue to succeed and grow,” says Luck. "We’ll continue to measure customer- and associate engagement to achieve world-class results and the world-class financial results will follow.

"Another key will be our ability to continue attracting, training, and retaining quality people. People buy from people. We’re on a first-name basis with most of our customers. They’re not just our customers; they’re our friends. If you continually turn over associates, you won’t develop those kinds of relationships. That’s why it’s so important that we offer a wide range of training and educational opportunities. We are continually building a strong ‘bench’ of good people preparing to become branch managers.”

A Winning Spirit

Also key in attracting good talent and winning customers is maintaining a solid company reputation. Nationally, ABC Supply has memberships in the National Association of the Remodeling Industry and the National Roofing Contractors Association. Branch associates are involved in local chapters of these and other professional organizations in their home communities.

In its hometown of Beloit, ABC Supply associates volunteer for community projects. In addition, the company supports the local technical college, the Boys and Girls Clubs, the local United Way, and Meals on Wheels. The Hendricks family focuses on efforts to revitalize the community and bring in jobs, and Ken and Diane Hendricks serve on the boards of various community organizations.

"This spirit of community involvement extends to our branches, where our associates are active in various organizations and charities in their home communities,” notes Luck.

Many businesses would like to emulate ABC Supply’s success story: Is there one item that has had the most significant impact on its success? "It isn’t any single thing but a lot of little things,” says Luck. "We changed the way we hire, the way we compensate employees. We look at vertical promotion and horizontal promotion, and best practices. We created a strategic marketing group to provide the necessary people resources to help us manage the critical issues in our business, from pricing strategies to market segmentation studies and market research. We have tried to build an infrastructure, a plan that we execute to achieve success, so there are a lot of little things we’re doing.”

CHERYL DANGEL CULLEN is a writer based in Chicago with more than 20 years of experience covering the LBM industry.