82.3 F
San Diego
Friday, Jul 19, 2024

Co.’s New CEO Makes Structural Repairs

Founded: 1961

Headquarters: Downtown San Diego

CEO: George Pierson

No. of local employees: About 240

Revenue: $367 million in fiscal year 2017, ended April 1; $352 million in fiscal 2016

It’s easy, in theory, for a company to boost profits by improving the product it sells.

But San Diego-based Kleinfelder Inc. doesn’t have a product, per se.

“We don’t have factories — our employees are our factories. As a professional services firm, that’s our only asset,” said CEO George Pierson, who has been running the employee-owned engineering, architecture and science consulting company since September.

“If they’re not happy, productive, well-respected by clients and providing superior services and technical solutions, then we don’t have much of anything to sell.”

It was the combination of the high quality of the company’s workforce and the potential to revive its lagging financial performance by reorganizing its management structure that convinced Pierson to come out of a relatively short-lived retirement to run the struggling firm.

Pierson left his most recent role as president and CEO of New York-based professional services firm Parsons Brinckerhoff after its sale — at Pierson’s suggestion — to Canadian-based WSP for about $1.3 billion in 2014. Between private consulting and serving on five corporate boards, Pierson didn’t foresee taking on a new executive position.

“I was supposed to be retired,” he said. “I was looking for the beach.”

But the more the New York resident heard from Kleinfelder about the firm’s underperformance and its desire to improve, the more intrigued he became by its offer to take on the challenge as its chief executive officer.

“When you look at a company that’s not performing as well as it should, that has all the tools to perform well, that’s really interesting,” he said. “Kleinfelder had everything at its disposal to be successful; it just needed to take a slightly different approach.”

Identifying the Issues

When Pierson joined the firm in September 2016, he first dedicated time to identifying the issues.

In previous roles, the tasks Pierson was brought on to manage were, perhaps, a bit more obvious.

When he joined Parsons Brinckerhoff in 2006 as general counsel and secretary, his immediate task was to assist in staving off bankruptcy — an imminent threat caused by the firm’s role in the “Big Dig,” a Boston tunnel project in which a motorist died that year after the collapse of a ceiling panel.

Before joining Parsons, Pierson worked for a number of firms as a construction lawyer. He began his professional career as an engineer.

Along the way, he picked up a bachelor’s degree in civil engineering from Bucknell University, a master’s degree in civil engineering from UC Berkeley, a law degree from Harvard University and an MBA from St. Mary’s College of California.

He earned the business degree while general counsel at Parsons. Later, the firm promoted him to run its Americas operations in another turnaround effort of sorts.

When Parsons was sold to British-based contractor Balfour Beatty, Pierson became CEO of what was now a global division of the larger firm.

It was those experiences that gave Pierson the skillset he needed to take Kleinfelder to the next level.

“It had gone through some growing pains, and some acquisitions weren’t as integrated as they could have been, so as a result financial performance suffered,” he said. “That impacts your ability to invest for growth and provide broader opportunities for your employees, so it was critical we change that around to get back on a growth path as well as invest more in our employees.”

‘Structural Problem’

An analysis of the company conducted upon arrival revealed some good news, and some bad.

“I came to the conclusion that it’s not because we’re (not) in the right market, it’s not because we don’t have good clients, it’s not because we don’t have the talent,” Pierson said. “It was more how we were running the business and how we were approaching those markets. It was our organizational structure that was holding us back.”

He implemented a new organizational structure for the company’s North American operations, shifting from a market-based system to a geography-based structure, as of April 1.

The philosophical underpinning of the move, Pierson said, was to give managers full autonomy over their divisions, including authority, responsibility and accountability, known internally as ARA.

“Part of our problem previously was there was a misalignment: There were certain people who had authority to do things, other people had the responsibility to do things and someone else was to be held accountable,” he said.

Establishing the geographic divisions was a method of aligning those elements.

The notion resonated with Executive Vice President Louis Armstrong, who heads the newly created West Division, based in Oakland. (The other areas that were recently established are the East U.S. Division and the Central U.S. and Canada Divisions.

Armstrong, like Pierson, hadn’t been looking for a role at Kleinfelder when the firm came calling. He was taking some time off after 27 years in the industry, most recently with the engineering firm AECOM, where he managed the company’s design and consulting services division in the Pacific region.

“I was talking to a lot of different companies and considering a lot of different roles, mostly C-suite,” he said.

He agreed to meet with Pierson for lunch in Oakland at the request of a recruiter, and the one-hour appointment stretched past two hours before the men realized it.

“We just really hit it off,” Armstrong said. “We share a very similar business philosophy, a lot of the same concepts and values as to how to be successful in this industry and in our first lunch we started talking about ways to make the industry better and ways to make the business better.”

He visited the San Diego office and felt it would be a good cultural fit.

“Even though it was a smaller role, there was huge upside potential for this company,” he said. “Getting in an area where I can really make a difference was important. I wanted to really help a company grow and be successful.”

Improving Communication

Armstrong, who runs a team of about 600 people, says one of his main goals is to use the new organizational structure to better communicate to clients the breadth of the services Kleinfelder offers.

“We have a lot of really good components in this industry right now,” he said. “The opportunity to get them to work together — that and the fact that we offer a variety of services is fairly diversified.”

While one client might turn often to the firm for geotechnical services, they may not be aware Kleinfelder also offers services to solve other problems the same client is facing.

“Clients know us for one or maybe two services, but not for the full suite of services we offer,” he said. “That’s one of the things we’re changing.”

Resurgence of Talent

Pierson cited Armstrong an example of the high-caliber of manager Kleinfelder has been able to recruit to be a part of the company’s revitalization.

“We’ve had a resurgence of talent coming into the company based on what we’ve done in the last nine months,” Pierson said. “The senior level people we’ve been able to recruit has sent a bit of a buzz around the industry.”

The company’s new chief financial officer, John Murphy, formerly ran the $1.5 billion division within WSP that was created by Parsons’ acquisition.

But it doesn’t matter where a person sits in the company’s hierarchy; Pierson said its new ARA mantra applies across the board.

“We talk about ARA — that’s why we had to shorten it — all the time, and everyone knows was it is,” he said.

In one example of the “accountability” portion of the triad, Pierson recalled a meeting of the firm’s senior leadership into which an outside consultant called remotely. It was clear the caller was driving, so Pierson requested the vehicle be stopped for the conversation for safety’s sake. Subsequently, Kleinfelder declined to again work with the consultant because of those actions, which it believed exhibited a lack of responsibility when it comes to safety, one of the company’s stated core values.

“That was inconsistent with our values, and while it was difficult to find another consultant that we needed along those lines, we weren’t going to keep that individual on,” he said. “Top players don’t mind being held accountable because they know they can deliver.”

As part of the effort to reduce overhead, the company has begun encouraging employees to offer suggestions as to how to streamline processes and rewarding those whose ideas are implemented.

“It’s not as if each idea saves a ton of money, but if each one saves 100 people five minutes per week that adds up over the course of a year,” he said. “But what’s most important is that people feel like they have a say.”

Kleinfelder employs about 1,800 people. Pierson says that number will grow as the company grows its market. The company notched its biggest sales year ever in 2016.

The company is in the process of establishing additional training, programs and benefits for employees from a new employee investment fund, he said.

“We’re feeling pretty bullish about our growth,” he said. “We feel quite bullish about our profitability, and we’re feeling pretty optimistic about the future of the company.”


Featured Articles


Related Articles