In a way, this article is unfair. There are so many factors that go into a successful rental organization, and so many people play essential roles. Is it fair to focus on United Rentals CEO Wayland Hicks without looking at the role played by co-founder, president, and chief financial officer John Milne? Is it fair to focus on NationsRent CEO Jeff Putman without looking at the roles played by Bryan Rich, Charles Snyder and others?
Probably not. A rental organization cannot succeed without strong performances all the way up and down the chain of command, and one can certainly make the argument that nobody is more important than those who interact everyday with customers — delivery drivers, inside and outside sales personnel, service personnel.
But it's the CEO who sets the tone, who establishes the direction, who bears the ultimate responsibility.
Choosing 10 people who are impacting the rental industry was not an easy task and for every one we did choose to focus on, we could have chosen several others equally as important.
Cliff Miller of Sunbelt Rentals, Tom Zorn of Rental Service Corp., Juan Carlos Mas of Neff Rentals, and Mike Watts of Sunstate Rentals are among those who immediately come to my mind. But nonetheless, here are 10 who will impact the rental industry in 2005.
- The Dream Team
Two years ago, NationsRent was in bankruptcy and most rental industry people had little confidence it would avoid liquidation.
But Bryan Rich, whose multi-location Boston-based Logan Equipment had been one of NationsRent's acquisitions, wanted to see his company and its people continue to succeed in the business he'd put his life into. That belief — and of course the potential for monetary success — that the company could be salvaged drove him to unite with investor Doug Suliman and form Phoenix Rental Partners.
They then brought in Jeff Putman, former CEO of American Equipment Co., now known as AMECO, as CEO to head the management team. AMECO, in addition to grossing more than $300 million annually in worldwide rental, operated dealerships. Putman believed, as did Rich, whose Logan also had been a dealer for multiple lines, that to take care of the customer meant a commitment to total service. They believed that the rental business was a solutions business, that if the customer, on a given project, needed to rent, the company should be prepared to rent, but if he needed to buy new or used equipment, the company should be prepared to offer that and if they needed service — on customer-owned or NationsRent-owned machines — the company had to offer that as well.
“The predecessor company was a roll-up that aspired to be a ‘pure play’ rental giant and I question the strategy of being a ‘pure play’ anything if that's not what the customer is asking for,” says Putman. “We want to provide the goods and services that our customers need and value. Customers have a job to do and they need to rent equipment or buy equipment to get the job done. They also need maintenance, and support parts and merchandise for the equipment, whether owned or rented. We're striving to serve all of those needs. As those needs change, Nations-Rent will continue to change.”
After emerging from bankruptcy in June 2003, Putman and team set about re-making the $500 million rentals-only consolidator in their new philosophy. They found that much of the infrastructure was in place with strong people, good facilities and a lot more maintenance capability than was being utilized under previous management. The primary concern has been to find the technical personnel to provide the equipment support the new management wanted to offer, primarily because of a technician shortage that has been well-documented in the industry.
NationsRent has also put more emphasis on the sales process and spent considerable time and money providing customized sales training. “That training was focused on understanding who our customers are and how we can help them succeed,” Putman says. Putman cites an example that illustrates how the company has changed.
“We recently made a $1 million dollar (plus) sale where we put together a package of our equipment and other people's equipment and arranged some custom modifications to suit the customer's unique needs. That would not have happened here two years ago. We would simply have said, ‘We don't do that.’ To the extent that a deal is ethical and we can make a fair return…our philosophy is to try to say ‘yes’ as often as possible.”
New equipment sales, used equipment sales and merchandise sales all brought in vastly increased revenue this past year. “I think that confirms our perception of what the market is asking for,” says Putman. “I also think it's a credit to our store managers and our sales staff to make the leap from pushing rentals to satisfying individual customer needs.”
NationsRent also enjoyed a good year-over-year increase in the service area, but Putman calls the company's performance in this area “scratching the surface.”
“The market is very receptive to the service offering but we are resource-constrained mainly in the area of qualified service technicians,” he says. “We need to pull together as an industry to elevate the status of service technicians and to provide the training they need to do their jobs well.”
Putman expects solid increases for 2005 and adds that NationsRent will soon be announcing the signing of several major dealerships this year, consistent with the company's new strategy of selling new equipment and providing after-the-sale support. And, he adds, NationsRent will continue to focus on safety and training, having reduced personal injuries by 50 percent from 2003. Taking fleet management up to the next level is also on its “to do” list, concentrating its fleet migration program toward its primary brands.
Building on the foundation of solid people already at the company, Putman put together what he calls a dream team that includes Rich, Suliman, and a team of executive vice presidents: EVP of fleet management Charles Snyder, who succeeded Putman at Ameco; John Malone, EVP of administration; Tom Hoyer, EVP and chief financial officer; Joe Izhakoff, general counsel; and Jim Haid, chief information officer.
“We all play off each other's strengths and we shore up each other's weaknesses,” Putman says. “You don't get many opportunities in a business lifetime to hand pick a team. I couldn't be happier with our corporate staff, our regional VPs and the 3,000-plus associates in the regions and stores that do the real work of making this company a success.”
Putman sees himself more as a leader and teacher than a micro manager.
“I believe that there's a lot of wisdom in the concept of ‘servant leadership,’” Putman says. “I view my role as coach and advisor to my team as opposed to making decisions for them or directing their day-to-day activity.”
- The Project Enabler
When The Home Depot opened its 1,000th tool rental department in December 2004 in Burlington, N.C., it reached uncharted waters. If the company continues its pace of opening a new tool rental department every 36 hours — and there is no reason to expect that to slow — The Home Depot will pass the 1,200 mark before the end of 2005. For a program that began in 1995, the rate of growth was unprecedented.
To facilitate this growth, The Home Depot hired former Hertz Equipment Rental Corp. executive Joe Dixon in 2002. As vice president of equipment rental, Dixon and his team created a synergy between tool rental and professional contractor services, thus leveraging the natural relationship between what a professional contractor buys and what he rents.
Dixon views his department — and The Home Depot store in its totality — as “the project enabler.”
“That's how we look at tool rental, we're the project enabler,” says Dixon. “That's our focus as a rental company inside a retail box. We enable the customer to complete the project, we give them confidence. We empower the do-it-yourselfer to take on a project they might not otherwise have taken on. If they want to put a tile floor in their bathroom, we can sell them the tile, the grout, everything else they need as well as provide them with a tile saw to do that project and if they don't want to buy that tile saw, obviously, tool rental gives us as a company two chances to serve the customer. They can come in and rent the tool and they have to bring it back and that's two opportunities for us to sell them something else in the store or remind them of something else they forgot. But the key is that we enable them to do their projects.”
Dixon's tool rental team — which includes director of tool rental, merchandising and operations Dan McAreavey — has enabled enough projects to make the tool rental departments within The Home Depot extremely profitable and convince the senior management of the Atlanta-based corporation to commit to building a tool rental department in every new store and retrofit the vast majority of existing stores to add on rental departments. “Three years ago CEO Bob Nardelli gave us the green light to put tool rental in every store and that's when they really turned the switch on,” says Dixon.
The label “tool” rental is gradually becoming almost a misnomer, as increasingly The Home Depot is including compact equipment as well, such as trenchers, skid-steer loaders, mini-excavators and small scissorlifts. The tool rental department has taken responsibility for the truck rental segment of The Home Depot stores as well and, although no definite plans yet exist, contractor services including onsite repair and equipment delivery are on The Home Depot's radar screen.
Dixon has also contributed significantly to a degree of professionalism in the staff that runs the tool rental program. Many Home Depot rental managers, regional managers, trainers and others have significant rental industry backgrounds and often the combination of rental with the retail knowledge from The Home Depot make for a well-rounded Home Depot associate.
In recent years the quality of tools and equipment offered by The Home Depot's rental departments has been upgraded, and vendors to the program are among the industry's leading manufacturers. Many of The Home Depot tool rental vendors design models specifically for The Home Depot Rental use.
“Selling to The Home Depot and servicing The Home Depot account is much different than they typically would for a lot of other rental companies,” Dixon says. “We have a lot more requirements, we are very stringent and there is a lot more expectation about what they contribute. They get very heavily involved in the training on a lot of different tools, they become much more hands on. It's not like they're just making a sales call and getting a purchase order. It's a lot of stuff behind the scenes and service is absolutely critical to what a vendor provides for us.”
Training Home Depot technicians is a big part of that support and the company has worked hard, in recent years, to upgrade the quality of its technical support. Each rental department has a tech room and 90 percent of what is rented can be fixed on hand. Increasingly, Home Depot technicians are being trained and certified to work on rental items.
While it may be some time before the vast majority of The Home Depot customers recognize that rental is offered, without question its rental departments have exposed thousands of customers to the benefits of rental. One of the biggest fears within The Home Depot organization when it began to experiment with rental was that rental would erode sales. They soon saw that rental enhanced sales as customers often tried equipment by renting it and then returned to buy it. And, more importantly, the offering of rental enables The Home Depot to satisfy every need of the customer. As Dixon says, it's the project enabler.
[Editor's Note: As this issue went to press, RER learned that Dixon left The Home Depot and was replaced by new senior vice president, pro and tool rental Joe Izganics.]
- The Apostle
Think about how many rental industry managers and executives got their start in the business at Hertz Equipment Rental Corp. The executive ranks of United Rentals, Nations-Rent, Home Depot, Volvo Rents, Cat Rental, Neff, and HERC itself are filled with people who got their start at the company that was always the industry's largest until Wall Street-backed companies joined the fray.
HERC was, and in large measure still is, known as the industry's trainer. And it all goes back to Dan Kaplan, who took over as HERC CEO in 1982 and built it into the largest rental company in North America.
From the beginning, Kaplan believed in doing things differently from the rest of the industry, bringing about a professional level of training and service that had not existed until that time. Kaplan developed standardized rental facilities, the concept of a national rental company and the first national-accounts program; developed the concept of new fleets, centralized pricing and proprietary computer software. HERC's training included Kaplan's concepts of operating rental businesses analytically. He developed the first centrally managed used equipment disposal program, and The Source magazine to facilitate retail sales.
Kaplan wrote Service Success, published in 1994, a how-to book on operating and managing a rental business. The book is used around the world and published in several languages.
One of Kaplan's most significant accomplishments was developing the concept of rental professionals. He established a program that only college graduates would be hired as sales coordinators. Those coordinators would subsequently be promoted to outside sales, then branch managers, region sales manager, region sales directors and regional vice presidents, and HERC's management training programs would train those people to go on to the next level. Many concepts now widely accepted in the industry such as the importance of time utilization and dollar utilization were developed and formalized by Kaplan.
What has he done for an encore? After leaving HERC, Kaplan decided to stay in rental as a consultant. Kaplan's influence became global as he consulted for rental companies, financial institutions, dealers, associations, publications, manufacturers and auction companies. Kaplan has made presentations on rental at association events, conventions and for a number of major investment firms including JP Morgan, Morgan Stanley, CIBC, Merrill Lynch, Smith Barney and others and has been interviewed on the rental industry by several television networks. Kaplan has consulted for hundreds of dealerships and rental companies from small independents to large public rental companies on how to organize and compete against sophisticated competition. He has helped develop plans for dealership and startups on how to launch a rental company, step by step. He has taught companies how to establish and manage pricing, develop fleet plans and build five-year pro forma operating statements. Kaplan has also written extensively, contributing to RER and other industry magazines throughout the world.
Kaplan has worked with companies in the United States, Canada, Mexico, United Kingdom, France, Netherlands, Germany, Belgium, Norway, India, Venezuela, Peru, Chile, Honduras, Trinidad, Dominican Republic, Costa Rica and El Salvador. He has done due diligence on rental companies for acquisitions around the world, consulted for manufacturers of all sizes, and consulted with hedge funds and investment funds on the merits of investing in rental companies.
Known for his strong opinions, not everybody agrees with Kaplan about everything. But few, if any, can deny his influence and the fact that he has probably influenced and affected more rental companies and rental people than anyone in the industry's history. Even in this very issue on influencers, at least three of the profiled executives — Willie Swisher of Stephenson's, Joe Dixon of The Home Depot and Gerry Plescia of HERC — spent years as executives under Kaplan's leadership.
Few if anybody has been more influential and persistent in spreading the gospel of rental and the belief that rental is inevitably the best way to handle equipment needs, and that the rental business is a great business to be in if one is prepared. Kaplan is a true believer. Like him or not, he is the real thing.
- Transformer Man
One might think a Texas boy like Willie Swisher would be a fish out of water in Canada, but it's not the case at all. Swisher, for years a senior executive at Hertz, has had a strong career in rental and had been involved in many facets of the industry, primarily with Hertz, before becoming CEO and a principal shareholder of two companies simultaneously — Guelph, Ontario-based software supplier Texada Inc. and Mississauga, Ontario-based Stephenson's Rental Services, formerly known as Stephenson's Rent-All before Swisher took the company in a new direction.
Stephenson's for years was known as a homeowner/retail-oriented rental company with many locations in strip malls, appealing to homeowners and light contractors. It had 40 or more locations in the greater Toronto area, locations out west in British Columbia and Alberta, and rental departments inside big-box stores. The company competed with The Home Depot as well as other rental companies.
However, Swisher and other managers believed it was time for a change. “We found that the DIY retail-type business is not a relationship business,” Swisher says. “Customers don't rent items enough to really have a relationship with. We still do $6 million to $7 million in that market, it's still important to us, but it is dependent on location proximity, Yellow Page awareness and pricing. We felt that to succeed in the long term, we needed a change.”
Swisher and staff analyzed that the one thing Stephenson's has that its competitors lack is 50 years of doing business in the Toronto area. “We've done business with just about every contractor in the Toronto area at one time or another,” he says. “But we weren't getting enough of their dollars. So we looked at those contractors, about 20,000 customers, and figured if we could get an additional $100 from 20,000 customers, that would be a lot of revenue.”
The strategy included reducing branches from 40 to 20, more than doubling the outside sales staff, pulling out of the big-box departments and pulling out of Western Canada to concentrate on the Toronto area. It also included a key acquisition of Core Rentals.
“Before we acquired Core, our inventory stopped at skid-steer loaders, 375 air compressors and 56-inch rollers,” Swisher says. “That's where Core started. So now we have 84-inch rollers, backhoes, dozers and excavators and the fleet is owned by the company, not by branches and operated out of central hubs.”
Even the company's name — Stephenson's Rent-All — came up for analysis and Swisher felt it limited the public's perception. Rent-all covers the fact that the company rents tools and equipment, but a truly contractor-oriented rental company offers services beyond just rental, and hence the new name, Stephenson's Rental Services, indicates the change in philosophy to a full-service rental company.
Swisher's role at Texada has given him a lot of knowledge about new technologies in development, which he has been able to apply at Stephenson's. One recent example was a dispatch system, using Cube Route Inc., Motorola microphone systems, which automatically connect with Texada software. When Stephenson's counter personnel write a contract, it loads the contract automatically into the dispatch system.
“Just working at Stephenson's on my own, I wouldn't have gained the insight into how that program could benefit us,” Swisher says.
Swisher and the Texada technical staff spent a lot of time developing real-time, fleet-management tools, and programs to manage maintenance, and time and dollar utilization. “The tools work for mid-sized companies such as Stephenson's, to Volvo Rents and Rain for Rent, which has 50 locations, as well as small one- or two-location firms,” says Swisher. “And the programs are flexible so that a user like myself at Stephenson's can look at the information from one point of view and somebody else at the same company can look at it from a different standpoint. Someone at a different company might prefer another standpoint. For example, I might like to look at time utilization on a graph presentation, others prefer a numerical presentation.”
Other Texada specialties include programs to optimize rent-to-rent customer cashflow by invoicing customers after three weeks for a one-month rental based on a rate system where three weeks equals a month. “If you can lessen days outstanding on receivables, that's a significant piece of the pie,” Swisher says.
Another software benefit allows customers at Stephenson's access to their information via the Web, enabling them to print out their bills and check their invoices without having to call branches.
Swisher expects that improved back-office functions will be an important area of concentration for rental software providers. “Functions like procurement of parts from manufacturers, a lot of those systems are not integrated with back office functions that run payables,” Swisher says. “It's a challenge for companies the size of Stephenson's to manage all those disparate systems.”
While integrating with new technologies is one challenge for Stephenson's, the more important one has been the re-making of its image and way of doing business. Has that transition been successful for Stephenson's? With double-digit growth and profitability over the past three years and revenue growth in the high single digits, Swisher says, “We've run a very successful campaign.”
- High-Stakes Roller
If you want to understand Ahern Rentals, a good place to start is to drive around the Strip in Las Vegas. Look at the hotel casinos — Bellagio, Mirage, New York New York, Paris, Venetian, Cesar's Palace, Rio, Mandalay Bay and so many more. Chances are Ahern Rentals not only provided equipment, but actually had a location on the jobsite that built it.
Of course Ahern operates all over Las Vegas and has 33 total locations in the Western United States: 15 in California, one in Colorado, 8 in Nevada, two each in Arizona, Colorado, Oregon, Texas and Utah. Ahern is certainly the dominant rental player in Las Vegas and is the major or a major player in most of the markets the company is in.
Ahern Rentals was founded by Ahern's father John Ahern in 1953. In the late 1980s, Don founded Los Arcos Rentals, a high-reach specialist. He bought Ahern Rentals from his father and his siblings in the early 1990s. Putting together the two companies, combined revenues were about $24 million. In 2004, Ahern Rentals brought in $135 million in rental alone and $154 million in total revenue, and Ahern expects to top $200 million in 2005.
Don Ahern never imagined the company would grow this big, didn't have a blueprint or a vision. “I gave up making goals long ago,” he says. “I just follow opportunities as they come along.”
Did Ahern sell his soul to the devil? Not hardly. Although he took out a $275 million line of credit last year, Ahern is quick to point out his EBITDA ratio, a healthy 4:1. He brings in revenue fiercely and the company is built on strong principals — high-quality equipment, strong management, strong maintenance, safety programs and knowledgeable staff. His son Evan Ahern is executive vice president; another son is one of the company's leading salesmen. His team of vice presidents are among the industry's most experienced.
Ahern certainly didn't grow his company by being tight-fisted. Ahern spends several hundred thousand dollars every year by hosting a 30-hour company party in a Las Vegas casino-hotel, taking over the entire building, providing meals and entertainment. The company is self-insured and Ahern's generosity when employees face illness or problems is widely known.
He also didn't grow the company by fearing to take risks. Several years ago he entered into an agreement with a retail big-box merchandiser to build rental departments in a number of stores. He scrapped the effort after a number of months, but he showed a willingness to branch out and try things.
Another of those efforts was dedicated service centers, seven of which Ahern opened in the past year. Ahern saw that his service staff was increasingly involved in repairing customer-owned equipment and saw the need to separate that repair activity from the servicing of his rental fleet. Although Ahern admits the company has a way to go to maximize the profit potential of the service centers, they have made considerable progress.
And if all that wasn't enough, Ahern has become a manufacturer, producing a line of high-end rough terrain telescopic and straight-mast forklifts called Xtreme Forklifts. Ahern has spared no expense in making sure the highest quality materials and processes have gone into the making of his forklifts, and the level of quality control and attention to detail in his Las Vegas manufacturing facility is impressive. Ahern Rentals is the exclusive U.S. distributor for the forklifts and he has chosen not to sell them to the rental market, primarily so that his rental company would not find itself in the situation of competing for jobs against his own machines.
“I want a machine with a longer life, I want a machine that doesn't fail as often, and when it does fail, I want a machine that's easy to work on and the parts are readily available,” says Ahern, in regard to why he went into manufacturing. “It really wasn't because I felt that I could build them cheaper than what I could buy them for. In fact it's cost me the same or in some cases a little bit more to build the machines than to buy a comparably specked model. But if I continue to buy those existing products, then I'm going to continue to roll my fleet every five years. This way I've got a 20-year-life machine. I want visibility, I want safety, I want reliability, I want all those things that are so often compromised by manufacturers in order to get their product out a little bit cheaper.”
Ahern manufactured 154 machines in the past year, has the parts and pieces coming in to produce about 240 this year and has a five-year plan to ramp production up to 1,000 machines a year. He offers his personal guarantee, backed by his own financial statement, to all buyers. Ahern's shops also manufacture truck beds, parts, and items for his own locations such as workbenches and fencing.
“Don's focus is cost of ownership,” says lead engineer Jerry Clacksteen, who designed scissors and booms for UpRight Inc. for 30 years. “That's significantly different from working for a manufacturer where their concern is the cost of manufacturing. A manufacturer builds it and sells it and then they don't worry about it anymore. Yeah, they have maintenance to do and they charge people for it. But our initial directive here was to produce machines suitable for a rental fleet. In that case, every time you have a machine that's broken down, it's not making money, it's out of rent. You have the cost of repairs plus the cost of revenue. That's critical for a rental organization, so our focus is different.”
Ahern has also proven to be innovative in restructuring Ahern Rentals' pay scale for sales staff, sales managers and branch managers, developing a system where a salesman would be compensated as much for keeping rates at a certain level as for a percentage of volume. Factoring gross volume, the salesman is compensated according to the percentage of discounting he's giving to customers. A salesman is rewarded for higher volume, but at each volume level, the pay varies, so that the higher the discounting, the less the salesman is paid. The result has been a substantial increase in the rates the company has gotten and a turnover of sales staff that wouldn't make the commitment to improve performance.
“I've been on this matrix for over two years now and I lost 65 percent of my sales people,” Ahern says. “That was the best thing that happened to my company. On the other hand, we've had good sales producers who have doubled or tripled their salary and helped the company at the same time.” Ahern says the company has tracked rental rates and has improved them around 9 percent since the program began.
Ahern has expanded considerably in recent years and doesn't expect 2005 to be a year of significant expansion for his company. However, he does plan to invest about $80 million in fleet capex, which would average close to $3 million in fleet additions per store, a significantly higher figure than national companies that would probably add less than $1 million per store.
There's a saying that if you're not going forward, you'll go backward, that if you don't try to think out of the box and take risks, you'll never maximize potential. Don Ahern has always been a risk-taker. Not every risk has paid off, but enough have to make Ahern Rentals one of, if not the, industry's leading, independents, and one of its fastest-growing companies.
- Ride Along
Gerry Plescia wasn't satisfied. It wasn't a surprise that results weren't great from 2001 through 2003 with non-residential commercial construction — the primary Hertz Equipment Rental Corp. customer segment — dropping double digits annually. But Plescia was concerned that his company wasn't totally connecting with customer concerns; that the entire organization needed to listen more about what the customer wanted.
Plescia set out to change that. The company went about surveying and listening to the customer on unprecedented levels, and Plescia attended dozens of meetings with customers and rode along with sales staff to meet with customers and hear their problems and concerns. And once he and his staff synthesized a vision of what their customers wanted from them, he made sure that vision was communicated on all levels of the company, from the corporate offices to the sales, counter, yard, delivery and service staff.
“What they had to say wasn't always pleasant to listen to, but it was very eye-opening to hear from them about what they wanted from Hertz Equipment Rental,” Plescia says. “It all comes down to the fact that this is still very much a people business. Even though some customers — more than we realized — were interested in things like reserving equipment for rental online, even buying equipment online, it was still very much based on the establishment of personal relationships.”
2004 was a big year for HERC, and although the company has yet to announce numbers, Plescia says the company's growth significantly outpaced increases in nonresidential commercial construction. Much of the company's improvement is based on changes made during the down cycle. HERC reexamined its inventory, sold off underperforming assets and went to a more lean management structure.
Always known for training, Plescia in recent years invested substantially in even more advanced training, bringing in professional business leaders to modernize training programs. “We trained branch managers, inside and outside sales staff,” Plescia says. “We did very strong training to improve our performance levels.”
HERC also broadened its equipment inventory mix. Having acquired a couple of companies in the late 1990s that were strong in construction supplies, HERC has leveraged that capability and knowledge to enhance its supply inventory in locations where it made sense to do so. It also increased its small equipment offering in many branches, trying to offer a wider variety to serve its customers.
Plescia has grown in his leadership style as well. “I used to be very hands-on, very detail-oriented,” he says. “But with a big company such as ours, I began to focus more on the larger picture, on establishing the direction of the company and planning for future growth. Our executive staff, including regional VPs, has tremendous experience, averaging more than 20 years with the company, and more than nine years in position. These people are fully capable of running their departments and regions, taking responsibility on a day-to-day, week-to-week level.”
Plescia has strong optimism about the coming year, both because of the forecasts for growth in nonresidential commercial construction and because of the changes the company has made in the past couple of years. A good business environment is good for everybody, but especially for those who make the necessary preparation. And Gerry Plescia and his team at HERC have done that.
- Clear Priorities
Now that Wayland Hicks has had more than a year at the helm of United Rentals, has he brought about major changes in putting his personal stamp on the company?
Not really. As Hicks says, Brad Jacobs, John Milne and he — he joined the company about a month after it was founded — developed the company based on a “robust business model” and have, essentially, not deviated from that basic business plan. As for his style, Hicks believes in having open channels of communication and says he regularly receives e-mails from people at all levels of the company, including entry-level employees. Hicks believes in articulating one or two major goals and repeating those points constantly until they become second nature.
“Large organizations don't focus well on multiple objectives,” Hicks says. “When you have too many priorities you don't have any priority. I always try to articulate clear goals, be very concise about what those goals are and try to simplify the message and communicate it to the organization over and over. To assign clear goals you also have to assign clear responsibilities; you have to establish goals and make sure you make it clear who is responsible for them.”
Recent goals for United have been raising rental rates, which the company achieved by 8.5 percent according to its third-quarter results, and developing the company's capacity for providing contractor supply items. United recently opened three of a planned seven distribution facilities to facilitate next-day delivery of contractor supplies to any point in the country. As for 2005, Hicks says, United is committed to maximizing return on capital and growing at a faster rate than nonresidential construction, its primary market segment. “We did that in 2004, and we are confident we'll be able to do that in 2005,” Hicks says.
Does that mean a return to the days of acquisitions? “We plan to focus on organic growth, unlike the early days of the company when we focused on growth through acquisition,” he says. “I still believe the market is very underdeveloped. We plan to start 30 to 35 cold starts this year to broaden our footprint and strengthen our position in the marketplace. We will pump growth capital into many existing facilities. And we are likely to do some small acquisitions similar to the ones we did in 2004.”
Hicks also says capital expenditures for fleet will increase substantially in 2005, after dropping to $336 million in 2003 and rebounding to $575 million in 2004.
Hicks' personal management style is he's not afraid to delegate, but likes to be in touch with all facets of the business. “I've made it a practice to try to remain closest to employees who are closest to our customers,” Hicks says. “That way you see the business through the eyes of the customers. A lot of big companies move too slowly and take too long to make decisions, and once they make those decisions, they take too long to implement. Markets move frighteningly quickly and organizations have to do the same thing. In the first half of 2001, it looked as though construction would be strong, but by the end of the year it dropped off the face of the earth. So we had to adjust. It's important to be decisive, don't be afraid to make changes, don't be afraid to make a mistake, nobody bats 1,000. If you make a mistake, recognize it, pick up the pieces and move forward.”
As part of his ongoing efforts to enhance communication, Hicks — along with president and chief financial officer John Milne and executive vice president of operations Michael Kneeland — are doing a series of town hall meetings with employees in hundreds of branches across North America. By the end of the process they will have spoken to and listened to 4,500 or more employees, after which regional vice presidents will continue the meetings. “Good leaders must have the trust and the confidence of their people,” Hicks says.
Hicks works closely with United co-founder and close friend John Milne. “John has a huge role with United Rentals and that role will continue to grow,” Hicks says. “John is one of the most respected executives I've ever been around. He has tremendous analytical skill and he has unique personal warmth. People admire him and enjoy working with him. He is more analytical than I am, with more of a financial background than I have. I've managed more people, dealt more with operations than John. He's a great asset to United, he makes a great contribution.”
Any company that is the biggest in an industry has its detractors and United Rentals is no exception. People have been predicting its demise since it first appeared on the rental scene in the fall of 1997. Now it's nearly a $3 billion company, although it has its share of problems, it doesn't seem likely that United is going to disappear any time soon. Especially if it remains customer-focused, and that's something Wayland Hicks will work to emphasize every day.
- Jobsite Visitor
Dan Tumminello was used to working alongside the owner. He always understood the vision and plans of the owner because of proximity, relationship and communication, and, in some cases, he played a role in developing that vision and plan. He'd been a salesman and sales manager, always playing a key role in the marketing of the companies he worked for and in managing the marketing and sales process and the people in the field. For years he had a constant adrenaline drive to succeed in business.
But once supply house and rental company M.J. Struckel was sold to a major national rental chain, after a while he lost that personal edge, the drive to get up in the morning and drive the business. It was time to do what he'd longed to do ever since he first went to work — own his own business.
Dan Tumminello has a volcanic energy, endlessly flowing like the Mississippi River he lives and works near. He never sits still — as his wife says, not even when he sleeps. That energy and belief appealed to his neighbor and friend Kevin Morrell, who had been in the real estate business. Tumminello pitched his vision of an aerial rental company to Morrell and from that point on, when Tumminello would wake up in the middle of the night, he'd look out the window across his yard and see, through the blinds, neighbor Morrell working on his computer, but now working on the business plan for what would become Midwest Aerials and Equipment.
Now Tumminello promotes his $15 million-plus enterprise endlessly, a CEO constantly on the front lines visiting customers on jobsites, setting the example in a lean, sales-driven company. Fortunately, the organizational details are headed up by Morrell, along with director of operations Dan Martino, an organizational, systems, computer wunderkind who brings order to chaos and loves the St. Louis Cardinals.
Tumminello is an example of pure drive, pure passion to succeed in an industry that no longer favors the independent, especially in the high-stakes, competitive aerial marketplace, which requires a company to invest heavily in inventory, forcing it to become highly leveraged. Tumminello's will and drive seems almost infinite. When he needed a $750,000 capital investment to launch his company without a history of ownership, he was turned down 47 times by lending institutions until he succeeded on the 48th try.
When asked to define his marketing methods, Tumminello's philosophy is basic: “Jobsites, jobsites, jobsites and more jobsites and when we're done visiting jobsites, we visit more jobsites,” he says. “You have to be there early and often throughout the project.” But beneath that apparent simplicity is a deep commitment to solid customer service that has made his company the leading aerial player in the St. Louis, Kansas City and Springfield, Mo., markets.
Midwest may be the barometer of whether an independent can succeed in today's aerial rental business. Founded in 1997, Midwest has grown quickly and had a strong 2004, grossing more than $16 million in revenue. Tumminello's extensive conversations with his customers — many of whom he has known for two decades — tell him he can expect a very busy 2005, with a lot of projects on the drawing board. Almost for the sake of the whole industry, one has to hope Midwest's impressive volume can translate into long-lasting profitability.
- Prepared for the Role
It almost seems as though Barry Natwick's career was scripted, with everything preparing him for this role as CEO of Volvo Rents.
Natwick started his career in the industry working in sales for L.B. Smith in Maryland and in 1979 joined Deere & Co. For Deere, he did everything from marketing to area manager, to territory manager of southern New England, to seeing financial analysts, to division manager and eventually in the corporate office on the product support marketing side. Then Natwick went to JCB for 15 years including six years as vice president. When he left JCB, he was looking for a career change and felt that rental was growing in importance and that manufacturers didn't have a clear enough understanding of rental.
He felt he needed the direct experience of working for a rental company. He was hired by Brambles and spent a few years learning first-hand about the rental business.
“In my time with Deere and JCB, I did quite a lot with the rental companies, but obviously it's different when you cross over and are actually working with a rental company,” Natwick says. “There's a lot more complexity to the rental business. I always had it in the back of my mind that manufacturers were eventually going to get into rental.”
Natwick was quite correct about that and after Brambles he ended up with Volvo Rents, starting out as an integral member of the core group that put the program together and going on to become CEO of worldwide rental operations. Still very much a work in progress, Volvo Rents has grown at a slower pace than originally forecast, but it has taken pains to build a strong foundation by ensuring that each franchisee is prepared to take on the task. And Natwick has set up programs to give maximum support to franchisees — training programs for branch managers, back-office personnel and outside sales staff and franchisees' councils to provide feedback to corporate on almost every conceivable issue.
Some Volvo Rents franchisees are experienced rental people who have a history in the business and an already developed understanding of what it takes. But some do not and Natwick and staff have worked hard to help the less experienced find operations people who are industry veterans.
The Volvo Rents staff assists the new franchisee in developing a business plan, and their system is set up to catch problem areas before they become serious problems. So if a franchisee is spending too much on maintenance, or if his utilization is too low on some categories of equipment; there are seasonality issues and other indicators, the regional management staff can find the problem area and work with the franchisee to correct it.
The degree of success Volvo Rents realizes will likely be decided on the front lines, by the franchisees and their ability to provide strong customer service. But a lot will be determined by the direction provided by the organization and, ultimately, that means Barry Natwick. He should be prepared for the challenge.
- Maximizing Uptime
Alex Schuessler became interested in rental as a young child. Traveling around the world with his father, who worked for a company that was partly owned by Deere and partly by Terex, Schuessler was always around construction equipment. Later as an undergraduate student at Cambridge, and as he earned a Ph.D from Harvard, Schuessler became involved with systems technologies. Later, as he taught at NYU, Schuessler analyzed issues regarding how to take very large amounts of data and make them relevant to users.
That led him to look at the rental industry and its most critical question: How to maximize customers' uptime? The search to solve that issue led Schuessler to develop the technology at the heart of SmartEquip. As it gathers steam and reaches more users, SmartEquip technology might be the most radical, yet simple, method to maximize rental company and manufacturer efficiency and maximum uptime yet invented.
How? In a nutshell, SmartEquip technology allows a rental center that needs a part, for example, to, from its existing management system, look up a required part, serial-number specific to any asset, and view a schematic of the part. It then tells the user what the part is, and by touching it onscreen, can tell the user how many he has in inventory by reading it from its own rental management system. If not in stock, it can instantly arrange manufacturer delivery and have it drop-shipped next day to the rental center or the jobsite. First it tells the user how many the manufacturer has available and asks how many he'd like to order. Gaining that information and ordering the part, which probably would have taken two hours of research at most rental companies (at a 20-percent error rate) but with SmartEquip technology, can be done in five seconds with 100-percent accuracy. The purchase order is generated, the work order is generated, the parts are ordered and sent with 100-percent accuracy, and no books have to be updated; it's all done automatically. No new hardware or software is required. And the same system can be applied to whole goods purchases and configurations of equipment.
The one catch, of course, is that the manufacturer has to also be on the system. It's a bit of a chicken-or-the-egg scenario, but manufacturers are joining in at an accelerating clip and rental companies are catching on to the SmartEquip benefits as well.
It prevents unnecessary inventory buildup, increases uptime significantly, reduces maintenance costs and increases parts accuracy as well. If a manufacturer changes the part ID number, the rental company staff never needs to hear about it, write it down or be concerned about whether or not records were kept — it automatically goes into the SmartEquip system and onto the company's own rental management software.
As important to all SmartEquip users are the costs of transaction, which many manufacturers and rental companies estimate at around $100 per parts order. SmartEquip promises a reduction in cost per transaction of $35 to $75 depending on the customer and the order.
SmartEquip will soon be involved with manufacturers supporting a third-party service network as well.
Schuessler's own academic background is an indication of the quality of thought that has gone into the development of the SmartEquip program, which he began in 2000. He has brought top-quality technology engineers to his organization and is working with some of the industry's most respected manufacturers and most innovative rental companies.
While some skeptics may remain, the proof is in what SmartEquip technology can do. And as it brings in new users at an accelerated pace, it becomes increasingly clear that not only is SmartEquip here to stay, it may dramatically revolutionize the way business is done in the rental industry.
