A Brief History of the Company
Hard Work and Humble Beginnings
Naylor has its beginnings back in 1968 with a transplanted Englishman named Brian Naylor. Along with his partner at the time, he started a company called Nadalin-Naylor Heating and Air Conditioning. The company survived as such for five years. In 1973 .., it underwent many changes; Brian bought out his partner, changed the business name to Naylor Heating and Air Conditioning, and then he moved the company to Oakville from its former location in Milton. The changes proved to be positive steps for the company, which flourished throughout the seventies. The business grew and added a residential division, a small commercial sheet metal construction group, and a service business that focused on institutional work. It also had a manufacturing capability with a small sheet metal and motor rewind shop. Typical of any highly entrepreneurial business, Naylor kept many balls in the air, and by 1983 .. had five divisions with a total sales volume of $2.5 million.
Despite the growth, however, the economic situation during the ‘70s and ‘80s was dismal, and threatened the survival of even the most successful companies. Interest rates rose
above 20% in 1978, and then again in the early ‘80s. Inflation was out of control and the government had brought in wage and price controls as a means to cope with the market uncertainty. By 1983 .., the hardships of the previous few years began to take their toll on Naylor. A once viable business found it facing major problems and losses in the early ‘80s effectively eliminated all the company’s earnings. Without a new direction and new ownership, Naylor’s most likely fate would have been bankruptcy.
The Start of a New Era
Fortunately, at this same time, a friend of mine, Jim Edwards, invested in the business, and in 1983 .. the assets of Naylor Heating and Air Conditioning were rolled over into a new company, Naylor Group Inc. Jim bought 50% of the company, while Brian retained the other 50% and stayed on as president and the main operator. Although the venture began with the best intentions, the relationship soon became untenable; losses continued to mount, the company needed a cash injection to keep running, and shareholders disagreed about how to fix the problems. I had watched this partnership struggle, and I eventually asked Jim about the possibility of me buying out Brian’s half and becoming involved in
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the operation fulltime. Jim was on the verge of losing his investment and so this prospect excited him a great deal. He even offered to put in more money if I would match his investment.
Jim and I managed to scrape together a large enough investment between the two of us - about $125,000 each, which included my entire net worth- to approach a new bank about a loan. We chose CIBC, with which I already had a good relationship, and managed to eke out an operating loan of $400,000. With the partnership details hammered out and our financial situation in place, I officially became president of Naylor in September 1984, and took on equal ownership of a business in distress.
My first order of business was to assemble a group of business acquaintances and form an advisory board that could provide me with advice and strategic input. I will never forget our first meeting, at which Pat Saunderson, one of the advisors, pored over the balance sheet and came to a disturbing conclusion: the numbers could be interpreted to say that if Naylor had not capitalized our leasehold improvements, the company would have had a negative net worth, meaning it was technically speaking—bankrupt. Despite going over the numbers again and again, he
never could figure out why the bank was lending us money!
The early ‘80s were not an ideal time to start a career as an entrepreneur; the business environment was abysmal with interest rates over 15%, business and infrastructure spending had been in the doldrums for at least eight years, consumers were in debt from high-interest mortgages and were not spending money, and the level of business anxiety was extremely high. However, I was young and hopeful, and at 3 ..6 years of age, I had experienced great leadership at other companies, and had been fortunate enough to work with some senior leaders who proved to be excellent mentors.
The Employee-First Philosophy
During my years working for other people, I had developed my own ideas about management styles and how to run a company. I was constantly butting heads with my superiors who disagreed with my approach but you can’t push a rope uphill, as they say, so I was unable to put my own leadership ideas to the test until my time at Naylor. The biggest difference between my approach and the methods used by my former
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employers was the way we perceived and treated employees. It was not uncommon for business owners during this time to harbor animosity for their employees, since they had become the easy scapegoats of the residual stress of a long-depressed economy and a meager business climate. Inflationary pressure on wages had destroyed company earnings, so businesses were inclined to think of their employees as a strain on success rather than a resource to be tapped. As a result, the dominant business strategy of the ‘80s was to cut overhead and limit investments that did not yield immediate dividends.
This is where my philosophy differed from that of my former bosses. I launched my career as an entrepreneur and my tenure at Naylor determined to invest in the future by financing employee training and development programs. Perhaps I am just naïve, but I believe the simple approach of treating people with fairness, honesty and respect will allow you to overcome any market conditions and rise to success.
making, or more importantly, losing our money. One of the first tasks we undertook was hiring an on-staff accountant. Our advertisement in the local paper received plenty of responses, but the most interesting by far was from a man named Gerry Dawson. A former banker in his mid-fifties, Gerry had recently lost his job in a downsizing and was very keen on being hired. Instead of sending in his application like everyone else, he personally brought it into our office and requested an immediate interview with me. He told me his qualifications were much greater than what the job required, but due to his age and the current business environment, he was more than happy to accept a job at this level so we hired Gerry on the spot and he soon got our accounting department on track.
Naylor back in those days was made up of 19 people: eight in the office and the rest out in the field or working in the sheet metal/motor rewind shop. Like many small businesses, we had poor accounting practices and did not properly keep track of where we were
Jumping feet first into a new business can leave you floundering in the deep end, but I got very lucky at Naylor with the excellent people who were there. But they had been over-managed—micro-managed is more the term used today—meaning that they had responsibilities within their jobs but not enough authority to perform these tasks properly. My operational methods sought to change this: I wanted to get the right people into the right positions, give them the tools to succeed, and then promptly get out of their
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way so they could do their jobs.
One of my employees was the service manager, George O’Hearn, who told me years later that when I was first introduced as the new owner of Naylor, he figured he’d have to go home, update his resume, and prepare for a job hunt. Fortunately for all of us, though, this never came to pass! Other employees included Gord Petrie, a rising star apprentice who got his HVAC ticket around the time I started, and great young HVAC mechanics like Mark Gamus, Roy Janssen, Paul McFadden, and Bill Moore. There were also the people who worked in the motor rewind shop, like Carl Hughes, as well as a young sheet metal apprentice named Casey Boers, whom you may know, and who had only just recently started at Naylor – his seniority is
about 6 months more than mine, a fact that Casey has brought up many times over the years.
A Change of Direction
There were some areas that required immediate attention and rapid changes when I began at Naylor, because the company was bleeding money. We analyzed the different divisions of the company and had to determine where we could succeed, and where we should be withdrawing our efforts. My background was in commercial, institutional, and industrial markets, so I had somewhat of a preconceived notion that we should not be mixing consumer and commercial spaces. About 20% of our business was being done residentially, which translated into $500,000 in sales. However we were losing about 10% on this business, so within my first year we made the choice to exit the residential market.
Our core business was now about $2 million, which broke down into $800,000 in service, $800,000 in sheet metal projects, and $400,000 in motor rewind. At the bare minimum, our overheads would not have survived with these numbers, and we needed a magic bullet that would replace the residential market, give us a financial boost, and differentiate us
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Bill Moore at the Mack Truck assembly plant in the fall of 1988.
from the competition.
I had experience with the electrical business and felt this would be a fitting new addition to Naylor’s repertoire. I contacted some friends in the industry, and that is how I came to meet Colin Harkness. He was my age and had worked for a big contractor, and was well versed in the industrial electrical sector. He was looking for a change of scenery, liked a challenge, and was excited by the prospect of starting a new division at Naylor. Colin joined us in October 1985, at a time when many of our projects were still simple inand-out tasks. Colin would estimate in the morning, obtain the job the next day, and be finished by that evening. I asked him once if I should come along as an apprentice, and when he declined I knew we had hired the right man. When it came to electrical, he had his own ideas about how things should run
and was in charge of the show.
A few years later, after our electrical sector was well established, Cooper Construction invited us to supply a design-build price for the Halton Regional Centre that was to be built in Oakville. We had worked with Cooper in the past, but this would have been the largest job by far. Colin went to the first meeting, and when he arrived there were three other electrical contractors that Cooper had invited as well. When the competitors had a moment alone, one of them suggested that rather than individually vying for the contract, when Cooper was only in the proposal stages anyway, they might as well just select one amongst themselves for the job. Everybody agreed, and when straws were picked, Colin ended up with both the short one, and from Cooper’s point of view, the electrical contractor to work with on their proposal. Cooper ended up being the successful bidder on that project, and we did in fact get the electrical contract. Even though we have worked with Cooper many times since then, we all still remember that project and refer to it as the “short straw job!”
Being in the electrical construction business, however, had an unforeseen downside in other areas. Since almost all of our motor rewind customers were electrical contractors, Our complete truck fleet - all new GMC’s with our entire staff of HVAC mechanics, 1985.
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we lost most of their business when we moved into their territory. Consequently, we quickly exited the motor rewind business, and offered new apprenticeships to the two employees from that division. Both accepted, and this is how Carl Hughes and Rick Laurien got their licenses and joined our HVAC team.
There was one last puzzle piece to add to Naylor’s framework, and that was the hydronic part of our business. I had known Lyn Forest for years, had worked with him in the past, and thought he would be the perfect fit. We approached him about the position, and he joined our team in 1986, launching Naylor into the plumbing and pipe-fitting sector which completed our array of mechanical
trade offerings. This got our foot in the door of some large construction projects, and by the end of the ‘80s, we were doing jobs in excess of $3 .. million.
When it comes to developing a business, timing seems to be paramount. As we were shedding the less profitable areas of the business and focusing on the development of new ones, the economy also started its gradual road back to health; if these elements had not happened when they did, Naylor likely would have met a swift death. Things slowly began to look up for us, because the commercial demand for our services hit a stride in the ‘80s, and the Greater Toronto Area became one of the most dynamic markets in North America. As it turned out, we were profitable in every year save for 1985, when we lost $3 ..5,000. By 1990, there had been a drastic recovery, and our sales were over $16 million.
A Company’s Best Asset
Our story, however, is not really one of sales growth; it is about people growth, because without the dedicated people who stood behind us, this company never would have survived the trials it did. With 13 ..0 employees by 1989, we had grown 700% in the first five years. Our service business had flourished
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Colin Harkness with Bill Montgomery, Vice President of Cooper Construction, reviewing the model for the Halton Regional Center, our “Short Straw Job”.
and grown to $2.3 .. million annually, and the balance of the company was in the construction area.
As the number of employees increased over the years, there had been some incidents between the field and the office staff—nothing major, but a few conflicts that arose from time to time that needed to be addressed. As a result, our field employees formally organized in 1987, and formed what became recognized as The Employees Association of Naylor Group Incorporated, a certified union with the Ontario Labour Relations Board. Known simply as The Association, we signed our first contract with them that same year, and we have a very positive and productive relationship with our field forces.
Effective labour relations have been a main contributor to our success, and this is an area where Naylor is ahead of the curve in regards to its competitors. A company that grows quickly and has a diverse group of managers will have related problems crop up, and we realized early on that the best way to resolve these issues was in a non-threatening and impartial manner, with an outcome that best suited everybody’s needs.
As we got bigger, we expanded our workplaces across the GTA, opening offices in Richmond Hill, Mississauga, and finally Cambridge. We were also running out of room in our Oakville office, so we moved the service department to a larger space in Burlington. We took experienced members of our workforce and transferred them into managerial positions, with Bill Moore running Richmond Hill, Gord Petrie overseeing Burlington, and George O’Hearn heading the Mississauga office, while still retaining overall service operations management. The Cambridge office had a few managers, but during the initial expansion Casey Boers was one of the first.
With the establishment of these new remote sites, we set ourselves up for all the advantages of being able to service customers more easily, but also the challenges of operating one
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The summer picnic with a sack race - l to r, Brian Brouwer, unidentified girl, Tom Hitchman, Gary Brouwer, unidentified man, Colin Harkness and Mike Stefaniuk, 1987.
central business in many different locations. For one thing, the market in the GTA began softening in the late ‘80s, and while our service and electrical divisions were doing well, the mechanical construction division was not able to keep pace with the developments of industry leaders, and was not proving profitable.
This was our first big failure. Our inability to properly run the mechanical construction division resulted in us shutting it down in 1990. Unfortunately, this also meant we had to let over 3 ..0 people go, and this was the biggest loss for us. We had so many different sections of the company running and our attention and financial resources were so divided that we did not feel it was possible
to overhaul this department. Naylor actually took a 20-year hiatus from mechanical construction after this collapse, and we did not venture back into the industry until 2010.
Despite this misfortune, we had succeeded in building a real business that had proven itself in the marketplace; we were relevant and customers needed us. We still had not made the big leagues, but we were getting some major exposure. Our truck fleet had grown from the original eight vehicles to well over 60 by this time. Customers and prospective clients alike were seeing our name out there more and more frequently increasing recognition of the Naylor brand.
Standing up for the Rights of the Little Guy
In 1992, we began a routine job bid that ended up transforming into a 10-year-long legal battle. Oakville’s hospital was planning an expansion, so we got prequalified and bid on the electrical work through the bid depository. We communicated with all the general contractors on the project, and were assured that if we could provide the lowest price, then we would get the job if they secured the contract.
The successful bidder was EllisDon,
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Gord Petrie receiving the John Spence Award form Harold DeHaas, International President RSES. This award is for the highest mark in the RSES Certificate Masters exam in North America in 1985.
since we had the lowest price at $5.5 million and they had named us as the electrical contractor, we assumed that we would get the job. However, when they were officially awarded the project in May 1993 .., they gave the electrical work to another contractor who had not even bid on the original project. I brought my concerns to the president of EllisDon Ontario—who has since become president of the whole company—and he said if we wanted to contest the issue, we could go right ahead and try, because a small company like us had no chance against a company their size.
Daring me was not an appropriate tactic, and we launched our lawsuit against EllisDon in the summer of 1993 ... Our case was heard in the general division court in Milton in 1994, and we were awarded $3 ..0,000. This was not our desired outcome, so we appealed the decision. Our appeal was heard in the Court of Appeal for Ontario in 1998, and we were awarded over $3 ..50,000, plus legal fees. This time it was EllisDon who disliked the outcome, so they appealed to the Supreme Court of Canada.
The Supreme Court only tries a handful of commercial cases every year – less than 10, so we were surprised when they decided to hear the case. The trial took place in January
2001, and EllisDon showed up with guns blazing and a legal team of five or more lawyers, including Earl Cherniak, one of the top litigators at the Supreme Court level. We, on the other hand, brought along an articling student and a traffic injury litigator by the name of Alan Farrer, who had never tried a case in the Supreme Court.
Alan was the best lawyer we could have asked for; he knew the details of the case inside and out, and the court agreed with our interpretation of the law. The final decision was announced in September 2001. Not only was our financial award determined by the Court of Appeal doubled, but the decision also put our little company in the history books. This was one of the biggest Supreme Court cases involving a construction suit in over 20 years, and it was a precedentsetting case. Thanks to our 10-year-long fight over the sanctity of the Bid Depository, a general contractor can no longer get away with reneging on a bid after naming a subcontractor.
It was an incredible feeling to know that we had stood up for the rights of small companies and contractors and that the system worked to defend those rights as well. Our company performance that year was extraordinary because of the large payment
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we received from EllisDon, and the company profit sharing plan gave all of our employees a piece of that legal award. The applause I received from the employees upon announcing this made me feel that the entire drawn-out exercise had been worthwhile. Even though Naylor no longer bids on jobs through the Bid Depository, I always get a sense of satisfaction knowing that it is a safer process for small companies thanks to what we did
period.
More Economic Hardship and a Banking Crisis
The 1990’s hit most businesses like a ton of bricks, and the word of the decade was recession. We had cut our losses with mechanical construction and cleaned up outstanding projects, but our sales in 1990 diminished by over 40%, and we just broke even that year. To top it all off, the banks were moving into a damage control stage, and CIBC was certainly doing the same. They had loaned heavily to Dome Petroleum in Western Canada, and Olympia and York in London, England, both of whom went broke and lost billions for the bank. CIBC’s response was to lower loan positions in real estate and construction, so our lines of credit were effectively cut in half within a 24-hour
Luckily, I still had Jim Edwards as a partner, and he immediately put some money into the business to meet the bank’s demands. As for my portion, it took me four months and friendly backing from my extended family to get it together. Throughout all this anxiety, there was a good lesson to learn; banks can change their spots in a heartbeat, and although they are your partners as lenders, being beholden to them can lead to disadvantageous circumstances in personal and corporate life. This was a lesson learned that I thought I didn’t have to relearn but you will see later on in this story that the banks came back to haunt us again in 2014.
Canadian banks overall were not very accommodating to small businesses during this time. I was determined to get involved with a lender that would be more understanding of who I was and what Naylor was all about. It took me over a year and numerous meetings before I would commit, but eventually I settled on HSBC. They were one of the biggest banks in the world and also large in Canada, but it was their operating philosophy that truly won our business. Their account mangers got to know their customers, and the bank acted and worked as a valued supplier. For twenty years they
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followed this path but they too changed their philosophy and when we needed their help in 2014 they were not there to support us. I am moving ahead on my story so more on this later.
Even with a major bank switch, the rest of the nineties continued to be difficult for us, and we eventually had to shut down our Mississauga office. We split the business between Richmond Hill and Burlington, and while this was more cost-effective, we ended up losing most of our Mississauga business to other contractors who were headquartered there. We also moved out of our Oakville office and took some extra space beside our service location in Burlington.
We expected the downturn in construction to be long and difficult, so we cut overhead costs
as much as possible and minimized our sales force. While we were right to prepare for the rough road ahead, we overcompensated and missed the opportunity to grow our service business more ambitiously. A smaller sales force meant our sales remained stagnant for several years, and in 1994 they dropped to $8.4 million annually.
Poor sales notwithstanding, we did survive, and that in itself is an accomplishment. Much of our endurance was on account of our service business, an area where we were not even pursuing aggressive growth. But thanks largely to customer referrals; our service division had steadily grown to $5 million annually, which was a 600% increase over the previous 11 years. Recurring revenue from our existing customers was our salvation in these tough times, and we realized that we needed a long-term plan to further develop the service side of Naylor. As our service division did develop, we started to gain recognition in the community and the industry as a good place to work for HVAC, electrical, and plumbing services, and word spread to suppliers, apprentices, and teachers at the trade schools.
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Brian Brower and Steve Hanna at Bonar Packaging (now Hood Packaging), May 1998.
A New Location, New People, and a New Chapter
The recession had created reservations about the use of money and resources, but we did not miss out on every opportunity that came our way.
When an affordable building in Oakville went on the market in 1995, we jumped at the chance to buy it. If there is ever a good time to buy real estate, it is when nobody else will, so we got a great building in a fantastic location with visibility from the QEW at an excellent price. We moved all of our Burlington operations into it, and still own and occupy that space today. We have performed major renovations and expanded the office space from 6,000 to 20,000 square feet, and added a 6,000 square foot warehouse.
The economy was starting to recover by the mid-nineties, so business had been picking up, and as we were finally getting out of survival mode, we began moving toward new growth strategies. Gerry Dawson, our original accountant, wanted to retire, so we hired a new financial controller, Patti Lowes, in 1995. She helped bring Naylor into the modern age through her expertise in computer systems.
Around this same time, my partner, Jim Edwards, was looking to exit the business. He was 25 years my senior and he had
been a passive investor involved in governance, I was the operator. We negotiated a fair deal, and in 1996
I bought him out. He was a great partner to have, but after 12 years, I was ready to take on Naylor as the sole shareholder. I had fostered relations with the bank, and my personal guarantees were on the loans, not his. Acquiring complete ownership of Naylor meant that we had turned this into a true family business.
The transition went smoothly, and as business steadily improved, we grew almost triple in size from the low point in 1994. The company was incredibly busy and new people were joining our team all the time, and even though we had only just come out of the worst times we had seen, we were still dreaming of getting bigger and planning for the future. There were also some personal issues going on in my life that translated into a desire to further develop the company. Going through a divorce, I had recently lost half of my assets, and was eager to see my family’s resources improved. My plan was to make Naylor the most successful it had ever been by increasing revenue and expanding the company into fresh territory.
By 2000, we were back in force as a $20 million contractor, with both our service and construction divisions each generating
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around $10 million a year. We had about 150 employees, and had positioned new people in almost every department, including accounting, estimating, sales and in the field. We reopened a Mississauga office in a bid to retake our claim in that market. Ever since that location had been shut down, we had lost about 80% of the customers we had developed in that area throughout the late eighties.
One area we delved into was something completely new to us: cabling and communications. It was doubly foreign
because it was an unregulated field, meaning that the people are not licensed through Ontario’s apprenticeship process in the same way they are with other trades. Jason Spiers was one of our first field technicians in this division, and he has since worked his way up to operations manager for the entire unit.
We also began realizing that we had cut our sales force too deeply. While we had an excellent business and skilled operators, we had a shortage of properly trained people who could get out there and tell our story to prospective customers. To remedy this, in 2001 we hired Paul O’Connor, a wonderful storyteller with a great attitude and lots of enthusiasm. He said he liked our company because when he was working sales for the competition, he could never convince a Naylor customer to leave us. He knew that with customer loyalty that strong, we were definitely doing something right. So he joined our team and in the 12 years he was with us he helped build a unique sales model and a great team that has succeeded in increasing our contract customer service base by over 500%. An integral part of this team was John Little, who started out at Naylor as an HVAC mechanic, and who became a premier salesperson and trainer, working his way up to sales manager - a position he retains
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Paul McFadden at MDS Laboratories in Mississuaga in the spring of 1991.
to this day. We grew from $20 million to $58 million in sales for Naylor’s core business between 2000 and 2012. We also have two other related businesses that generated an additional $8 million in sales, and our total employee complement, including affiliate and subsidiary companies, was approaching 3 ..00.
It would seem we had found the magic elixir and we were rocketing into the future. This is the time one should step back and do a proper analysis of what is really good business and what is not. We didn’t do that and we got ourselves in over our heads.
Not everything was working well. We had been in the electrical construction business for over 25 years and our target customer was not spending. We were primarily in the midsize industrial market and these customers were the ones who got hurt most from the 2008 recession. Over 25% of our customer base just disappeared during the years 2008 and 2013 .. – most of these companies either relocating to the US or Mexico or just going out of business. Our secondary electrical construction market was in the mid-size commercial office building space. This too went dormant for several years. Our solution was to go into a new market, the large ground mount solar installations. We were quite
successful at securing these jobs and when we acted as an electrical contractor only we were capable of doing a good job and realizing a proper profit. We made a decision to move up the food chain a bit and we became a general contractor and in our first foray as a GC we signed on to do three sites. The outcome was not a good one as we lost a significant amount of money.
We had to rethink where we were really good and in doing this we kept coming back to the conclusion that we were a great service company and we provided important
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Steve Walker at Notre Dame High School in Oakville, 1996.
inputs to our service customers doing retrofit and upgrades to their mechanical and electrical systems. We decided that after 28 years in the construction market we were going to exit it. It took all of 2014 to do this and our employees – mainly electricians – who had worked with us for many years stayed with us to help us cleanup our projects. Over the course of the year we had to lay off over 80 people. Like the early nineties when we did the same thing with our mechanical construction division we lost a lot of good people. It is the hardest thing to do as a businessman/entrepreneur to have to shrink your business. However we did it for the good of the company and we now had a model that was much simpler and highly focused on the service business and our long list of customers with whom we had maintenance contracts.
It was a difficult time for all of us to work through 2014. It was interesting, the problems we had with the banks in the nineties resurfaced this time too. When they were needed to help they were not there. This is the second time the Hitchman family had to learn a lesson so hopefully there won’t be a need for a third instance.
Our Culture – Setting us Apart
One of Naylor’s greatest accomplishments is that we managed to maintain a great company culture and an engaged workforce. What’s more, we know that our employees are happy because they told us so! In 2006, we participated in the Queen’s University and Aon Hewitt Associates Top 20 Best Small and Medium Employers in Canada survey. It was a 3 ..0-minute online survey that questioned 75% of our employees about their level of engagement in nine key areas of business. We participated because the researchers provided valuable feedback and data from the surveys that we could use to determine our strengths, and even more importantly, our weaknesses in the human resources department.
Through their responses, our employees indicated that we were providing a welcoming and hospitable work environment that made Naylor a great place to work. The survey results could be broken down by geography and by operating unit, so we were able to conclude that between our four offices and three business units, there was consistency in how employees perceived the company. Overall, we ranked 11th in the national survey, and we were recognized as one of Canada’s Best Medium Employers. No other company in our industry (specifically mechanical and
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electrical contracting) had ever been recognized in this regard which really helped differentiate ourselves in the market.
We hired an outside human resources consultant to help us formulate plans to improve the areas and issues where we were not operating effectively. A year later we checked in, and determined that there was progress in most cases. We also redid the survey in 2012, and our company score showed improvement from the previous study. The survey that year rated the top 50 companies, and once again Naylor was recognized as a top employer. Our employees were telling us that we were on the right track, and we were thrilled to hear it.
able to grow the company quicker as an integrated unit rather than a separate entity, especially with having access to Naylor’s existing industrial customer base.
A couple years after acquiring the compressed air business, we became a partner in another company called Viridian Automation Inc. in 2009. I had known Jeff Volkers for several years and he had run a successful controls company. He had built a company around intelligent automated building technologies, but the company came under financial pressure not because of the controls piece. The other half of the business was in providing
The Ever Expanding Naylor Group
To further expand our product and service offering, we bought a compressed air service business called Pneumequip in 2005. It was located in Cambridge, so we moved the business into a building with our local Naylor service operation, changed the name to Naylor Compressed Air, and became an Ingersoll Rand dealer. After several years of running this company as a standalone, we decided to absorb it into Naylor, which we completed in 2013 ... We believe we will be
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Paul Breedon at Gambles Produce in Etobicoke, November 1998.
energy retrofits with paybacks from savings garnered by the customer –a good idea but one that didn’t work, at least in this instance, because of an unsuccessful partnership and an ineffective business model. Jeff wanted a second shot at the business he knew well, and he was looking for a new partner. I saw a great opportunity here and we joined forces in 2009. What started as a small company with just Jeff has already grown into a successful business with about 20 employees.
Viridian established itself as a onestop company for building automation requirements, such as CCTV, security, and other new technologies. Since there was a fair bit of overlap with Naylor’s cabling and communication division, we decided that Viridian should absorb that part of Naylor. The two businesses are perfectly complementary in the smart building industry. A big side benefit for Naylor is that it can perform much of the electrical and mechanical work for the projects that evolve out of the controls and security piece.
and learning, and that is inspirational and strategic. It also requires people who can rise to the challenges of a quickly growing business, because a person who can successfully manage a small company is not necessarily equipped to run a large one. For this reason, continued education is paramount in our business.
We cannot remain relevant to our customers if we are outdated. Naylor employees are often sent to supplier sponsored training or other educational courses. We also have a unique focus on soft skills training because we are a customer-centric business, and proper communication skills are necessary. We want to create lasting relationships with our customers, which is why our official name includes our focus on our customer relationship, “Building Partnerships”. When we gain a customer in one area, our goal is to build on that and to continuously provide our customer with more of our services.
The Right People with the Right Training
To grow a business like ours, you need dynamic leadership that is always changing
The employee who is closest to the customer is responsible for our dealings with that customer, for representing us, and for making decisions on behalf of the company. Our employees, therefore, receive ongoing training that provides them with the tools to deal with customers, suppliers, and coworkers effectively. I believe that this provides
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our employees with a double advantage, because their spouses and families also benefit from their improved communication skills.
To manage our training more effectively, we created a formal human relations department in 2005. Today, we are taking this one step further, and developing the Naylor Institute of Training. We have created official job descriptions for every position in the company, and are pairing each position with an ideal skill set. This enables us to create training paths that allow our people to reach their maximum potential; if an employee wishes to change job functions, then we will develop an individualized training program that will provide the skills required to reach those career objectives.
Centralizing Operations and Maximizing Efficiency
Over the years, we have changed the structure of our company to centralize operations as much as possible. We have four geographic offices out of which our mechanics, operations managers, and service managers work, while our sales people are located in the communities they service. Having offices that span from Cambridge to Richmond Hill allows us to provide comprehensive service
coverage all the way from London to Oshawa, and north to Peterborough and Barrie.
Naylor has a long history of maximizing efficiency, which is why we were one of the first businesses in our field to become ISO certified – which we did in 1997. ISO guidelines ensure consistency, and encourage us to constantly examine our procedures and search for ways to improve the delivery of our services. We thank the ISO process for giving us the disciplines we needed to constantly look at how we were doing things. By 2013 .. we felt we had good
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Roy Janssen, winter 1987.
enough systems and processes in place that we no longer needed ISO regulation so we dropped out of that program and concentrate now on our own methodologies. It is very important for us to constantly look at how we can do things better so we can stay relevant for our customers. We are more focused on this approach now than we have ever been.
We have also invested heavily in our accounting and project management systems. In 2011, we moved to a web-based mobile application that has been very well received by customers and employees alike.
We are on the cutting edge in this area, and have developed our own software systems.
While we are not yet a fully paperless company, we are doing much of our work electronically. Our transition into more modern business practices will happen more rapidly in the coming years, because the next generation of business leaders has been fully immersed in technology since a young age. The next groups of people who will run this company are fully connected and computer literate, and will help to transition the company to a mainly digital format.
Just like today’s technologies, the needs of our customers are constantly changing, and
therefore, so too are our market offerings. It is no longer sufficient to just maintain and repair equipment; our customers want to know what work we have performed, what else we recommend to be done, and they want this information to be readily available and easily accessible by them without having to deal with our staff. For this reason, we continue to invest in our information technology systems, especially those that provide data to our customers. The cost of this could be quite prohibitive for smaller contractors, but the alternative to remaining technologically state-of-the-art is becoming marginalized, and many of our new customers join the Naylor team because of the accessibility of our information systems.
I am certain that the future holds many exciting things for Naylor. We are currently still a mid-sized company, but I am confident that we will see our numbers exceed 500 employees, and that will be an incredible accomplishment. Evolving technologies will also impact the business, both in terms of the new directions that we will take and how they will change our operational procedures. My tenure at Naylor will end before much of this comes to pass, and those achievements will be left for the next generation.
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The People Behind Our Company’s Story
Naylor has been very fortunate over the years to have so many incredible people involved with the company who have worked so hard to bring our dreams and goals to fruition. I am going to highlight the two senior operators who were guiding lights of the development of our business. They were fortunate in having a long list of good people backing them up as we went into growth mode.
George O’Hearn and the Service Sector
George O’Hearn began his career as a motor rewinder before he became licensed in HVAC and gas fitting. He had only been working in the trade for a few years and was promoted to
service manager, which is where he was when I arrived in 1984. At that time, there were about 10 people working in service, and about half of the department’s $800,000 in revenue came from one client, the Halton District School Board.
One of the first challenges I wanted to tackle was to bring on new customers, to reduce our dependency on only a few people for survival. We needed a proper sales force— people equipped with an understanding of our message and the proper materials—so George hired some salespeople to spread the word about Naylor. We had some interesting characters in the early days, but they always did their best with what we could provide. Over time, we learned from our victories and our mistakes whilst constantly improving our approach, and eventually we won some new accounts, with George always cheering on everyone’s efforts.
We also knew that it would be wise to examine how other contractors were succeeding, so George participated in several industryrelated forums. He also took an 18-monthlong management training course offered by the American Management Association that educated him in the key areas required to run an expanding operation: human resources, finance, accounting, marketing, and sales.
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George O’Hearn addressing Oakville staff at our semiannual meetings with all employees, 1998.
As our customer base grew, so too did our field forces. George always had a knack for selecting the young mechanics with the greatest potential, many of whom moved on to become service supervisors and managers within the company. Under George’s careful stewardship, our service business grew to over $20 million annually by 2010. He is now our senior health and safety officer, and in charge of our human relations department. The industry experience he has gained over his years is invaluable, and we are privileged to have him as our senior trainer for the next group of young employees.
Colin Harkness and Electrical
Another key operator in our first 25 years was Colin Harkness.
estimating, supervising, and project management.
Like George, Colin took the AMA management training course, and participated in many industry groups over the years that helped us to expand. He had a great work ethic that encouraged determination and productivity in others. Labour slowdowns and changes in the economic environment only prompted him to work harder to find projects for our electricians.
He arrived at Naylor when he was 3 ..6, as an electrician who also had experience as a foreman on small projects, inside estimating, and with sales. Colin was around long enough to see Naylor’s electrical outfit grow from his one-man operation into a $25 million business in 2012. The size of our field force peaked in the summer of 2011 when we had over 80 people, plus a group of engineers and field people who worked on inside sales,
In the early ‘90s, we came across an opportunity at a large industrial firm, Ford Electronics, which manufactured electronic components for the automotive industry. In the summer of 1990 an impending labour disruption in the form of a strike from their IBEW unionized contractor threatened the viability of that summer’s shutdown program. Colin and I agreed to meet with the plant manager, where in it was discovered that within a three-week period, he wanted to move, change, and upgrade about half of the assembly line operations in this 250,000 square foot plant that housed millions of dollars in equipment. Taking this job would have required every electrician, millwright, HVAC and sheet metal mechanic in our employ to work around the clock the for duration of the project.
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I believed that this project was interesting, but beyond our skills and capability. I assumed Colin’s answer would be the same as mine, but his take was slightly different: he felt we absolutely had the skills to do the job but we didn’t have was enough people to get it done in time. We talked about it further, and decided to put out some calls to our competitors to see if we could put together a workforce large enough to do the shutdown while still having enough people to service our regular customers.
We managed to put together a large enough crew, over 50 people in total, and not only did we get that shutdown done, but we also continued to get projects from Ford
Electronics until the plant was sold 10 years later. From this endeavour we learned two very valuable lessons. First, we had become incredibly competent as a multitrade contractor; secondly, we had been around long enough and worked hard enough to have gained the respect of our competitors. Just as importantly, we also discovered that competitors were not always opponents, and at times they could even be allies. It was possible to be better together than we were alone, and this knowledge was gained thanks to Colin’s confidence.
Colin retired in 2012, but his final task at Naylor was to help us develop a mechanical project group to complement a similar group on the electrical side of the business. Forever the humble character, Colin would often say that “I am just an estimator.” In reality, he was a strong leader and a corporate builder who left Naylor with a lasting legacy. He had a permanent impact on the lives of the people he trained.
Providing Employees with Opportunity
Every one of the senior operators in Naylor’s service division got to those positions by starting at an entry level position and moving up through the ranks. The typical
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Casey Boers, ( Senior Vice President, Service 2013) on the tools as an HVAC mechanic, 1992.
progression is this: you start out as an apprentice, become a service technician, and eventually become a supervisor. The next promotion is to service manager, and in rare cases, like that of Casey Boers, the next step is becoming senior vice president of an entire division.
Casey was just a 17-year-old sheet metal apprentice when I arrived at Naylor, but he soon moved over to HVAC and finished his apprenticeship there. He went through the usual stages, moving his way up from field technician to a supervisor in Cambridge, then back to Oakville as a service manager around 2003 ... He wanted a more formal education, so he completed the University of Toronto’s MBA program, from which he graduated in 2009. In a class of 50 people, he was one of only three who did not have an
undergraduate degree, and he still graduated in the top half of the class. Bill Moore is another employee who worked his way up from the field, and once there he helped build our Toronto office from the ground up. When Bill became the service manager in Toronto in the late ‘80s, only a few people worked in that office, meanwhile today it is among our biggest service units. He is now responsible for our project business in Toronto, designing and supervising the installation of mechanical and electrical systems.
If Naylor had a medal to give for the most versatile employee, it would certainly be awarded to Gord Petrie. He was responsible for opening our Brampton service office back in the ‘90s, he filled in for Colin in the electrical department during an extended sick leave, and he served as the senior operator in our compressed air business. He recently passed off the reins of that division to a new operations manager, Daryl Spain, and Gord has become head of mechanical projects in the Cambridge and Milton area.
Many of Naylor’s long-standing service or operations managers had full histories with the company before moving into one of the offices, and this includes people such as Roy Janssen, Paul Breedon, Paul McFadden, and
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Jim Breedon at Woodbridge Foam in 1998.
Greg Geim. There are also some newer arrivals in the senior positions, people who recently moved into management or supervisory roles after stellar field careers, and that would be people like Bill Cronin, Adam Davies, Piero Quaglia, and James Moreau. Naylor also offers great lasting career opportunities for our field mechanics and electricians. Carl Hughes, for one, started as a motor rewinder and ended up as an HVAC mechanic with a specialization in boilers. Carl was instrumental in introducing our apprentice mentoring program, was part of the group that created The Association, and served as its president for many years.
The projects group contains a mix of field people and engineers. This group is currently headed up by Brian Brower, whose dad,
Gary worked for us throughout the ‘80s and ‘90s as a superintendent. Brian joined us as a young HVAC apprentice, and had a fine career in the field before becoming an operations manager in service, and then a service manager in Oakville. Brian spent several years part time attending McMaster University’s management program which he graduated from in 2013 ... He is supported by many of our long term people like Gord Petrie and Bill Moore plus several young engineers.
To thank these many long-serving employees, we started having 20-year-club dinners every five years. When I started at Naylor in 1984, there were 19 employees; when we held our first dinner 20 years later, there were 10 attendees, meaning that half of the original employees were still with the company. In 2009, the second dinner had 19 attendees. These dinners highlight the dedication of our people, and hosting them makes me proud that we have managed to create such a friendly and open atmosphere that encourages lasting commitments.
Most Naylor employees come to us for a lifelong career, but on occasion we do have people find outside opportunities. It has always been our philosophy to encourage them and wish them the best on their new
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Carl Hughes rewinding a motor in our shop, 1984.
paths. Almost invariably, when people leave Naylor they end up working in a related industry, and become permanent customers of ours. We have had several successful partnerships begin from such circumstances.
Making Way for the Next Generation
Many of our mechanics have had long and successful careers with us, and we are now fortunate to have some of their children joining our ranks. Several new employees are following in the footsteps of a parent, and double generation families now include the Roszell’s, the Boers’, the Cronin’s, the Russell’s, and the Barnes’. We always encourage our employees’ children to work for us in the summer, and three of my four children worked at Naylor in some capacity during their school years.
Along with recruiting from within Naylor’s extended family, we have also started enlisting engineering graduates to fill important positions in project management and estimating. Each new graduate is immediately given practical experience, and starts out working alongside our electricians and mechanical tradespeople in the field. Our motto is simple: there’s no better way to
learn something new than by doing it yourself.
We have hired engineers from various universities, but the majority of them are from McMaster in Hamilton.
We eventually developed a formal program that brings in three or four engineering graduates every year. They are put on a oneyear rotational program that provides them with a well-rounded understanding of our entire operation. At the end of that time, we assign them to a group fulltime, based on their own interests and skills, and the recommendations of our managers. Once or twice, however, we have had to stop a rotation early, because the managers in a particular division wanted the graduate placed with them immediately.
Given everything I have experienced over the years, it strikes me as odd how often
I hear baby boomers complain that the younger generations do not share our same work ethic. I have found time and time again that this simply is not true. They see life a little differently, but overall they want the same things as the generation before them: a good education, fair opportunities, and a stimulating and progressive work environment. And in Naylor’s case at least,
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I also do not see evidence of people today switching jobs more than they did in the past, as most of our employees come to us looking for permanent careers.
I am optimistic that the young people of today are every bit as loyal and dedicated as the generations of employees that have come before. They are better educated, more technologically aware, have newer and faster ways of communicating, are better adapted to our quickly changing world, and will be more efficient than we ever were. It is a wonderful time to be starting a career, and companies like ours will benefit greatly from the modernization that will occur as the next generation takes over.
Our Health and Safety policies are leading edge in our industry. Our training is always at or above provincial requirements. It is only through training that we can truly have the proper respect of the dangers of the environments we work in.
Safety is a Priority
We operate in many environments – from condos and seniors’ apartments to heavy industrial manufacturing. Each one has its own needs, both in how we deal with our customers and also in what the workplace looks like. We are very aware of the dangers involved and we have always had a major emphasis on safety. We want all our people to go home each night with the same good health they started out with the beginning of the day.
We have had a few accidents over the years, and yes some were serious; however, we have always had our employees ‘go home’. We are rated at the Workers’ Compensation Board of Ontario and our norms are to be in the top quartile with lost time injuries and we have attained this mark more often than not. Where we are extra cautious is with new employees – especially the young apprentices where this might be one of their first jobs. With proper mentoring from their journeymen supervisors they will learn the right way to approach a project, one that is both effective and safe.
When we are on customers’ jobsites and the equipment we work on or the site where it is located has an unsafe component to it we request that the customer remedy the problem or we do not do our work. In a very few cases we have had to ‘disconnect’ from a customer and turn them into a noncustomer. This obviously is a very dramatic outcome and almost never happens but it has occurred in my career. We will never knowingly put any of our people at risk!
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People Are Our Greatest Resource
The most important asset we have in our business is our people. When new people join the Naylor team, it is often an enduring commitment for both the company and them. They stay with us as we provide them with the resources and experience to develop their soft skills and management abilities, and as the years go on, we continue to provide lifelong training in their area of expertise. Today, eighty per cent of our executive management team member’s hold MBA’s, and all of them save for me obtained their degrees while still holding fulltime positions with the company.
We provide our people with the cutting edge tools necessary to perform their jobs as efficiently as possible, because our forte is service. Our employees are the face of our company, and they are the best and largest resource we have to distinguish ourselves from the competition. Naylor’s defining business strategy is to have a technically skilled workforce that is highly motivated and in sync with company objectives, while properly managing our labour input to ensure that we have the resources to complete all current projects.
About 90% of our field people are certified by the Ontario government’s trade certifying
process, because their jobs are considered craft trades. And while Ontario had a long history of unionization in this area, today fewer than half of the craft trades we provide are represented by international unions – companies like us and nonunion contractors are the areas where future growth in employment will occur. This trend is affecting almost every industry except the public sector, and it seems to be related to an increasing corporate awareness about the importance of treating employees with fairness, respect, and paying proper wages. Our field forces are still represented by The Association, which functions independently from other unions and has its own rules and regulations. The Association provides our field people with representation at the most senior level of the company. Through their elected officials, they can share their views about how they are treated, and provide feedback on the consistency of our human resources programs throughout the company. We also guarantee quick resolution of issues, because they are dealt with immediately at our regular monthly meetings.
Naylor’s people philosophy is quite simple, and has remained the same since 1984. We search out the best people in our industry, we
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require them to be the best they can possibly be, and in return, we pay them the highest rates and provide an industry-leading benefit package.
Our annual holiday allowance is based on seniority, rather than the industry average of two weeks, we have a profit sharing program with every employee who has been with us for over a year, and we try to ensure that our field employees are among the highest paid in their trades in this market. We also give each field employee a seniority position, which dictates how discharges are made during rare layoffs, and how their bonus pool is distributed.
People might think that we lose too much money or charge clients too much because we pay our employees more than our competitors. But our attitude is this: we do not want to operate in a market where clients are only concerned with finding the cheapest contractor. Early on in my career, I came across a quotation from John Ruskin (1819 - 1900) that truly resonated with me, and I have used it as a personal and corporate modus operandi for the past 40 years:
“It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money—that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable
of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot—it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”
I have always believed that the best way to operate a business is by providing customers with something better, and one way we do this is through our multi-trade service capability. While international trade unions dictate what work can be performed by which tradesperson, Naylor’s people are governed only by the rules of their own association. This means that we circumvent the inefficiencies in the construction and servicing of equipment that other internationally unionized companies encounter. In fact, we have always encouraged our field employees to pursue training in more than one trade. Specifically, we request that our service electricians and those working in our mechanical trades (plumbing, HVAC, and sheet metal) also become licensed for gas fitting. Multi-licensed employees mean we can send fewer people to each project, which translates into three benefits; we can service more clients at one time, it is more cost-effective for everyone, and our employees have more diversity in their jobs.
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Similarly, our apprentices are also encouraged to train in our other trades. We have a very comprehensive technical training program that is run by suppliers, outside consultants, and our own qualified personnel. The more skills an apprentice can bring to the job, the more rewarding the job, and the more efficient we become as a company. Our office staff is likewise offered opportunities to expand their horizons. Almost 50% of our new job postings are filled by internal applicants, because we always encourage our office people to ask what skills they can obtain to facilitate a move into another position or department within the company, if they so choose. In the future, this process will become much easier as we perfect our Naylor Institute of Training program.
One exciting (and self-imposed) challenge we are currently facing is the idea of expanding our operation into new geographical areas, in particular the United States. It is a challenge for us because we do not want to expand the company at the expense of our corporate culture; namely, we do not want to lose the Naylor way of approaching interpersonal connections. This is expressed in the way we treat employees, customers, suppliers, and each other. This kind of thing cannot be imposed on a workplace, so we would have to relocate enough people who understand Naylor’s values so that the culture would be maintained in the new location, and imparted upon the rest of the local personnel. We are very enthusiastic at this new prospect, and eager to offer exciting opportunities to our people, like moving to a new location, starting a new chapter in Naylor’s history, and taking on more senior managerial positions within the company.
We are currently looking at Charlotte, South Carolina as our first foray into the United States. We have two Naylor people who have stepped up and want to give it a try, Steve Meyer and James Forbes. The operation will be starting in the Spring of 2015.
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Dave Arcaro at Erindale II, February 1988.
A Family Business, Succession, and the Future
The Next Generation of Naylor Ownership
Family businesses are the growth engines of our economy, and during the recovery from the 2008-9 recession, 90% of the job growth came from this type of company. As the owner of a family business, my long-term plans extend anywhere from five to 20 years, and I am always thinking about the future leaders of the business. Large public companies, on the other hand, plan for one or two years at most, and they manage earnings to be reported on a quarterly basis, maximizing today instead of investing in tomorrow.
My entire career has been concentrated
around family businesses. Before I bought Naylor, I worked for two family companies: one was a large public company, Atco Industries, and the other was a private one, Black & McDonald. During my tenure, the ownership of both businesses was either transitioned to the next generation or the owners were in the process of doing so. I was fortunate to be around for these conversions, as I learned some valuable lessons about succession planning.
There is an adage in our society saying that in a family business, the first generation of owners builds the business, the second generation lives off of it, and the third bankrupts it. It was my intention to build the business and then create a desire in my children to run it successfully or else I would sell it to a buyer who would continue to have the company prosper.
Luckily for me, two of my children became involved with the business at very early ages, and will take over at Naylor as I reduce my active participation. When Lauren and Greg were growing up, they took advantage of many chances to work at Naylor. Greg technically started when he was just 10 years old, cutting grass at the offices on weekends. He later took on more involved roles, working in the electrical project group
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Greg Hitchman at his summer job when he was 15 working in the Oakville office, 1999.
at age 14 and then offsite at 15 with the communications group, doing cabling work for schools in Simcoe County. Lauren also started around that age, beginning with various positions in the accounting areas including one summer as a dispatcher. By their late teens, both children showed a great deal of interest in both the family business and commerce in general.
Around the time they were finishing their university degrees, Lauren and Greg independently determined that they eventually wanted to take the reins at Naylor, although they were still too young to know if this would be in a professional management position or an active operational role. Although it seemed a little early to begin the preliminary stages of the transition process, and although I was only in my early fifties and still had more plans for my own career, we hired an outside consultant to help us manage the process. After all, I knew that beginning the transition early was a huge factor in the successful changeovers for the Southern (of Atco Industries) and McDonald families. Lauren got her degree in commerce, and with the encouragement of our consultant, she first went out to gain work experience at other companies after graduation. She
obtained a job as a financial analyst with Manulife Financial, and then worked in sales at Xerox. After a few years with each company, she came to Naylor, first taking the position of new maintenance sales representative, and then moving on to a management role. She went back to school at the University of Toronto for her MBA, and is now responsible for the back office functions of the company, including our shared services group and accounting. Her operating role is managing the service side of our business.
When Greg graduated from university with a degree in economics and political science, he began his HVAC apprenticeship, completed his basic at trade school, and then decided to gain some outside business experience. He started out working in media, and by the time he was 22 years old, he was running a call center in Bangalore, India that had about 100 employees. He then rejoined Naylor around the same time as Lauren, initially working as a service operations manager at our office in Richmond Hill. He later changed to the projects side of the business back in Oakville, and is now in charge of this group. Greg is spearheading our new operations in the United States.
Like Lauren, Greg completed his MBA parttime, and graduated in the spring of 2014.
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Unlike Lauren’s program, however, Greg’s specialized in students who are planning to take over a family business. For one week every two months, the students gathered onsite at one of their family’s businesses, while the rest of the course is taken online. I am very pleased with this program, because Greg gained valuable insight about the operation of family businesses, and received a great education in specialized strategic planning, along with the more traditional MBA curriculum.
advantage, and we kept the same members for about 10 years. They offered discipline, reality checks, and were constantly re-examining the company’s goals. If our focus became too broad, the board would refocus our attention on the key directional paths where we had real chances to develop competitive market advantages. During the recession of the early ‘90s, the board wisely prompted us to start cutting back early, and advised us to keep our focus only on the profitable areas of the business.
Staying on Track with Advisory Boards
All public companies have Boards of Directors that are responsible for looking after the interests of the shareholders, challenging management choices, and inputting ideas about the strategic issues that determine the direction of the company. Without the board, individual egos could prevent owners from making proper and informed decisions for their company. It was for this reason that I formed an external advisory board at Naylor as soon as I joined the company. They are essentially a board of directors for a private company, aside from the fact that there are no shareholders to whom they are responsible. Our advisory board provided us with a huge
Eventually, the company came to a point in its development where the issues we faced were of a much different nature than before. As a result, I dissolved the advisory board for a few years. When the board was reinstituted around 2004, it was with a new group of advisors who could assist with the transition to a new generation of owners and managers. For example, Tim Hogarth has been helpful in our transition to the next generation of ownership. Tim is president and CEO of Pioneer Energy, which is a 50% family owned business by the Hogarth family, and in Tim’s career he joined the business and over time has risen to be its senior operating leader, taking over from his father.
Our board is comprised of several other successful business owners and
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entrepreneurs. Grant Hood is one of our members, and is a prosperous serial entrepreneur who, thanks to his varied experience, is able to provide advice on a wide range of issues. Roger Grochmal is the owner of AtlasCare, Toronto’s premier HVAC contractor for residential service and installation, and his industry experience is very valuable to the board. They keep us disciplined, attentive, and focused on the issues that affect the long-term health of Naylor and our affiliate and subsidiary companies.
continue to run the business, this will not happen. Many family businesses use this type of trust arrangement to pass companies from one generation to the next, because it allows assets to be passed along without taxation threatening the capital base of the company.
The Succession Process: Assimilating New and Old
As Naylor’s sole shareholder, I moved my assets into a family trust in 2001 to prepare for the transfer of ownership. Lauren and Greg are the beneficiaries, meaning that when this move was completed, we had all committed to the business being passed on to them. The main advantage of the family trust is that when I die, the financial growth that Naylor and I personally have accumulated will not be subject to large estate taxation, since any additional gain in value was put into the trust, and not attributed to me. If Naylor were ever sold, then a large taxation would occur, but as long as our family and its beneficiaries
The succeeding generation of Hitchman owners is highly committed to this business; they want to see it grow to its full potential under their stewardship, and they wish great success to their management teams and fellow employees. It is my hope to remain involved with strategic planning, and eventually become the chief cultural officer, which would allow me to perform my favourite job function: being highly interactive with our customers and field forces. This was my initial role at Naylor almost 3 ..0 years ago, and I hope to resume this post, and continue my involvement with the company in this capacity for many years to come.
When I came on board with Naylor, we were a small company with fewer than 20 employees, and annual sales around the $2 million mark. Today we are no longer a small company. Our employee base is approaching 200 people, and our sales are close to $40 million. These are two very different businesses that require two very different business models and management styles. The people who were
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with me from the start deserve the greatest commendation, because their own management skills and strategic thinking capabilities developed as company expansion necessitated, and they managed to adapt and evolve with the growing business. The company where it is today, demands a whole new skill set that only a newer, younger, and better educated group of leaders can provide.
We have a balanced combination of field people in management positions and university or college graduates in project management, system design, and sales. The executive management team has many experienced and long-serving employees, but excluding me, the average age of our senior management team is under 40 years of age. This means that our team is made up
of both the experience of age and the technological understanding of youth. I believe there is no better way to understand what motivates younger workers than to have one on your executive team providing input.
Naylor and its affiliate, Viridian Automation, are in good hands as we move forward. We have built a powerful management system backed by strong and skilled people that will have no trouble facing challenges in the years to come. Our employees are highly committed, they do what needs to be done, and they are capable of moving the business forward successfully. I cannot say what will happen in the next thirty or forty years, but I am confident that the company will flourish and be prosperous. Our current strategic plan would see this company double in size over the next seven years, so it is a very exciting time for Lauren and Greg, their management team, and for every Naylor employee. As for me, I may not be as involved as I once was, but I will always keep a watchful eye on the company, celebrate its every success, and cheer you all on at every opportunity.
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Greg, Lauren and Tom Hitchman, 2013.
A Glimpse into Naylor’s Future
The senior leaders that are taking over at Naylor are young, well educated, highly committed, and most of them have worked their entire careers for this company. This means that our senior management is involved and has practical experience, which allows them to deal with leadership issues, acquisition opportunities, strategic planning formats, and other matters in a multi-faceted way.
In order to make long-term goals and decide the direction that the company should take, every two years we hold a strategic review process that spans two days. During this time, we collect valuable input from managers and supervisors from all over the company, and use this information to determine five to seven major objectives that could potentially create huge change for the company. In addition to the major goals, we also select smaller areas where we can implement modifications or expansions to our current business model and our daily operations.
To investigate the plausibility of major strategic opportunities, we developed a process that helps us to determine the effects that each objective would have on the company. We appoint a champion to each cause who collects data that gets reviewed
continually by the strategic planning committee as issues evolve. If at any time we determine that the objective is unfeasible, we halt any further examinations. If we complete the analysis and decide it would be in the best interests of the company, we go forward and move into the implementation process.
Continuing with this discovery process will allow us to effectively perfect our operational techniques as we grow. Several major opportunities have been identified and since executed thanks to this process, such as centralizing our operations and keeping people in geographical proximity to where they operate, as well as moving to a webbased mobile communication platform. This system allows employees’ instant access to a customer’s equipment list and service records, gives our construction operators online access to our systems from remote locations, and has a GPS mapping feature that can locate our people.
If we continue with such progressive methods and procedures, there is no telling what great things Naylor will accomplish in the coming years. I have a realistic vision of Naylor as a company of over 400 people, providing services to a customer base that is twice as big as today’s, and with sales approaching $100 million. We will open up Naylor operations
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in the United States and expand our trade and service offerings.
There are many fine, small businesses that could complement our existing business units that do not have a well-defined transition plan like the one we have in place. Consequently they will be sold and we will be a willing buyer.
I also see our affiliate company, Viridian, growing to about $20 million in annual sales, and reaching an employee base of 50 to 70 people. As new technologies are invented or come on to the commercial market, they will move into those burgeoning areas, and will be a major partner for us, adding their technological strengths to our customer base.
I am happy to know that while we continue to grow as a company, we will maintain a culture that is consistent with our historical values. We were, are, and always will be a people-centric company. Our people—our customers, suppliers, and employees—are our number one asset. We will always try to optimize equipment and process solutions for our customers, and provide our employees with new and challenging opportunities. We will continue to encourage lifelong learning and constant skill acquisition, so that our people can rise to their career objectives and
maximize their potential.
My personal values are very much the same as Naylor’s corporate ones, and I see those same principles in Lauren and Greg, which will ensure a continuation of our culture. This is something we have worked very hard to develop and foster, so I know that this will be preserved; Lauren and Greg will treat others the same way I have, and the culture that evolved during my career will remain intact as we go forward with the next generation of Hitchman’s and their management team.
I have been very fortunate to work with so many fantastic people, and for us to have nurtured and developed Naylor together from the small company it was into the growing and successful business it is today.
I look forward to meeting the employees and prospective customers that Naylor will encounter in the future. And I would like to thank all of our employees and customers, past and present, for all of their hard work, dedication, and enduring efforts in supporting our company along its path. I am both excited and privileged to experience with you what the future has in store for us all.
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Tom Hitchman, circa 1991.
