Hardhat utopia

Sixties social theory meets the building trade at Dallas contractor TDIndustries -- and it works

With a satisfied smile, Jack Lowe Jr. works his way through the nest of cubicles at TDIndustries, a Dallas-based plumbing and air-conditioning contractor where he serves as chairman and chief executive officer. Lowe, dressed casually in an open-collar shirt, walks at a leisurely pace, stopping several times to greet employees, all of whom sport blue and white plastic nametags.

He makes a detour into the company kitchen, personally retrieving a glass of cold water for his visitor. Lowe then gestures toward his office suite, positioning himself so he can catch the reaction to his executive accommodations.

"You like my office?" he asks, grinning, as he surveys a space most corporate chieftains would consider suitable for a large cloakroom.

Then the top executive plops his lanky frame into a puny swivel chair. He shares his office with his assistant, Anne Reese, and both conduct their business at the same standard-issue, unadorned metal desks.

Cloth-covered partitions separate Lowe and his next-door neighbors--field superintendents--but do little to muffle the noise from the other side. As Lowe settles down to talk about the employee-owned company his father founded in 1946, which now brings in $135 million a year in revenues, he must compete with the shrill ring of a field superintendent's cellular phone. The nearby employees, in turn, could easily eavesdrop on him.

"We don't have many secrets," Lowe says.
The TDIndustries chairman's unpretentious digs reflect a conscious effort by Lowe--following his father's path--to create a somewhat touchy-feely, outwardly democratic but profitable business in the highly competitive Dallas commercial construction industry.

TDIndustries ranks as the largest contracting firm in Dallas specializing in air-conditioning and plumbing for commercial buildings. It can claim responsibility for the mechanical infrastructure of such high-profile edifices as the Dallas Convention Center, The Ballpark in Arlington, and J.C. Penney's headquarters in Plano, as well as many of the glass boxes along Central Expressway.

It is a thriving company. After surviving a regional downturn in construction in the late '80s, TDIndustries' revenues have steadily climbed this decade, with $163 million projected for 1999. Worker ranks have swelled to 1,038 employees, and the company's market share dwarfs that of its competitors.

But TDIndustries is also an unusual Dallas corporation, a place where executives wax philosophical to an almost all-nonunion work force of plumbers, sheet metal workers, pipe fitters, and welders about such feel-good concepts as ethics, integrity, trust, and even love.

Something of a secret in Dallas, TDIndustries has rarely received attention in the local press. But last month Fortune editors featured TDIndustries on the magazine's cover as the second-best company in the country to work for. TDIndustries ranked behind only Synovus Financial, a Georgia-based outfit, but rated above such well-known, worker-friendly places as Southwest Airlines, the investment bank Goldman Sachs, and computer giant Hewlett-Packard.

In the cynical '90s, an era of downsizing and disloyalty, how has Lowe managed to nurture a workplace where more than a dozen employees approached at random volunteer how happy they are with their jobs and how they're committed to their employers? And how, in an industry as unstable as the construction business, does TDIndustries keep its annual turnover rate at 13 percent for employees who have been there at least a year?

Either there's something to learn from TDIndustries' success, or it's just too good to be true.

Mike Fitzpatrick, the chief financial officer at TDIndustries, says he received a telephone call recently from an Oregon construction company executive who'd spotted the Fortune story. "Do you guys franchise?" the executive wanted to know. "Or could you buy us?"

Fitzpatrick told the caller no, and no. Then he explained that there's no wizardry to the company's culture. "It's not magic," he said. "It's just a lot of hard work, and it gets down to the people themselves."

The company does, however, possess a peculiar corporate structure. Imagine if workers had the power to fire their bosses. At TDIndustries, the Employee Stock Ownership Plan (ESOP) gives non-management workers almost 75 percent of the closely held company's voting stock. That means blue-collar workers not only get a share of the profits, but--in contrast to most ESOPs--also have the muscle to boot Lowe and his entire board of directors.

"It's not easy," Lowe says, "but there is a way to do it." The workers would have to organize and nominate a slate of five or more board directors for the annually scheduled election and then succeed in getting 50 percent or more of the votes behind their ticket.

The company also has adopted an unusual philosophical mission. More than 25 years ago, Lowe's father, Jack Lowe Sr., began incorporating management guru Robert Greenleaf's ideas into the company training program. Greenleaf, a former AT&T personnel executive, wrote an essay called "The Servant as Leader" in the late '60s. Having spent a lot of time talking to college kids in the era of student protests, Greenleaf advocated theories that in most companies would cause mayhem. His basic message: Allow the grunts to run the show.

In his essay, Greenleaf makes his main point with a story borrowed from German novelist Hermann Hesse, author of Steppenwolf, Siddhartha, and Magister Ludi. In Journey to the East, Hesse writes about a character named Leo who accompanies a group on a journey and performs only menial chores, yet buoys the travelers with his goodwill. When he disappears, the others can't continue. That's because Leo, the servant, was in reality the leader, the guiding spirit.

TDIndustries managers and supervisors are supposed to fashion themselves after Leo, respecting the preferences of their subordinates.

All the talk about servant leaders and employee ownership, however, would amount to little if TDIndustries managers didn't manage to bring those ideals into the workplace in concrete ways. Yet the company does distinguish itself in everyday details, erasing outsiders' understandable skepticism about sappy notions such as the company's pledge that it will perform "like a powerful river, chang[ing] each day, even as it stays within the banks of its deepest guiding values."

"The opportunities here are great," says Maurice Kelly, a superintendent who started 12 years ago as the lowest-level sheet-metal worker.

"It's just a fun place to work, and it's a good place to work," says Bernie Williams, a 48-year-old plumbing supervisor who has worked there 13 years, and three years ago persuaded his son, now a foreman welder, to join the company.

Kelly's and Williams' photographs are among the hundreds of framed portraits hanging in the entryways of TDIndustries' corporate headquarters. Each employee who's been with the company for at least five years gets honored with a photo in the foyer. There are now 375 photos in the hall.

"Just hanging in there is a big deal here," Lowe says as he walks past the rows of portraits.

It's 3:20 in the afternoon, and 18 plumber-helper applicants are seated at round tables in a conference room at TDIndustries' headquarters in Far North Dallas. The applicants are diverse: Hispanic, white, and black. But only two women are present.

(Of TDIndustries' new hires in 1997, 14 percent were women and 31 percent were minorities. Only 7 percent of its new professional hires, however, were minorities.)

In the conference room, Rosalyn Joseph, TDIndustries' employment coordinator, stands at a lectern. For the past few weeks, Joseph has screened about 100 calls from people who have read the company's newspaper ad seeking applicants and specifically encouraging women to inquire. Joseph invites the respondents who sound serious on the phone to this session, the first step in a paid 10-week training program at the end of which the pupils become $10-an-hour plumbers' helpers.

A petite woman with a slightly skeptical look in her eyes that suggests she's caught on to a scam or two, Joseph tells the assembled applicants matter-of-factly about the virtues of TDIndustries. She starts with this year's projected revenues: $163 million.

It doesn't take long for Joseph to brag about the Fortune ranking. A banner in front of the building also proclaims that honor.

"Is Herb number two?" asks a woman in her 30s. No, Joseph explains. Southwest Airlines, the company where Herb Kelleher is CEO, is "actually number four. We try not to hold it over them." Fortune had ranked Southwest the No. 1 company to work for the previous year, while TDIndustries rated number five.

Robert Levering, director of the San Francisco-based Great Place to Work Institute, which, along with Hewitt Associates, conducts the research for Fortune's rankings, says TDIndustries ranked so high because of its unusual structure and the company's phenomenal scores in surveys of employee satisfaction. The researchers have known about TDIndustries for years, since the company has extensive contacts with consultants in the worker-satisfaction field. Levering also included the Dallas company in his book, co-written by Milton Moskowitz, The 100 Best Companies to Work for in America.

To come up with the Fortune rankings, Levering and Moskowitz investigated 206 companies, culling from a list of more than 1,000 large and mid-sized firms. They sent questionnaires to 250 workers at each of those companies. At TDIndustries, Levering says, 85 percent of the 189 employees who responded said they believed they were fairly paid, and 83 percent believed they got a fair share of the profits. Few companies--even among Fortune's exalted roster--have such high percentages of satisfaction, Levering says.

In the conference room, each TDIndustries applicant gets a copy of the company's mission statement: "We are Committed to Providing Outstanding Career Opportunities by Exceeding Our Customers' Expectations through Continuous Aggressive Improvement."

Joseph attempts to explain how that fancy language translates into immediate benefit for the prospective plumber trainees. "We pay for you to learn a trade," Joseph tells the group. In addition to extensive internal training, TDIndustries will subsidize any tuition for coursework--even programs offered by other companies--related to an employee's current job or one he aspires to at the company. Indeed, all TDIndustries employees are required to get some kind of schooling or internal training for at least 32 hours a year.

"The other big thing I like about this company," Joseph tells the group, "is our ESOP." All TDIndustries employees are allowed to participate in the ESOP three to six months after their start date, Joseph explains. They can invest up to 10 percent of their salary in the ESOP, and the company will match the contribution from a fund created from 20 percent of the annual profits. If TDIndustries does well, so do the ESOP participants, with no limit to the company's dollar contribution. Lowe says an employee who has put 10 percent of an annual $30,000 income into the ESOP for 10 years can expect to cash out for somewhere in the neighborhood of $120,000.

The ESOP represents more of an opportunity for TDIndustries employees to gain control over their work lives rather than an accelerated investment plan. When workers retire, the company is required by the plan to buy back their stock, which is not traded publicly, if the employees want to sell it. But the workers also have the option of keeping their stock in the plan and cashing out later. For retirement purposes, TDIndustries workers have the more common 401k program.

"We have one guy that retired at TD as a millionaire," Joseph tells the applicants for the plumber-helper jobs. "I can't wait."

As she concludes her spiel, Joseph tells stories about TDIndustries' 59-year-old CEO, Jack Lowe Jr.

"If you become a partner," Joseph tells the group, using TDIndustries' term for its employees, "you will meet in a room with Jack Lowe, and you can tell him honestly what you think. He's just that kind of guy. He treats everybody with respect."

But the newcomers seem unmoved by the talk of a trustworthy CEO, a potentially lucrative ESOP, and a we-love-you philosophy. They ask few questions. (Many TDIndustries employees say it took them a year or longer to comprehend how deeply rooted were the company's attitudes about workers getting say-so and respect.)

"This is an unusually quiet group," Joseph says. The only one with any queries is the woman who cracked the joke about Herb. She wants to know about daycare (the company doesn't provide it) and cross-training (no, TDIndustries isn't hiring electricians' helpers now, though opportunities for other trades might arise later, Joseph says), and if you are paid for the time you spend in school (no).

At the end of the 30-minute talk, Joseph distributes tests to assess the applicants' math and reading skills. "Can we use a calculator?" one applicant asks. No, Joseph says. The exams test for ninth-grade-level skills in math and reading comprehension.

Later, Joseph reports that only four of the applicants passed both portions of the test--a necessary requirement for getting into the plumbing training program. After the background checks, the field is whittled down to two. Last year, the company hired 300 new workers of 1,500 who applied.

While it might not sink in for the uninitiated, long-time TDIndustries employees confirm that much of Joseph's talk to prospective employees accurately reflects the company's policies and practices.

The company does liberally provide for training and schooling, and tradesmen who've become master craftsman for the company can cross-train.

Marlin McDaniel, Bernie Williams' 25-year-old son, who's worked three years at TDIndustries, has gone through pipefitting courses at Northlake College and welding programs at Trinity Contractors. He has about a year to go before he reaches journeyman status--the end of a typically four-year process. TDIndustries paid for all his education.

Wearing a yellow canvas work suit, an orange hard-hat and protective eyewear, McDaniel takes a lunch break at a construction site on Harry Hines Boulevard where TDIndustries is among the subcontractors helping erect the headquarters for the Dallas chapter of the American Red Cross. "We're hooking up the coolers and the chilling towers, then we'll turn them on and test for leaks," says McDaniel, who talked to the Dallas Observer after we approached him--without any prompting from corporate promoters--on the construction job.

McDaniel, a Louisiana native who worked in a shipyard back home before taking his dad's advice and coming to Dallas, speaks gratefully of the opportunities his company has provided him. Like all the other TDIndustries workers at the Red Cross site--and all other jobs where TDIndustries has field employees laboring--McDaniel has the chance to get some extra change, $100 or more, if he and his crew finish the work on the building under budget. The entire team at a job site--from the lowliest helper to the superintendent--will share 30 percent of any money saved on a specific building contract. For superintendents and foremen, those incentives amount to thousands of dollars a year, and for lower-tier workers, hundreds.

McDaniel knows he's moved up in the company at an accelerated pace. He became a foreman in a surprisingly short period of time, three years. At a unionized shop, McDaniel wouldn't be eligible to be anything but an apprentice for another two years. At TDIndustries, he says, the advancements come much faster. "I was just a little welder's helper, and my foreman asked me if I could handle it," McDaniel says.

His father, a master plumber before he came to TDIndustries 13 years ago, seems aware that his son's fast climb raises questions about whether he possesses enough seasoning and hours on the job to be a decent foreman. He says defensively about his son: "He came in at the right time. And at TDIndustries, you are allowed to rise that fast. He doesn't necessarily have all the training, but no one else wanted the responsibility. He was willing to take on the extra work."

For TDIndustries' detractors--and the biggest contingent of those exists among the unionized building-trades workers--the notion of a young, less experienced McDaniel supervising other workers represents everything that's wrong with the company's policies.

In the mid-1970s, when most commercial buildings in Dallas were still built by union labor, TDIndustries (then known as Texas Distributors) led the way in putting unorganized workers on the job. "They were one of the first companies to go in with nonunion workers," says Johnny Gibson, secretary treasurer of the Dallas Building and Construction Trades Council.

The unions, not surprisingly, have not embraced TDIndustries. They argued--and continue to stress today--that the company's nonunion labor is not skilled enough or properly trained. "These jobs are just swarming with people who are not qualified," Gibson says.

Jack Lowe Jr.'s response: "We are the biggest in the state. The proof is in the pudding."

In the '70s, the unions posed a potential threat to TDIndustries. The company's employees often had to cross union pickets to get to work. One time, Lowe told the Dallas Business Courier, unionized elevator operators turned off the power so TDIndustries workers couldn't get to a job site.

But since then the tide has turned, with some of Dallas' biggest names in real estate development, such as Trammell Crow Co. and Austin Industries, pushing for the change. Nonunion or open shops, as they are known, have taken over most Dallas construction sites. Partly as a result, Gibson says, "The wages in Dallas are way behind the rest of the country."

Typically these days, a few trade unions are represented at a site, but the majority of the workers are nonunion. At the Red Cross building, for instance, the ironworkers are union employees. Most others are not.

TDIndustries executives are a little defensive about the union issue today, even though it no longer represents a threat. "If one of our people wanted to be in the union, they certainly have the right," says Bob Ferguson, executive vice president of the company. "It was not our mission or goal to beat out the unions. We admire them for their craft skills."

As far as pay scales are concerned, TDIndustries competes with union rates, according to company managers. Journeyman union plumbers, for instance, earn $19 an hour--the same rate as at TDIndustries, whose top plumbers also have the incentives, the ESOP, and year-round work.

When Joseph told the roomful of applicants that if they became "partners" at TDIndustries, they'd get to visit often with Jack Lowe Jr., she wasn't exaggerating. Lowe, who takes his job as the Leo-like spiritual leader seriously, surfaces before employees frequently.

After newcomers pass their three-month mark with the company, for instance, they meet with Lowe at headquarters. He'll meet with them again sometime in the next two years when they share breakfast with him and 20 or so other workers. The sessions, known as "Breakfast with Jack," are designed to give employees an opportunity to air their concerns and differences.

Lowe--who won't let a reporter sit in on such a breakfast--has altered corporate policy as a result of discussions that started at those shared meals. He began to hear lots of grousing a few years back, for instance, about the company's health plan. Eventually, Lowe, who'd been making such administrative decisions himself, turned the program over for review to a committee made up of workers and management. They transformed TDIndustries' health plan into a less expensive one, Lowe says, and one employees prefer.

Lowe's father, Jack Sr., began the tradition of meals with workers in the early '70s, about 20 years after he started the company. The older man would have the workers to his house for spaghetti casserole dinners. It took him two years, but eventually the founder had dined with all of his workers.

His son now does the same thing, but does it continuously, so every two years nearly every worker gets a meal with the CEO. He conducted 15 breakfast gatherings last year.

Lowe took his father's place as CEO and chairman six weeks after the founder's death in 1980. He had worked for the company since 1964 after graduating from Rice University with an engineering degree. Lowe had originally planned to attend Harvard to get a master's degree in business administration, but the steep tuition brought him back to Dallas, and he asked his father for work.

"I asked Dad what he thought about me coming to work for him, and he said, 'Let me talk to a couple of people and get back with you,'" Lowe recounted to Ashley Cheshire, author of a company-sponsored history.

Another of the founder's sons, Bob Lowe, also works at TDIndustries. Some 14 years younger than his brother Jack, Bob Lowe, now 45, started in the business as a sheet-metal worker. Today, he has an operations supervising position. He is also among a roster of prospective candidates to take over Jack Jr.'s position when he retires as he's promised to do in six years. The company has set up a succession plan, informing potential leaders what traits they need to work on if they want to make the grade later on. One of the key attributes the future TDIndustries CEO needs, according to the plan: Empathy.

Jack Lowe Jr. has earned a reputation of being empathetic. But he earned it the hard way. Almost a decade after his father died, Jack Lowe led the company through its toughest time, a historical chapter that isn't quite as burnished as the one presented to plumber-helper applicants.

Jack Sr. founded TDIndustries in the late '40s with $10,000 he borrowed from an aunt. By 1952, way before such plans had become fashionable, he'd started inviting employees to buy stock in the company and share in the profits. "He just thought it was fair," his son Jack says. For years, the arrangement had always worked in the employees' favor. Then came the late '80s. The commercial construction industry nose-dived. TDIndustries, which had expanded greatly in the middle of that decade, began to see revenues drop. In 1989, the company lost $3 million. It was, at the time, a typical Texas tale of woe. Its bank failed, and the feds took over the debt.

But at TDIndustries, unlike most other companies in the state, the corporate financial troubles directly impacted workers' nest eggs. The company could not afford to buy back stock from retiring employees.

"It was a very difficult time," Lowe recalls. "We had stockholders who couldn't collect. We were unable to pay out everybody. I don't know if it was legal or not; I sat in here and decided who was the most needy. I was a triage officer."

To assure the troops, the top executives agreed not to sell any of their own stock. Eventually, Lowe and others devised a plan to distribute monies from an overfunded pension account and ask the beneficiaries to contribute their shares back into the company's equity pool. Amazingly, the managers asked the workers for $1.1 million and got back $1.25 million.

The experience deeply influenced TDIndustries' CEO. "It humbled Jack," recalls Bob Lowe.

But in these flush times, most remember the event as a corporate-culture character builder. "It was a great triumph story," says Steve Saunders, a former TDIndustries executive. "The truth is, everybody did get paid. "

Adds Bob Lowe: "Sometimes the very worst things turn out to be the very best things."

Since those miserable moments in the late '80s, the company has adhered to a debt-free pledge--an unusual way for a construction company to operate. The company owes no money to anyone but stockholders. "That's something we embraced in the depths of our experience," Jack Lowe Jr. says.

Perhaps the most persuasive positive talk about TDIndustries can be heard from former employees.

Last July, Lowe followed through with strategic plans to sell off a 70-employee unit that provided residential air-conditioning service. The division was still making money, but TDIndustries wanted to focus on the commercial and multi-family dwelling sector. Attempting to do what's best for the employees, Lowe says, he offered to sell the division to them as a group. They took him up on the offer and made a bid of $1.5 million. Many of them planned to sell their TDIndustries stock to finance the purchase.

In the end, however, Steve Saunders, president of the resulting company now known as Tempo Mechanical Services Inc., says the workers couldn't come up with that much cash. So TDIndustries agreed to sell it for a lower price.

During the negotiations, Saunders says, his outside attorney seemed perplexed by the level of trust between Lowe and the employees in the unit. "Do you have this in writing?" Saunders remembers the lawyer asking. Saunders would say no, that he didn't believe he needed to get Lowe's promises on paper. "I know Jack Lowe," Saunders said he explained. "I don't need this in writing."

A few weeks after the sale was final, Saunders says, he had a sobering talk with his new group of employees. "They told me at a group meeting that they wanted to create a new place just like the one they left. That puts a lot of responsibility on me.

"I still remember the moment. It sent chills up my spine."

There are a few snags in the almost-too-good-to-be-true stories about TDIndustries' trustful relationships between workers and managers. In the foyer where all the photographs of veteran employees are hung, for instance, someone has drawn a mustache and a beard on one woman's face. Not a very servant-leaderlike kind of behavior.

More substantive issues exist. One obvious one: While the financial results for the company are issued to employees on a quarterly basis, the executives and top officers do not disclose their salaries and compensation. The employees know how much stock the officers hold, but aren't told how much they're paid or receive in incentives. "I think it's a legitimate question to ask," Bob Lowe concedes. In publicly traded companies--as well as even some closely held concerns--shareholders do learn how top officers are compensated.

Executive Bob Ferguson says that CEO Lowe earns less than $350,000, or less than 20 times the lowest-paid worker at the company.

Says Jack Lowe Jr. about the salary disclosure: "I'd tell mine if everybody else tells theirs, but nobody else wants to do it. They just want to know mine."

But the absence of precise knowledge about the directors' pay scale means the worker shareholders cannot judge the officers' performances against it and vote their stock accordingly.

For Maurice Kelly, however, the salaries of top executives make less of an impression than calculations about his own. A superintendent now, he started with the company 12 years ago as a plumber's helper. He now earns more than $43,000 a year, plus the bonuses he earns when he brings in jobs under budget.

Kelly also appreciates the openness at TDIndustries--even when it doesn't necessarily work in his favor. Recently, Kelly says, two of his subordinates who had less than two years' experience asked if they could switch to the service department and get away from the construction site. The two, like many, wanted the freedom of the service jobs as well as benefit of company vehicles. Kelly told them no.

But the two leapfrogged over Kelly and went straight to Lowe. The CEO gave them the go-ahead and switched them to the service department. "Lowe told me, 'Give them the opportunity,'" Kelly says with a smile, clearly unconcerned, as many supervisors in other companies might be, that the outcome might have reflected badly on him.

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