Wholesale Change hosts Ian Heller and Jonathan Bein, Ph.D., recently spoke with Eric Chernik about the leadership principles he applied as the CEO of Building Controls & Solutions (BCS) to achieve 700% growth in three years. Eric has decades of B2B distribution experience in organizational behavior, human resource consulting, leadership development, marketing, finance and supply chain strategy. Building Controls & Solutions is a provider of energy management, building controls, automation and gas detection solutions for the commercial HVAC industry.
Ian Heller: Can you give us an overview of your company?
Eric Chernik: Building Control & Solutions is a niche provider focused on building automation for commercial buildings, helping customers be more efficient and more effective.
I like to say we are as old as 78 years old or as young as 4 years old. Four years ago, we were a small, sleepy division of a larger industrial controls company owned by a private equity firm called Luther King in Fort Worth, Texas. We had four locations and 35 employees. Over the past four years, we’ve acquired five new companies (one was 78 years old), 14 branches and employ 130 people through organic growth and mergers. The scale of the business has allowed us to invest in people, processes and technologies such as ERP and ecommerce. Today, we are one of the largest players in our industry and still growing.
Heller: That’s impressive growth. You must be at the point where you can create your own IT and human resources architecture rather than outsource it. How do you decide to bring some of those things in-house versus continuing to rely on outsourcing?
Chernik: When we started the business, my first plan from a leadership perspective was to find a really good financial leader. Our CFO “umbrellaed” over accounting and purchasing. Because of my background, I umbrellaed marketing and human resources.
We may be big in our space, but we are still a small company and outsource a bunch. As we’ve built out our roadmap to scale, we figured out inflection points between outsourcing and insourcing. We rely on consultants and experts for payroll and benefits that we don’t need to bring in-house. This frees our HR leader to focus on strategic things like employee development and performance management.
Jonathan Bein: How do the value proposition and business model at BC&S differ from other approaches of building controls?
Chernik: We aim to be local — local in terms of people, expertise and inventory for our customers. Some customers need product the same day or next day. They can’t wait until next week so there is that stocking component. There is also the consultative element of our people in our branches. Customers don’t always come in and know exactly what they need. We help them think about their projects in a way that will help with efficiency and effectiveness.
Another big value-add is our technical expertise. Think about building automation and controls that drive HVAC, lighting and security. There is a technical engineering component involved in that. When we work with mechanical contractors, we have highly skilled technicians that can support and advise them. Our technicians also train with the manufacturers and carry various certifications to help train our contractor customers to be better in front of the end-user.
Our tagline is, “Smart Choices for Smart Buildings.”
Heller: Generally speaking, some distributors undervalue how important it is for their people to have good product knowledge. I did a focus group where we asked customers, “With all things being equal, would you go to the distributor that has more product knowledge?”
They all said, “100%. Yes, I want to talk to someone who knows products.”
It’s such a differentiator and with technology advancing so quickly, I imagine it must be hard to stay up to speed on those advancements, even harder for contractors.
Chernik: It is. That’s why we stay in our niche industry and don’t get too broad. It allows us to stay focused and bring in technical people. Skills development is important as we train and certify our people. Often, some of our folks may be more knowledgeable than the manufacturer sales rep. We have many manufacturers we work with — like Honeywell, Johnson Controls, Belimo and others — that rely on us to train the customer and to sell and grow market share for their products.
Heller: What was the catalyst that drew you to this particular position?
Chernik: I’ve always been agnostic to industry. I’m a growth guy. I get energy and excitement about growth. When someone tells me they want to invest in growth, which Luther King did, I get very excited. Expanding territories, products and service offerings, and channels to market. That’s what drew me in four years ago — the opportunity to grow something and build a great team around growth.
As we merge with or acquire other companies, the question always comes up, “How do you build your team?” As a distributor, we buy companies because of their people, not the intellectual property license. So, we inherit the customer-facing and technical side. I like to learn from these experts, figure out their best practices and then take it to other regions or vertical segments in our business.
In a growth business, the back office is critical to success. And, our culture helps drive this success. We don’t call ourselves a “headquarters.” We call our back office the “FSO”, which stands for Field Support Office. Everything we do is to help our field personnel support our customers.
Recently, we had a contest. We asked employees to think of an internal tagline. The winning tagline was, “Powered by people. Driven by innovation. Guided by integrity.”
Heller: I love that. In my last executive job, I had a rule for everyone in my department that if anyone from the field called, you had to drop whatever you were doing and answer the phone. It sends a different message when you view the field at the top, rather than at the bottom of the organization.
Chernik: Yes. As we acquire a 10-person company in Charlotte, North Carolina or a 12-person company in Boston, we know they are thinking, “Here’s this big company and a whole bunch of things are going to change.”
It can be scary. How can we alleviate fear for those individuals? How do we show the team’s local leadership that we will empower them to grow the business, provide resources to perform better in front of their customers and offer more product service capabilities? How do we take some of the back-office stuff off of their plate so they can focus on their customer?
We don’t want to lose the people and the talent that we worked hard to acquire and merge with. Over the last few years, we’ve had five acquisitions and an attrition rate of about four percent. That’s a much lower turnover than some peer companies experience at about 10%-20%.
Bein: How are you managing change across this time of rapid growth in the industry?
Chernik: With our hyper-growth, it’s all about change management. When we onboard new people, we focus on assimilating with the current team members. We alleviate fears and provide local empowerment.
We enhance our culture with transparency and accountability. I spend about 50% of my time thinking about people, processes and accountability. We tie incentives and bonus structures to everyone in the business, whether you are an outside seller, warehouse person or customer service associate.
We share information and business results with employees across the company. We look for input and feedback from our employee population. We conduct annual surveys that have led to the creation of a peer recognition program, a monthly newsletter and monthly town hall meetings that I conduct. A big initiative for 2023 is to build out more robust skills development programs for our employees.
Bein: One thing I love about what you said is that culture management stems from the top. I’ve seen companies who view culture as an objective for the HR person to handle and manage, like a checklist item. That’s an upside-down approach.
Chernik: I do not believe you ever get good customer engagement unless you have good employee engagement. Culture is about driving employee engagement, for people to love what they do and to love coming to work on Monday mornings.
I think about our business in the distribution world as a five-legged stool. Three legs of the stool are outside sales, inside sales/counter team and technical team. If those three are in harmony, you hit a double or triple. You hit a home run when you team up with your fourth leg, the manufacturer, and build a strategic relationship with them. But we can’t forget the fifth leg, the customer, the one that pays the bills. How do we become their trusted source?
We want employees and customers to become raving fans. That builds loyalty, not just for today, but for years ahead. We start to become thought leaders, too.
Bein: You’ve created this amazing environment, one that is attractive and magnetic. What steps have you taken to build out your leadership team?
Chernik: As I mentioned earlier, our customer-facing side of the business is organically homegrown. These folks have been in the industry for 10-20 years. We have one individual with 44 years, he’s a guru. We’ve enabled these longtime, talented people with resources that take the administrative work off their plates. We free them up to work with our customers and be passionate about the business.
On the technical side, I lean on recruiters and for the less technical positions, I rely on network referrals. That’s how we found our heads of marketing and human resources.
Heller: When you are looking for a functional leader, whether it is a CFO or marketing leader, you want someone who is a subject matter expert. But if you don’t have a healthy leadership culture, you’re not going to have a healthy employee culture. How do you select the people who have the right values, attitudes and team skills to work with your team in a way that is healthy and manages conflict?
Chernik: I prefer to talk to references that have worked with that person for three to seven years and have seen their leadership style and their functional style firsthand. That’s better than a 45-minute interview. I lean on my trusted advisors and network to help me with that.
I meet with my leadership team weekly. We also meet monthly to spend time digging into company initiatives. We’ll have a one or two-day retreat to talk about the parts of the business they are passionate about. I facilitate those a bit, but I count on entrepreneurial thinking from the team. It’s a tricky balance between too much structure or too little. I tend to lean more toward the middle.
We have to get away from the organization politics and hierarchy of some of the big companies. For instance, I was in a conversation the other day about titles versus responsibilities. I shared with this person that I am less worried about their title. If you show value and wow the other person, they’re going to come to you every time for that value you bring to the business, regardless of your title.
Bein: Do you have advice for smaller companies trying to make more of an impact?
Chernik: I’d say to think about building scale. If you do the same thing over and over again, you will grow incrementally by about 3% to 5%. But if you really want to grow and make an impact on a region or an industry, think about how you scale up so that you have the resources to reinvest in the company.
Once you have scale, you can make investments in people, technology and processes. Focus first on your people, then work to know your competitive advantages and what differentiates you from the competition. Build strategic relationships with your vendors. Along this journey, don’t forget the importance of entrepreneurial spirit. As we merge with and buy companies, we work hard to keep their entrepreneurial spirit alive.