Employee Ownership, Midwestern Values Drives Garney Construction's Success

Garney Construction MissouriKansas City, Missouri may well be the bastion of traditional Midwestern values. It’s the perfect home for the corporate headquarters of Garney Construction, which was founded on and still operates under those traditional Midwestern values.

One of those values is that employees should contribute to the well-being of their company and should be rewarded for doing so. Charles Garney, who left his father’s Kansas City plumbing business in 1961 to start Garney Construction, decided the employee-owned business model was the best way to accomplish this. In 1986 Charles sold 30 percent of the shares in the Garney Holding Company to employees to begin the transfer of ownership. The transfer was completed in 1995 when Charles sold the remaining shares to the employees.

There are more than 1,600 employees and “every employee is an owner,” says Ed Rolf, corporate equipment manager. “Ours is the perfect model of an employee-owned business.” There is a direct return on personal effort, improvement and contribution. This reality is part of the corporate culture. It is well-defined and openly communicated. “Every employee-owner knows our backlog at any given time,” says Rolf. “Mr. Garney had a wonderful vision for building employee ownership, yet the outcome has exceeded even his ambitious vision.”

Expansion occurred as new offices were opened. Two key acquisitions also contributed to this growth, Grimm Construction of Colorado in 2001 and Encore Construction Group in Florida in 2012. The Garney.com website lists 19 current locations. “Some are semi-permanent and can relocate to follow the market,” says Rolf. The eight long-term locations are the headquarters in North Kansas City plus Nashville; Winter Garden (Orlando area); Fairfax, VA (D.C.); Alpharetta (Atlanta); Mesa (Phoenix); Littleton (Denver); and Tracy (northern California).

Equipment management

Rolf started with Garney in 1989. He spent the first 25 years in the field before moving to the corporate office. He is the corporate equipment manager for the eastern United States. He and his counterpart for the western U.S., Dustin Cronin, are tasked with getting the best return from some 275 pieces of equipment under the jurisdiction of his office.

“We keep things as basic as possible while also leveraging everything to its maximum advantage,” he says. At least 95 percent of the equipment is leased. Typical lease terms are 24 to 36 or 36 to 48 months. The lease agreements include preventive maintenance and repair. “It’s not practical for us to keep employees trained and equipped to service our wide variety of equipment over our extended geographical regions. We are regional but nomadic and highly mobile. Including all equipment services as part of our lease agreements greatly simplifies things for us.”

All of one type of equipment is replaced at one time, giving Garney greater leverage in negotiating leases. The risk with this approach is the trading in of equipment with widely varying hours of service. To help mitigate that risk, “it’s up to the crew to keep equipment busy, to maintain high and consistent utilization rates,” says Rolf. The equipment is assigned to the crew, not their regional office, and they have responsibility for it.

Crews are also responsible for acquiring or renting smaller pieces of equipment and machines for short-term use. While large, high-utilization, extended-period equipment is managed from Kansas City, regional offices cultivate their own relationships with local dealers and rental firms for other machines.

Rolf likens the company’s management model to the U.S. government, where Kansas City is the Federal government and regional offices are the states. Kansas City manages certain things to maximize profitability but regional offices are given a great deal of autonomy and responsibility for developing and adhering to best management practices for their markets.

utility construction contractor missouriP3, or triple “P”

Garney Construction specializes in public-to-private partnerships (P3), which Rolf describes as “a unique structure for owners to use to shift project risks to the private sector.” P3 project development and construction can be funded using several options. With this approach, Garney prefers to be both the project developer (or equity) and design-builder. This structure allows the owner to pay for the project through a concession-contract.

Garney used the P3 contract structure for the Vista Ridge water supply project in San Antonio, Texas, the largest P3 water project in North America with a development and construction contract value of $927 million. Vista Ridge was completed for the Central Texas Regional Water Supply Corporation. The project included the installation of 140 miles of transmission pipeline—consisting of 54-inch and 60-inch-diameter bar-wrapped and steel pipe—three pump stations, one cooling tower, 18 wells, seven miles of well collection lines, three concrete tanks of four million gallons each, and one 10-million-gallon concrete tank, all designed to deliver 50,000 acre feet of water per year.

Community involvement

Another Midwestern value very present in the Garney Construction mindset is support of local communities. This is another place where regional offices have autonomy to act, to “find a need and fill it” as the successful entrepreneur’s mantra goes.

“There is no corporate directive for this,” says Rolf. “We leave it up to the individual offices to act as they see fit.” He says examples run from pouring a concrete pad for an animal shelter to providing bicycles to youth programs.

Rolf himself embodies Midwestern values. When asked what advice he’d give others, he calls on advice he received from his father and grandfather. “My dad always said, ‘If you’re the smartest person in the room, you’re in the wrong room.’ It was his way of reminding me that I always have something to learn if I stay humble and seek out people who know more.”

His grandfather emphasized the importance of being honest and forthright in all his dealings. “Stay aboveboard and you’ll never have to worry about anything.”

Rolf closely follows the advice he got and that makes him a perfect fit with Garney Construction.

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