New kids on the block rely on old-school business principles

Although the owners of Mid-Atlantic Fabrication & Finishing, Terence Reid and Walker Knox, had no experience in running a small business before acquiring the company, they have made a go of it, increasing orders about 50 percent in the first 12 months of ownership.

If you were to dig into the details of 1,000 metal fabrication shops, you’d find no end to the variety of parts they make and markets they serve. If you were to ask 1,000 shop owners about the history of the business, you’d hear 1,000 versions of an entrepreneur making the best of the good times and struggling through the bad times, adapting to changing market conditions, and refining the way the business runs. However, when you ask 1,000 owners of small fabrication shops about the company history, you usually get one story: “My grandfather started a machine shop in his garage a few decades ago ….” The second- and third-generation owners usually spent summers pushing brooms and deburring parts, took every shop class available during their high school years, and moved up through the ranks by learning to run every machine on the shop floor. Supervisory and managerial roles came with time, and eventually so did company ownership. Along the way, the company expanded into fabrication, which eventually eclipsed the machining side of the business.

The current owners of Mid-Atlantic Fabrication & Finishing, Knightdale, N.C., took an entirely different route. The owners are cousins who bought the business in 2015. One of the cousins, Walker Knox, came equipped with a degree in textile chemistry and 25 years in a variety of sales positions for large, multinational corporations. The other, Terence Reid, had just wrapped up a 30-year career in the United States Marine Corps. On the surface, it seems that it would be difficult to find two business owners less equipped for metal fabrication and less prepared for success in this industry. However, a little deeper digging reveals that their backgrounds actually make them a good pair for running a small fabricating shop.

Far from dipping a toe into the water to check the temperature, Reid and Knox dived right into the deep end. Granted, it wasn’t quite as dangerous as it sounds. The business was thriving in a reasonably lucrative niche, doing precision sheet metal work, tube fabrication, powder coating, and custom screen printing. The original owner had established everything a company needs to be a success: a reputation for quality work and reliable delivery times, a deep reservoir of fabrication and finishing expertise, and a stable customer base. Also, he agreed to continue to work for the company for some time after the sale to help with the ownership transition.

The big questions concerned how quickly and how thoroughly Reid and Knox would learn the business and adapt to their new roles, and how the Mid-Atlantic staff would take to the new ownership.

Little Fish, Big Pond

The company has the variety of fabricating equipment you’d expect to find in a small shop: a laser cutting machine, two 58-station turret punch presses, three press brakes, and a vertical mill. For joining and assembling, it uses a hardware insertion press and welding units for resistance welding, shielded metal arc welding, gas metal arc welding, and gas tungsten arc welding. It does a variety of fabrication, machining, and finishing work for numerous industries.

“We have several significantly larger competitors,” Knox said. “Mid-Atlantic is a small company that deals in low volumes, which means this is a quick-turnaround business. We can do small lot sizes, and we have found that many customers are in a hurry” (see Figure 1).

“As a third-tier supplier, we frequently respond to a crisis in the first tier,” he said. “In many cases, a customer sends a drawing and needs a part made in four days.” Time isn’t really money, but the two are often interchangeable (within reason), and Mid-Atlantic has a straightforward and transparent approach to help its customers strike a balance between these two precious resources.

“We have a menu of prices,” Knox said. “For any given part, we have one price for a one-week delivery, another price for a two-week delivery, and so on.”

Transparency is important to the owners, and it shows up in many things they do. For example, on the first day of new ownership, Knox lost no time in getting the word out. He didn’t want customers to learn about the new ownership sometime later, when calling to place a new order or check on an old one. A conversation like that would have been a bit awkward, at best, so Knox got on the phone right away.

“I made calls to the top 20 customers, the first thing on the first day, to set up appointments to visit them and learn about their businesses,” he said. “The more I know, the less I am at risk to lose that customer.” Apparently this was a good first step on the journey toward building solid relationships.

Figure 1
Walker Knox, Brandon Capps, Plant Manager, and Terence Reid inspect a small lot of parts. Because it’s a small company with little bureaucracy, its niche is small production runs produced in short timeframes.

“A year later, we were averaging about 50 percent more orders,” Knox said.

Drop and Give Me Twenty!

The popular image of service in the USMC varies a bit, but not by much. Ronald Lee Ermey captured the essence of it as the drill instructor in Full Metal Jacket, but Reid wasn’t a drill sergeant and he wasn’t as intense as most marines are thought to be. When Reid was off duty, he wasn’t known for drinking, cursing, and carousing, and when he was on duty, he oversaw more civilian contractors than military personnel, so he relied mainly on soft skills to get things done. Logistics was Reid’s forte, which turned out to be excellent preparation for running a business.

Reid spent the bulk of his career in aviation logistics, working in spotless, well-organized facilities overseeing the maintenance and repair of all sorts of aircraft systems—mechanical, electrical, electronic, and hydraulic. After rising to the highest post available in that field, Colonel Reid changed direction slightly when he transferred to a repair depot. There he oversaw the repair of nearly every piece of ground equipment in the USMC inventory, from vehicles to small arms. Along the way he picked up two master’s degrees and learned quite a few of the latest trends in running a business. Educated in the principles of lean processes, he earned a green belt in Six Sigma and attended an executive program that provided exposure to a number of corporations in a variety of industries. Learning the big picture and many of the fine details of running a business provided tremendous insight to using best practices and achieving world-class results. The goal, as Knox stated it, was to learn “What does ‘right’ look like?” He wasn’t running a business, but the military’s goal is to use all of the best practices it can glean from the civilian world.

Procedures, Processes, Protocols, and People. Despite the modern world’s reliance on training, equipment, and written procedures, Reid believes that the main component of any organization, military or civilian, has a heart and a soul.

“It’s really about people,” he said. “Early in a career, when you’re a lieutenant or a captain, it’s all about the mission. Later on, you realize it’s really about the people. If people aren’t engaged, you can’t accomplish the mission.”

In Reid’s view, getting things done is a matter of hiring the right people, providing the training and tools they need to get the job done, and adhering to written procedures; getting things done right is a matter of holding people accountable. His goal for Mid-Atlantic wasn’t to set up a command-and-control mode of management, but to use the principles of leadership and to rely on the people of Mid-Atlantic to get things done. Although he was well-versed in sheet metal fabrication from his military experience, he wasn’t a machine operator then, and he isn’t one now. He didn’t write production schedules then, and he doesn’t now. He didn’t try to manage the details when he was in the USMC, and he doesn’t now.

His intention, from the first day, was to rely on the people of Mid-Atlantic. The supervisors knew how to supervise (and generate production schedules), the machine operators knew how to make parts, everyone knew what was expected, and they all knew how to get the product out the door.

Well, not quite.

The first day of new ownership was a bit of a shock to Reid. He was expecting that the best practices for business he had seen in the executive program were common throughout the business world. However, he had seen large corporations run by professional management overseen by boards of directors; a proprietorship of 15 or so employees is a different arrangement. A big company has luxuries that simply aren’t available to small companies, such as hiring department managers, delegating responsibilities, sending people to training seminars, learning about best practices, initiating lean manufacturing, and working to fine-tune the company at every opportunity.

A small business usually is run by one person who works 60-hour weeks and shoulders all of the executive burden. The business is the owner’s vision, and the main goal is to fulfill and ship customer orders. One person handling all of the managerial responsibilities leaves little time for any activity that doesn’t have a direct impact the bottom line.

Figure 2
Employee engagement takes many forms, including input and effort in building improvements.

The company ran well, but the work processes weren’t thoroughly codified by written procedures. Little documentation explained what to do or, most importantly, how to do it. The former owner had no written standard operating procedures or records of preventive maintenance inspections. The company was successful, but that success was somewhat fragile, relying heavily on the direct participation of a single person. Reid intended to change that more or less immediately.

Semper Fi! Meanwhile, if the Mid-Atlantic staff members were expecting Reid to behave somewhat like a Hollywood drill sergeant and run the company in a command-and-control mode, they were in for a pleasant surprise. Reid wasn’t one to bark orders then, and he’s not one now. For much of his career, Reid couldn’t even count on the threat of a court-martial to reinforce a message; as an officer in charge of logistics and repairs, he oversaw many more civilian employees than uniformed personnel (a ratio of about 100 to 1). He relied on the sorts of skills that drill instructors don’t possess.

“The role of a colonel is to orchestrate, coordinate, and organize,” he said.

Reid reorganized things by drawing from the military’s reliance on an organized hierarchy, workplace structure, clearly delineated duties, and each person’s understanding of responsibility and accountability. For example, where each job at the company used to be somewhat compartmentalized, Reid sees workflow as a continuum. He has made efforts to ensure that each person understands the role of the people around him. Cross training ensures that, when one person is out for a couple of days, anyone can step up and get the job done.

The company has a similar goal in how it handles day-to-day inquiries. Knox has stressed the importance of responding to every e-mail and voice mail in less than 24 hours. For consistency, the ownership has designated a primary contact to respond to each of the various types of questions, and they have designated a secondary contact in case the primary contact isn’t available.

It’s not just a more organized workplace, but it’s cleaner, too. Under Reid’s direction, the entire place got a thorough cleaning, a fresh coat of paint, and new carpeting. Some of the machines had seen better days, and after some research—with input from the staff—he realized that they needed to replace a few old machines with newer and heavier models. Reid took the engagement concept further when he realized that they would have to replace some concrete floors with thicker floors to support some of the new equipment. Rather than handle it himself or outsource the entire effort, he sought the input of the Mid-Atlantic staff in tearing out the old concrete, installing rebar, and pouring new floors (see Figure 2). When the company decided it needed salt spray tanks to conduct the industry-standard 1,000-hour tests to test its finishes, the Mid-Atlantic staff designed and built them.

Does this mean that Reid has the place running like a well-oiled machine? Not just yet.

“The quality here is good, as good as it was at the depot,” he said, so the caliber of work isn’t a concern. However, he still has some work to do. His vision for how the company runs is different from that of the previous owner, and he’s still working in that direction. Establishing the written documentation for procedures, processes, and maintenance was just one step along the way.

“After a year of ownership, the company is where I thought it was when we bought it,” he said, referring to the documentation. “When I got here, we were walking, and now we’re at a slight jog, but we’re not running yet,” he said.

His vision for running means running autonomously, according to Knox.

“Terry’s goal is that the business should operate without his direct supervision,” he said.

No Secret to Success

In one of Knox’s previous jobs—working for an extremely large company—he learned the value of using customer relationship management (CRM) software. An excellent tool for logging customer interactions and tracking sales, such software helps a large company standardize, organize, and analyze a multitude of sales activities and other aspects of customer involvement. Such software helps a large company get the most value it can from the vast sums it spends on sales training.

However, when his employer threatened to withhold commissions if the sales force wasn’t diligent in using the software, it seemed to Knox that the company had begun to place more value on the software than on the customer relationship itself. He soured on CRM software, and in his view, it’s not really a good fit for a small company like Mid-Atlantic. It might even be more hindrance than help.

For a single sales representative overseeing a few dozen clients, Knox is confident that a simpler way is the key to success. He believes in integrity. That’s it. No specialized sales training. No sales program of the month. No software. No complicated commission structure. Nothing fancy at all.

“People don’t buy from corporations; they buy from people,” Knox said. “They don’t buy from just any people; they buy from people they trust. You have to build a relationship based on trust.” In Knox’s view, after 25 years in a variety of sales capacities, it really is just that simple.

Building a rapport, and turning that rapport into trust, can take many forms. He recalled a business trip to Europe in which his host handled all of the details—he picked up Knox at the airport, drove him to the office for a series of meetings, drove him to his hotel, then later picked him up and took him out to dinner. No need to call a cab. No need to navigate a strange city. No need to try to find his host in an unfamiliar restaurant. It was a softer, more personal way to conduct business than he expected, and the way he was treated stuck with him. During the trip he even met the host’s family.

Knox doesn’t take it quite that far, but from that experience he learned the importance of handling the details, simplifying anything potentially difficult, and treating customers like partners.

“I thought to myself, ‘If I can make it like this with my customers, I’ll do much more business,’” he said.

The other side of the coin is handling any problem that comes up. This is where accountability comes into play. A problem doesn’t signify the end of a business relationship, and might even strengthen it. He recounted an experience he had when working for a coatings manufacturer. A customer had a 55-gallon drum of a coating and a 55-gal. complaint.

“He took off the lid and started stirring it,” Knox said. “Quite a few large solids rose to the top. I thought, ‘Uh-oh. That doesn’t look right.’” Something had gone wrong at some stage of production, and one of the components had precipitated out of solution, leaving the customer with a 55-gallon drum of defective material. It would have been easy to interrogate the customer about where and how and how long it has been stored, and imply (or state) that the customer hadn’t stored it properly, but Knox knew that wasn’t true and wouldn’t result in any future sales even if it were true. He took responsibility for it, which came as a big surprise to his customer, and he continued to be a customer.

“If a problem comes up, you have to own it,” Knox said. “Own up to it and find a way to resolve it. You’re much more likely to keep the customer, especially when the customer understands that it’s in his best interest."

Mid-Atlantic Fabrication & Finishing, 205 Forest Drive, Knightdale, NC 27545, 919-217-6170, info@mid-atlanticfab.com, www.mid-atlanticfab.com