Careers and organizations have lifecycles just like devices and software. The task for all of them is have the right tools and skills to do their jobs at each point in time along the way.
However, this can be tricky because yesterday and even today’s capabilities might not be right for the challengers that show up tomorrow—or even later today. For example, there’s no guarantee that good operators or engineers will be good managers. The risk of “fighting the previous war” is ever-present.
To give his colleagues a heads-up about the looming challenges they’re likely to face, Rick Pierro, chief strategy officer of the life sciences division at E Tech Group, presented “The 30-year lifecycle of a successful systems integrator” on May 18 at the Control System Integrator Association’s (CSIA) executive conference in New Orleans.
Pierro is also the founder and former president of Superior Controls, a system integrator in Seabrook, N.H., and longtime CSIA member. It was acquired by DFW Capital in 2016, while Superior purchased Banks Integration in 2017. Superior was next acquired by Falfurrias Capital in 2019, which had bought E Tech and Glenmount Global the year before. They were collectively rebranded as E Tech Group, which reports that it's a North American provider of automation, controls and engineering services that's headquartered in West Chester Township, Ohio.
Tests in the early years
While every system integrator starts out working and learning from someone else, there comes a point when some decide to strike out on their own. Just like all small business owners, they want to try being their own boss. However, this isn’t an easy path because their clients quickly become their new “bosses,” along with the employees they must find to serve them.
“The first five years are all about survival,” says Pierro. “You usually have one client, and the most important task is hiring competent engineers, even though it can be hard to know their technical capabilities. The first three or four we hired were great, but the next one wasn’t. That experience really shook us to our core, and made us lose confidence.”
To identify more qualified candidates, Pierro reports his team at Superior devised a written engineering test with obvious and some less-obvious elements. To evaluate PLC programming skills, it presented a typical scenario: “A mixing vessel has three normally closed valves that can be opened for filling with wax, hot water and cold water (no pumping is needed). There’s also an outlet valve, an agitator and a discharge pump used to move liquid out of the vessel.”
The test then asked participants to program the following sequence:
• Fill the vessel to “Level 1” with hot water.
• Add wax to “Level 2,” starting an agitator after the wax addition has been running for 30 seconds.
• Turn on a light as a signal for an operator to add dry ingredients.
• Wait for a pushbutton from the operator indicating that dry ingredients have been added;
• Agitate for two minutes after the wax addition is complete.
• Add 200 gallons of cold water.
• Pump out the liquid.
While a typical client might ask for a sequence like this to be programmed in one hour, Pierro adds that candidates were told they would only have 30 minutes. This gut-checking monkey wrench helped Superior find engineers, who were not only competent, but could also handle stressful situations.
“Only allowing 30 minutes for a one-hour test helped us find people who could work under pressure,” explains Pierro. “We also gave a test with something missing, such as the fact that a level transmitter was needed. This helped weed out candidates, who might be prone to getting angry quickly, or couldn’t cope with missing elements. They’d be successful if they pointed out that communicating a level measurement required items like a 4-20 mA signal that wasn’t on the test. If they passed, then we could check two or three references, and sometimes hire someone that same day.”
No matter what their results, Pierro adds that Superior’s recruiting team also sought to be diplomatic and respectful of every candidate. “We tried to treat everyone the same, even if we turned them down for a job,” he says. “This is simply the right thing to do, but it’s also important because a candidate that a system integrator doesn’t hire is just as likely to get a job with its best client.”
Sales and marketing are everyone’s job
After Superior had been in business as a system integrator for about six years, Pierro states he and some colleagues took a Sandler sales training course, which generally teaches the importance of being a consultant to clients, rather than a traditional, pushy salesperson.
“We also learned that ‘onsite engineers are your stealth sales force,” says Pierro, who adds that Superior developed an expanded Sandler method that asks potential clients several crucial questions. Designed to identify their pain points, these questions include:
• Why do you want to automate this system?
• How long has it been a problem?
• Who else cares about this?
• How much money is this costing?
• Are your clients concerned? If so, why?
• What will happen to you and your boss?
• Who else is affected and involved in this decision?
• Given this project’s estimated cost, how do projects of this size get approved here?
Beyond using the Sandler method, Superior also adopted marketing tools and techniques, including:
• LinkedIn, Facebook and X (Twitter) programs;
• Emails via Constant Contact about news and events;
• Outings with clients and staff, such as cookouts, sporting events or sailing excursions;
• Holiday mailings, such as cards and calendars;
• Participation on advisory boards covering significant topics; and
• Outsourcing marketing tasks, such as social media, blog posts and press releases.
“Marketing is everything you do in your company that clients will be exposed to,” adds Pierro. “And, if you’re able to do an activity that you love doing, and can bring clients and coworkers along, then your enthusiasm will spill over, you’ll get to know them better, and may even become friends.”
Finances and growing pains
Once its staff grew large enough, Pierro reports that Superior’s management, accounting and other organizational functions had to radically evolve, become more formalized, and get delegated to a larger group of managers.
“We started with a part-time bookkeeper, but once we reached 50 employees, our initial method of ‘management by walking around’ broke down, which led to overruns and costly mistakes,” explains Pierro. “Rule of man had to give way to the rule of law, which meant developing and implementing consistent policies, human resources (HR), and enterprise resource planning (ERP) applications. This also required us to adopt some new roles, which can be a very difficult transition because the people who could take us to the next level weren’t the ones we started with.”
Some notable ERP software packages are available from SAP, Oracle, Microsoft, Netsuite and Deltek. Their dashboards report key metrics, including total accounts receivable, payable and aging receivable; cash, work-in-progress and trends; utilization by engineer and supervisors; and projects approaching their budget limits, perhaps triggering an alarm when they exceed 80%.
“We had to manage change as we grew. So, where we previously had 50 engineers reporting to one person, we had to pick seven or eight senior managers to serve as group engineering manager (GEM) about one day per week, so they’d still be 70-80% billable,” explains Pierro. “However, when we reached 75 and more engineers, we had to switch to having four full-time directors, have the GEMs report to them, and add a dedicated HR department. Now, we’re doing 240 projects per year as part of the several thousand that E Tech does.”
Chance to add value
Because changing a company’s core features and processes is wrenching, time-consuming and doesn’t directly add revenue, Pierro states that another essential activity is creating value during downtime.
“If we lose a proposed project, we go through the usual five Kubler-Ross stages of denial, anger, bargaining, depression and acceptance. However, we try to get ourselves and our people through these steps quickly and remember that nothing will keep us from hitting our overall goals,” says Pierro. “Because of this, when there’s downtime, we can create reusable code libraries for control and equipment modules, services, or create internal documents to help the company run more efficiently. These include training modules with quizzes, standard operating procedures (SOP) for project execution, and project templates to accelerate software development. This time can also be used to prepare for CSIA certification, which is extremely valuable and helps make us more efficient.”
Pierro adds that training modules in the Superior Navigator program are now part of the E Tech University curriculum. New engineers undergo about six weeks of training with these and other tools, while also shadowing and learning from senior engineers.
Growing live and active culture
Naturally, integrated trainings and developing intangible assets are also part of E Tech’s ongoing efforts to nurture a company culture that lets it function effectively and provide the best possible service to its clients—even as it continues to grow. Pierro emphasizes that company culture isn’t just team building, and consists of traditions and practices, including:
• Communications that respond quickly to calls for help;
• Empowerment that encourages staff to be bold and make decisions;
• Encouragement that helps and mentors others;
• Verbal and monetary rewards that show management notices and appreciates exceptional performance; and
• Investing in employees.
These efforts are intended to develop trust in their employees that management will always support them, and build those relationships with clients that know they’ll always be treated fairly.
To further enhance its culture, E Tech also provides Intranet newsletters, Q&A videos with its CEO, wellness challenges, employee appreciation days, technical training and certificates, management training, technical or management career counseling, and other technical presentations.
“We’ve all worked remotely so much lately that now we insist everyone come into the office on Wednesdays, and our staff reports that they like it,” says Pierro. “The best predictor of employee retention is if someone has a best friend at their job, so we encourage it. If you have 50 kids at a Cub Scout Pack meeting, they’re there to have fun, and the same is true for engineering companies. So we try to make our projects fun, and use them to build camaraderie at the same time. We also hold “road warrior dinners” with participants walking before stopping for appetizers, and run 5Ks with me offering $300 to each person who beats me, which is very popular.”
Preparing to sell the company
Once system integration firms get big enough—or their owners get old enough—they usually begin to consider selling to another company. This is where those good practices will pay off. However, selling any company also comes with its own laundry list of chores. These include calculating:
• Major effect of the company’s value;
• Earnings before interest, taxes, depreciation, and amortization (EBITDA);
• Growth and steadiness of EBITDA and revenue;
• Diversity of client base with an avoidance of client concentration;
• Overall market that’s growing and adverse to recessions;
• Steady, repeatable, predictable and reliable income, which is more valuable;
• State of present financial systems; and
• Depth and breadth of management team.
Activities during a sale include engaging with an investment banker; drafting a confidential information management (CIM) memo; teasing the sale with a brief description of the unidentified buyer, while still complying with any non-disclosure agreements (NDA), and weighing non-binding offers. Next, buyers and sellers hold management presentations, deliver letters of intent, perform due diligence, conduct purchases and sale of stocks and assets, and roll over equity items.
Pierro adds that working with a larger system integrator has many advantages for clients, such as reduced management, financial and scheduling risks, more locally available and 24/7 support, wider personnel skillsets, and one master service agreement (MSA) for all services.
“We’ve learned that a one-man-management company is worth less than a company with an empowered management team because that team can take over if and when it’s needed,” adds Pierro. “There are also many benefits for individual staffers that come with joining and growing into a larger organization. After 10 years in automation, an engineer may have more opportunities in a larger company to become an engineering manager or a principal engineer for a specific technology. A larger company can also do more recruiting with professional headhunters, which we know works because we hired 100 new engineers last year.”