Mechanical Inc. makes the investments needed for long-term growth
Mechanical Inc. has a 100-year plan.
When the August 2113 edition of Plumbing & Mechanical arrives in your shop, chances are good that your descendants and future employees will read about Mechanical Inc., which is based in Hillside, Ill., just west of Chicago.
“Our company philosophy is we want to be here in 100 years and that guides everything we do,” President Brian Helm says. “We make long-term decisions. We may sacrifice short-term gain in favor of long-term gain and longevity.
“Many companies don’t put that out to their employees because they want to keep their options open. They aren’t sure what their five-year goal is, much less their 100-year goal.”
The long-range outlook makes a big impact on how Mechanical Inc. relates to its three main constituents: its customers, employees and shareholders.
“We want to make sure we treat our customers well and we want to work for people who treat us well because these are 100-year relationships,” Helm says. “It’s important for our employees to know that we will still be around, stable and effective at what we do. Our shareholders are the family part of the tripod. Our family is always investing in the company. We’re not pulling a bunch of money out of the company because we need to be here in 100 years to provide good jobs and good income going forward.”
Mechanical Inc. is part of the Helm Group, based in Freeport, Ill. The family-owned Helm Group started in 1946 doing heavy highway construction. The family added mechanical services 22 years later to perform the piping work needed on its wastewater and water treatment plant projects. In 2003, Helm Group grew the business further when it acquired Borg Mechanical, which worked out of Mechanical Inc.’s main location in Hillside.
The Helm Group also performs heavy civil construction including highway bridges, marine work, asphalt paving and underground utilities. In addition, the company owns and operates aggregate quarries in northern Illinois.
With $120 million in revenue in 2012, not including joint venture revenue, Mechanical Inc. contributed about half of the Helm Group’s total revenue of $250 million. That puts Mechanical Inc. at No. 26 on our 2013 Pipe Trades Giants list. The company’s size and forward-looking philosophy have allowed Mechanical Inc. to invest in BIM, prefabrication and safety training to improve its productivity and increase its value to customers.
Mechanical Inc. is a union contractor that employs 400 full-time equivalents. This number increases to as many as 700 during the summer when the contractor takes on school-related projects, Helm says. In today’s construction market, education ranks second in the types of projects done by Mechanical Inc., right behind health-care facilities. Next is industrial process work that includes pharmaceutical, chemical, automotive and food-grade plants.
About 90% of Mechanical Inc.’s jobs take place in Illinois and Wisconsin. It will travel beyond those states for special customers. Mechanical Inc. recently finished work on a 1-million-sq.-ft. medical mart and convention center in Cleveland where it provided the project management, field management and labor. The company performed the work with a local joint venture partner.
Service work accounts for 25% of Mechanical Inc.’s revenue and is growing faster than the construction side, Helm says. The contractor is increasing its service business through its sales efforts and referrals from existing accounts. Most service customers are separate from construction customers.
“These are existing buildings that really don’t have much construction need, but they do require maintenance and spot repairs,” Helm says. “The three opportunities for growth in our service business are building integration, such as temperature controls; energy solutions; and facility management.”
The company’s emphasis on safety ties the service and new construction sides together. Mechanical Inc. employs three full-time people in risk management: Chris Loring, Shawn Meier and Anne Regez.
“We also put the responsibility for safety on our journeymen, foremen, and project managers so it’s not just one person or three people’s responsibility,” Helm says. “It’s everybody’s.”
Mechanical Inc. invests in safety training for a number of reasons, the primary being the well-being of its employees. Another is that safe employees lower the company’s insurance costs.
Mechanical Inc.’s exemplary safety record helps to generate business as well. Its experience modification rating is 0.52; an EMR of 1.0 is considered the construction industry average, according to the Safety Management Group.
“We track our dollars spent per man-hour on worker’s comp insurance costs and our cost has been going down significantly over the last five years,” Helm says. “We’ve made a big impact to our bottom line that way.
“Safety also makes us money and gets us work because customers look at EMR. Our EMR is one of the lowest we’ve seen around the industry among our peers.”
Drive the schedule
What differentiates Mechanical Inc. most from its competitors is its willingness to spend the money necessary to improve its productivity, Helm says. This helps to explain its investments in building information modeling software and its three prefab shops, but safety is part of the same strategy.
“It’s amazing how our most productive jobs also are our safest jobs, and vice versa,” he says. “When we have a really good year for safety, it’s almost always a great year for net profit. Conversely, if we have accidents, we don’t do as well financially. If you’re not planning for safety, you’re not planning for productivity.”
Productivity is important because it helps the contractor get more work on the sales side and improves the bottom line by lowering costs. While some customers believe the productivity of all mechanical contractors drawing from a shared union labor pool must be the same, Mechanical Inc. tries to educate them that the differences in productivity from contractor to contractor can be great.
“We really believe that, based on our experience,” Helm says. “We always say that once you give your field people the right information, material and tools to make them productive, the rest is easy. But it’s on management to give them those three things.”
When working on a jobsite with other trades, Mechanical Inc. prefers to take the lead in making all the contractors more productive by reducing the inefficiencies built into most projects. Mechanical Inc. uses lean construction principles to drive the schedule, Helm says.
“Our project managers talk with the project managers of other trades on a regular basis, especially in the Chicago area where all the trades know one another,” Helm says. “We all know what makes us more productive. We work together to make that happen.”
An advantage that Mechanical Inc. has over some of the other trades is its engineering department’s reliance on three-dimensional design software. The company’s engineering department employs five registered professional engineers including department head Stan Zuravel.
The mechanical contractor started using 3D CAD, a forerunner of BIM, in 1998 as a way to make its field labor more productive and safer through prefabrication. While Helm believes BIM benefits a project overall, he says it is particularly beneficial in prefabricating systems and modules before they’re installed on the jobsite. Mechanical Inc. operates two prefab shops for piping and one for sheet metal.
“Our goal when we get a job is to take as many hours out of the field as we can,” Helm says. “Once we do that, we can execute the hours in the shop with much closer supervision and much more certainty. That’s the biggest impact on productivity, just being in that controlled environment.
“We can work without interferences from other trades and minimize the disruption to existing facilities. One of the biggest factors is it’s safer to work in our own shop rather than on a jobsite with other trades.”
Mechanical Inc. is very bullish about the market opportunities it sees in the next two-plus years, Helm says. Longer term, Mechanical Inc. promotes a growth-oriented culture based on its customers and employees.
“We’ve been fortunate in that our customers have driven much of our growth. They want us to continue to be on their projects both on the construction side and the service side,” Helm says. “In our industry, whenever you see growth that isn’t centered on customers helping you grow, it’s always a problem. We’ve made sure our customers are the ones driving our growth.”
Most customers maintain their interest in green buildings. Mechanical Inc. works with them in two ways. One is through equipment upgrades and better monitoring of energy and water usage. The other is by helping them to take advantage of tax credits and other incentives to install more efficient systems.
“Unless it’s a developer who wants to flip the building within five years, every other type of owner is very interested in energy-efficient buildings,” Helm says. “The construction of a building is just 20% of its lifetime cost. If that’s the only cost you have, and then you’re going to sell the building, that’s all you’re going to care about. If you can shave money off the 80% of the back-end costs, for most owners that’s a big deal.”
The company is looking aggressively for people to run its projects and to add to its engineering department. As with many contractors, finding managers to run projects and labor to do the field work continues to challenge Mechanical Inc.
As a union contractor, the company is active on joint labor-management boards to recruit new people into the industry. Helm chairs the United Association Local 597 Mechanical Contractors Association Apprenticeship Committee.
“It’s a real problem from a trade standpoint because we’re retiring many more people than we’re taking in,” he says. “But recruiting overall is a problem and one of the big challenges we have as an industry is replacing the people we lost during the recession. I don’t think we’ve seen the worst of that right now.”
Half the managers at Mechanical Inc. come to their job with a field background through the union. The contractor recruits the other half from universities with either an engineering or a construction management program. These include Milwaukee School of Engineering, Illinois State University and Ferris State University in Michigan. Managers from both backgrounds bring their own strengths to the position, Helm says.
Technical skills are important, but Mechanical Inc. also looks at a person’s enthusiasm, problem-solving, communication skills and the ability to get results when hiring new managers. Training provided by the company seeks to develop those skills with a blend of specific technical topics and classes related to negotiations, written communications and other leadership-related subjects.
Being an active member of trade associations supports the company’s training efforts. Helm sits on the board of the Mechanical Contractors Association of Chicago and joined the board of the Mechanical Contractors Association of America in March during its national convention in San Antonio, Texas. Other local associations include the Plumbing and Mechanical Contracting Authority of Northern Illinois and the Piping Industry Council of the Rockford (Ill.) Area.
“We take advantage of the training the different groups offer,” he says. “Being on the board allows me to steer that training to some extent, and I also make sure I don’t miss any training opportunities for me or our employees.”
Mechanical Inc. realizes how important employees are to its growth-oriented culture and long-range plan, Helm says.
“Without good, dedicated employees we would not be where we are today,” he says. “And we wouldn’t be able to be around for the next 100 years. They’re the most important component to our longevity.”