President and CEO of Hargrove Engineers + Constructors, a Mobile, Alabama-based company with 1,200-teammates in 11 states.
By Liisa Andreassen
For Hargrove, success starts with company culture. In fact, he says, culture to a company is much like “roux is to gumbo.”
A conversation with Ralph Hargrove.
The Zweig Letter: What’s your philosophy on fee/billing and accounts receivable? How do you collect fees from a difficult client?
RH: We like to work with the client to determine the type of fee structure that makes sense for each specific project, understanding that there’s no “one-size fits all.” We have time and material billing structures, as well as fixed fee. Over the last several years, we’ve seen a rise in the number of clients seeking EPC project execution on a lump sum basis.
We strive to build good relationships with our clients, including their accounting departments. We consistently deliver a quality product and find good communication is the key to avoiding misunderstandings which create delays in payment. If issues do arise, we work closely with all levels of our client’s organization to quickly resolve the situation in a proactive manner. This allows our return on receivables to be less than half of the industry average.
TZL: What’s the recipe for creating an effective board?
RH: Hargrove is privately held with no outside board members. The key to effective leadership is diversification. We must use different people with different perspectives from a wide range of our offices who, together, understand the strategic goals of our company as a whole. They must also have business savvy, not only in our industry, but of the overall global economy. They must be men and women of high character, integrity, and with strong leadership capabilities.
TZL: Is there a secret to effective ownership transition?
RH: Consistent leadership and empowerment is the secret. We empower teammates at all levels in the organization and establish clear, consistent leadership that provides vision for the direction the company is heading. As our teammates buy into that vision, it focuses everyone on the same goals and creates an ownership culture at all levels of the organization. That culture becomes a part of every teammate making the ownership transitions easier because everyone has the same vision.
The company was founded in 1995 as Hargrove and Associates, Inc. and we have opened ownership to more than 80 associates. When bringing on new associates, it’s important to identify individuals who truly embrace our company culture and share the entrepreneurial spirit that has driven our company to be what it is today and what it will continue to be in the future.
TZL: How do you go about winning work?
RH: I believe that winning is a byproduct. As I’ve mentioned, Hargrove’s first focus is the relationship with our clients and desire to understand their specific needs on each project. Our highest goal is to be their partner and make them successful. We’ve found that when you focus on the relationship, and of course, excellent project execution, the rest naturally follows.
TZL: What’s the greatest problem to overcome in the proposal process?
RH: Don’t overthink it! Keep it simple and focus on the client, the relationship, and listen to their needs.
TZL: Once you’ve won a contract, what are the “marching orders” for your PMs?
RH: I tell them, laughingly, “Don’t screw it up.” We have a robust project management system and have rigorous procedures in place to ensure the highest level of quality in our project execution and delivery. In all seriousness, I tell them, “Let’s show them what ‘good’ looks like!”
TZL: How does marketing contribute to your success rate? Are you content with your marketing efforts, or do you think you should increase/decrease marketing?
RH: Over the last 10 years, Hargrove has seen substantial growth. Our leadership is proactive in building relationships on a seller-doer model and, though we run lean, we emphasize the importance of meeting the client’s needs on every level. Our marketing and business development teams are top-notch and operate on the basis that relationships are our priority. Hargrove’s marketing strategies reflect this, and our reputation wins work.
TZL: What has your firm done recently to upgrade its IT system?
RH: We have migrated to Office 365 to take advantage of cloud services such as hosted SharePoint, OneDrive, and hosted email. That allows us to share data across multiple locations and collaborate more effectively. We are also increasing bandwidth at all office locations to benefit from cost savings in higher bandwidth rates, and we are upgrading network technology to use SD WAN, which will allow us to better manage the flow of information between offices. We continue to deploy the latest versions of engineering applications that give us the latest features making design efforts more efficient.
TZL: What’s the best way to recruit and retain top talent in a tight labor market?
RH: I often say that winners like to play alongside winners. We recruit and retain top talent because of the strong relationships built and maintained within our team. It all starts with relationships, and if we fail to build our relationships internally, we are unable to provide the quality of the relationship we desire with our clients. This allows us to recruit using the “one team” belief and culture. We also know, in order to grow, talent must always be challenged.
TZL: What’s the key benefit you give to your employees? Flex schedule, incentive compensation, 401(k), etc.?
RH: Our teammates highly value the chance to be a part of Hargrove’s ownership. They appreciate the opportunity to impact the shareholder value as an ESOP (here we use TSOP the T is for “teammate”) participant and owner.
TZL: How do you raise capital?
RH: We primarily raise capital from traditional banking relationships. We also provide an opportunity for investment from our teammates through our associate ownership structure.
TZL: What’s your preferred strategy for growth, M&A or organic? Give us a synopsis of how your firm effected growth in the recent past.
RH: Our preferred strategy for growth is whatever method will aid in the long-term success and growth of the company while preserving the Hargrove culture. Our growth method has been organic; however, that does not mean we’re not open to pursuing acquisitions if it’s the “right fit” for both Hargrove and other parties involved.
Hargrove has seen significant growth in recent years. We’re constantly assessing client needs and how we can position ourselves to better serve them. Our most recent office additions have been Houston in 2014 and Beaumont in 2016. We also grow by expanding services that benefit our clients like controls and automation, commissioning and startup, EPC, and technical services.
TZL: What’s the greatest challenge presented by growth?
RH: As we continue to grow, we work hard to instill the Hargrove culture in our new teammates and maintain our high standards of quality and performance. It’s important to consistently tell the “Hargrove story” and constantly keep the pulse on these efforts to ensure the continued integrity of our culture and the expectation of outstanding quality and performance. Our culture is our holy grail – our culture is to us what roux is to gumbo.
TZL: What’s your prediction for 2017 and for the next five years?
RH: 2017 has started off strong and with the current opportunities we’re seeing, we believe this will continue throughout the year and flow well into 2018. Long-term predictions are less certain, but we anticipate continued growth over the next five years and will make sure we are well positioned to take advantage of market expansions. However, knowing the volatility of the market, we continue to assess our clients’ needs to manage the ebb and flow of changing conditions. Our team handles ambiguity well, and we’re always quick on our feet.