By Ray Penner
Sometimes we hear a young entrepreneur refer to his or her company as “their baby.” The analogy can be more fitting than we realize. At first, parent and child must be inseparable to ensure the child’s survival. As time goes by, the child develops their own personality, influenced by the parent’s values and leadership. More time passes, until the day when the child has come of age, and parent and offspring go their separate ways.
For JNE Welding and its founder, Jim Nowakowski, that time has come. On March 10, Jim announced that he had chosen his successor, Adam Logue, to take over as CEO effective May 1, 2019. Although Jim will continue to serve as a mentor, he will concentrate more on personal interests, along with his wife, Brenda, who is also retiring from the company. As for JNE, the new CEO has plans that dovetail with the agenda of JNE’s new First Nations ownership.
THE COMPANY’S CAPACITY IS LIMITED TO YOUR OWN CAPACITY. IF YOU WERE TO VANISH, SO WOULD THE COMPANY. YOU THEREFORE HAVE TO CHANGE YOUR ROLE IF YOU WANT TO PROGRESS TO THE NEXT STAGE OF CORPORATE GROWTH.
A substantial change in any company can create concerns among employees. In December 2015, 60% of JNE’s shares were purchased by English River First Nation and Peter Ballantyne Cree Nation. Now, with Jim’s succession announcement – along with the announcement that Brenda Nowakowski, who has been vice-president of finance in excess of 19 years, overseeing administration, payroll, human resources, safety, and procurement, will be leaving in June – you have the makings of a case study in change leadership. Although it’s admittedly early in the game, it looks as though JNE has avoided the pitfalls of other companies that have suffered, and in some cases failed, in such a scenario.
WHAT DID JIM AND JNE DO RIGHT?
The answer to that question begins on the shop floor in 1980, when Jim worked alongside his first employees as a journeyman welder. He led by example. It was easy for staff to know what was happening with the fledgling company and to be inspired to drive its growth. JNE’s reputation, and the work orders, grew exponentially, forcing Jim to work long hours to keep up with demand. His trusted financial advisor, seeing the stress, gave Jim a book, The E-Myth Revisited. The author’s premise is that because you’re an entrepreneur (the “E” in the book’s title), the growth of your business depends on your capacity to do the work. Because you’re hands-on, eventually you become an impediment to growth. The company’s capacity is limited to your own capacity. If you were to vanish, so would the company. You therefore have to change your role if you want to progress to the next stage of corporate growth. It is the popular axiom of working on the business instead of in the business.
Moving from the shop floor into the office of president and CEO was not easy for Jim. He loved his vocation far more than his new responsibilities, and he knew he had a lot to learn. One of his most important lessons came from a highly acrimonious feud between two of his administrative people in 2001. “It was to the point,” recalls Jim, “where they kept their doors shut in their adjoining offices. It was demoralizing for everyone at JNE.”
Jim raised his concern with a trusted consultant, who asked, “Have you actually seen them verbally abusing each other?” Jim answered that indeed he had. “What did you do about it?” asked the consultant. Jim admitted he didn’t do anything, believing that as adults they should be able to work it out on their own. “Then your lack of action is not only allowing that behaviour, it is endorsing it.”
YOU WANT TO REWARD THE PEOPLE WHO ARE STEERING THE SHIP. WITH AN OWNERSHIP POSITION, IT’S NOT AS EASY FOR THEM TO LEAVE IF THE GOING GETS TOUGH. OTHERWISE, YOU MIGHT END UP WITH BOARD MEMBERS GETTING INVOLVED IN OPERATIONS, AND THAT’S A RECIPE FOR DISASTER.
“It’s like a light went on in my head,” says Jim. “I knew right then and there that I had to take action if I wanted the right kind of culture in our company.” Soon after, one of the combative managers left just as Jim was about to fire him, and the other left shortly thereafter. Jim then selected 25 of his 75 employees and asked them to attend a special Saturday meeting. He told them they were going to collectively develop – with the help of an independent facilitator – a JNE Code of Conduct, rooted in JNE’s corporate values and Jim’s personal values. “We talked about what was important to us individually and as a company, how we should treat each other, and how we’re going to grow.” The Code was written, and it did not take long in the days that followed for employees to realize that Jim was serious, that their agreed values and Code would be strictly followed by all who wanted to stay with JNE. Today, it is still one of the first things Jim talks about when asked why JNE was named one of Canada’s Best Managed Companies along with numerous other honours, and is a leading metal fabrication company in Western Canada.
As soon as employees began learning in 2015 about the potential change in ownership, they were assured that the values and culture would not be changing. This assurance was repeated at the announcement of the change in leadership.
TRUST TAKES TIME
The second factor leading JNE’s change also had its roots in the early days of the company. Jim might have traded his welding station for a desk, but he did not stop talking to his employees. He instituted weekly “shop talks,” which in the past decade became monthly, to tell them what was going on. He took every opportunity to walk around the plant, chatting with workers individually, encouraging them to say what was on their mind. By consistently adhering to his routine of shop talks and casual walkabouts, Jim created genuine trust. Long before the formal announcement, he started talking about stepping down as CEO, about the First Nations acquisition, and about his commitment to ensuring that his promises to employees would be kept. So on the day Jim gathered everyone together to announce the change of ownership to JNE’s workers, his words of assurance and optimism rang true. It was the same when Jim announced the new CEO. It was in sharp contrast to companies that, after months or years of unaddressed rumours and suspicions, suddenly call an employee meeting to provide assurances that by then sound hollow.
BY CONSISTENTLY ADHERING TO HIS ROUTINE OF SHOP TALKS AND CASUAL WALKABOUTS, JIM CREATED GENUINE TRUST.
JNE employees needed to know that it was still their company – the company they knew – regardless of who owned it. “I was determined that whether I was in charge or not, our corporate culture based on our values and code would not change,” says Jim. “That is why I decided early on that we would be promoting from within.” After months of deliberation guided by a consulting firm, Jim chose Adam Logue, the current vicepresident of operations, as the new CEO. “I was very pleased with the positive response I’ve received, especially from within JNE, about becoming CEO,” says Adam.
A NEW DIRECTION
Adam has been with JNE for 21 years. Like Jim, he is a welder by trade and started out on the shop floor. “You might say I’ve grown up in the business,” says Adam. “I’ve always considered Jim as a mentor. He has always led with integrity.” Adam knows the importance of continuing Jim’s legacy and preserving the culture, but he also understands how important it is for him to lead the company in its new stage of development. A key consideration is the engagement of First Nations people in the business. “Right now, we cannot hire people straight out of trade school,” says Adam. “We’ve become too specialized. I see us expanding to offer more services that can be performed by entry-level workers, so we can provide in-house training right from entry level through to projects requiring a high level of skill.”
JNE’s new ownership is not that surprising for those who know Jim Nowakowski and his broader commitment to his community and province. Workplace diversification is important at JNE, as evidenced by the range of nationalities and cultures on the shop floor, along with an increasing number of female “journeypersons.” Adam shares his mentor’s commitment to reaching the objectives of JNE’s First Nations owners, whose first priority is to ensure that the company continues in its current direction, while developing more opportunities for First Nations participation, skill development, and economic growth.
The governance model for JNE has been carefully designed to create a healthy cohesion for all stakeholders. It allows the principal operators, including Logue, to have some shares in the company, while the majority shareholders remain at arm’s length from operations. To Jim, that arrangement was essential. “You want to reward the people who are steering the ship. With an ownership position, it’s not as easy for them to leave if the going gets tough. Otherwise, you might end up with board members getting involved in operations, and that’s a recipe for disaster.”
The board, managers, and employees are all glad that Jim won’t be riding entirely into the sunset. “I’ll still be at the Board table as a minority owner. I’ll still be dropping by from time to time to offer advice when I’m asked for it and to chat with employees to see how things are going,” he says. After all, as with coming of age in any family, JNE and Jim may not see each other on a daily basis after December 2019, but they will always be connected.
First published in the June 2019 edition of The Business Advisor.