By Brent Banda
Rob McCammon was a 26-year-old structural engineer working at Kilborn Engineering, a consulting firm located in Saskatoon. He was sitting across from Vern Demmans, the owner of Industrial Welding. Demmans was a client of Kilborn Engineering and had just asked McCammon if he’d work for him, learn the business, and eventually buy him out.
“Sorry,” McCammon replied. “My wife and I are going backpacking.”
Fast forward nearly a year and the young couple were somewhere in Indonesia. McCammon caught himself thinking about the offer and considering that maybe there was something to this idea of owning a business. Once back in Saskatoon, he was rehired at Kilborn. And Demmans made the offer again.
McCammon explained the situation to his supervisors at Kilborn. “They told me that this may be my niche in life so go try it out and if it doesn’t work out, then come back,” McCammon took their advice and accepted the job with Industrial Welding. He still speaks highly of the people at Kilborn whose support changed the course of his life. “They weren’t selfish at all. I have so much respect for these people.”
With a small company, when you get the right people you have to do something to keep them.
Building the team
Industrial Welding (later renamed IWL Steel Fabricators) manufactures custom steel products. Walk onto the shop floor and you might see heavy steel equipment for the mining industry. Next to this could be simpler products such as stairs and handrails. You might also see structural steel frames being fabricated for an industrial facility or a new hospital.
Back in 1984, when McCammon first joined IWL, the capacity of the business was smaller. There was a need to build out the team that would take over from Demmans.
Doug Eyre, a skilled welder fitter, was hired about the same time as McCammon. About four years later the shop foreman left and McCammon suggested Eyre for the role. “No way, he’s too young,” was Demmans’ reply. “He’s only 24.” But McCammon had seen something special in Eyre’s ability to lead people.
Demmans promoted Eyre. “We put him in there,” explains McCammon, “and all these guys in their 30s, 40s, and 50s were working for him. I don’t know if it’s charisma, or respect for him as a skilled tradesman, or if there is some magic, but Doug has real leadership skills. People want to follow him.”
Erling Anderson had recently been hired as chief draftsman. Demmans took the year off in 1989 and left McCammon, Eyre, and Anderson to run the business. The company had a profitable year. The three managers bought Demmans out in 1990 in an asset sale. The previous owner received a partial lump-sum payment and the remaining payout was from future profits with interest on the loan at the bank’s prime rate. Demmans was paid out in four years. The sale was a win for both parties.
The new ownership group were eager to grow the business, but there was one serious gap to address. They needed someone to run administration. The office manager proved to be the most challenging position to fill in the company. In quick succession, four people quit or were fired.
McCammon got a call from a friend in the industry who had just hired someone from Calgary. That new employee’s wife had worked in a steel shop for 12 years and was looking for work. A job interview was scheduled with the candidate, Shelley Cropper.
McCammon and Eyre planned how they would handle the interview. With four unsuccessful hires fresh in their minds, they decided that if Cropper seemed like the right fit, they would think about it for a day before making an offer. “Near the end of the interview I heard myself saying, ‘Can you start tomorrow?’ God, she knew everything,” McCammon said. “We got lucky.”
How valuable was Cropper? “When Shelley came on she was so good we sold her 5% of the company after a few years. Then she bought another 5%.”
We went from handmade drawings to 3D modelling. Then we adopted robotic and automated shop equipment. It wasn’t easy. The challenge with change is obtaining buy-in from all employees and even customers.
“In the era when we owned IWL, it was tough to get good people. The thing is with a small company, when you get the right people you have to do something to keep them.” McCammon pauses to consider the point further. “When I look back, I think how I could have owned 100% of a business all my life. But I’m kind of glad that I was able to provide others with the opportunity to become wealthy. Plus, my wife and I could take a holiday and know the place was well looked after.”
The management team was coming together, but in 1996 it was clear something had to change. McCammon explains, “Erling was nine years older than me and less open to technological change and organizational change. To that point everything was still being designed by hand and he was hesitant to take further training and learn the software that was being adopted in the industry. So, we just kind of agreed to part ways.”
With the benefit of hindsight, McCammon reflects on what transpired. “I made a pretty big mistake. Erling was a heck of a draftsman, one of the best I’ve ever seen. A big gap in the company was estimating and project management. I moved him to estimating and project management but it wasn’t a proper fit for his capabilities. I put him in a position he never should have gone into. And when we did separate, he said, ‘I never wanted this job. You made me take it.’ He was right. I wasn’t smart enough to see that.”
The three owners of IWL, McCammon, Eyre, and Cropper, were determined to grow the business. They soon realized the need to adapt.
The market in Saskatchewan for IWL’s services was small enough that the company had to diversify. One solution was to export out of Canada. When the US exchange rate was favourable in 2003 and ’04, IWL was awarded work for gas turbine buildings all over the southern states. IWL’s Saskatoon competitors were slow but McCammon was running three shifts. It didn’t last. The Canadian dollar strengthened, and by 2008 and ’09 demand in the US dropped 60% and American fabricators slashed their prices. The market dried up.
In addition to managing the hard realities of securing a stable and profitable flow of work, IWL had to stay abreast of industry trends. McCammon describes these drastic changes with a level of excitement. “I was able to experience major technological leaps in the steel fabrication industry throughout my career. We went from handmade drawings to 3D modelling. Then we adopted robotic and automated shop equipment. It wasn’t easy. The challenge with change is obtaining buy-in from all employees and even customers.”
A fundamental ingredient to IWL’s success was its workforce’s ability to develop new skills. McCammon is convinced robust systems made this possible. “We implemented a merit-based human resource system. Everyone knew where they had progressed from, where they were at, and where they were going. As people achieved different milestones, we rewarded them with an appropriate raise. The same idea if they fell backwards. They had to pick it up or they would drop down to a lower wage.”
Since labour is the largest cost in our type of work, we had to lay off employees and reduce hours by work sharing and freezing wages. These options are very hard to stomach because you are affecting the life of good employees and their families.
In the wake of the COVID-19 pandemic, many companies chose to reduce operational capacity in response to decreased market demand. McCammon faced his share of similar decisions over the 28 years he was with IWL. If the market started to go down and the business was set up for a higher volume than what the market could provide, McCammon was prepared to reduce expenses. This scalability has meant a fluctuating workforce over time. At its peak, IWL had 75 employees in the shop and is currently operating with 40.
“Since labour is the largest cost in our type of work, we had to lay off employees and reduce hours by work sharing and freezing wages. These options are very hard to stomach because you are affecting the life of good employees and their families.”
McCammon did everything possible during these difficult times to avoid scaling back. That meant being desperate for work. He says he made his worst business decisions when bidding very low during economic downturns and bidding to less-than-reputable owners and contractors. In both scenarios, there were costly problems. IWL had to use liens and the court system numerous times to collect payment.
“I can recall one project that I bid when I was feeling the pressure to get an award. This project had sketchy owners, poor plans and specifications, and a less-than-professional project manager. When putting our bid together my brain was screaming in the background, ‘Don’t do this!’” McCammon ignored his gut instinct. “We received an award and the whole project blew up in my face. There were wrong dimensions so we needed to perform re-work, there was misaligned concrete so the steel wouldn’t fit, and there were field back charges. Also, the owners went broke so we had to get paid by the bonding company. That project was a building on a main road in Saskatoon. I am reminded of my stupidity every time I drive by.”
Learning from mistakes is important, and McCammon has many stories about how unfortunate situations shaped his business acumen. “One time we had a mine’s employees ask us how we’d do a job. We were a little naive at the beginning and so we showed them. They followed our instructions and did the work themselves. A few years later, one of the mines had to get a large piece of equipment out of a mill. We went out there and checked it and determined we could remove it in one piece. They asked how and we said, ‘Sorry, it’s a trade secret.’”
Business decisions have far-reaching consequences, but decisions that cross into personal life take on a different meaning. The entrepreneur chooses to bet personal stability on the health of the company. “I remember the first time I had to sign a personal guarantee when we bought the business. I was signing away everything I owned. My hand shook. But by the third personal guarantee I was like, ‘Whatever. If a semi hits you on the highway and kills you, what’s the difference if two more run over you as well?’”
Selling the business
“My mentors often commented on how hard it is to sell your business,” McCammon remembers as he considers how he sold IWL. “They would say that you spend the first 10 years just trying to keep your head above water, and then the next 20 years building the business. Nobody ever thinks about how to sell the business.”
McCammon explains how they struggled despite their best efforts. “Doug and I thought that we would try to get ahead of this and bring in junior shareholders long before we wanted to exit. In 2003, we sold a small percentage of shares to three key individuals who we thought would make a great team. In hindsight, we pushed them into a partnership when they had not gelled as a team. Even after quite a few years, they did not make an offer to purchase the remaining shares. They were content with a minor ownership position.”
In 2012, McCammon was introduced to Clearwater River Dene Nation’s CEO, Ty Rutzki. Both realized IWL would fit well with CRDN’s group of companies and Rutzki and McCammon had similar visions for growth. IWL was a desirable purchase for CRDN because the business had great systems, a long-term customer base, good facilities, and good equipment. It had invested in technology and had a strong management team in place. IWL shareholders agreed to proceed, and after performing their due diligence, CRDN purchased 100% of the company in July 2012.
McCammon stayed on as IWL’s general manager until the end of 2015. He feels the business continues to run with an entrepreneurial spirit. “With CRDN, they do the overall analysis and strategic planning but are not involved in daily operations. Our previous shareholders kept working and are still there today. They treat day-to-day operations like they are still owners. You can’t turn off that mindset.”
Retirement has turned out to be a wonderful phase of McCammon’s life. He keeps his business mind sharp by serving on CRDN’s board, working at the strategic level with companies that the band owns. He is the Board Chair of Farm in the Dell, a Saskatchewan community-based organization that builds homes in a farm like setting for individuals with intellectual disabilities. But his eyes really light up when he talks about recent trips he and his wife have made to Haiti.
“We have travelled there four times. My wife, Audrey, is a retired nurse so she helps with a mobile medical clinic. We’ve also helped build an orphanage and homes for poor Haitians.” McCammon sits in his home office, pointing enthusiastically to photos on his wall of Haitians they have met.
McCammon’s passion for helping people in Haiti seems to embrace two characteristics that emerged in his business career: a strong appreciation for human connections and the willingness to do the right thing, even if it is difficult.
“It’s remarkable,” McCammon reflects on his Haitian friends. “We’re so fortunate to live where we do. I never cry at home. But when my wife and I go to Haiti I cry at least three times. It’s good for you.”
First published in the June 2020 edition of The Business Advisor.