LEADERSHIP SPECIAL...... What Leaders Gain by Listening Closely to Employees

What Leaders Gain by Listening Closely to Employees

Bill Sandbrook is the president and CEO of U.S. Concrete. He is a 1979 graduate of the U.S. Military Academy at West Point. After receiving his bachelor’s degree in management he spent 13 years in the U.S. Army, where he first developed his leadership skills. “The leaders who truly succeed are passionate about their responsibilities to the various constituencies that they interact with,” he says in this interview with Knowledge@Wharton.

An edited transcript of the conversation follows.

Knowledge@Wharton: Before we talk about leadership, could we speak about your early years, your role models growing up, and what you learned from them?

Sandbrook: Sure. I would characterize my father as my role model. He was in the cement industry, on the operations side. He wasn’t in finance or sales. He was an operational executive who started early in his career in college working in cement plants. As he was promoted, he was transferred to locations with increased responsibilities, cement plants around the country.

Growing up, watching him, growing up myself in the cement industry, and watching his work ethic, his commitment to performance, to the safety of his employees, to his responsibilities, for which he was receiving pay from his employer, and to the way he treated subordinates, peers, and superiors respectfully — it had a lasting impression on me.

I didn’t realize it at the time because when you’re a child or a teenager you don’t realize the impressions that these things are making on you. Later in life you start reflecting on the leader that you want to be, and you start a little bit of self-reflection and analysis in trying to figure out why you make the decisions you do, or why you look at life or your work in a certain way.

You then reflect and realize where you got it from. So I didn’t realize it at the time but now as I’m approaching the latter years of my career, and look back to what really shaped me early, before any formal education, I would say it was my father.

Knowledge@Wharton: That’s so wonderful to hear. Do any memories stand out in your mind of things you saw him do as a father and as a leader that still have a lasting impression on you?

Sandbrook: Mostly the way he insisted on taking care of his employees, both as his responsibilities as a manager in keeping them safe at work, and when certain people who worked for him fell on hard times, his generosity in personally helping them through a difficult financial or emotional period of their life.

Knowledge@Wharton: That’s wonderful; that’s great to hear. You went to school through the U.S. military academy at West Point. After that you spent 13 years in the U.S. Army. I was wondering what were some of the key lessons that you learned about leadership during your military career. Are there any examples that stand out from that phase of your life?

Sandbrook: Well it’s interesting. You learn discipline first of all, and then you learn the ability to make decisions without perfect information. So you synthesize as much information as is possible to obtain, and then you are forced to make a decision. In the military, you don’t have the luxury of time to make critical decisions. So you can’t order another study. You can’t bring in another consultant to help you think through something.

You have subordinates that you can take advice from, you have leaders that you can take advice from. But in the end in a very short amount of time you have to make life-changing, or life potential altering decisions both at the tactical and strategic level. And there were many times in many exercises that those types of critical thought processes had to be undertaken, and the more you do that the more comfortable you are in decision making.

I think the military (education), for young officers and mid-grade and senior officers, is you come out of the experience with that skillset deeply ingrained in how you approach decision making in your civilian career or your professional career where I am now. I think that is the biggest takeaway from my military career — a critical ability to analyze and make decisions. 

Knowledge@Wharton: Is there any decision that you made under difficult circumstances, or as you said with imperfect or incomplete information that stands out in your mind?

Sandbrook: Well, my military experience now is pretty far in the rearview mirror. But a direct application of those military lessons was during the 9/11 [terror attacks]. On the day after, when I was a young executive in a heavy materials company north of New York City, I decided very quickly to offer assistance at Ground Zero, and bring a significant amount of heavy equipment and human resources on the very next morning, less than 24 hours later. We sought approval from governmental authorities to deploy that equipment at Ground Zero and assist in the search and rescue and initial response. We did that without any authority from my bosses.

My chain of command was in Washington, D.C. I was in downstate New York, and I just assembled that equipment and personnel, got permission from the mayor to come down to Ground Zero, and then brought all of that equipment. I didn’t worry about how to pay for it, didn’t worry about who was going to pay for it, didn’t worry about liability, didn’t worry about union affiliations. I had a mission to do, and accomplished that mission with imperfect information, and frankly not proper approval authority. I was able to do that through that military experience.

Knowledge@Wharton: And eventually when your supervisors found out, what was their response?

Sandbrook: I would say it wasn’t really my supervisors. I mean, I was CEO of a midsized company that probably had revenues of about $400 million, so my superior would have been the North American CEO. I was the New York/New Jersey CEO. So I want to categorize it’s not like the next line operating manager. I was at a significant level, he was at a significant level, and they supported my decision. But they really didn’t have any way not to, I mean it was a national crisis and they were really unable to show any criticism at all, and they showed tremendous support in the end. Well, not just in the end, they showed tremendous support of my efforts.

We stayed down there three to four days and then redeployed back because our equipment was too big for the job. But my point in that is I wasn’t paralyzed by “let me go get the proper approval authority, let me go get proper legal representation, let me get proper waivers from all of my men that I’m bringing down into a potentially precarious situation.” I wasn’t paralyzed by all of the things that tend to paralyze business leaders these days.

Knowledge@Wharton: And how would you say that experience shaped you as a leader?

Sandbrook: I think that leadership was already there. I don’t think it changed me as a leader; it changed me as a person on seeing something as devastating firsthand. But I don’t know if it changed me as a leader; I think it helped younger managers in my company see what a real leader can do rather than how it changed me. I think I was already at that stage at that point.

Knowledge@Wharton: What led you to join U.S. Concrete as CEO? Tell us about the situation in the company and industry at the time when you decided to join.

Sandbrook: Just prior to joining U.S. Concrete I was a very senior executive with a multinational heavy-building products company called CRH headquartered in Dublin, Ireland. I had a very large profit and loss responsibility, over 20,000 employees and a $5 billion revenue line at the peak of the cycle just a few years before. That had declined somewhat with the level of construction and I faced the reality that the multinational material companies that are domiciled in countries outside the U.S. have their CEOs primarily and overwhelmingly from the domiciled country. And there aren’t that many publicly traded heavy material companies in the world, let alone on the New York Stock Exchange or on the NASDAQ, and only a handful of domestic-based companies that are headquartered in the U.S.

And I was offered the opportunity to come to U.S. Concrete as the CEO. It had emerged from bankruptcy in 2010, a year before I was offered the position. A new board was seated, and the new board went to search for a CEO who could extract the maximum amount of value for the existing shareholders who were now the debt holders. The board wasn’t sure at the time if they were going to liquidate or grow the company, and I had no intention of ever liquidating the company. I thought that the assets were good and the underlying economy had bottomed out.

I had been in the industry over 20 years and I had confidence in my abilities that I could resurrect this company with the proper strategy, the proper leadership and with an economy that could be turning around. So I took a significant pay cut, and a lot of equity at risk. I did not want to end my career saying I had the opportunity to be a public company CEO and I turned it down because I was afraid. I didn’t want to get to that point and never know that answer.

I would have rather taken this job and failed either because of my own inabilities or because of the external economic environment. I would have rather failed at it than having never tried it and never known if I could do it. So the challenge was based on some fundamental facts that I thought would play in my favor. The combination of those made me [bring] change to this company, and then start resurrecting it from a very distressed situation in 2011.

Knowledge@Wharton: How did you go about analyzing the situation and developing your turnaround strategy for U.S. Concrete?

Sandbrook: A very short answer is that I spent most of my first 90 days out in operations and in the field listening — mostly to my employees, but also to customers And hearing, and watching, and listening, and then evaluating after much listening what the steps were that needed to be taken. At the same time, I was making minor improvements in shifting decision making from the corporate level into a more decentralized model.

Our business is a localized model. Ready-mix concrete does not travel far; it only travels a couple of miles, 50 miles in West Texas, 10 miles in Manhattan. It’s perishable; it lasts two hours. So it is a local business model, and you have to understand the local dynamics at play, the local competitive environment, the local raw materials situation, the local permitting issues, local traffic. And you can’t undertake fixing a company from preconceived notions of what needs to be fixed if you haven’t walked in your employee’s shoes, or in your customer’s shoes.

So I spent most of my first three months listening and formulating a plan as I went. I’ve said before that you really are kidding yourself, and you are kidding the company, and you are kidding your board of directors if you think you can come in, give them a plan to turn around a company that you know nothing about. You have to get out there and see it, feel it, and touch it before you can come in with a plan that might have worked for you in a different environment, but might not work there. So you might be solving the wrong problems with the wrong tools unless you really are a good listener.

Knowledge@Wharton: And as you listened to your employees, what could you tell about their morale? How did you go about rebuilding morale after the bankruptcy and getting their buy in to the turnaround strategy?

Sandbrook: Well the morale was low as you have inferred. [The start] was that I was in the field listening to them; they hadn’t seen senior-level management from headquarters in many months or years — they had not been listened to. The company was so centralized that they had to go for approval at the corporate level for minor operational decisions. Part of it was driven because of a cash crunch. But it was so minutely controlled that individuals had lost their initiative, and they had ultimately lost responsibility for the decisions they were making because they weren’t allowed to make decisions.

And once you have given away the responsibility of the decision making to headquarters, you have a team that is not invested in the ultimate outcome anymore because they were never part of the decision to begin with. So the very first thing was to reengage them that they needed to be part of the solution of turning the company around.

People at their core want to be part of something successful. People don’t want to get up every day and be on a losing team. I don’t want to go into losing and winning because it’s overly simplistic. But the essence is you want to get up every day and be energized about going to something you believe in. So you have to make them believe in it.

The very first way to make them believe in it is to make them feel they’re part of it. The very first way to make them feel part of it is to make them feel that their experience gained over maybe 20, 30, 40 years, that their career was worth something, that their opinions were worth something after working at it for so long. And you do that at the lowest levels, you do that with an equipment operator, you do it with a plant operator, you do it with a plant foreman, you do it with a plant manager, and over time they buy into that.

That philosophy has worked for me in my last company, that people want to be engaged and want to be part of something that they can feel proud of. And I needed to make them feel proud of it again. And then they had to have confidence in me. So while I’m listening to them, I ask the right questions. And they look at my background and they start gaining confidence in me. The hard part is that you can’t be everywhere at once. So you need to spend all of your time and all of your waking hours out there. It’s very time consuming. But it has to be done.

Knowledge@Wharton: What did you do to win their trust?

Sandbrook: I trusted them. I almost invariably trusted them without them having to earn it at first. I trusted them and I trusted in their experience. For instance, they knew that certain equipment needed to be fixed but they wouldn’t even ask to get it fixed because they knew headquarters would turn them down. But they knew that that their plant was running inefficiently and their costs were twice as high as they needed to be.

So I told them they did not have to ask me for approval to spend money. And I said you will know when you reach a certain level, you will feel it in your gut that you need to ask me for permission. Until you feel that level, I trust you. So not only did I earn their trust, I proved that I trusted them by giving them that authority right off the bat. I didn’t have to have me or have them earn my trust. I needed to do it the other way, so I gave them my trust immediately which they reciprocated.

And then they could see, I started laying out in a little bit more detail what our plans were — what we were going to do differently, what the strategy was going to be. We were going to take the offensive; we weren’t going to be on the defense anymore. We weren’t selling any more plants. We were going to exit some businesses, redeploy that capital and reinvest in the business for the first time. I gave them the ability to earn bonuses again, I reinstated the 401K matching contribution. There were tangible things I gave them in small doses to see that we were making progress, and that I was willing to share the value of that progress with them.

Knowledge@Wharton: So when you took over I think the stock price for U.S. Concrete was $2?

Sandbrook: Well, when I took over, the day I started, it was $6. And then it dropped over the next four months to $2, because you can’t turn a battleship in a day or two. We work off a backlog. So our contracts were kind of fixed, and our costs were fixed in the short term. So it went from $6 to $2; in the beginning of January of 2012 it was about $2. I think we had a good day today in the market and we closed at $73.35.

Knowledge@Wharton: So it’s quite a huge turnaround —  what are the key factors that led to this happening?

Sandbrook: Well getting employee to buy in, using their collective wisdom gained over all of their years of experience, and harvesting that and motivating that through good leadership not only from myself, but from myself to my next level of managers, because I can’t be everywhere all of the time. So I needed a good cadre of like-minded individuals who shared my vision for leadership and a performance culture, and a work environment that was supportive of each other.

Our product is looked at by the investment community as a commoditized low barrier to entry, low margin product set. I had to develop a strategy to refute that. I instituted a strategy to consolidate ready-mix markets in urban areas of the country — with very difficult operating conditions, unionized environments, heavy traffic congestion, heavy environmental regulations — where I could get a premium for our product and build defensible positions. I then went about executing that strategy relentlessly over the next five years piece by piece, and have brought the entire team with me. And [I have] a very good group of investors in our shareholder base with the top mutual funds and money managers in the country investing in our overall strategy and execution of that strategy.

Knowledge@Wharton: As you look to the future, where do you see the biggest opportunities and the biggest risks for U.S. Concrete?

Sandbrook: Well, the biggest opportunities are replicating our model in other urban areas of the country where we can get competitive advantages through the areas that I mentioned. That’s our biggest opportunity to expand outside of our four main regions now.

We intend to do that in a measured way. The biggest risks: It’s a cyclical business so calling the cycle and making sure that our leverage is acceptable at the transition to a little slower rate of growth. In a cyclical business, we have to be mindful of that and try to predict that a year or 18 months ahead. I don’t see that on the horizon right now, but there will be a slowdown from the current growth rates that we are experiencing. So the risk is trying to find that early before it turns.

Knowledge@Wharton: If you look back on your leadership journey, which would you say has been your greatest leadership challenge? What did you learn from overcoming it?

Sandbrook: Well, that one goes all the way back to when I was a young lieutenant on my first assignment in Germany in 1980. The Army was broke at that time. Nobody wanted to serve, it wasn’t a prestigious job, the caliber and quality of the soldiers coming out of Vietnam were much less than they are now. There was a big drug problem; there was a big alcohol problem.

As a 22-year- old lieutenant in Germany, having a lot of soldiers that I had to figure out a way to improve — to operate as a cohesive unit, with individuals that were tough individuals. It was not the professional Army that we have now. To be able to wrestle with that and develop strategies as a very young officer, to bring that very diverse group of soldiers into a well-disciplined, cohesive, drug free fighting unit … You’re in a real life experience on the East-West German border in a cavalry platoon with tanks and heavy equipment and dangerous operating conditions. To be able to look back and say I turned that unit around, that was a very unique challenge at a very early age.

And I did that much the same way: looked for the good in people, led by example, coached, was tough when I needed to be, was soft when I needed to be. That was a very good grounding in basic leadership 101.

Knowledge@Wharton: So over the years I am sure you have met lots of leaders in different contexts. I wonder what you think separates leaders who succeed from those who don’t?

Sandbrook: There are going to be various definitions of success. But the ones who truly succeed are passionate about their responsibilities to the various constituencies that they interact with. By that I mean to their employees, their shareholders, the external community being their customers and stakeholders. (In our business, drivers are stakeholders.) I have 1,700 trucks on the road every day. Those 1,700 trucks need to have responsible and safe drivers on the road. But the best leaders take those responsibilities extremely seriously and serve those constituencies with a general level of enthusiasm to satisfy each individual stakeholder’s needs.

And other characteristics would be they need to be selfless; they need to put the stakeholder’s interest above their own. They have to be empathetic. They should have an ego that is only driven through a performance culture, that has nothing to do with pats on the back for themselves. They can’t have a superiority complex. They have to be decisive. They have to be a leader that people want to follow. True leaders and the ones that are the most successful need to be people that they would want to work for if they were working for somebody. And if they can look in the mirror at the end of their career and say that they have satisfied those criteria, those are successful leaders.

Knowledge@Wharton: That’s a wonderful answer. And one last question, how do you define success?

Sandbrook: I define success as that upon my retirement I will be able to look in the mirror and say, I gave everything I had. And I hope I made people’s lives better. I hope because my companies were successful, that people had a better retirement because they had bigger bonuses because they earned it. Because their stock appreciated and they can send their kids to college debt free instead of taking on a ton of student loans. That the people really enjoyed coming to work and working for me. If I can have those, and it has nothing to do about money, if I can say that and say that in all honesty by looking in the mirror, I’ve had a great career.

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