Exchange Income Corp. president and CEO Mike Pyle was uneasy with the news that he had been chosen a finalist for Ernst & Young's Entrepreneur of The Year awards, handed out this October in Calgary.
"I was really uncomfortable because it implied that the success of our company is somehow inherently based on something I've done, when it's really something that should celebrate what our entire team has accomplished."
Started in 2002, EIC (TSX: EIF) was created to invest in profitable, well-established niche ventures with a strong cash flow and capacity for growth and to distribute dividends to its shareholders. The company's estimated $300-million portfolio includes four subsidiaries in specialty manufacturing as well as four locally recognized names in aviation: Perimeter Aviation, Calm Air, Keewatin Air, and its recently announced pending acquisition, Bearskin Airlines.
In total, 1,500 people are employed in EIC-owned subsidiaries and a dozen accounting, acquisition and administrative professionals work in its Winnipeg head office. "Our job is to provide capital and oversight while making sure that our subsidiaries follow their business models," Pyle says.
While EIC's phenomenal growth has garnered well-deserved accolades such as the Ernst & Young nomination, Pyle emphasizes that his team understands that "the quarterback often gets more praise and takes more of the criticism" than they deserve.
"It's fundamental to our culture that what we do, we do together. And that's why we decided to take over 60 people, including each of our CEOs, heads of finance, their spouses and everyone in head office to Calgary with us for the Ernst & Young awards," he says. "The fact that we were recognized out of all the companies that could be recognized was something to be celebrated in itself and that's what we chose to do."
Q: What sort of people strategies do you consider when acquiring a new company?
A: We buy companies that have strong management teams and by that, I don't mean a good CEO. Frankly, that's the least significant factor. It's the strength and depth of the company's second-tier management structure that we look at. The second thing is to try to understand the culture. Because the business was profitable before we got there, we want to make sure we preserve whatever it was that made it work. That's paramount. Of course, it also presents challenges because when a company is successful and its employees are happy, the last thing they want is a guy in a suit showing up and announcing that he's buying the company. The first reaction is never, "Yay! We're owned by a public company!" It's, "Aw, you're going to wreck the good thing we've got going." So we spend a great deal of time ensuring that people are comfortable and have a positive experience with us. We're in the business of buying companies, so how we treat people in Company A will affect what Company D thinks about us if we look to acquire them down the road.
Q: What would happen if an established culture was compromised during a transition?
A: We have had that experience. The owner of a manufacturing company we purchased was upfront in telling us that he didn't intend to stay. He was a smart man, but it was obvious that he was something of an autocratic taskmaster in the way he managed the business, therefore, he had not groomed a successor. While his management team was made up of competent people, they were not entrepreneurial. They were only used to doing what the boss told them to do. So we brought in someone from the outside to replace the CEO, but his management style didn't match the culture with which the company was accustomed. We found another CEO that was a slightly better fit, but it still didn't work and performance dramatically declined. So we've had to step in and run the company ourselves. It has since rebounded, but we went through 24 months of hell because we broke our own rule: the culture needs to stay the same. It's been an unbelievable challenge, but we've learned from it. We learned that if worse comes to worst and the CEO can't run the business, the management must be able to continue day-to-day operations so that customers are looked after, the financials remain stable and the culture stays consistent.
Q: What is your recruitment strategy in your head office?
A: As we've grown, our fundamental strategy has been to hire the best people you can when they are available -- even if that means you get them a little too soon. For example, we hired our tax manager when he became available even though we didn't quite need someone of his capabilities at the time. I realized that we'd likely need him within six months or a year, but by the time that opportunity came around, there was no way that he'd still be available. So we hired him. The same goes for our CFO and our head of acquisitions. I knew that if we were going to grow into a professional firm, we needed to add them to our team as they became available even if we weren't yet sure how it was all going to work out. We believe we now have the best people for what they do, not the best people who came at a certain price tag or the best people available on the day we were hiring. The best people, period.
Q: What do you believe attracts people to want to work for your company?
A: In a word, passion. Our business is young and dynamic and it requires a certain passion for what we're doing and the underlying vision of where we're going. Sometimes when we're working on a big deal, our workloads go through the roof. We've had times when we've had to work until three in the morning finishing financial statements to meet a deadline, but there's nobody here I ever have to ask to stay. Nobody here I ever have to tell what needs to be done. Everyone thrives because they love this business and enjoy working in our culture, which is fun, informal and very flat and decentralized in its structure. I believe in letting people make their own decisions, just as I have always felt the support and guidance of our board in trying new things. Because of this, we have assembled a remarkably young management team. They come in prepared to do what needs to be done and appreciate knowing that they can immediately make an impact, help lead a deal and build something for the future.
Q: How do you manage to retain such a young team given their generation's restless reputation?
A: We have younger people, so it's somewhat simpler to provide compensation strategies that grow with them. Because we're generally not bringing on a 50-year old executive with a huge price tag, our compensation structure can grow with our people. They are adequately compensated through a combination of salary and benefits, including incentives tied to personal and company performance. At the same time, I believe compensation is fairly unremarkable. When compensation strategies are poor, they make people very unhappy. When they're good, no one says much. Nobody goes home and says, "What a great day! They paid me too much!" But if you got paid more than you were expecting, or you get a bonus that was bigger than expected, it affects you for about a week. Then you get used to that level of money and move on. That's why retention really goes back to the value of being part of a passionate team and being entrusted to take a piece of what's being done and running with it. Our people stay because they want to. It's exciting, it's fun and allows them to be part of something big.
Q: What is the best piece of leadership advice you have ever received?
A: It would be to understand yourself, what you do well and what you like -- and then build the organizational structure around your strengths. Personally, I'm very good in stressful situations; negotiations and big picture stuff. But I know that I'm administratively challenged. If all the documenting and reporting were left only to me, our statements would never be filed on time and we'd likely default on every TSX regulation there is. I need people around me who are good at that for us to be effective. Conversely, if I hired a bunch of negotiating deal-doers, I'd be wasting resources because that's part of this business I'm always going to want to be involved in. So be honest about the things you're good at doing and the things you'd be best delegating to someone who can do it better.
-- With reporting by Barbara Chabai
John McFerran, PhD, F.CHRP, is managing director of Boyden Global Executive Search. He can be contacted at firstname.lastname@example.org.