October 2005

Employee-Owned

The Horizon Group thrives in the commercial market by promoting employee empowerment and perfecting customer service.

By Andy Jenkins
The Horizon Group Inc.

Davenport, IA

www.thehorizongroupinc.com

Year Founded: 1985

Employees: 50 full-time

Shop Size: 36,700 square feet

FYI: The Horizon Group Inc. is using an Employee Stock Owned Program (ESOP) that gives all employees ownership of the company.

The Horizon Group Inc., a custom casework manufacturer in Davenport, IA, has about 50 different owners. Well, sort of. Four years ago Horizon began setting up an Employee Stock Ownership Program (ESOP), thus giving each employee a percentage of shares and, essentially, ownership in the company.

Ever since, the 21-year-old shop has continued to grow, using unique customer service tactics and a meticulous production process. Today, Horizon is a steady fixture in the Chicago and Quad Cities commercial markets, and President Nick Leonard sees no reason why that success won't continue into the future.

Looking at the past, it is clear that Horizon has come a long way from its beginnings in 1985, when co-owner Elza Sager opened the shop after leaving a 15-year career at another casework manufacturer. It started slow, Sager says, with no employees and no orders. At one point, Horizon actually specialized in store fixtures for various national department stores, but finally made the commitment to focus on custom casework and cabinets for its local and Chicagoland markets.

These days, Sager spends most of his time in the office concentrating on sales and bidding. His 36 years in the industry have seen quite a few changes.

"I think the biggest change since I've been in the business has been the development of all the CNC equipment ... I think that's pretty obvious, really," Sager says. "Things our guys do on the CNC, I used to have to do by hand out there in the shop. And it would take me four times longer to do it. The end result was the same ... well, I shouldn't say the same ... CNC is actually better. It's perfect every time."

Sager says he is not old enough to retire, but when that time comes, he has a plan in place to sell his portion of Horizon stock back to the company, thus making Horizon 100 percent employee-owned.



Share Values

When Sager's fellow co-owner John Peters left the company in 2001, the two were looking for a way to keep Peters' half of Horizon in company hands. They did not want to bring in some new force, Leonard says, whether that be a new group of people or investors. So, instead, Peters looked into setting up the ESOP. After careful planning and research, Horizon bought Peters' stock, and as time has progressed and loan payments have been made, that stock has found its way into employees' hands.

"The nice thing about the ESOP situation is that it worked out well for John, it worked out well for us and it kept the ownership within the company," Leonard says.

Horizon created three teller pods for a credit union. The unit has maple veneers with stain and cherry finish. This style is becoming more popular in banks, compared to the long wall of teller stations.

But, at first, the advantages to this program were not quite as evident. Leonard says that because the company used loans to purchase Peters' stock, employees did not see actual gains until Horizon began making payments on its loans.

"When we first introduced the ESOP, there weren't a lot of shares being released," Leonard says. "And at the time, the value of those shares was pretty low, so employees were looking at their statement and thinking, 'What good is this?'"

Since that time, Horizon's stock has continued to rise - over 20 percent from that low point at the beginning - and since the loans are beginning to get worked off, each employee is seeing more and more shares coming his or her way. According to Rod Davis, a member of Horizon's core management group, the employees' reaction to their "ownership status" is what has truly been an asset to Horizon.

"The mindset is different here," says Davis. "The employees see when they're wasting material and losing money, and now they feel pretty open in speaking up about it. They realize that they are the company, and that has stimulated a lot of ideas for saving money and doing things differently."

Employees have learned to roll with the changes of their stock value as well. When the company recently bought a new Holz-Her Triathlon edgebander (a $150,000 investment), the stock's price dipped a bit, but employees were urged to think about the big picture.

"We told the employees that investments like the edgebander are going to affect our share prices," Leonard says. "But the payoff comes when we can move more product through the shop faster, allowing more growth."

Horizon depends on its employees to meet its reliable, tight delivery dates - an aspect that the company's reputation was built upon, Leonard says.

"The ESOP has built a lot of pride in the workforce and created a sense of ownership as well," Leonard says. "Employees see a benefit now when we do well on one job, and it leads into another future job for the company."

Back to School

While Horizon's ESOP scenario is unique, its focus on customer service and communication could be considered unusual for the industry, to say the least.

Given the nature of the commercial casework market, and the production process, constant, clear-cut communication is required between the shop and the customer. Leonard equates this challenge to the children's "telephone" game. "By the time specifications and designs make their way to the end of the line, the information can get so diluted that you're not even building what you were supposed to [build] in the first place," he says. "It's all about passing information along."

So, to help ease this passing of information, Horizon recently began sending its employees back to school for communications training. The local community college offers a course called "Frontline Leadership Training" - focusing on the basics of interpersonal communication. Employees from the management and production teams have learned skills that help them deal with situations at home, on the shop floor and with customers.

"Situations in class come up and employees think, 'I could have used this with my family.' We do this program for that sake, and for dealing with one another out on the shop floor. Then it overlaps on to our customers," Leonard says.

This Horizon job, completed for a dermatologist office, used Red Oak Veneers and hardwoods, with the stain and finishing all done in-shop. Drafting and Project Manager, Neal Zahn, worked closely with the general contractor and provided templates for all the trades to follow in order to ensure that the soffit curves and wall matched Horizon's casework.

To date, nearly half of Horizon's employees have taken the communications course, and Davis says the results have been clear. He notes a specific case when Horizon was faced with prohibitive rising costs from its waste disposal company. This was one of many opportunities Davis has had to put his training to work - this time while negotiating with an individual from the company.

"It's all about diffusing aggressive personalities," Davis says. "I went to his office knowing that he's not going to be as aggressive face-to-face. We talked it out and everything went great. He cut our price in half and cut our contract. We got everything we wanted just by not being aggressive back, and respecting that he's got a job to do. Our guys are all taught the same thing."



Customer Care

For more than a year now, Horizon has been implementing a new customer service technique that gives its customers first-hand knowledge of the entire production process and also keeps both sides in constant communication with one another.

It all started in the spring of 2004, when Horizon began getting backed up on its orders, much to customers' dismay. Leonard says that most customers (typically general contractors) did not understand why changes in their plans would make such an impact on Horizon's deadlines. So, Davis decided to start bringing the customers into the shop for something he calls a "Contractor Process Seminar."

The seminar aims at showing contractors the step-by-step process that takes a project from blueprints to installation of the casework. Davis shows contractors what goes into the entire production process, all the way from initial bidding and pricing, to the material procurement, to the final delivery process - and everything in between.

"We've found that a lot of our customers - even old customers that we have a great relationship with - don't really understand what is involved in making their cabinets or custom casework," Leonard says. "Some just think they call in an order, and then it shows up. A couple of general contractors have figured out that once they know how we work, their overall jobs will move much smoother."

So far, Horizon has held the contractor seminar for more than 15 different contractors, usually four or five at a time.

"Contractors love it when our part of the job is laid out for them," Davis says. "We learned a long time ago that if we see an issue or problem, and then determine what a good solution might be and present that, it's easier for them and they'll say, 'Thanks for figuring that out for me.'"

Once the contractors are well-versed in the production process, Horizon stays in constant communication, letting them know when Horizon needs information and when issues arise. Davis gives an example of one time when a project's design called for the use of two different colors that did not quite match. Someone on the shop floor noticed the discrepancy, and Horizon offered a different color to the customer, who gladly approved the change.

"Other companies might take the 'not my problem' approach. Instead, Horizon presents solutions, and nine out of 10 times the contractor will say 'yes' to changes and thank us for catching it. They can alert different trades, then, for other changes that need to be made," Leonard says.

Horizon has found that by getting in touch early on and developing relationships with its contractor customers, the project is more likely to run smoothly and repeat business is sure to follow.

"Our whole objective as a company is to make the superintendent's job easy," Leonard says. "Because, then, he's going to have a good job and come back."

Finding a Commercial Niche

Throughout the company's recent history, Horizon has been solely focused on its commercial markets, both locally and in the Chicago region. More specifically, Horizon tends to get large commercial contracts for casework and cabinets in medical buildings and banks. Leonard says that lower interest rates over the past few years have fueled commercial building, especially in the primary industries they focus on.

"The commercial market has been strong for us in the past six or seven years," Leonard says. "Last year was a little soft, but it is coming back stronger this year ... especially in our markets. There are new banks popping up all around. And new hospitals and medical buildings. And we've seen the trend of doctors breaking away from hospitals and setting up their own clinics. So, that's been a really strong market for us, too."

Although Horizon has found its commercial niche in the banking and medical markets, it also has recently completed jobs for college dorms, hotels and the gambling industry. Leonard says Horizon has done a few residential jobs in the past, but prefers to focus on the commercial market. Residential jobs can be a little more high-maintenance, he says, especially compared to the larger commercial contracts that end once the architect for the job runs through the work with a punch list.

Down to Business

At any given time each month, Horizon has between 20 to 60 projects in various stages of completion - each following the same process that contractors are taught at the company's seminars. The process is dependent upon the customer's approval of three different elements: shop drawings, colors and field measurements.

Horizon created four of these crescent shaped display units for the lobby of an eyecare center. The eyeglass frames are hung on acrylic rods that are mounted into translucent back panels, while the body is of plastic laminate in a woodgrain color. Horizon also did the center's reception desk in similar colors and materials.

It all begins when Horizon's vice president of finance, Neil Hamilton, uses estimating software from Alliance Millsoft to bid each project, based on the initial blueprints given to Horizon. From there, the project is assigned to one of Horizon's five project managers, who stays in constant communication with the customer throughout production.

The project manager is an important position within Horizon, with responsibilities of overseeing and then ensuring the smooth completion and delivery dates of 10 to 15 different projects every month. A small room houses all of the project managers, plus an employee who is strictly responsible for generating the cutlists for each project and for creating programs for the Holz-Her CNC and the Busellato point-to-point boring machine from Delmac Machinery Group. Inside this room, project managers plan production schedules based on the required delivery dates.

The company's draftsmen create their own drawings based on the details from the architectural drawings provided, and then move the project over to the material procurement process, handled by Bob Parker, pre-production coordinator.

Parker has been with Horizon since the company began, starting out on the shop floor, and has now made his way into the office. He orders all materials that make their way onto Horizon's shop floor. Once all three elements are approved by the customer, Parker combines project information - cutlists, bar codes, drawings - and sends them to the shop for production.

Horizon's shop recently added the edgebander and noticed increased productivity, Leonard says. Other shop staples include a Giben panel saw, Altendorf sliding table saws, Timesavers 2300 series widebelt sander, and case and drawer clamps.



Looking to the Future

Sager likes to point out that ever since Horizon began focusing on custom cabinets and casework in 1990, the company has grown every year. Leonard expects this same steady growth to continue into the future, following the 30 percent growth experienced in sales over the past four years. Horizon also looks for an 8,9 percent growth in revenue each year, and Leonard hints at new potential markets a little farther down the road.

"Historically, we always split 50/50 with our local and Chicago markets. At some point, we may have to open another market in another city somewhere," Leonard says. "We think we do what we do very well and I don't see any reason why we can't continue to expand on it."

 

                                                                                                                                                                                           

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