Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
2008 Remodeler of the Year
Neil Kelly Company’s green remodeling practices, business strategies and best practices help them earn Professional Remodeler’s highest honor.
Tom Kelly has the aggressive nature of a world-class athlete, the passionate soul of a rock star and the wily personality of a high stakes gambler.
But when you get right down to what really makes him tick, it’s the heart of gold that beats within his Irish-American chest that separates Kelly from many remodeling firm executives and industry leaders.
Here's the Podcast of the interview with Tom Kelly —
The jovial, witty and kind-hearted Kelly has Neil Kelly Co. poised to come out of the remodeling industry’s downturn stronger than ever — partly because he’s not afraid to take a calculated risk or two and partly because he cares about the careers of his 159 employees as if they were members of his extended family.
That nature and an innate passion for green building practices — both of which he inherited from his father, industry icon and company founder Neil Kelly — trickle throughout the entire organization. Not only does that make for a wildly successful company culture, it creates an environment where the buy-in is so deep and rich that the company will increase its volume from $25 million in 2007 to more than $27 million by the time the books are closed on 2008. While many remodeling firms in America are struggling just to keep revenue flat, Neil Kelly Co. has pushed the pedal to the metal thanks to Tom’s aggressive business strategy and cunning knowledge of the Oregon markets his company serves.
|Neil Kelly Co. President Tom Kelly has taken an aggressive approach to growing the company through expansion into a new market and launching a home performance division.
Photo by Craig Mitchell/Getty Images
It’s all this that has earned Neil Kelly Co. Professional Remodeler’s 2008 Remodeler of the Year award.
“When I think about how times have slowed down, the thing I’m most proud of is how resilient my employees are,” says Kelly. “I don’t have a bunch of folks going around, down in the mouth. I have people saying, 'If I do that, it isn’t going to do any good. I’m gonna go out and do some personal marketing; we’re gonna work hard, we’re gonna find business.’
“We had one of our carpenters bring in a lead today. We now have a program for that, which we started when the economy started to slow down. I’m really proud of how resilient my employees are in the face of tough times.”
In 2008, Neil Kelly Co. is on the verge of closing its most financially successful year ever. Design/build, with a focus on green, has been the driver of the Neil Kelly brand for decades. The company also operates a home repair division, a custom home division, a home performance division and a $3 million per year, environmentally friendly cabinet company incorporated separately from the rest.
Not willing to just sit tight through the downturn, Kelly has taken an aggressive approach to the current market conditions. By increasing marketing in 2008; expanding into the burgeoning Bend, Ore., market; opening the home performance division; hiring 20 new employees; and building new strategic partnerships with building product manufacturers, media outlets and community leaders alike, the company has increased its client base, number of leads and sales volume.
The engine that drives Neil Kelly Co. is and always has been its marketing. With an average spending of 2 percent of revenue the last four years, Kelly increased that number to 2.75 percent in 2008 rather than choose to remain flat or decrease it, as many companies do when market downturns occur.
“I spent an extra $100,000 in the last six months, over and above what we had budgeted for the year, because I felt it was an opportunity to gain market share in a slowdown like this,” Kelly explains. “At the same time, I’m very invested in not wanting to grow the company down due to the economy because I’ve got a great group of employees. So that investment is made from a long-term perspective, as opposed to what we can get for the moment. Let’s keep everybody busy and let’s gain some market share through the slowdown. You go to business school and they say 'don’t advertise less in a slowdown, advertise more.’ That’s easy to say, harder to do.”
Kelly’s marketing approach is concentrated on newspaper advertising; public television and radio spots; consumer seminars; and local trade shows. The message highlights Neil Kelly Co.’s dedication to green, which connects the brand well with the strong environmental values held by most consumers in the Pacific Northwest.
The radio and television advertising Kelly runs promotes the business mainly in the Portland market but does give the company some reach into the Bend and Eugene markets as well. Neil Kelly Co.’s television presence recently took a unique turn when the company decided to become involved with the local Fox affiliate, KPTV-TV in Oregon to produce a series of five Saturday morning shows featuring one of Kelly’s recent green remodeling projects. (See a sidebar at the bottom of the article for more details.)
Most of Kelly’s marketing strategy is tailored to each market’s nuances. Kelly weighs the decisions as to what to run in each market based heavily on the keen market knowledge and opinions of his managers in those markets.
“I have a real strong philosophy about what I call listening to the ground and listening to my people that are in those markets, and listening to what they have to say as to which media is more effective in their market,” Kelly said.
Kelly’s ultra-keen marketing sense also includes an opportunistic element many remodeling firm executives would consider risky or unworthy of consideration. Because Kelly has experienced both the long- and short-term benefits that investing in community service programs has given his brand over the years, he puts a lot of emphasis, not to mention capital outlay (nearly $110,000 total in 2008), into such things as Habitat for Humanity, Native American Youth & Family Center, Sisters of the Road non-profit food program and more than 50 other institutions in Oregon. Kelly spent a whopping $45,000 this year on a major sponsorship of a Bob the Builder exhibit at the local children’s museum.
“Yes, that cost us $45,000, but it’s a great way to give back to the community,” Kelly explains. “And who’s there, but moms with their kids who are just entering into the remodeling phases of their lives. So we’re doing something good for the community, but we’re also doing a sponsorship that puts us right in front of our potential client. We do a lot of things quietly, but we also do a lot of things like that, that are fairly high-profile.”
Many of the community service types of marketing Kelly does have little or no cost attached, however. When Kelly opened the Bend division, for instance, he bought out a local kitchen and bath remodeling operation that included a showroom. Before they opened the showroom under the Neil Kelly brand, they remodeled the facility and donated the old cabinetry to a local non-profit organization in Bend. When they held the grand opening at the newly remodeled showroom, that donation came up in numerous conversations among community members in attendance who were impressed by Kelly’s commitment to their community. As Kelly put it, “You can’t beg, borrow or steal that kind of reputation.”
“I think that’s part of your brand,” Kelly says. “When consumers understand that you’re a responsible member of the community, there’s a fair amount of literature out there in this world that says they’re more likely to purchase from you if they understand that you are a responsible corporate citizen. It’s what I like to call enlightened self-interest. It’s very much a legacy of my father’s. He was somebody who really gave back to the community and built that into our corporate soul.”
Both Neil and Tom have received a fair amount of personal recognition for their community involvement as well. Neil has had scholarships and awards named after him, posthumously, and Tom and his wife were honored this year with The Friend of the Children award by that same local children’s museum that is hosting the Bob the Builder exhibit.
Kelly’s sales force takes an active role in the marketing effort as well. Each design consultant manages an array of initiatives to promote their own names as designers and promote the Neil Kelly brand. One- and two-year follow-up calls to past clients, individual newsletters, seasonal greeting cards and in-showroom seminar presentations have been implemented for years at Neil Kelly Co.
Members of the Neil Kelly management team (left to right) Julia Spence, Human Resources VP; Lisa Elsener, VP/Controller; Monty Moore, VP New Homes; Tom Kelly, President; Yasmine Branden, VP/Production Manager; Randy Hudson, Sales Manager; and Martha Kerr, Executive VP.
This year, extra requirements have been put on the sales force to reach out to the marketplace more aggressively. Showroom seminars have been expanded to include weekdays; individual direct mail campaigns now go to targeted neighborhoods or market segments (owners of historic homes, for instance); “take one” fliers have been created to attach to job site signs similar to real-estate fliers; and speaking engagements have been scheduled with targeted organizations (such as aging-in-place seminars for organizations targeting the 50-plus homeowner).
“Besides generating fresh awareness of Neil Kelly and our designers to new prospects and newly arrived residents unfamiliar with the Neil Kelly name, these initiatives are designed to consistently reinforce the primary brand attributes of professionalism, integrity, quality and superior design and craftsmanship that are the foundation of the Neil Kelly marketing message,” Sales Manager Randy Hudson explains. “They also help our design consultants grow and maintain confidence in their own skills and their relative position of strength in the market.”
Neil Kelly Co. has always taken an aggressively practical approach to growing its business.
What began in 1947 by company founder Neil Kelly, who dedicated his career to promoting professionalism in the remodeling industry (See our article from February 2008, “10 Most Influential People in Remodeling History,” on www.ProRemodeler.com), has grown steadily into the diverse firm it is today because of this strategy.
In the past year alone, that has included two key expansion initiatives: opening a home performance division and expanding into a third market, in Bend, Ore. Both of those undertakings were executed with the company’s usual precision and careful planning.
“When we get involved in any new divisions of the company, we’re pretty methodical,” Kelly said. “We write a business plan and we write a budget. In general, whether we’re expanding into a new division or expanding into a new market, we’re going to involve employees who already work for us and hire new people.
The home performance division, launched mid-2007, was planned to operate as an adjunct of the already existing home repair division. Some current employees were shifted to the new division; new hires were made; and training and equipment were procured.
In partnership with Energy Trust and Energy Star, home performance services include conducting energy efficiency audits, indoor air quality assessments and remediation of inefficiencies found in those areas. Like any new division Kelly launches, the operation is currently undergoing analysis and refinement.
“We are expanding the division to enhance its effectiveness, and enhancing our procedures to work smarter instead of harder,” says Brian McVay, home repair and home performance manager. “One of the nuances of home performance is how to take all of the information we obtain in an energy audit and articulate this in simple terms that a homeowner can buy into. We are refining our sales process to educate instead of the opposite.”
While the early results have not quite met his sales and profit goals, Kelly sees the division more as a long-term investment and potential upsell opportunity for remodeling.
“If I wanted to rate it on a scale of one to 10, I’d give it a seven or eight,” Kelly said. “We haven’t quite met the goals that we would have liked to have met, but we’re doing fairly well. That whole thing about doing audits and energy efficiency measurements on houses, I think, five years from now all of us remodelers will be doing something like that as part of the services we offer. If we’re not, we’re going to be missing out on what is going to be a very important part of our market.”
|“I’m really proud of how resilient my employees are in the face of tough times.”
— Tom Kelly
The expansion into Bend had been in Kelly’s business plan for a number of years, but the situation was never quite right. When Kelly decided this was the year to take the plunge, an opportunity presented itself for him to buy out a Bend kitchen and bath remodeler who was ready to retire, including buying the company’s existing showroom in a prime location.
“We were pretty deliberate about investigating the Bend market, doing some research to really understand what the opportunities might be there,” Kelly recalls. “We wrote a business plan, made a very deliberate effort to find the right location and so on. It didn’t quite go the way we thought it would. We didn’t go in there thinking we would acquire a company, but that’s what we ended up doing, which was a great opportunity for us and for the guy who sold it to us.”
Kelly retained the company’s employees and added three of his own from the Portland and Eugene locations for a total of eight who now run the operation. So far, the division is holding its own, on track to meet the $1.2 million first-year sales goal Kelly budgeted for. His five-year plan is for the operation to generate between $4 million and $5 million.
Has the downturn in the economy forced him to re-think whether the timing of this expansion was the right thing to do?
“We knew the economy in Bend was actually tougher than most other places in Oregon,” says Kelly. “Because it had been a really hot residential market, it also went the other direction harder than others in the state. But the opportunity there to be able to hire people … if we went in there during the boom time, it would be very difficult for us to develop relationships with trade contractors and hire employees, and we have been able to hire fabulous people. We’ve been able to develop relationships with trade contractors who are interested in us, so we’re laying the groundwork for long-term good business.”
Part of what makes Neil Kelly Co. tick is its company culture. With 20 new hires to help handle the increased business this year’s expansion generated, keeping the culture intact despite a large infusion of new people might have been a concern for most companies.
But because Neil Kelly Co. has a strong reputation throughout Oregon for its care for the environment, their communities and their employees, the company has been able to identify and hire many highly qualified candidates that are a good fit in that culture.
“We know that our company culture and our emphasis on environmental sustainability brings us employees who will provide an extra measure and help us grow,” says Julia Spence, vice president of human resources. “We’re seeing young people who are searching for a values match as well as a good job.”
It doesn’t hurt that Neil Kelly Co. also has in place a very detailed and diligent hiring process designed to help them make quality hiring decisions and avoid mistakes.
First interviews, depending upon how many applications are received, take place directly with Spence. She then conducts second interviews with the hiring manager (usually jointly), plus interviews with two or three team members in the respective department. All new hires go through reference checks, background checks (including sexual-predator checks), drug testing, and a DMV background is pulled for anyone required to drive as part of their work.
If the position is in sales for any of the divisions, the candidate will also be sent for an interview with Kelly’s outside human resources firm, the MBL Group, which has worked with Kelly for years and is familiar with the type of person who will succeed in Kelly’s sales environment.
All this due diligence before any employee is offered a job helps the company protect a company culture that has been carefully nurtured by Neil, Tom and their executive management team for decades.
“The caring family environment was initiated by Neil and has been passed on through the generations by the lucky folks who had the opportunity to work with him,” says Martha Kerr, executive vice president, who has been with the company for 39 years. “Our HR manager, Julia Spence, is a wonderful custodian of the great legacy that Neil has left us and reminds us all every day how important it is to be sure that all of our employees understand the culture and are encouraged to support it completely and pass it on.”
Kelly is never one to stand pat. So future growth and expansion, including potentially into Seattle and other regional markets, is more than likely sometime down the road. Now with four showrooms (including two in Portland) in three diverse markets, Kelly is always on the lookout for new business opportunities and strategic alliances.
One thing is for certain. No matter what the future brings for Neil Kelly Co., it will be handled with the careful planning, strategic thinking and unique personal touch of the company’s leader.
Tom Kelly wouldn’t have it any other way.
“As a remodeler, I believe you shouldn’t do things like build new homes or do home repair unless you get serious about it and formalize a new division of the company. Otherwise, you’re a general remodeler who’s doing an OK job at home repair and don’t really focus on it. Or you’re a general remodeler who’s building new homes once in a while and you don’t really work at formalizing the processes and focusing on that business as a specialty in itself.” Kelly says. “I’m a real believer in that.”