TD INDUSTRIES CHAIRMAN JACK LOWE JR. EXPLAINS HOW TRUST & ACCOUNTABILITY ARE ESSENTIAL BUILDING BLOCKS FOR SUCCESS

What do these Texas-based companies have in common? USAA, NuStar Energy, The Container Store, Men’s Wearhouse, Whole Foods, National Instruments, Rackspace, and TDIndustries? They’re all on the Fortune magazine list of “100 Best Companies to Work For.” For TDIndustries, that’s nothing new. It’s been on the list for 15 years in a row.

“I think people take pride in the fact that they work at TD,” said Jack Lowe Jr., the company’s chairman. TD first made the Fortune list in 1997, when Lowe was CEO.

Fortune surveys the employees of companies for its list, and compiles the results based on 250-300 surveys. But TD takes it further.

“We survey everybody,” Lowe said. He maintains that TD’s 1,800 employees have more confidence in the complete results. TD uses the results as a form of feedback – they’re posted on the walls of each business unit. “It’s like going to the doctor and finding out what you need to fix,” Lowe said.

The Roots of Servant Leadership

Lowe took over as the CEO of TDIndustries in 1980, after his father, Jack Lowe Sr., passed away. Lowe Sr. had started the company in 1946, and developed an interest in servant leadership soon after Robert Greenleaf started presenting the concept in the early 1970s. Lowe Jr. continued the philosophic approach to leadership when his father died.

“It’s a friendly state and it just fits our style,” Lowe said.

But it’s not all sweetness and light. “For a while we thought servant leadership was being nice to each other, rather it comes with a good dollop of accountability because over time, you need to perform,” said Lowe.

In fact, Lowe could be considered a “leader’s leader.” Not only does he subscribe to servant leadership, but he is a student of management guru Peter Drucker. Using that combination of philosophies, Lowe has led TD to its current position as one of the nation’s largest mechanical contractors and facility service companies. Its 2010 revenues were $308 million. Some of its bigger projects include Cowboys Stadium, the American Airlines Center, and the Ballpark in Arlington, as well as Lakewood Church in Houston. The company is a leader in intelligent buildings, and has achieved LEED certification (Leadership in Energy and Environmental Design) for a number of buildings, including Sabre Headquarters in Southlake, the Botanical Research Institute of Texas in Fort Worth, the Ronald McDonald House in Austin, and the Plaza at Enclave in Houston.

Besides his role as chairman at TDIndustries, Lowe is also Chairman of the Board at Zale Corporation, and serves on the boards of Drew Industries and KDC.

Drucker held that the first thing a successful leader must do is ask, “What needs to be done?” In the 1980s, the construction market collapsed in Texas. The effect on TD was so severe, the company lost half its revenue and laid off half its employees. Lowe knew the remedy would have to be drastic. He saw that the company’s pension plan, which was overfunded by a million dollars, would have to be scrapped if the company was to survive.

Built on Trust

The plan was $1 million overfunded. It had $5 million and took $4 million to fund it. “The only way to get the extra $1 million out was to terminate the plan,” Lowe said. “You couldn’t just withdraw the excess.” On top of that, the company’s bank had just gone under.

At a meeting of all employees, Lowe explained the situation. Not only did the company need the extra funds from the plan, they also needed at least another $1 million to stay in business. They worked out a formula where employees could invest their retirement money and put it back into the company. In the end, almost everyone contributed, and TD got an additional $1.3 million.

“That’s built on trust, in my view,” said Lowe. “That trust recommitted us to each other and probably caused us to hold each other more accountable.”

One way TD holds itself accountable is to see that employees grow in their jobs. Lowe said the company does a lot of leadership and skill development.

“We pay for almost any training anybody wants to take – MBA’s, performance management, master plumber . . . whatever they need to help people grow,” he said. “I think people take pride in the fact that they work at TD. I’d say it happened because it’s a combination of helping people grow as well as performing.”

Leadership development is something Lowe emphasizes. “A leader is someone who influences others,” he says. “And when you think about it, everyone influences others, so everyone is a leader whether you supervise somebody, or not.”

Built on Accountability

As people grow in their jobs, accountability is a key benchmark. “Everybody has two big things you have to do well to work here,” Lowe says. “You have to help people around you grow and you have to produce business results – whatever that result responsibility is – it could be safety, or a plumbing crew or the profitability of a business unit. If you can’t do both of those things – and we’ll help you learn how – but if you can’t do both of those things, you can’t work here.” Lowe said some very profitable executives have been terminated because they couldn’t help people grow and couldn’t build trust.

Once an employee (TD calls them “partners”) has been at TD for 90 days, he or she attends a program called “Catch the Spirit.” That’s where they learn about the company’s history and culture, safety, and what Lowe calls the “dual responsibility” of helping each other grow and producing results. If they’re interested in moving into a leadership position, they spend many more hours in the classroom and get feedback on their progress.

The servant-leader model has created an environment where partners trust leadership to listen to their ideas, and leadership trusts the judgment of partners.

“Our frontline workers hold each other accountable,” Lowe says, “like when they’re late for work, they hear from their coworkers and they do the same with their supervisor, if they’re late.” That might sound harsh, but Lowe says it isn’t at all. “These folks love each other and care about each other,” he says.

“We have a policy on funerals that says, ‘If somebody important in your life dies, you can take three days off, and if your mother dies more than once, we’re going to fire you.’”

Work environment figures into the mix as well. TD has revamped its organizational structure – doing away with separate business units and presidents for each unit – although all the people are still with the company.

There are no offices, either. Everyone – including Lowe and CEO Harold MacDowell – works from a cubicle. It’s just all part of a culture that aims to treat everyone equally. In fact, Lowe says all stakeholders – employees, customers, vendors, and your community – all count.

“If you only focus on one thing for the short term, like stockholder value or stockholder return, that’s not going to optimize stockholder value because the employees are important and the community is important and the vendors are important,” said Lowe.

One important way TD builds trust among its employees is through transparency. Because it’s employee-owned, everyone takes part in a meeting the last Friday of the month – all the offices are connected by video conferencing – and the latest numbers, such as customer satisfaction, new construction jobs, safety, employee turnover, and financials from each business unit are shared.

“I think you almost need to celebrate being wrong,” Lowe said. “I think people trust somebody who can say, ‘You’re not going to believe the stupid thing I did.’” By the same token, Lowe says when good things happen, employees tend to think, “Well, I guess he or she knows what they’re doing.”

What would Lowe suggest to other companies that are interested in instituting servant leadership?

While it helps to have a CEO who is gung-ho about it, Lowe says that’s not always necessary. Supervisors can start with their work teams.

“My thought is to give everyone a copy of the pamphlet [on servant leadership] and read eight pages at a time every week and talk about what you’ve read,” he said. “If, as often happens, it helps deliver some pretty stunning results, somebody is probably going to ask you, ‘What are you doing?’”

Or, more subversive methods might be tried. “If I were a middle manager, and I didn’t think my CEO would embrace this, I might spot one of the other senior execs that might have some empathy for it,” said Lowe. Invite them to lunch, and perhaps get them engaged that way.