If You Build It, Will They Stay?
Rick Kearney set out to squash his company's turnover by building the ultimate employee-centric workplace. Now, two years and close to $12 million later, he's expecting more from Summit East -- much more
Only Rick Kearney knows why he did it. And for the moment, anyway, that's just fine with him. "Very few people have the total vision," says the computer entrepreneur. "They just don't absorb it." Until they do -- and he's sure "they will, eventually" -- those around Kearney are free to draw whatever conclusions they want about what he's been up to since May 1998, when he first decided that he needed to take full ownership of a 116-acre former cow pasture. It was then that he pledged himself to building an "employee-centric office park" on the site. After plunking down $4.6 million to acquire the dirt, Kearney has since spent an additional $2.9 million on the development, in addition to $4.2 million to put up his own headquarters there. "Some people think I'm crazy, but I'm not doing this imprudently," he insists, though he freely admits he knew "nothing" about real-estate development when he started.
Building the office park is a mystifying move, but it's one that's in keeping -- aside from its scale -- with the character of the 42-year-old, whose soft voice and sporty polo shirt guarantee that he'll be underestimated. "It scares the heck out of her," he exclaims, describing the reaction of his wife, Bernadette, to his latest undertaking. "Did he ask me? No," she reports. "But I trust whatever he says he wants to do."
What Kearney wants to do isn't always easy to predict. Back in 1986, for instance, he quit his gig as a systems engineer at IBM Corp. -- on the same day, no less, that he'd earned admittance into a prestigious recognition program -- to devote himself to, um, volunteer work. "I think I said something like, "Thank goodness, I'm sitting down,' " recalls Bob Ramay, who was then Kearney's boss. "But I knew Rick, so I knew he had thought this through."
"Rick has accomplished many things I told him couldn't be done," says Mainline's CFO, Erin Ennis.
What Ramay didn't suspect was that years later he'd find himself working as a project manager at Mainline Information Systems Inc., the computer reseller Kearney started in 1989, after having started a nonprofit and cofounded a foster home. Kearney has devoted the past decade to furiously building the fast-growing Mainline, a four-time Inc. 500 company based in Tallahassee, Fla., into a regional and then national competitor -- and then an international one with projected revenues of $135 million this year. As CEO, president, and sole owner of the company, Kearney carefully credits "understanding IBM" as "the key to our success," leaving out his own bullheaded opportunism. In 1996, when sales were at $19 million, Kearney committed Mainline -- even the name is calculated, he says, to convey that "we are mainstream people, not computer weirdos" -- to becoming one of the first IBM business partners to peddle its precious mainframes (now known, to ease the stigma, as enterprise servers). By 1997 sales had skyrocketed to $70 million. To get there Kearney had doubled the number of employees by hiring a dozen salespeople and four vice-presidents.
"Rick considers himself to be a visionary," says Erin Ennis, Mainline's chief financial officer. "He isn't satisfied with anything less than a big mission." And he isn't easily deterred. Last year, she recalls, "we all told him he was crazy" for wanting to start a separate venture to showcase the company's emerging expertise in E-commerce. The result: Kearney launched Shirttailor.com in November. "Rick has accomplished many things I told him couldn't be done," Ennis says.
Even so, as the former CEO of a real estate conglomerate, Ennis felt duty-bound to "talk frankly" with Kearney about his imposing scheme to single-handedly develop the land that a $75,000 granite sign now identifies as Summit East. She reminded him about the fickle fortunes of the community's real estate developers, warned him of the project's potential for sapping him of his time and Mainline of its much-needed internal capital. Across town, she pointed out, Arvida -- the development arm of the St. Joe Co., the state's largest real estate company -- was building a 5,000-home community called Southwood, which would eventually include 5.7 million square feet of commercial space. Kearney heard what Ennis had to say -- or claims he did. "I tend to resist, but I do listen," he says. "She's tried to add a certain amount of sanity to it."
But there was little room left for sanity -- or anything else -- in Kearney's grandly detailed design for the park. He envisioned as many as 20 office buildings, each one housing employees of fast-growing technology companies, including his own. The Summit East companies would, in effect, share the costs (and, of course, the benefits) of state-of-the-art systems, from a videoconferencing center that would broadcast live classes, to a centralized "brain" for backing up data. They'd also find themselves equipped with the most modern tools for retaining talent, able to offer an atmosphere where their employees could commune among the majestic oaks or linger by a picturesque pond, while never being far from their beloved laptops, thanks to strategically placed wireless transmitters. Kearney wanted Mainline workers to toil in cubicles they would help design; he wanted them to be able to click on icons to alert the park's concierge to such pressing errands as dry-cleaning pickups or take-out lunch deliveries. Using the park's intranet, employees at Summit East would be able to tap in and check on the kids they'd dropped off at its day-care center. There would be jugglers at lunchtime and jazz concerts at dusk, and in-between, employees would strike up the bandwidth using fiber-optic pipelines and feel the rush of hyperactive phone switches. After work they could dine at the park's restaurants, shop at its grocery store and strip center (now known, to ease the stigma, as a midsize shopping center), and pick up prescriptions at its pharmacy. With so much so close, employees wouldn't ever need, or want, to leave.
Which was, as Kearney kept insisting, the reason he was building Summit East: to end, once and for all, Mainline's chronic retention and recruitment problems. Well, that's how he sold the idea anyway. "What Rick wanted to do was to create an environment for people so that they'd want to come to work there, even if they were not getting the same size paycheck that they could be getting in California," says general contractor Laurie Dozier, the cofounder and president of Mad Dog Design & Construction Co., a local contractor with about $20 million in revenues. Dozier, recounting his initial discussions with Kearney in the summer of 1998, says, "He wanted this to be the workplace of the future."
That's true but hardly complete. Kearney, whose employees will move into Summit East's first building this month, hasn't shelled out roughly $12 million solely to buy the undying loyalty of his 70 local workers. As he -- and, for now, he alone -- sees it, the "smart campus" represents his most intelligent weapon against an enemy that threatens Mainline's viability, an insidious foe that other company builders may not behold until it's too late. "Right now, this is 'Rick Kearney's wild idea.' But once people see it, they'll grasp what it's about," confides the CEO, whose company posts net profit margins of around 10%. "This is absolutely critical to the survival of this company."
Planting himself in what will one day be the giant atrium of his new building's foyer, Rick Kearney draws such a vivid picture that he seems not to notice everything that's missing: the circular reception desk, the zigzagging staircase, the glass-enclosed sky bridge and -- perhaps most conspicuously of all -- his own feet. Most of the absences can be explained by the fact that Mainline's building, on this day in late December, is still about five months from completion. Kearney's dress shoes, on the other hand, were fully operational, and visible, until very recently. By the time he attempts to reclaim them, they have sunk almost up to their laces in the ooze of mud that Summit East, softened by two days of drenching downpours, has become.
But Kearney, ever determined to finish what he's started, insists on completing his lavish description of the "kinetic artwork" that he imagines sprouting from the opposite wall. He's conjuring a 12-foot metal tree, its branches protruding in all directions, with 18 video monitors hanging from them. If such a totem exists, he hasn't yet found it. Neither has Dozier, who hoped he'd gotten close last autumn when he snapped a picture of a video wall he spotted while vacationing in Belgium. But "it wasn't what Rick was after," reports Dozier. And Kearney, as the contractor has learned by now, always knows exactly what he's after.
Through Summit East, he's out to lend new meaning to the term Internet bubble by creating a self-contained colony for young, brainy E-centrics. Upon moving in, CEOs will simply plug their companies into the park's state-of-the-art voice, data, and communications network, and thus be spared even the momentary distraction of having to choose their own systems. Kearney foresees the enrolled companies' helping one another by forming alliances, identifying opportunities, and occasionally sharing their Java programmers.
So rigid are Kearney's ideas about Summit East that he's convinced he can get the park he wants only by doing it himself. Not that he hasn't sought any formal input. In early 1998, he paid $22,000 to have an Orlando-based real-estate-consulting company analyze key elements of his plan: Should Summit East be gated? How wide need the roads be? Motel or hotel? Sit-down restaurant or fast-food joint? Waterfalls? Ponds? According to Owen Beitsch, executive vice-president of Real Estate Research Consultants Inc., Kearney "or at least one of his staff people" showed him the door after reading his company's recommendations. "His principal objective is about keeping the human resources involved. We explained that while we agreed with his objectives for preserving human capital, real estate is at best a speculative business," says Beitsch, who criticized Summit East as being too big, too costly, and at an unproven location to boot. "We suggested some ways to reduce the speculative nature of the opportunity, such as finding a developer. He chose to disagree that it was speculative, and he chose to do it himself," says Beitsch. Kearney proudly confirms that "I totally ignored everything he said," which he succinctly summarizes thusly: "Their final analysis was, 'You're in over your head, and you should sell the whole thing.' "
After digesting Beitsch's biting report, Kearney upped his real estate holdings by buying out his partner. Needless to say, "my preference would have been to continue to own half of it," Ennis notes. William F. Butler, a partner at Boutin Brown Butler, a local real-estate-appraisal and -consulting firm, who evaluated the property last year, valiantly validates Kearney's scheme even as he tenderly tempers it. "The park is not going to grow weeds," he says. "But will it become the high-tech mecca that Rick wants it to be? That's the question," says Butler, who has served as an adviser on the project.
Now, with the completion of Mainline's headquarters, what Summit East has indisputably become is a tribute to Kearney's rock-hard commitment, which rivals the thick steel frames bordering the hillside building's windows. He's serious about what he says. When he promises to give a visitor uninterrupted time, Kearney doesn't just mean that he'll ignore any calls. He actually unplugs the phone and wraps the limp cord around its receiver for emphasis.
Dozier got his first whiff of Kearney's pungent passion when he beheld the budget for Mainline's 30,800-square-foot building. At $4.2 million, Kearney's spending level was "rare for this community," says Dozier. At roughly $136 a square foot, the building has cost about one and a half times the price tag of the average office building in the area, Kearney estimates.
Kearney calls his "campus" the "offices of the next millennium."
But the budget's size was only the first signal that Kearney, who sees himself as building "the offices of the next millennium," would disregard any and all preexisting practices. In choosing an architect, for instance, he settled on Manausa Lewis & Dodson Architects Inc., a local firm that had never designed a corporate office building. "I told Rick that I was going to design him an award winner," explains principal C. Trent Manausa. In selecting an interior designer, Kearney bypassed local contenders and chose Griswold, Heckel & Kelly Associates Inc. (GHK), a Chicago-based firm that, he had read, designed surroundings for the kind of company he wanted Mainline to become -- namely, a giant company like Sun Microsystems or Hewlett-Packard. "I wanted to be able to get the coolest and best of what's out there," he says.
Not that he always chose it. When GHK proposed a coat of glaring tungsten blue paint for the kitchen area and break room -- where Mainline's minions can flop into overstuffed chairs and chill in front of the big-screen TV or the gas-fueled fireplace -- Kearney toned it down to a "more Old South, normal blue." But he did go along with many of the firm's recommendations: shrinking the library (so much research is now done online); relocating the coffee bar (why risk spillage around the work area?); and splintering the central copier room into multiple smaller locations (it cuts down on waiting time).
He consistently pushed for unusual alternatives. For the grounds' drainage system, he couldn't abide the typical eyesore of storm-water ponds that, he says, "end up looking like moon craters" when they're empty (and, for that matter, breed mosquitoes when they're full). Summit East has one big pond engineered to handle the runoff and storage of water. "It'll be one of the finest ponds in Tallahassee and certainly the most expensive," notes Kearney, who spent about $60,000 to prove to state regulators that it could handle all the water. He wanted all of Summit East's landscaping to convey "human-centric" comforts, grandiose yet practical: from the wide two-lane entrance and two-lane exit, lined with two-inch-caliper trees, to the illuminated wall-of-water fountain, to the roads cushioned by an extra-thick two-inch layer of asphalt.
Nonetheless, "this isn't an open wallet," says Dozier. "This has been tightly controlled, and people have been reined in." In March 1999 Dozier realized that not only were his fears about costs justified -- what with "pretty sporty" masonry and the underestimation of expenses associated with packing down the soil and procuring the steel needed to fortify the glass-heavy structure -- but the situation was worse than he had imagined. The projections for the Mainline building were over budget by a staggering $1 million.
Getting the word, Kearney managed to stay optimistic. "We had plans for a building," he says. "Just not one we could afford."
Kearney consistently pushed for unusual alternatives at Summit East.
The task, as Dozier defined it, sounded straightforward enough. "We had to cut costs without cutting into the heart and soul of the building," he says.
That presumed that Summit East's mastermind knew which aspects of Mainline's building were expendable and which were most crucial to achieving his oft-repeated goal: halting the unacceptable turnover rate among employees, whose ranks had swelled so swiftly that workers bulged from three separate buildings. As he rethought Summit East -- never mind when he'd originally conceived the project -- Kearney must have felt confident that he knew the answer to management's most ancient yet urgent query: What do employees really want?
As a matter of fact, he did -- feel confident, that is. But the reasons he gives now for having championed key features, insofar as he's able to recall them, can feel as squishy as the ground around the new structure still can. Go anywhere in Mainline's building (OK, not the bathrooms), and it's clear that Kearney believes his employees value exposure to natural light. "We had to fight the architects to get the windows we wanted downstairs," he says. There's a glass-enclosed skywalk, a staircase with an outside view, and even a serpentine window spanning both stories, hugging the curving contour of the building's steel frame. Two of the walls upstairs are composed entirely of glass. And then there are such outdoor-access areas as the lanai, a screened-in porch where employees can spend quality time with their laptops, undistracted by bugs or rain.
The abundance of windows suggests that Kearney had compelling data to show that employees wanted them. But the best evidence Kearney offers for the need for natural light is the testimony of a creative worker, albeit one of the Renaissance. Leonardo da Vinci is "known to have preferred to work by a window," says Kearney, who logically assumes that the Italian polymath, were he alive today, would be designing Web sites.
Then there's the modular furniture Kearney wanted, stackable pieces giving employees flexibility in terms of how high they could configure the walls of their eight-by-eight-foot cubicles. They've got options in terms of accessories too: pegboards, extra drawers, and windows that would let them gaze upon the faces of neighboring cubists. "If you create an ergonomic and a customizable work environment," Kearney explains, "employees can be just as happy in cubicles as in closed offices, because of the socialization that can occur among them." How, pray tell, did he come to possess that nugget? "I talked to the manufacturers of the furniture," he says, adding that they told him they get a "bad rap" from the Dilbertized masses. Further, he's factored in the findings of "independent studies that the manufacturers have either researched or commissioned or whatever."
Whatever source Kearney freely points to as having stoked his vision of the ultimate employee-centric workplace, it seems insufficient. He's read, for instance, about cutting-edge Web-design companies where the CEO works out in the open, either at a podium or at a stand-up desk. Not Kearney, who has a regular office. Why so conservative? "I don't think IBM executives would feel as comfortable meeting with us around a stand-up table," he says. That may be true, but the notion that Kearney would make it a priority to satisfy anyone else's taste seems implausible.
But other people -- -in this case subordinates -- are supposed to have been Kearney's entire reason for undertaking Summit East. In recent years Kearney, whose company now employs 135 workers in total, hasn't been able to budge Mainline's 20% turnover rate. Until last year, that is -- when it shot up above 25%, a spike he attributes to the ill effects of having employees spread out in different buildings. Feeling "isolated and abandoned," he explains, has made some of them vulnerable to the frequent feelers they get from headhunters.
Summit East isn't Kearney's first attempt at curbing turnover. Hoping to inspire loyalty, he's already boosted employee benefits. He's outfitted employees with cell phones and pagers, and even offered them the option of telecommuting. "They all just become entitlements," he says -- including the three-night cruises for two, offered to employees in 1997 (in the Bahamas) and 1998 (in the Bahamas and around Key West). In 1997 he went so far as to launch Integra Professional Services, a subsidiary dedicated to recruiting technical personnel for both the company and its customers. The money-draining experiment lasted 18 months. Similarly, a short-lived plan to offer senior executives phantom stock -- in lieu of stock options, which Kearney claims he'll be ready to grant "in the not-so-distant future" -- ended up spooking him.
"I became disheartened," says Kearney, who realized that "if you do all those things, you have only a chance." Hoping to lift those odds, and inspired by the camaraderie and job satisfaction he noticed at the more "people-centric" vendors and IBM outposts he had visited, four years ago he began looking for four acres that Mainline could call its own. There, he'd create "an environment that spoke of success and quality and future growth and opportunity." But as his desire to find just the right spot deepened -- not one next to a truck stop or abutting a housing project -- 4 acres became 10 acres. Then 12. He was considering paying $800,000 for 20 acres when, in November 1997, a deal came along for some land on the east side of Tallahassee, at the interchange of U.S. 90 East and Interstate 10. He spent $2.1 million to buy a 50% partnership interest in what is now Summit East.
Kearney's vision: the ultimate employee-centric workplace.
As the plot thickened, and lengthened, so did his ambitions. He began talking about making it impossible for employees to be recruited away "once they'd tasted the goodness of what our campus has to offer." Last September, having obtained the necessary permits, gotten the city's OK on spending $2.2 million to extend its sewer system, and even won over the park's neighbors, Kearney couldn't contain his satisfaction over the plans for Mainline's building. At the time, he described the new headquarters to me this way, "All of this is designed with this idea in mind: if you were an employee designing a workplace, what would you like to see? -- as opposed to what's cheapest for the employer."
That makes it sound as if employees have been canvassed and questioned, probed about which environmental elements they'd like to see incorporated. Not exactly. Seven employees did make up the committee that met with five vendors of cubicles, evaluating their offerings in terms of structure and value. And all employees were invited to test the systems, then fill out questionnaires. "I know more about workstations than I care to know," says Sherrie Kishbaugh, marketing-operations manager, who later sat on the committee that tested 10 different chairs. The winner, she notes, was also one of the most expensive candidates. In terms of other input, employee Mike Jones says in November he visited Summit East, where Kearney sought his opinion on the best color for the wall fencing in the smoking area. "I didn't care, but I thought it was interesting that he asked," Jones notes.
To be sure, while employees are a big part of the equation, Summit East isn't as much about them as Kearney sometimes says. He sees a much bigger picture, or at least one that's coming into focus. It's too risky, he knows, to wait until he can make out its exact shape. So Summit East, for all the expense and hard work that have gone into it -- to keep it on budget, Kearney switched the masonry veneer, reconfigured the air-conditioning system, and redesigned the roof -- really just embodies his best guess about what he needs to do to withstand what he believes the future holds. He hasn't spent all that money just because he wants employees to hang around or even because he wants to see his beloved Tallahassee take its rightful place beside RaleighDurham, N.C., as a hotbed of fast-growing technology companies. He's expecting something more from Summit East. Much more.
Kearney has seen the future, and, frankly, as far as Mainline goes, it stinks. The company he's run for the last 10 years couldn't even survive for the next 5.
That much he's sure of. So while he talks up "synergy" and "connectivity" as vital elements of why he's building Summit East, the actual impulse driving him is much more primitive: fear of the unknown. He projects unshakable certainty because he's up against utter uncertainty. And he knows it. "Obviously, a lot of critics will tell you it will be hard or impossible to do something like this," he says. "You can't listen to what everybody tells you. You've got to have patience, faith, and confidence."
He pauses, then adds in a near whisper, "People just aren't believers."
"If local people don't get it, we'll bring in the companies from afar."
Kay Stephenson, who calls Summit East "a wonderful idea," ranks as a nonbeliever. In late 1998 the cofounder and president of Datamaxx Applied Technologies Inc. was shopping around for new office space to accommodate her software company's phenomenal growth. In 1999 its sales rose to $12.5 million, up from $4.4 million the year before. Stephenson is now building a 33,000-square-foot facility -- not at Summit East but at Southwood, the competing development across town, which includes 450 acres zoned for commercial use. "I just felt like if anybody could pull this off, they could," she says, speaking of Arvida.
And it helped that Arvida gave her "an unbelievable deal" while Kearney "wouldn't negotiate on price," says Stephenson, who ended up paying $376,000 for 3.76 acres, as opposed to the $600,000 Kearney demanded. "We had really hoped to attract Kay," says Mainline CFO Ennis, "but it would have been difficult for us to match their price." Summit East's prices also alienated Mike Sheridan, who this year has been looking for 50,000 square feet for his company, a third-party administrator of insurance benefits that is growing by nearly 15% a year. "Rick has not been able to translate how much he wants for the property into the value-added he's offering," says Sheridan, chairman of Fringe Benefits Management Co. "I'm not 100% sure he's going to pull it off."
Summit East is, after all, merely "vaporware," as Don Rosenkoetter puts it. That hasn't stopped him from signing on, however. Others have looked at the Summit East site map, but Rosenkoetter, CEO and president of One WebPlace Inc., went further. He actually chose a Monopoly-size square on which to build a 54,000-square-foot headquarters for his start-up, which makes E-commerce software. The 55-employee company, which has been based in Albany, Ga., expects to move in come April 2001.
"It's a wonderful environment for a nerd workaholic," says Rosenkoetter, who admits that his construction experience has been limited to sand castles and airplane models. Still, he knows what he'd like to see as part of the new headquarters: an exercise room, a sauna, showers, an outdoor basketball court, and a media room so "employees can watch our commercial on the Super Bowl," he cracks.
The company may be able to afford such a premium TV spot, given what it's spending on the new building. Kearney is actually financing the construction, then leasing the finished product to the start-up, which will have to pay for any internal modifications. "Unless we do a little bit to facilitate them coming here, there will never be a first," Kearney has said. There's already a second. Glen Davidson, owner and president of PAT LiVE -- the only division of ATG Technologies, a three-time Inc. 500 company -- says that in February he decided to build the headquarters for his $12-million technology-service company at Summit East, against the advice of his own accountants. "They said it was too expensive," he recalls. "But you've got to spend your money on something, so why not have a nice place to work at?"
If that philosophy sounds eerily compatible with Kearney's, that may be because Davidson meets with Kearney and six other CEOs once a month as part of a peer group. "He did the sales pitch on me. I got to thinking about what Rick preaches hard on -- the retainment of our people -- and I said, 'Heck, let's do it,' " Davidson says. "I've made a lot of decisions in my life without looking at the analytical side of it."
As far as Kearney's concerned, the analysis that led him to build Summit East remains solid, no matter how soft local reaction has been. To fill up the 136,000 square feet of office space that's part of Phase I of the development, he decided at the end of last year to launch an incubator. He set about raising $50 million to back a dozen or so high-tech start-ups, which are expected to move in with Summit East companies. He's setting aside 2,000 square feet of space in his own building for just such a start-up tenant. And he's already had interest in the incubator from corporate supporters, including IBM and Sprint. "If the people locally don't get it, we'll just bring the companies in from afar," Kearney reasons. David Wimberly, whose company, First Financial Group LLC, serves as adviser to the Summit East Technology Fund LP, says that "this whole concept is just a real brainy concept. Rick is a real genius at coming up with ideas."
But as Kearney sees it, he never had any choice. Mainline, he's convinced, will have to radically change over the next five years -- at least as a peddler of mainframes, machines whose prices are dropping 30% a year. "Five years from now," Kearney says, "we will not be selling mainframes and making a profit. I just don't know what business we'll be in." He adds: "There will be big winners and big losers in the next five years. Everything will be reevaluated in terms of whether it can be done differently through electronics. The world as we know it is going to change. We're all at risk."
Clearly he sees Mainline playing a role in E-commerce, helping integrate and facilitate new E-business partnerships. This year he's aiming for 5% to 10% of revenues to come from the company's E-commerce efforts. That's why he acquired a local $1.1 million Web-design company last September and launched a Korean-based E-commerce consulting division in January. That's why he took it upon himself to build Summit East rather than hire a developer -- because a CEO needs to know more than ever before. Furthermore, "put up a four-wall building downtown, and you are not going to survive," he says. Scott Maddox, the supportive mayor of Tallahassee, says that Summit East represents the kind of "bold bet" that cities need to take. "If you act in a traditional governmental fashion, you will miss the boat in the Information Age," says the jeans-clad 32-year-old mayor.
"What we're doing is creating a friendly environment for companies that want to participate in the transformation of this marketplace," Kearney explains. "You have to have fertile, tilled soil for wherever the seeds land. You have to be ready for whatever comes next." Tilting forward in his office chair, he unwinds the phone cord from the receiver, preparing to plug it back into its jack. "We don't know what half the changes are going to be," he says softly. "But we've got the fiber-optic cables in the ground, and we're ready."
Joshua Hyatt is a senior editor at Inc.
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