Create Jobs, Eliminate Waste, Preserve Value
The bronze eagle on Ken Hendricks's conference room table shares more with its owner than boundless patriotism. Captured in flight, the bird scours the earth with fierce eyes, talons extended to seize its prize. So Hendricks surveys the landscape, spying opportunities where others see nothing. He sees. He swoops.
It is a raw September morning in Beloit, Wisconsin; from the conference room window I watch canoes scud across the Rock River in the rain. Hendricks, 65, sits near his avian counterpart and scans Forbes magazine's list of the 400 richest Americans, fresh from the Web. At No. 107, with a personal wealth estimated at $2.6 billion, Hendricks has moved up 100 places since 2005, and we are looking for big names he's beat out (last year Oprah memorably ate his dust). "Two point six billion," says Hendricks, shaking his head. Then he chuckles. "It's not even real," continues the CEO, chairman, and sole owner of ABC Supply. "The money doesn't mean a damn thing."
From many people that sentiment would ring hollow. But not from Hendricks. While it would be disingenuous to claim he is still the same dirt-under-the-fingernails roofer who dropped out of high school in 1959, Hendricks remains within spitting distance of his psychic and geographic roots. Born in the town of Janesville, just north of Beloit, he lives in a 3,200-square-foot house, drives a mud-spattered Jeep Cherokee, and answers his own phone--every 10 minutes or so. The night before publication of the 400-richest list, the billionaire treated me to a Stump Burger at Skip's Friendly Village, the neighborhood tavern where he and his wife, Diane, eat several times a week. ("Treat" isn't quite accurate: It was two-for-one burger night so technically I ate free.) He is also fervidly antielitist. If the Forbes list had yearbook-style categories, Hendricks would be voted Least Likely to Attend Davos.
It's not that Hendricks doesn't enjoy being rich. But the mantle of tycoondom weighs heavy on a man who identifies intensely with the workers who built ABC into the nation's largest wholesale distributor of roofing, siding, and gutters. In Hendricks's worldview there are two unalloyed blessings: family and a good day's work for a good day's pay. "My whole life is about trying to treat the working man fairly and give him a good opportunity," he had said the day before while driving me past the packed parking lot at one of his plants. "If you've got a job you have pride. You can dream. You can go home and talk about your kids going to college."
It is Hendricks's obsession with jobs that has brought me to Beloit, a pretty, well-kept city equidistant from Chicago and Milwaukee. We spoke for the first time in July when I was working on an article about former No. 1 companies on the Inc. 500. Having covered the requisite where-are-they-now territory, I had started to make concluding noises when Hendricks broke in with, "Hey, this is kind of a neat story you might want to hear." He went on to describe his crusade to restore 3,500 jobs lost in the bankruptcy of Beloit's major employer.
The plot in précis: The Beloit Corp., the world's largest manufacturer of papermaking machines, had anchored Beloit's economy for 140 years. Family owners sold the business in 1986, and in 1999 the acquirer--Harnischfeger Industries, a public company based in Milwaukee--entered Chapter 11. The Beloit Corp. closed. About 1,500 workers were cut loose; area foundries and parts makers failed; caterers, restaurants, and other businesses suffered as well. Local estimates put job losses at 3,000 to 3,500--as much as 10 percent of Beloit's population.
The company's buildings, a million square feet of industrial and office space, sold at auction to an out-of-town investor, who let them lie largely fallow. So in 2001 the city manager called Hendricks and asked him to buy the property. Hendricks obliged, and in 2002 he began scouring the country for businesses to put inside the Beloit Corp. facilities and in other vacant buildings around town. In four years Hendricks has acquired or helped launch nearly a dozen companies and corralled them in Beloit. He has lured many others with attractive rents and custom modifications to buildings. Those businesses now employ about 1,400 people. Local companies started by Hendricks before the Beloit Corp.'s demise account for another 750 jobs.
A neat story indeed. Great entrepreneurs are like the Red King in Through the Looking Glass: They dream a dream and all around them people live it. Many Beloiters, it appeared, were now living in Hendricks's dream, a hopeful place of jobs and opportunity. I was particularly impressed by the variety of industries represented in the rescued plant. And I liked that his focus on growth companies didn't neglect blue-collar jobs in favor of white but created more of both, with an emphasis on opportunities for the socially and educationally disadvantaged. As Hendricks talked I wondered: Might this be a model for how U.S. industrial cities can thrive in a global service and information economy?
Within hours of meeting Hendricks in Beloit I learn not to use phrases like "global service and information economy." The most prosaic of visionaries, Hendricks thinks locally, acts locally, and is impatient with pointy-headed attempts to interpret what he does in a broad theoretical context. His goals are big but never lofty, and he pursues them one square foot and one human being at a time. His unit measure of achievement is a job. "There are three sayings I live by, and one of them is 'The tragedy of life is what dies inside a man while he lives," says Hendricks. "That's what losing a job is like. That's why we have to bring them back."
The other two sayings Hendricks lives by are "A ship in harbor is safe, but that's not what ships are for," and the concluding lines of Robert Frost's poem "The Road Not Taken." ("Two roads diverged in a wood, and II took the one less traveled byAnd that has made all the difference.") Framed versions of these quotes hang by his desk in an office that looks as if a Staples (NASDAQ:SPLS) exploded. Hendricks doesn't use a computer, and anyone wondering what 20 gigabytes made flesh looks like can satisfy his curiosity here. The desktop is blanketed with paper. A couch and two of four chairs are stacked with books, folders, and magazines, rendering the CEO's open-door policy a shade less hospitable. Other surfaces bristle with Native American artifacts, model planes, duck decoys, assorted gimcracks, and an unseemly number of awards ("We have closetsful," says Hendricks dismissively). There is shelf upon shelf upon shelf of family photos. Five of his seven children and his wife have executive positions with the company.
Hendricks believes almost anything can be salvaged. I ask him for reasons not to buy a company and he swats away the question.
Above one credenza hangs a steel model of an iconic photo of construction workers lunching on a beam suspended over New York City. The image commemorates both Hendricks's passion and his past. Like the men in the photo, he is a veteran of hard physical labor and meal breaks taken in high places.
The ABC Supply story is so American dreamy it sounds made for the inspirational-speaker circuit. Hendricks grew up hauling and laying shingles alongside his roofer father, leaving school in 11th grade to work two 40-hour-a-week jobs: one in a factory and one at an electric utility. In 1963 he launched a roofing business that seven years later would employ more than 500 workers. To keep those employees busy during harsh midwestern winters, he and his wife started hoovering up real estate, much of which they rehabilitated and sold. (Readers are invited to mentally add "and Diane" to half the sentences in this article. Hendricks compares the couple's business partnership to that of Home Depot (NYSE:HD) co-founders Bernie Marcus and Arthur Blank. "I'm the one out front, getting things started," says Hendricks. "Diane is the finisher, taking things down to the last detail.")
As a roofer doing business at military bases and Kmarts (NASDAQ:SHLD) across the country, Hendricks felt frustrated by the industry's patchy, wasteful supply chain. He also bridled at the disrespect distributors showed their customers. "It got me deep in my gut that hard-working, honest roofers like my father were treated like lowlifes," he says. "I wanted to change that image."
To Hendricks the solution was implicit in the problem: He would build the first national chain of roofing and siding distributors. So in 1982 Hendricks launched American Builders and Contractors Supply, marrying local market expertise and service with centralized support and cost efficiencies. Two years later, the company began its dizzying ascent of the Inc. 500, reaching No. 3 in 1984 and No. 2 in 1985, and planting its flag on the summit in 1986. Today the company has $3.1 billion in sales, more than 6,000 employees, and 345 stores.
About half of ABC's growth derives from the acquisition of struggling independent distributors; the rest is split between buying and improving successful distributors and starting new ones. Bankers, lawyers, suppliers, and friends convey news of companies whose owners have died or that are succumbing to high labor costs or poor management. Sometimes it's the owner who makes the call.
Hendricks believes almost anything can be salvaged. I ask him for reasons not to buy a business, and he swats away the question. "Wrong location? Move it," he says. "Wrong people? Replace 'em. Wrong industry? I don't believe it. I've got a company in the machine tools industry, and we're doing great. I'd happily go into the coal business. It's how you look at something and how it's managed that make the difference."
Hendricks is applying a similar philosophy to Beloit, which he treats like a 16-square-mile fixer-upper. We are touring the town in his Jeep, with its Bush/Cheney sticker on the bumper and an Ann Coulter book on the back seat. Hendricks owns five million square feet in the area and is constantly gobbling more. (He manages real estate through Hendricks Development Group, a company not affiliated with ABC.) We pass property after property that he has bought and refurbished: an abandoned pump station turned visitor's center, an old Catholic high school that now houses the local Head Start program. Every so often he indicates a point in the distance. "From here to there I own everything," he will say.
He's in fine eat-the-rich fettle. "To hell with the executives. The workers are the ones who built this community."
Hendricks's history in Beloit is more complicated than one might think, given his love of restoring things and the town's obvious need for restoration. ABC's rise roughly coincides with the decline of this racially mixed city of 35,000. Once a thriving industrial center, Beloit began to leak manufacturing jobs in the late 1980s. A couple of nasty crimes tarnished its image; physical and social infrastructures frayed.
Despite the city's troubles, Hendricks's early forays into local development met with some hostility. His real estate buys in minority neighborhoods--at one point in the '70s he and Diane owned about 100 houses in such areas--earned him the epithet slumlord. Those charges have dissipated, but innuendo occasionally comes back like reflux. At a recent United Way event, Hendricks says, a woman "came up to me and shook her finger in my face and said, 'I know how you made your money. You're not such a hotshot.' But the people around us immediately attacked her. They said, 'How can you say that? Don't you know what he's done for us?"
Hendricks still attracts ire today--not surprising; he's an unelected private citizen with strong opinions and the resources to get his way. Some people take angry issue with his projects--most notably a plan to move the police station, library, and other city services from the business district to a largely vacant mall he owns half a mile away. A number of business owners, in particular, worry that the exodus will sap vitality from downtown. "It's a very small sliver," says William Barth, editor in chief of the Beloit Daily News. "But you do hear the occasional comment, 'Why don't we just rename it Hendricksville?"
Hendricks's reputation started to change in 1993, when he pulled off his first local coup de théâtre. Like almost everything else related to Beloit's revival, it involved the waterfront. Leaders here have long viewed the Rock River as key to luring businesses and people; in 1988 they formed a civic development organization called Beloit 2000 (now Beloit 2020) and cleared dilapidated bars, bowling alleys, and gas stations from the river's banks. In their stead, the group built a park replete with running paths, playgrounds, and paddleboats. The new waterfront is the first thing visitors see upon entering town. Green and vibrant, it practically begs you to stop and take a stroll.
But across the road from the river, a monstrosity loomed--the rotting remains of Fairbanks Morse, a maker of diesel engines that at its peak employed more than 5,000 people. Over 50 years, the company's Beloit operations had dwindled until two-thirds of the 120-acre campus sat vacant--a brooding eyesore of colossal proportions. Hendricks bought the property. And rather than demolish it, he transformed the buildings into the castle-on-a-hill that is now ABC's headquarters.
Ask almost anyone in town what established Ken Hendricks in Beloit, and they cite the resurrection of Fairbanks Morse. That act also introduced the city to his doctrine of preservation and unearthing buried value, which has guided much of Beloit's recovery. Gary Grabowski, executive director of the Beloit Foundation, a local philanthropic organization, remembers driving past the Fairbanks Morse and thinking, This has got to go. "What makes Ken Hendricks Ken Hendricks," Grabowski says, "is that he stood on the roof and said, 'My God, look at that view! Why would you destroy this?"
Beloit Ironworks, the old Beloit Corp. property rehabilitated and renamed by Hendricks, isn't just a boon to workers present. It is also a memorial to workers past. The pale-brick and metal buildings are swathed in massive murals, mostly black-and-white photos of real workers and scenes from the plant's glory days blown up and reproduced on vinyl. An old man in a tatty sweater stares wistfully into the distance; beside him are a cocky-looking fellow in a cloth cap and other faces captured generations ago. Panoramic scenes from the old plant's interior cover entire walls. At night, when lights shine down through colored glass panels near the roof, those walls seem shorn away. Viewing the building from a parking lot across the river, I imagine I am gazing at an operational factory floor, albeit one with eerily immobile workers.
Interrupted every few minutes by the cascading trill of his cell phone, Hendricks is giving me the grand overview. "The photos are people who actually worked here--not the owners, not the executives. To hell with the executives," says Hendricks, who is in fine eat-the-rich fettle. "The workers are the ones who built this community, paid taxes, built the roads and schools. I take people on tours of the building and they get tears in their eyes. It reconnects them, gives them their history."
There is no good time for the implosion of a major employer. But at least the bankruptcy of the Beloit Corp. occurred when Hendricks had leisure to devote to the problem. In 1998, he had hired David Luck, former president and CEO of Bridgestone/Firestone Retail Operations, to be president of ABC Supply. That allowed Hendricks to, as he says, "do my entrepreneur thing." So while Luck embarked on a plan to take ABC to $5 billion by 2009, Hendricks was able to fling himself at the Beloit Corp. project--body, soul, and canyon-deep pockets.
Confronting 35 acres of decaying buildings and 3,500 out-of-work people, he applied his trademark six-word formula: create jobs, eliminate waste, preserve value. His first act after buying the property was to persuade Metso, the Scandinavian papermaking company that had acquired Beloit Corp.'s intellectual property, not to retreat to the land of the Vikings with its spoils. He offered to construct a new building to Metso's specifications in Beloit's industrial park and lease it on generous terms if the business would stay. Five months later the 80,000-square-foot facility was ready, a speed record that won Hendricks an award from the governor. The feat retained 165 engineering jobs in the community.
Hendricks then commenced structural rehabilitation, transforming the old campus into sleek, exposed-brick offices and bountifully appointed manufacturing space. Simultaneously, he began prospecting for businesses to fill it. It takes a village to raise a village--Hendricks is by no means one-man-banding the revival of Beloit, which has dozens of smart and deeply engaged civic leaders. Still, Beloit Ironworks houses 17 companies, all of them there at the behest of Ken Hendricks.
Some Ironworks inhabitants are tenants, lured by attractive rents. Others are companies Hendricks bought and moved, such as Specialty Automation, a maker of robotic machines for the automobile industry. Two companies in the building are pure start-ups. Another, Stainless Steel Tank, predates Hendricks's purchase of the site, having leased a building from Beloit Corp. before its demise. That company, which makes fluid-carrying tanks that ride on trucks, was financially wobbly when Hendricks bought it and restored operations, preserving 80 jobs and creating another 60.
Sam Popa's company took a more serendipitous route to the Ironworks. Popa, a 41-year-old Romanian immigrant, begins his tale as we are removing our safety goggles in a blessedly silent room above his cacophonous factory floor. It is an entrepreneurial story inside an entrepreneurial story: two neophytes' humble start-up sprouting within a veteran's ambitious vision.
After moving to the United States in the early '80s, Popa worked 16 years for a fabricator of aluminum ladders in Franklin Park, Illinois. Then management thumbed down his proposal to diversify into other products. Frustrated, Popa flew to Japan, where he used his savings of $400,000 to buy all the machinery in an abandoned aluminum-extrusion factory. "I said, 'Okay, dismantle this thing and ship it to the United States," says Popa. "Only I didn't have a ship-to address. The only building we could find that could fit all this equipment was in Beloit, Wisconsin."
Hendricks believes you can tell what people value by what they discard. On Ken and Diane's first date, he accosted a departing restaurant patron to request the uneaten half of his sandwich.
So Popa and Darius Szczekocki, who had become his business partner, stowed the machines in a bay of Beloit Ironworks while waiting out construction of a plant in Kirkland, Illinois. It was 2003, and the Ironworks buildings were still in chaos. The partners wanted to use the facilities for just six months, for maintenance and repairs. "Then one day as we were unloading the containers a guy comes by and says, 'What's all this?" Popa recalls. "We said it does aluminum extrusion. He says, 'What is that?' We explained. He said, 'How many jobs will you have?' We said a couple hundred.
"He came back later and said, 'My name is Ken Hendricks and I own the building. I want to reanchor this complex. I want something that's going to be big, that's going to create jobs. I want you guys to stay."
Hendricks offered to buy 70 percent of the business for $5 million and sealed the deal with a handshake. He made $150,000 worth of modifications to the building, digging 18-foot-deep foundations to support the 200-ton extruder, which resembles an enormous Play-Doh machine. In 2005, the three partners attended a machinery auction in Ohio. Hendricks bought nearly every lot and launched an Ohio company, which Szczekocki runs. American Aluminum Extrusion, in Beloit, and American Aluminum Extrusions of Ohio have combined sales of $85 million.
The strangest new business in the Ironworks is undoubtedly American Industrial Art. Its provenance is vintage Hendricks. When he bought the Beloit Corp. property, the entrepreneur found nearly half a million patterns--wooden molds, of assorted shapes and sizes, used to make machine parts. A bankruptcy judge paid him $35,000 to haul this trove to the dump. Instead, Hendricks called on Jack De Munnik, an old friend and onetime artist at advertising agency Leo Burnett in Chicago. Like the king in the Rumpelstiltskin tale, Hendricks presented his protégé with a mountain of cheap material and challenged him to spin it into gold.
De Munnik started spinning. Preserving the shape and patina of each pattern, he assembled the pieces into tables, clocks, sculptures, and wall hangings of fabulous beasts he called Machinas. "They kind of build themselves once you start playing with the parts," says De Munnik, leading me around an otherworldly gallery suffused with low light and ambient music. "You see a wing, then you see a face, then a leg. Or you can do it the other way. I decided I wanted a Jurassic turtle and went looking for the shapes and parts."
The works of art, many priced in the thousands of dollars, don't have an obvious market in Beloit, but Hendricks expects interest from corporate buyers and affluent consumers once word gets out. Bank of America (NYSE:BAC) bought five pieces this year--a nod, Hendricks says, to its industrial customers. "If we made enough of these we could haul them out on a semi," says Hendricks, gesturing around the vast atticlike space where hundreds of thousands of forms await transformation. "We could take them to San Antonio, Santa Fe, Rodeo Drive, Merchandise Mart in Chicago. Those people have money and would appreciate the uniqueness.
"Even if we only got $50 apiece for them, 50 times 500,000 is $25 million," says Hendricks. "That would have taken the Beloit Corp. out of bankruptcy."
I love the pattern story because it richly illustrates another of Hendricks's favorite themes: You can tell what people value by what they discard. That belief is ingrained not only in the business, but also in the Hendricks clan. Perched on a stool at Skip's Friendly Village, Diane Hendricks tells me about her first date with Ken, during which he accosted a departing restaurant patron to request the uneaten half of his sandwich. Diane, who is an executive vice president at ABC and president of her own insurance company, then leans down the bar to ask three strangers if they want her leftover pizza.
On his visits to distributorships, Hendricks is forever astonished at how much waste he sees. Many businesses fail, he believes, because management doesn't value the right things. "Maybe somebody nicked a little bit of roof edging in a warehouse, and they say, 'Ahhh, it's scrap. Throw it away," says Hendricks. "Well that's $30 or $40, and at a 20 percent margin you've got to sell that five times before you're back to breaking even. You've got customers who are building a shed or something and they'll pay 80 percent for that."
To hammer home his point, Hendricks often drags bemused managers out to their own scrap heaps. If the day is windy, he'll pluck a $20 bill from his wallet and let a gust carry it away. Invariably the manager takes off after it. "He's running down the block to get it, and when he comes back I'll say, 'Was that pretty hard?" says Hendricks. "And he'll say, 'Yeah.' And I'll say, 'Just take this out of the trash and sell it to somebody and you've made $20."
If wasting building material is a crime in Hendricks's eyes, wasting people is a sin. Repeatedly he rails against "sick" cultures that don't nurture employees, or that simply discard workers as Beloit Corp. did. ABC, by contrast, invests $15 million each year (.5 percent of sales) in training and employee development and returns 51 percent of after-tax net income to the work force in bonuses. Close to half of the company's managers making an average of $100,000 or more started out as roof loaders, warehouse workers, or truck drivers.
Hendricks's anger over wasting people extends beyond business to society. Any injustice to the common man rankles. At a rally for a county sheriff's candidate he lambastes (to loud applause) political forces impeding his plan to expand services at a halfway house that he created from a vacant nursing home. "Why wouldn't you give these people every chance to make it?" he argues in frustration. Back at ABC, he rises suddenly from his chair and urges me out into the hall to view a print titled "Last Stop Before Home." The drawing depicts a flag-draped coffin deserted on a bench at a train depot. Hendricks is a rock-ribbed Republican and supporter of the Iraq War; his cheeks mottle as he laments public ingratitude for the sacrifices of soldiers.
It's as though he worries money will tarnish his regular-joe creds. So he is humble but not modest. He boasts that he has two company jets and then boasts harder that he rarely uses them.
Hendricks gets emotional one other time in our two days of conversations. He is showing me around the Pits, his nickname for the game preserve on which he lives. Constructed on the site of the gravel pit that rebuilt Chicago after the Great Fire, the Pits comprises 200 acres of land and 100 acres of water enclosed by an eight-foot chain-link fence. Although the grounds are roomy enough to host large functions--every week the Hendrickses invite 150 employees or community members to enjoy a cookout, fishing, or winter sports--the house itself is modest.
A bronze statue of a Native American, originally on display at Gene Autry's ranch, stands at the bottom of the driveway; we are greeted at the door by two golden retrievers, Geronimo and Cochise. The interior, warm with gleaming cherry and buttery leather, is chock-a-block with Native American artifacts: pottery, rugs, and masks accrued during visits to tribes around the country. "I'm really into Indian culture because they got screwed," says Hendricks as we stand on the balcony overlooking a stretch of river. "We call them savages. You've seen Dances With Wolves, right? I've got it on tape. I renew that energy once every six months. It just pisses me off."
The publication of the Forbes list, not surprisingly, sets off another diatribe about the iniquities of the idle rich. Wearing his everyday uniform of jeans and ABC logoed shirt, Hendricks is holding forth on the corrupting power of easy wealth. "For a lot of guys it's found money," he says as he charges around the office trying to get Forbes to correct an erroneous figure on its website. "They have an invention and somebody hands them a check for $2 billion. So they go out and buy big houses and big boats. They spend their days out on the golf course. They can't spend it fast enough."
By contrast, Hendricks calls himself a "mature billionaire," meaning he built his fortune day by day, dollar by dollar. "It hasn't really affected my life," he says. "I don't even know I have it." Nevertheless, he seems sometimes to strain over his image. To put Ken Hendricks on the couch (a presumption he will hate), it's as though he worries money will tarnish his regular-joe creds. How can people not doubt that a guy this rich is still just a guy? Hendricks's response to those doubts is somewhat disorienting: He is humble but not modest. So he boasts that he has two company jets and then boasts harder that he rarely uses them. He points out the luxurious amenities of his grounds while emphasizing the demureness of his house. Twenty years ago, when ABC was hovering under $200 million in revenue, Hendricks tooled around town in a Mercedes 450SL. He still owns a Mercedes but scarcely ever drives it. His wife confides that when she suggested he use it to ferry me around because the Jeep was too messy, he refused on the grounds that it would convey a misleading impression.
The entrepreneur's aversion to playing among the rich and powerful is part of what keeps him in Beloit. That's not to say his focus is purely parochial. Hendricks owns companies all around the United States, as well as in Brazil, Canada, China, Germany, India, and Scotland. And his grand plans are grand indeed: He has a concrete strategy to improve the transportation infrastructure of the Midwest. Toward that end he has acquired a barge company on the Mississippi and is negotiating for three others. He is looking to buy a railroad.
But Hendricks has no yen to follow the likes of Bill Gates and George Soros onto the world stage. There is still plenty to do in Beloit. In addition to the Ironworks project, he is restocking other parts of town with businesses, including a recycler of wooden pallets he's started with his son Kevin and a company that packages beverages in bacteria-free containers. Between them, Ken and Diane Hendricks serve on 17 local boards, including the board for the Hendricks Foundation, which benefits the people of Rock County. The pair are also the major supporters of the Beloit International Film Festival, an unlikely sounding event that attracted 4,000 attendees in 2006, its first year.
"It's not that everything that needs to be done in this town falls in Ken's lap," says Ron Nief, director of public affairs at Beloit College. "But everyone knows what he has done here and here and here. And I think people do ask themselves, 'What would Ken do in this situation?"
It's not a hard question to answer. Buy it. Preserve it. Make it strong. If possible make it beautiful. Most important, use it to generate jobs so that every parking lot at every business is full and no one who wants to work can reasonably claim, "I never had the chance."
Also, don't take up golf. That game is for rich folks.
Leigh Buchanan is an editor-at-large for Inc.