Conversation Series: Dave Slott, TruGreen-ChemLawn

In the second of a new "Conversation" series in Lawn & Landscape magazine, Cindy Code, Group Publisher of the Lawn & Landscape Media Group, spent a morning with Dave Slott at the TruGreen-ChemLawn headquarters in Memphis, Tenn. These interviews are not designed to provide history or background of a company, but instead to examine how the people at the helm of uniquely successful companies have steered their firms into leaders in the professional lawn and landscape industry.

When Dave Slott, 38, graduated from Western Michigan University, he had plans to be a lawyer. But a part-time summer job as a spray technician in Kalamazoo, Mich., drastically changed his planned career path.

Fifteen years after dragging his first hose across a residential lawn, Slott was named president of TruGreen-ChemLawn, headquartered in Memphis, Tenn., following a rapid rise to the top of this mammoth firm. He replaced Don Karnes, an affable fixture in the lawn care industry, but still works side by side with the man who gave him his first management job.

In 1981, TruGreen itself represented less than $5 million in annual revenues and about 80 to 100 employees. Today, a number of acquisitions later, TruGreen-ChemLawn is an $800 million firm, with 280 profit centers and peak employment of 15,000. Of the 280 profit centers, 80 represent franchise locations while the rest are company-owned branches.

Today, the firm services more than three million customers systemwide commercial, interior plant care, residential. Its parent company, ServiceMaster, represents in excess of 6.5 million customers and more than $4 billion in earned revenue.

TruGreen-ChemLawn, a leader in many ways, often shuns the limelight, but in this exclusive interview with Lawn & Landscape magazine, Slott reveals insight into this industry giant.

Q. Describe your career and the events that landed you in this enviable position.
A. This (TruGreen) is the only job I’ve ever had. After graduating from Western Michigan University in 1980, I was preparing to go to law school and began working part-time at TruGreen in March of 1981. I was offered a $1,000 raise to stay.

I started as a sales representative, moved into a production specialist capacity and then became a branch manager. Next, I became a regional manager and then, ultimately, a zone vice president. From the ages 21-26, I went from a front-line sales representative and technician to a vice president.

In 1987, TruGreen was sold to Waste Management and I served in the same function for three years. When Waste Management and Service Master got together, I was still a division vice president overseeing about 60 percent of the company. In 1992, TruGreen bought ChemLawn, and in 1994, I was named executive vice president of operations running all the day to day functions for the company. In 1996, I was promoted to president.

Q. Who are your mentors?
A. Don Karnes, who I succeeded as president of TruGreen-ChemLawn. We’re very close friends. He and I have been through the wars together. He was my first regional manager. Don is the individual who took a chance on me as the youngest branch manager, at the time. We’ve basically worked together my whole career. I still report to Don, who is now the group president of lawn care and pest control for ServiceMaster.

Q. Are you an entrepreneur?
A. Yes, very much so. TruGreen was an up-start and we had to compete to survive. In the early years, it was very much about being entrepreneurial because the industry had no rules. We would believe that we created telemarketing based on survival.

I think a lot of the motivations we’ve had to grow the company have been entrepreneurial. We try to drive that at the lowest levels of the organization. We want people to be accountable and responsible. If you’re that, you need to be empowered. And, if you accomplish all that, you need to be rewarded. That’s the attitude by which we’ve grown the business.

Being an entrepreneur, and having come from the front line, all of our loyalties go back to the front line. The mistakes that we saw for ChemLawn with Ecolab and TruGreen with Waste Management were bloated overheads building a top heavy corporate structure that the branches couldn’t overcome. We’ve been very careful not to burden our branches with inordinate costs. We’re very responsible about our corporate overhead.

Q. How many regional managers work for TruGreen-ChemLawn?
A. Fifteen in three divisions East, Midwest and the South. There are 15 regions around the country representing about 15 to 20 branches; five regions per division.

We have very low turnover in the branch and regional ranks. Branch manager turnover is less than 10 percent. Region manager turnover is less than 5 percent. We haven’t had any division turnover.

We have a company philosophy: Consistency leads to predictability leads to profitability. And you can’t achieve that without continuity. On average, our branch and region management have in excess of 12 years industry experience. That allows us to push decisions further into the field. That’s been part of the philosophy and the success of the company.

Every acquisition we’ve ever completed resulted in representation in our management ranks. We have taken the attitude that new blood coming in keeps us fresh and creative. And the operating strategy at the branch level is a potpourri of every best idea any one of these companies ever had in lawn care. We assimilated all of those best practices and made a TruGreen-ChemLawn operating strategy that we believe has served us well.

Q. How do you take managers who were former rivals and competitors and turn them into company people?
A. That’s always a challenge. We’ve been very careful not to label anybody. We’re interested in providing the best services and treating our employees the best in the lawn care industry, regardless of lineage. If you have a good idea or best practice, we can use it to our advantage to better the whole. This is how the barriers are broken down.

We’re not interested in whether they have a TruGreen, ChemLawn, Barefoot or Orkin background, but in hiring the best people with the best ideas for the best positions. That’s not to say we’re all things to everybody. I need to be a realist to understand that certain competitive barriers will never be broken down, but I think that’s the exception, not the rule.

The management of this company has been on all sides of the acquisition table. I remember the anxiety of being acquired by another company. I think you try to have empathy for the people involved in an acquisition. You never forget what that was about; and we try to be sensitive to alleviating people’s fears.

Q. Were you directly responsible for the Barefoot and Orkin acquisitions?
A. We’re part of a conglomerate in ServiceMaster so I would say yes, but with a lot of help from our ServiceMaster parent. We did the models, made the recommendations and brought these acquisitions to the 1-yard line. ServiceMaster took it over the goal and scored the touchdown.

Q. How do you target companies for acquisition? What’s your strategy?
A. Acquisitions are about timing. The timing was right for the shareholders of Barefoot to benefit. Orkin wanted to channel their resources back into their core business and we happened to be there.

Barefoot was a public company. Their stock had deteriorated over the last several years, and we felt there was an opportunity. We felt we could offer a premium to the shareholders of Barefoot, and we were the logical choice to do it because 90 plus percent of their locations tucked nicely into ours. We were able to consolidate the two businesses together.

Orkin Lawn Care happened to be more heavily weighted in the South, which represented a nice step forward for us in those areas. I can’t speak for Orkin’s motivations, but it was common knowledge that their pest control business had struggled over the last few years, and they must have felt it was necessary to divest themselves of lawn care and plantscaping which was distracting them from their core business.

Q. What are your plans for Orkin’s plantscaping business?
A. We want to be responsible today by investing in businesses and stategies that will continue our growth momentum well into the future. We’re taking steps now to diversify our service lines. Interior plant care, which we got involved in two years ago, is starting to accomplish that. If you look back at lawn care seven years ago, observers viewed lawn care as a fragmented industry struggling to make money. Here we are seven years later with most of the companies we’re familiar with doing very well. That transformation has taken place over the last seven years. When you talk about interior plant care, you hear the same quote today, This is a fragmented industry, struggling to make money.

Q. Where will your vision pick up where Orkin left off?
A. We see the plantscaping as a growth vehicle for us with tremen dous synergies between the inside/outside marketing strategies.

Q. What about TruGreen-ChemLawn’s core business of lawn care? Is plantscaping going to distract you?
A. No, because we’re going to keep them separate. We’re going to have the plant care branches report up through our regional structure. As a rule, the complexity and sophistication of interior plant care warrants that we will run the majority of the branches on a stand-alone basis.

There will be some consolidation, but the lion’s share of the strategy will be to run stand alone branches. So, we will leverage our existing regional infrastructure, but not necessarily the branch infrastructure.

Q. What kind of growth projections do you have on the interior side?
A. Significant. When you leverage our 280 profit centers and the employees associated with that, we have a tremendous amount of opportunity. The commercial customers making the interior purchasing decisions are the same people making the exterior decisions. So as we cross-reference those lists between inside and outside, there’s a tremendous amount of opportunity.

Q. Explain your internal growth strategy.
A. To grow internally, we need to increase customer retention, expand the sales process, and add new service lines. We recognize that a company cannot sustain growth by acquisitions alone.

Q. Despite a lack of market saturation, a number of operators report that few new lawn care customers exist.
A. I don’t believe that. We’re the largest company and we would not be able to attain the revenue growth rates required of a publicly traded company if all we were doing was switching the same customers. I think we’re bringing do-it-yourselfers in; the demographics in any service industry support that. You have increasingly more time-poor households with more discretionary income to spend. We’re the benefactors of that phenomenon.

Q. What’s the average retention rate of customers at your various branches?
A. Commercial, in excess of 80 percent. Residentially, more than 75 percent.

Q. What’s your business mix?
A. We do about 20 percent commercial and 80 percent residential.

Q. How do your service offerings vary from region to region?
A. All the branches offer lawn care and tree and shrub care. Service offerings are regionally and agronomically set up. In the East, you may need lime, when it’s not needed in other parts of the country. So, there are regionally adjusted programs and beneficial services established for particular problems in certain areas of the country.

Add-ons include aeration, overseeding, grub control, lime, flea and tick control. We are not into landscaping to any great degree. We really have not employed that strategy; rather, we partner with companies who do that well. It seems to have worked best for us.

Q. Contractors and customers alike are searching for full-service providers in many respects. Won’t TruGreen-ChemLawn diversify further?
A. Never say never; however, we think we have enough opportunity with our core business. As we look at the penetration and maturity rates across the country, we think we have enough to keep us busy for many years to come.

Q. How much untapped lawn care business exists?
A. It differs from market to market. We anticipate the spray business is $2.5 to $3 billion, somewhere in that neighborhood. And a guesstimate is we’re 15 percent of our demographically selected residential sector. We have branches, on a comparison basis, where one out of three targeted demographic lawn care customers buys lawn care from us. We also have branches in which we’re less than 1 percent penetrated.

Q. How has TruGreen-ChemLawn been able to recognize growth when the residential market is considered so price conscious?
A. I’m pleased with our profitability. You have to remember that at the end of the day this is still a route business. Density makes you money. You have to have customers. Are there pockets of price sensitivity? Absolutely. But if you have the service, the productivity, the people, the systems and the resources to support the price, you’re going to get the business.

Are we the most expensive? No. Are we the least expensive? No. But I think we provide value for what our customers are paying. When I first started out, lawn care was magic. Over a 20-year span it turned from magic to assumed expectations. It used to be you could go up and down a block and people would be falling down in front of your truck. You could pick out the houses that had a service. Now, it’s a sea of green carpet. The second generation of consumers who grew up with lawn care have higher expectations.

Q. What about the commodity vs. service argument?
A. I have to believe that a $40,000 truck, a professionally trained, well-mannered person who has a career and is well-compensated makes a difference. That may not be the case for everybody, but I think in the greater majority, people want value. They want the results, they want the service. I think if you provide that, you’re going to win in the marketplace. It’s a price sensitive business; there’s no doubt about it. But if you can make a profit, provide a reasonable price to your consumers and provide added value, you’re going to gain customers.

Q. Is there a standard service model for your branches and franchises?
A. Our training program, called AdvantEDGE,® focuses on excellence developed through guidance and education. We have an elaborate training program for each front-line position in the company. We’ve spent millions on that. Personal development is equally as important to a life-long career as financial gain.

There is a standard training program for each branch location. On each regional staff we have a people services manager who is responsible for the recruiting, retention and training of all the employees at the branch level. We have decentralized that into the field. Our region manager supervises a mini corporate staff. So for each region, beyond just the 15 region managers, we have a commercial sales manager, an information services manger, a residential marketing manager, a people services manager and a technical manger. The majority of these leaders have come from within the ranks. We promote from within to the 90 plus percentile. We’re not afraid to go outside the company, but our first preference is to promote from within.

Q. With 15,000 employees, how do you instill your philosophies down the ranks?
A. That’s a challenge. Certainly it’s not the same as when we had 80 people. Our greatest strength is that we’re decentralized, and our greatest weakness is that we’re decentralized. That meaning we’re dependent on the talents of the branch management to instill the corporate philosophy in their employees day to day.

With 15,000 employees, I can set the tone, but I think I need to be pragmatic and realistic enough to understand that X percent of employees will never meet me; will have no idea who I am. I’d love to be able to sit down and have a discussion with them, but I’m dependent on the infrastructure of the management to carry the message. I think we have a strong culture that does a very good job of maintaining and promoting a consistent message throughout the organization even though we still can improve. Does the 15,000th person on the payroll have the company’s best interest at heart? We’d like to think so.

Q. What are your greatest successes at TruGreen-ChemLawn?
A. Certainly, the Barefoot acquisition and integration was a career defining moment for me. Another significant issue for me is the em-ployee retention in the management ranks. It’s very important to me that people feel like this is the place they want to be and maintain a career. I think our management turnover is a reflection of the fact that they enjoy working here. Not that that’s a Dave Slott success, but having been one of the key architects of TruGreen-ChemLawn’s growth over the last 18 years, that’s important to all of us.

We’ve also been able to provide our front-line personnel with personal, professional and financial growth to the degree that this past year we had several six-figure front-line employees.

Q. What are your strategic plans for the next five years?
A. We have a five-year strategic plan that we laid out three years ago. Diversification of the service line is one. Interior plant care is materializing as we speak with the Orkin acquisition. We achieved a solid number two status, however, we’re not number two in anything, so I don’t anticipate interior plant care being any different.

What’s on our minds is the successful diversification into the interior plant care business, improved customer retention which we are experiencing this year. Our cancel rate has improved because we’re investing a significant amount of money in the front-line people through better systems and incentives.

Over the next three years, I want to continue the momentum we were able to achieve under Don’s leadership the company is two times larger than it was three to four years ago. And it’s a bigger challenge to maintain those growth rates, but we have the committed, experienced people and strategies in place to be able to do that.

My goal is to achieve our five-year strategic plan objective, which calls for us to be a $1 billion company in the year 2000. We’re on track, if not headed to do that sooner.

Q. Are you a hands-on president?
A. I’m out in the field about three times a month. That’s the biggest disappointment I have, coming up the ranks the way I have, is that I don’t have as much time in the field. Time gets increasingly taken away from being visible to the front line.

Q. Is consolidation good or bad for the industry?
A. I think it’s a positive, however, everything is cyclical. In an industry with a few major players, what a great entrepreneurial climate for somebody to start something new. I would imagine you could see record numbers of new businesses in the next few years. Hopefully, it’s an opportunity for aggressive entrepreneurs. Although it’s a lot different to start-up today than 15 years ago.

The author is Group Publisher of Lawn & Landscape magazine.