Building a Giant in the Heavy-Equipment Industry
Post Date: Feb 12 2015
"To be successful today, you've got to convince customers that you'll take care of them when they're down -- and you've got to walk the walk, you can't just talk it. You've got to prove it time and time again."
So says Ron Offutt, founder of RDO Equipment Co., one of the largest John Deere dealers in North America. He is also the founder of R.D. Offutt Company, the largest potato grower in the U.S.
For more than 45 years, Ron has been building an empire on lifelong relationships with agriculture and construction equipment customers by adhering to three simple principles: maintain a sense of core values, understand your stakeholders' ever-shifting needs and deliver the finest service. His family business grew steadily, got big, went public and then was taken private again, and the equipment side became a $2 billion business.
It all started along the North Dakota-Minnesota border in the metropolitan area of Fargo-Moorhead in 1968. Ron was farming in partnership with his father and renting equipment from a John Deere dealer in Casselton, North Dakota, when the dealer offered him the opportunity to buy the business.
From that initial purchase, Ron steadily acquired John Deere dealerships throughout the upper Midwest. RDO now operates in more than 100 locations across the U.S. and worldwide, with 90% domestic revenue growth over the past five years (13.9% compound annual growth rate) and nearly triple domestic operating income growth. RDO offers a wide array of construction and farming equipment for high-performance companies across the globe.
How did one dealership turn into a giant in the heavy equipment industry? With an intense focus on engaging employees and customers throughout their business.
From Private, to Public, to Private Again
A visit to RDO in late 2014 finds a workforce brimming with excitement about the company's heritage and its future. In the flagship Moorhead location, relics from the past -- classic tractors and other historical machinery -- are on display alongside cutting-edge farming equipment. In a daily storewide meeting, team members discuss the projects they are currently working on and exchange ideas, while managers motivate their employees with goals for that day, week and month.
Employees at the store are quick to say that the company is a "great place to work."
"This is a great industry to be in, and if you're going to be a part of it, we want you to choose us," says Jean Zimmerman, RDO's executive vice president of organizational development.
Zimmerman notes that the company's culture is guided by the principles of servant leadership, radical transparency, personal growth and, above all, trust.
As RDO grew throughout the 1970s, 80s and 90s, so did the enticement of taking this family-owned business public. In 1997, Ron issued an initial public offering on the New York Stock Exchange. In a booming economy, the decision seemed to be the right one. But almost immediately, things didn't turn out as planned.
"Very quickly I knew that I didn't like the public game, and I don't think my father did either. There was lots and lots of pressure to grow," says Christi Offutt, Ron's daughter and chairwoman and CEO of RDO. "But what I was learning was that the more pressure the team got to meet quarterly expectations, the worse the company was performing. We were moving away from talking about the customer, we were moving away from talking about the culture, and we were spending all of our time talking about meeting analyst expectations to keep the revenues growing."
Amid these frustrations, the board of directors chose Christi to become chief operating officer in 2001. Soon after that, the Offutt family took the company private again, where it has remained ever since. Christi stayed at the helm. Ron characterizes this time as the dividing point between what RDO originally was and what it is today.
"I think there are two cultures in the life of our business: the one that I started, and the one that Christi started," Ron says. "I was able to be successful in the business when I created a culture of tremendous loyalty on behalf of the employees who worked for me. We knew each other's families; we knew each other's personal strengths and weaknesses. As [the company] grew, that culture needed to change for the company to take the next step, which Christi brought to the house."
Shifting From a Transactional Business to a Solutions Provider
In the company's first phase, before Christi took over in 2001, RDO sold much more individual agricultural equipment. Farms were smaller then, and there were more of them.
"When I started, [RDO] was very much a transactional business -- sale by sale, customer by customer," Ron says. "Today it's more about being a solutions provider for your customer and helping that customer solve his or her problem."
In RDO's modern culture, top leaders at the company say they maintain their success internally and externally by adhering to a set of action-oriented core values for business operation. These values include collaborating with employees, building customers for life, creating opportunities and committing to doing what they say and playing to win. RDO prides itself on the principle "There are no secrets here."
"We've instilled and empowered our managers to understand what our core values are and how we operate with our stakeholders so they can make the right decision," says Chris Cooper, an executive vice president at RDO.
Keith Kreps, also an RDO executive vice president, says a culture of creativity and trust exists companywide, which fosters innovation and high levels of employee engagement. "When you don't feel like you're paralyzed by making the wrong decision that could affect your career or affect your job -- as long as you made an educated decision -- you really get people coming out with great ideas and a lot of creativity. They're willing to go out there and 'wow' our other employees and customers," Kreps says.
Toward True Engagement
In 2014, RDO worked with Gallup to move beyond employee satisfaction -- which focuses more on superficial company perks -- to true employee engagement, which is about fostering a deeper sense of connection to one's job and company. Now, 52% of RDO's employees are engaged, with 8.67 engaged employees for every one actively disengaged employee. Organizations that lead the world in employee engagement have 9.1 engaged employees to every disengaged employee, so these are "very encouraging early results," Zimmerman says.
Zimmerman credits these results to initiatives the company implemented over the past several years. Every employee now has an individual learning plan, and RDO spends 15% more on training than comparable-sized organizations. The company offers a 30-month management institute for its leaders. RDO leaders have also integrated engagement into their leadership approach and communication strategy, weaving it into their operations and day-to-day conversations.
"I truly believe that the initiatives we've developed to support our culture along with a strengths-based leadership approach leads to a more engaged workplace culture," Christi says.
Zimmerman agrees, emphasizing that the culture must promote hard work and RDO must be an enjoyable place to work. "We've taken steps of making this a place that attracts and keeps employees and attracts and keeps our customers," he says.
Because of RDO's persistent growth, the company is experiencing some growing pains. In part, this is the result of the breakneck pace of North Dakota's economy and the various challenges that come with operating in nine U.S. states. Business is booming so much that there are too many jobs and not enough people to fill them.
"We've got well over 2,000 employees, but we have opportunities to continue to grow," Cooper says. "We have close to 200 open positions that we're still trying to fill."
Christi mentions that there is plenty of competition for today's skilled labor pool: "We've recruited from everywhere -- Georgia, Florida, California, Alaska -- it's a continuous challenge."
Amid these challenges, RDO continues to redefine the business of equipment in the 21st century. The company's leaders say RDO is committed to finding cutting-edge solutions for its customers.
"I think you'll see less growth in the size of the machines," Ron says. "What you're going to see is more intelligent equipment, and that will increase productivity for the producer."
This kind of "precision agriculture" may keep RDO at the forefront of offering technological solutions to its customers, and the company sees further growth from its ventures in Russia, Ukraine, Mexico and Australia in the years to come. Already these international partnerships are providing solutions to a wide range of customers, even in troubled hot spots. RDO forecasts $360 million in international revenues in 2015, of which Russia and Ukraine factor into the mix.
Ryan Offutt, Ron's son and Christi's brother, runs RDO's Russia and Ukraine operations. As someone who represents the future of RDO and the path it will take in decades to come, he reflects on how what RDO means to customers in 2015. "We're a big part of our customers' lives, and they're dependent upon on our team members to deliver solutions to them every day," Ryan says. "Having a reliable partner is critical to their success."
Building a Giant in the Heavy-Equipment Industry - Gallup.com