• Conservative Values & Practices Build G.W. Berkheimer Co.

    Oct. 15, 2012
    Hard work built and sustained the steel mills of Gary, IN, in the early 20th century. It was this culture – and this city – from which G.W. Berkheimer Co. emerged as an HVACR wholesale distributor. And while the distributor of 2012 may look very different than the company that first began as a wholesaler in 1937, the work ethic that was forged in the steel mills remains as strong as ever.

    G.W. Berkheimer Co. began as a stove repair company, and indeed the 1920 Gary telephone book includes a listing for the G.W. Berkheimer Stove Company. Over the ensuing decades, the company has evolved into the G.W. Berkheimer Co. of today, a regional distributor with 27 branches in Illinois, Indiana and Kentucky including six that operate in Indiana as a subsidiary under the South Central Company name.

    Brian Cobble, president of G.W. Berkheimer, says it was the “conservative values and practices” of the founders that contributed to the company’s growth, while the second generation of managers built upon those values, which since have been carried on by the third generation. Cobble, who becomes the president of HARDI at its annual convention in October, says the company’s conservative approach to business extends to how it views itself in the market. They don’t look to call attention to themselves or seek out publicity. They prefer to focus on what they do for their customers each and every day.

    While Berkheimer has retained its conservative approach to business, they have not been afraid of growth either. When worthwhile opportunities have arisen, Berkheimer’s management has not hesitated to pursue them. Over the years, the company has added locations as their delivery trucks began venturing beyond their traditional market area. “We’ve essentially played leapfrog,” Cobble says of Berkheimer’s expansion since the 1950s.

    In 2006, Berkheimer deviated a bit from the traditional “one branch at a time” internal growth strategy and purchased the South Central Company headquartered in Columbus, IN. The acquisition added five locations throughout Indiana, including geographic markets where Berkheimer did not yet have a presence. The addition also brought several key product lines that have helped Berkheimer to further diversify its portfolio. However, even more important than the addition of locations and products, South Central’s 50-year-plus company history and values were a perfect complement to Berkheimer’s culture. Today, South Central’s six locations operate as a stand alone subsidiary of Berkheimer.

    Doing business this way has fostered a great deal of stability, which has endeared the company to its employees, its customers and its vendors. They appreciate the “old school” values of Berkheimer because they know that this company will be there for them. “We like the tortoise model,” Cobble says. “Slow, steady, conservative,” adds Dean Cobble, Berkheimer’s executive vice president and Brian’s brother.

    Chris Huser of Lamping Huser Heating & Cooling in Indianapolis has been working with Berkheimer at its Indianapolis location for as long as he’s been in the HVAC business. When he started his business in 1990, Berkheimer was there to support him. “I feel like I’m working with friends,” he says of his relationship with Berkheimer. “They go out of their way to service me.” For Huser, it’s all about the consistent quality and service that keeps him a loyal customer. “I probably do about 95 percent of my business with Berkheimer. I could shop around for other prices, but why bother? They’ve been very good to me over the years.”

    Empowered Branches

    Brian Cobble says Berkheimer empowers its branches to work with the company’s area managers in order to facilitate faster and smarter decision making that best serves its markets and its customers. With such diversity of branches that includes locations in and around the Chicago area, as well as some of the more rural areas of

    Indiana, it made no sense to have a one-size-fits-all approach to how some of the branches operate. Dean says creating more freedom for the branches is a break from the past and represented a fairly significant step to take given the conservative nature of the company.

    In the past, many decisions involving local branch operations were made from its headquarters, now in Portage, IN. “We had pretty tight control, and few decisions were made at the branches that didn’t first pass through the doors of headquarters,” Brian recalls. To be more responsive in the market, they moved to a structure in which the branches report to area managers. “As the company grew and added locations, we just couldn’t continue having everything pass through a decision-making funnel here,” he says.

    Establishing three regions within Berkheimer, with area managers responsible for each region, has achieved its intended goal. “They are much closer to what is happening in the field and with our customers. Consequently, they’ve been able to respond more quickly and make much better decisions based on more timely market information,” Brian says.

    Berkheimer has also tried to encourage a certain level of entrepreneurship on the part of branch managers, Dean adds, because the markets vary widely, and the managers are in the best position to know their customers. “Gary and Valparaiso are well-positioned to service the steel mills of northwest Indiana. That is a completely different business model than what’s done in Arlington Heights and suburban Chicago. And that’s substantially different from how our branch team approaches their market in Lafayette, Indiana,” he says.

    All of Berkheimer’s branch managers are home-grown and have worked their way up the ladder “rung by rung, position by position, to their current levels of leadership,” according to Dean. “They have tremendous credibility in their facilities and in their markets with their customers.”

    “Customer Relationships Are Huge”

    While there is more decision-making authority at the local level, Berkheimer still strives for an exceptional and consistent level of customer service at all of its branches. Some customers in the Chicago area may do business with three or four different Berkheimer locations, based on where they happen to be working that day, so it’s important to ensure that they always have a positive experience wherever they are, Dean says.

    Berkheimer employees know that the bar is set very high when it comes to customer service. Jill Steele, assistant branch manager at Berkheimer’s location in Lombard, IL, says the key is to understand the needs of the individual customer. Fast and accurate service is a given, she says, but follow-through and technical knowledge are also very important, and that’s something they may not always experience with every location of a competing distributor. “We make sure that our employees are really knowledgeable,” Steele says. “We frequently see customers who are relatively new to the field, so we often handle a lot of technical questions. We always try to be there for them.”

    As a 16-year employee of Berkheimer, Steele has worked her way up from filing clerk to assistant branch manager of one of Berkheimer’s larger locations. She has always been impressed with the amount of training that management provides employees. “They’re great with training,” she says. “They would never deny any beneficial training that you may want or need.”

    Brian says Berkheimer has always placed a particularly strong emphasis on technical training for the inside sales teams within its branches. “The inside sales teams are normally the people that contractors have the most contact with on a day-to-day basis, so there is a certain consistency that customers expect at the counter at Berkheimer,” he says. Product and customer service training across the company also help to promote a consistent Berkheimer experience for customers regardless of which location they visit.

    While training can help employees better understand products and improve their technical knowledge, Dave Prokof, branch manager of Berkheimer’s Arlington Heights location, adds that Berkheimer employees also take great pride in their work and who they work for. “I just love working for the company,” says Prokof, who joined the company in 1979 in the warehouse. He became manager in 2001.

    Employees develop relationships with customers that create strong bonds of trust, he says. “Relationships are huge – it’s where you get most of your business from, and it’s how you sell a product.” How Berkheimer responds to problems that arise strengthens those customer relationships. “We’ll take care of what needs to be done. Why do we sell so much? It’s how you handle issues that come up,” Prokof says. “Anybody can sell anything if everything is going good. When there are problems – and when you fix them – that’s when you really gain their trust.”

    Ray Brooks, a transfer supervisor in the Indianapolis branch, is another longtime employee who has been with Berkheimer full-time since 1987, after first working there part-time during college. “We talk about customer service all the time. Without customers, you don’t have a business. You don’t have a livelihood. You’ve got to take care of the customers,” he says.

    Mike Lovings, owner of Lovings Heating & Cooling in Portage, IN, says he has developed a strong relationship with Berkheimer in the more than 31 years that he has been in business.

    For all of that time, he’s relied on Berkheimer’s locations in Gary and Valparaiso to support him. “They’re a great bunch of people,” he says.

    Lovings considers himself a “troubleshooter” who is able to solve customers’ problems that other contractors can’t figure out. When he needs help, he says there’s always someone at Berkheimer who has certain training or is a specialist in a specific area of HVAC. He gets advice that he can trust and that he can then put into practice on the job.

    Berkheimer has brought in one or more of its vendors, such as ATCO-Gary, a manufacturer of sheet metal, to visit with customers to help them work out solutions. Dave Strilich, an owner and managing partner of ATCO-Gary, says this approach sets Berkheimer apart from other distributors because they invest in their customers’ success. “Their intent is to help them when they can,” Strilich says of Berkheimer. “They really know their industry and they spend a lot of time developing the relationship between themselves and their customers, and they allow us as a manufacturer to participate in that process.”

    Treating Employees Like Family

    Treating the customer right is an extension of how Berkheimer has treated its employees, Brooks says. “They’ve always been fair,” he says. Now that Brooks is in management, he works to extend those very same principles to his employees.

    Employees also say there is no us-versus-them mentality that exists between employees and the management team. “The management team has always made it a point to get to know us,” Steele says. “Whether it’s a visit to the branch or at the annual sales meeting, there’s a sense that we’re all in this together.” Steele characterizes it as treating you like a family member rather than as an employee. Adds Brooks: “You can talk to anybody in the company. Nobody is unreachable.”

    Because the company operates an Employee Stock Ownership Plan, Berkheimer employees are motivated to think like owners and not just as order takers. “The opportunity to participate in the success of Berkheimer has had an enormous cultural impact on our company,” Dean says. “It’s a key part of the employee benefit platform. Due to the long-term nature of the benefit, it helps keep our employee turnover relatively low.” The ESOP was put into place in the early 1980s. Today, Berkheimer’s ESOP remains the single largest shareholder of Berkheimer, having approximately 350 participants.

    Brian says they have never tried to overcomplicate what they want to accomplish. “The way we look at this business and the role that we, as a wholesale-distributor, play is pretty simple. It’s not rocket science,” he says. “At the end of the day, it’s all about having local inventory accessible to the contractor and backed by a knowledgeable team of operations and sales representatives that know what to do with the products.”

    Depth & Breadth of Inventory Are Key

    The Cobbles say having a significant breadth and depth of inventory has been essential to the company’s success over the years. Even during the recent recession, Berkheimer did not cut its way to profitability at the expense of inventory. The company maintained its commitment to inventory availability and, using its inventory software system, made sure that it had more of what its customers wanted. “Many companies cut their inventory dramatically to raise cash, but we never did that,” Brian says. “Our software system calculated necessary inventory levels based on sales activity and that’s what we followed to drive those types of decisions.”

    Manufacturers, too, appreciate Berkheimer’s commitment to inventory. “They maintain very strong inventory positions, so they are able to provide the parts when and where the contractors need them, which is their primary fundamental role,” says Brent Vick, director of sales for Honeywell’s North American Residential Trade business.

    Operating in diversified markets has helped Berkheimer during the years. The company serves the residential, commercial and industrial markets. While they are not all equal, each represents an important component of its business. Within each of those markets, Berkheimer is also active in new construction and service replacement. Having their eggs in these various baskets has helped to balance the business and keep it going when one or the other of those markets softens.

    Since 1941, Berkheimer has built a reputation for its product catalog, which provides a unique competitive advantage over other distributors in their market areas. You can go to any job site in Berkheimer’s market area and will probably see its dog-eared catalog on the dashboard of a contractor’s truck. Today, Berkheimer also produces smaller, specialized catalogs that are dedicated to specific markets, as another way to provide customers with exactly what they may be looking for from the distributor.

    Because new HVACR products are continually coming onto the market, suppliers count on distributors like Berkheimer to have them on the shelves and ready for their customers. Honey-well points to Berkheimer as one of the leading “pioneer” distributors that brings in new products and then backs them up with solid technical knowledge that benefits customers. “Berkheimer has a reputation of doing a very good job in that regard,” Vick says. “They will quickly accept new product and understand where the opportunity is in their marketplace to move quickly to get the right inventory in their organization to make it available to their contractors.”

    Long-Term Partnerships with Suppliers

    A major component of having inventory with a breadth and depth of products is having strong relationships with manufacturers. As Brian puts it, “Without a good manufacturer relationship, we don’t have the right products to sell.” So Berkheimer’s executive team spends a lot of time cultivating those relationships to ensure that the strong partnerships continue to thrive.

    Manufacturers say distributors like Berkheimer bring sound fundamentals to the relationship – good customers, smart employees with long tenure and strategic locations. “They have a very good branch network that does a nice job supporting their contractor customers. It is my sense that their contractor customers are a very loyal set of customers in the market sector,” says Vick of Honeywell.

    Vick says Berkheimer is a “very strong, key strategic partner for Honey-well” in Berkheimer’s market areas. “I would say our relationship is very good. In addition to being a customer, of course, they play a very important role for us in that market and help us get our products and our methods out to the contractors.”

    Allied Air Enterprises (a division of Lennox International), which manufactures several different industry brands of heating and cooling products, has a deep strategic partnership with Berkheimer and a relationship that goes back more than 65 years. “We place a high value on their business expertise and market insight and collaborate in numerous areas (operational, sales and marketing) to strengthen individual and collective capabilities,” says Joe Nassab of Allied Air Enterprises.

    Illustrating this point, Nassab points to a commitment that Allied and Berkheimer made last year, which supplemented Berkheimer’s successful Armstrong-Air dealer business with the addition of Allied’s Ducane brand. “The decision was significant and required extensive planning and coordination,” Nassab recalls. “Working together, we established a tremendous transition framework and then executed that with great focus and collaboration. This transition has strengthened the capabilities of both companies.”

    Dean says its strong relationship with suppliers is based on a mutual level of trust. “We have a core philosophy of not treating any supplier as though they’re a commodity,” he says. “We have professional, advisory relationships that go back decades.” Long-term, true partnerships with suppliers mean that each side sees the value in the other and then builds on the relationship. “Whether they’re professional service providers or product vendors, we believe strongly in the value of those long-term partnerships,” he says.

    Those long-term partnerships extend to its employees and customers as well as its suppliers, which have helped to sustain and grow Berkheimer over the past 75 years. “This company is about our people, our customers and our vendors,” Brian says. While members of Berkheimer’s management team may joke that the company “moves at a glacial pace,” they also recognize that being deliberate and steady pays off in the end. Brian says they often remind employees that “we are all custodians of this company. Our duty, our obligation, is to pass it on to subsequent generations better than we received it.”

    Michael Maynard is a contributing editor based in Providence, RI. He writes frequently on HVACR, construction and architecture issues. Contact him at [email protected].