Patrick Baldwin: Paul, I appreciate you getting John Myers on The Buzz. I don't know a lot about Rentokil outside of Brandon Ho and a couple of interactions around town.
Paul Giannamore: John was a great guest. I'm happy that he spent hours and hours with us. Patrick, we are going to have to parachute into this interview. If we start at the beginning, this would be the longest buzz on record. He was generous with his time. He had a lot of cool and interesting tales. Patrick, I saw you taking notes over there. You were hearing some things for the first time.
Patrick Baldwin: I learned a lot and I had a great time. John, thanks for coming on The Buzz. Let's step into the boardroom with John Myers.
Paul Giannamore: Let's do this.
---
Paul Giannamore: John, thanks for being with us on The Boardroom Buzz. One of the things that I wanted to talk to you about is, is John Myers the person and John Myers the manager? How the heck did you get to where you are today running up a North American business pushing $1.5 billion in revenue?
John Myers: Thanks for asking that question. For me, it's always been less about career planning and more about opportunistic action-taking. Part of that starts with you having to have a family structure that says, “Let's do that.” My wife and I moved nine times in twenty years or something like that, a bunch of places in the US plus almost a five-year stint in England. The reason I bring that up is when there's an opportunity that fits your career interests and you say yes, it's going to make you a better businessman and maybe even a better person because you have to adapt yourself to new surroundings.
Paul Giannamore: Where did you get your start, though? You grew up in Connecticut. What was the first stop on your train?
John Myers: When I graduated from college, I got a sales job. Sales guys are used to hearing a fair amount of noes and trying to get yeses. It was a perfect setup for me to understand that I wasn't selling a thing. I was selling ideas and trying to change minds. When you're in a leadership role, you're always trying to read the room, understand whether the strategy matches up with what you think it does. You got to be a pretty good listener. Eventually, you have to sell it through the organization so that the strategy becomes the organization's strategy rather than mine.
Paul Giannamore: What happened next?
John Myers: They said, “It seems like you're a pretty decent sales guy in Ohio. Let's see if a Connecticut kid can live in New Orleans and sell to Southerners.” I was kicked out of my first customer on day two on the job. I was told never to come back. Thank goodness, I had a good boss who made a couple of phone calls to that customer and said, “There's more to this kid than you give him a chance to be.” Because of that, you learn that there's a different style of communicating and a different style of decision-making. In the south, there's the polite no. If you grew up in New England, you're used to the straightforward, in-your-face no.
Paul Giannamore: “Get the hell out of here, John.”
John Myers: I didn't get that straightforward, in-your-face no. I got the polite no, the Southern no. I was taking that as a baby. At my going away party, that same customer gave me a card. He put the card on the ground and stepped on it so his footprint was there. Inside, he said, “Day one, we started with my boot up your butt. Today, I will miss you.”
They then came to me and said, “We'd like you to run a manufacturing facility.” I'm a sales guy going to run a manufacturing facility in Atlanta 24 hours a day, 7 days a week, 3 different unions, unprepared to be a great production guy. How do I know that other than from the customer's perspective of quality and productivity and the like?
I had a great boss who was willing to teach me. I was smart enough to go down on the shop floor early on and talk to the frontline shift supervisors who had been doing this job for twenty years and did know and say, “I'm here not to get in your way. Your job is to help me know what you need to do your job better. The best word that comes out of that is you developing humility.”
Paul Giannamore: John, how old were you when you took over the manufacturing facility?
John Myers: I was 29. I was always willing to learn. As a result, I did well there. My company was bought and sold. This was supposed to be succumbing to understanding manufacturing and sales so I could be a general manager. When the company that I was working for was bought by someone else, I had to go, “This is not like a career here, right?”
Paul Giannamore: “I don't plan to be on a plant forever. That was never the goal.”
John Myers: They said, “We want you to go to San Antonio and be the plant manager, not the number two be the number one.” I said, “I’m not sure I want to do that.” I learned another important lesson. They said, “There's a big difference from being number two of a facility to being the guy.” As much as I knew about manufacturing at the point, I didn't know how to be the leader of a facility. I went to San Antonio to be a plant manager.
Paul Giannamore: You learned the polite no from the Southerners. You ignored your wife's polite no every time you asked her to marry you. You worked in Atlanta and now you're down in San Antonio running a plant. What widgets was this company making?
John Myers: I meant to tell you the story. When I graduated, I had one job offer so I said yes to that one.
Paul Giannamore: Did you take a few days to think about it so it made it look like you are in high demand?
John Myers: I tried to negotiate around the edges but it wasn't much there. It was a packaging company and it was called American Can Company. I walked in and I was a management trainee. They said, “We have two openings, one in the dog food division and one in the beer division. Which one would you like?”
Paul Giannamore: I know which one you took. In those days, American Can was the big one. They were competing with Crown Cork & Seal. It was almost like what Nucor is to the steel industry. They were a nimble, fast-moving, competitor of American Can.
John Myers: Family-owned.
Paul Giannamore: I have no idea why I know that.
John Myers: You spent some time in Philly. They were in Philly. I spent sixteen years in the beer and soft drink can division. There’s a tremendous amount of learnings associated with that as you might imagine. It's 3 or 4 of us making you a commodity mostly selling to the largest bottlers in the world, a commodity with strong buying power. There’s Busch, Pepsi, Coke, Coors, or Miller, you get the idea. It’s a different business environment to where I am today where there are 19,000, depending on who's counting, pest control providers. There's no widget or commodity product to grab onto.
Paul Giannamore: The interlude for you between the manufacturing business and the pest control business was Cintas.
John Myers: There were a couple of other steps in between. After San Antonio, I went to St. Louis and I was the national account guy selling beer cans to Anheuser-Busch, my only account. As you might imagine, if you want an account, Anheuser-Busch was the account to have. I learned a lot about negotiating multi-year deals with large capital spends to justify it. We build a factory and that kind of thing for them.
I ended up working closely with the president of American National Can and he asked me if I wanted to go to England, north of London. It’s another one of those, “This is going to be a cool venture.” You don't just say yes to that one as you might imagine, Paul. You do have to have a family conference on that. We had two little girls that were probably 6 and 3. It’s easy to move at that age. If mommy and daddy are happy, they're going to be happy.
I was the head of sales and marketing for the UK. I’m managing a sales organization over there. Once again, a big transition. Do you trust your instincts on how you made business decisions in the US? Is it the same in the UK? Is it “different”? Do people think differently? The answer is they think differently but the business decision-making processes, and I know you do a fair amount of international work, Paul, are similar. Trust your instincts. The buying motives and the value proposition you're trying to create are the same even though there might be some nuances to culture.
Paul Giannamore: I do stuff all over the place. The mindset is the same, it’s the cultural nuances around the edge and how certain things happen, like if you're in one country and you're used to doing it one way. You talked about the Southerners with the polite no. In certain areas of Europe, you get the polite no. In other areas of Europe, you get the middle finger. Asia is different. You learned that. You already had some good prerequisites going to the UK. You spoke English already. That was a leg up. Patrick is still trying to learn it.
John Myers: You’re clearly resilient, Patrick.
Paul Giannamore: He takes a lot of beatings on The Buzz, that's for sure.
Patrick Baldwin: I appreciate it.
John Myers: You were talking about Cintas. It bounced around a little bit. I came back from the UK as an ex-pat. I was with the Head of HR and we’re talking about my assignment and he said, “We're trying to figure out what it should be but I have a question for you.” I said, “What?” He said, “You have a daughter, right?” I said, “Yeah. She's young.” He said, “Let's assume she's graduating from college right now. Would you want her to come work for us, our company?” I said, “No.” He said, “Why are you here?”
Paul Giannamore: It’s an interesting question.
John Myers: Of course, I've been there for 16, 17 years. I’ve been thinking these were the steps to a career path to do X. He reset the expectations and said, “You can do more outside of our company than you can do inside of our company.” It was a great piece of recommendation for me. I didn't act on it well. I took the next job that was offered to me. It’s like the rebound girlfriend if you will. There was a little place in my resume. I won't get into the name of the company. A great boss. They had great expansion plans and I was going to lead those expansion plans but they had no money to do any of the expansion plans. That was a bad mistake on my part. There was a lesson there.
The lesson I share with people that are looking for jobs all the time is this lesson. I went for the money and the title. Never do that. Go to work for a good boss and a good company. Don't worry about the job and the title. The job and the title thing works out every time if you pick the right boss to go work for with the right company. I got it totally out of whack.
I went to Cintas and I interviewed with Bob Kohlhepp, who was the CEO at the time. He and I had a great set of interviews. I came home and said, “I want to work for these guys.” These folks get stuff done. They have a bias towards action. I went to work for him and my wife said, “What's the job?” I said, “I'm the director of business development.” She said, “What's that?” I said, “I’m not 100% sure.”
She said, “How much are you getting paid?” I said, “I'm not exactly sure either. I'm getting an offer letter. Don't worry. I already said yes.” I'm working for this amazing company and this incredible boss. That means every time I meet with him, I'm going to have to bring my A-game. I can't show up and think I'm going to slide. It'll be good for my mental side of the business and my development side of the business capabilities.
Paul Giannamore: Let me ask you, John. Was it the Cintas interview that made you say what you said, which is to choose the right boss and the right firm over the title and the money? Had you known that before that?
John Myers: It was the latter. I got “lucky,” Paul. When I got a promotion, I interviewed with my boss and he was a great guy and developer of talent. That was fine. I then did the interim between American National Can and Cintas. He was so good at what he does. I'm not saying he was chummy. He was bright and driven with a record of taking a company from X to a public company. That was when I learned that lesson. I think about that all the time. When I talk to kids that are looking for jobs at a college, I say, “Seriously, these are the two things. Don't go to medical sales if you hate blood. Pick these two things and the rest will work out.”
Paul Giannamore: How long did you spend at Cintas before you ended up over at Rentokil?
John Myers: Right around eight years. Like a lot of people, I used to get my fair share of calls. My boss, Bob Kohlhepp, got promoted and there was a shuffle. Korn Ferry called and I took the call and they described Rentokil. I had done a little work on Rentokil seeing what they were doing back in my business development days, which was trying to figure out what other businesses Cintas should get into because they were known as the uniform people. They had an incredibly good hygiene services business.
They described a $200 million business in North America in an industry that was probably at the time $6 billion run by a European group based in the UK where they were dominant. They had aspirations to make North America big. The thought of being able to come in the early days with Rentokil and take something that was roughly $200 million and do something with it was appealing. Once I got good company, I met the guy I was going to work for and I said, “He's good.” It was Alan Brown and a guy named Andy Hobart. They were bright. They gave me the job, which was good. The rest is history.
Paul Giannamore: You leave Cintas. You take a job for Rentokil North American. In early 2006, Rentokil closed the Ehrlich transaction. At the time, from an operational perspective, it was largely viewed as almost a reverse merger. Ehrlich was effectively Rentokil North America. Was Vic Hammel at the helm at the time?
John Myers: He did.
Paul Giannamore: Vic stuck around. Vic is running it. If I remember, you came on board and there was a transitionary period where Vic handed it off to you. To this day, Vic remains close to your organization. He's an outside adviser.
John Myers: Those that own companies and sell them do care about what happens to their company. Heart and soul went into that. Vic would stay on for three years and make sure the transition went well. I came in when Vic’s three years were up. Every week for two years, we had lunch together. Vic Hammel knew more about this business than anywhere close that I knew but he also has strong opinions. We would have these debates about these things that I was doing.
Part of the reason to change was it's time to change. Yellow pages are moving this way. Digital sourcing is moving this way. Vic and I would argue about whether that's the right thing or whether every truck should have a local telephone number on the side of the trucks so they knew you were from Shamokin, Wilkes-Barre, or Allentown. I was thinking we needed 1-800 numbers so we could track the calls and all those change things. We had a tremendous amount of debates about strategy and tactics. Lo and behold, years later, he’s still helping me out. Sometimes he doesn't take my call anymore on the first ring because he's got grandchildren and other stuff to do.
Paul Giannamore: When I think about Rentokil North America, in general, it is an extremely important part of Rentokil Initial, the entire organization. Not only is it core to the business in pest but it's also the fastest growing and largest market segment. I don't know if you and I ever talked about this. When Alan Brown was around, I reached out to Rentokil in the UK. I sat down and had a cup of coffee with Alan. I was in my late 20s or early 30s. I decided I was going to raise some money and buy Rentokil North America.
I reached out to Alan Brown and he was kind enough to amuse himself by having a cup of coffee with me. He sent me to your boss, Mr. Andy Ransom. He sent me a letter. This was probably around 2008 or 2009. He said, “Rentokil North America is core to our business. That's pest control and that's what we're growing, particularly in North America. We'll not be divesting it. If you come across anything we want to buy, track us down.” That was my first dealing. At that time, he shared the same title that you had at Cintas. He was the director of business development, a former deal attorney.
One of the things that always interests me is that when Rentokil first bought Ehrlich, there was a lot of smoke in the market about who the hell is Rentokil? It's a British firm and the Redcoats are coming. All of a sudden, they're going to turn this thing into some European nightmare. That's not what happened. In a lot of ways, Rentokil North America has remained a distinctly American business, especially with you at the helm here and all of your senior managers for the most part. Can you talk to us a little bit about what it's like being the head of a North American business tethered with a UK company?
John Myers: There are a couple of things that come to mind right away. The first thing is I love working for Andy Ransom. He's in London and I'm not. It's a five-hour time change. There's a separation that has to occur. It's a great setup for me, first and foremost. The second thing is because North America is important to the global business, we do get our fair share of ex-pats to come over for 2 to 3 years to learn another part of the business, another way of doing business, and then they go back. We get these little 2 to 3-year bursts of infusion, which is important.
A lot of companies are talking about diversity in their leadership team. Of course, we are as well. We're trying to diversify the way we look today like most companies, which are mostly white men. The benefit of getting diversity is the diversity of thought. When you have the diversity thought, you get better decision-making. When we get several folks that come over for 2 to 3-year assignments, it's amazing the quality of decision-making we have.
Paul Giannamore: They come over to learn the right way to do things. That was me and not you, John. I get to have fun with these guys. “Brits, you guys come over and learn the right way to do things.”
John Myers: By personality, Andy realizes he can't dictate tactical execution of the strategy. That's good. That means he's not in my kitchen saying, “Where are you with the pricing strategy that we agreed to do X or the compensation strategy of Y or the marketing strategy of Z?” What he does insist on and it's what I insist on my folks is, “Let's decide on the strategy. Let's debate the heck out of it. Once we've agreed on the strategy, let's then implement the strategy.”
What he won't allow is me to say, “Yeah,” while the whole time thinking, “Yeah, I'm never doing that.” By the way, I don't do that either because I don't have time for that debate, only to be chasing people to see if they're doing what we said we would do. The other part Andy is amazing at is he realizes that some of the things that we're trying to fix have been in place for fifteen years. He's not looking for them to be done in 15 months even, let alone 15 minutes.
When I was brand new in my job, I thought an assignment was you had to fix this right away. Through a lot of conversations and eventually, some courage on my part, I would say, “Andy, if we go fast, we're going to blow this company up. I want to do this in a three-step process.” If I said 3 steps over 5 years, he would start laughing. If I said, “I don't want to do it during the busy season because of X, Y, and Z. I want to lay the groundwork during March and April. We'll then come back in October and do these last two pieces and button it up in January.”
He's pragmatic enough to know that what he didn't want to do is blow up the business. He wanted to make incremental improvements in the base business. As I got experienced, I was more confident in my ability to recognize that you should have that criteria and cadence for solving problems. Of course, after you've been on the job a little bit, you're always a little bit smarter.
Paul Giannamore: Especially the way that Rentokil North America has grown. You came on board slightly less than $200 million in revenue. Now you're going to be pushing $1.5 billion in revenue. How many employees are now under you?
John Myers: It's right around 9,000. If you start thinking of that type of math, then you understand that if you want to implement things consistently with 9,000 employees, you can't be winging it. You can't have this super top-down approach. Every once in a while, someone will say to me, “We've got to communicate this strategy and the tactics better.” I said, “Absolutely. I don't think I've done as good a job as I need to so I'm going to do this five-point plan.”
If you're all expecting every 9,000 employees to hear my voice and act on it and not be dependent on hearing your voice on the same strategy, we’re in big trouble. My voice isn't relevant to our frontline colleagues. Of the 9,000, 3/4 are frontline colleagues doing work out there in a vehicle, answering a phone, or selling something.
Paul Giannamore: This is the last question I'll have for a little bit and I’ll let Patrick get some stuff in. How the hell do you run a business with 9,000 employees? When I deal with our clients that go from 10 employees to 100, the increase in complexity in an organization between 10 employees and 100 is 60-fold, 50-fold. In 2020, forget COVID and all this, what’s a day in the normal life of John Myers like nowadays running such a large business?
John Myers: Long time ago, we started talking about this concept of success versus excellence. It's a little bit of nuance but it's important to describe because it describes what I work on. The success describes your results. Excellence describes your methods for achieving those results. As the company gets bigger, it's got to be the method you use to achieve results. That drives what I work on. Like anybody else, I get pulled into some meetings about internal audits.
Paul Giannamore: Safety meeting.
John Myers: Safety is a little different because that's part of our culture but you get the idea. There’s some stuff that keeps the wheels going. There's the stuff that is important to what we work on. We talk a lot about the methodology for being successful. One of the things that we talk about a lot is hiring, training, and development of people.
If you get those three things right, in our business, not the factory floor where you have a widget maker and the guy that has the best widget maker wins but the company where it's about the people that affect your mechanism for the service delivery. If you get hiring, training, and development right, you're going to be amazingly successful. Three-quarters of my week, day, month, is spent on those three things either in meetings that support those efforts or in the field to see what's going on with those efforts.
Pre-COVID, I used to spend a lot of time in the field. Road routes are probably six times a year. I made sales calls five times a year. I talk to customers ten times a year. Even though those numbers are adding up to a lot, it’s not as much as I like because those are the days that I have the most fun. You find out the things that you said you were going to do. I have been trained in and people understand why we're doing this, not because I'm the boss and I told you to do the thing and all the other elements associated with being successful in the space. That's my normal week, day, year in those categories, Paul.
Paul Giannamore: You talking makes me think about something. The last time you and I saw each other was pre-COVID. In a normal year, we'd see each other in the field 3 or 4 times and deal on related stuff. Almost every time I would see you, irrespective of where we were in the country, you were like, “I'm going to be showing up to dinner a little bit late because I'm going to go spend some time with a customer.”
Patrick Baldwin: It’s the polite no, Paul.
Paul Giannamore: This guy was out there spending time with customers. I didn't know if that was a leave-over so to speak from your prior career of being a biz dev guy or if you looked at it from a CEO perspective and thought to yourself, “I got to be out there with these customers. I got to understand what they think about our organization, what they think about our competitors, what they think about our people.” What was that like? Why do you get out there and spend time with these customers?
John Myers: You're hitting both points, by the way. One, because I was the sales and marketing guy for so many years, I'm not afraid to do it.
Paul Giannamore: You like the thrill of the hunt.
John Myers: I do. You and I talked about some of the acquisitions that we've all wanted to make. This sounds negative but hopefully, it's not. You’ve seen me go into sell mode about why our value proposition is better than the other options they have. Selling shouldn't be considered a negative. It's a way of imparting value and information. I'm not afraid to do it.
Andy Ransom and I were talking about this. We’re fear-of-failure guys. We worry about having the wrong answer or even when we have the right answer, the failure to implement well. We spend a lot of time with anxiety about those things. The best way I've found to take away some of the anxiety is to get close enough to it that you can say, “When I said that, they went boom, boom, boom.” They gave me a blank stare and I go, “That was one of those things that sounded good in the boardroom but it ain't working.”
We call them specialists but the industry calls them technicians. My guys are smart. They don't put me with bad guys. They're going to put me with their best guys. When I ride with one of our specialists, immediately on the first 30 minutes, “How's it going?” “Good.” “How long have you had this truck?” A year.” One-word answers. Eventually, after seven hours, no one can do that. They tell you everything, all the warts and all the things that make them happy. You say, “I noticed you're not using the handheld.” “That doesn't work.” They'll tell you that. As a result, you make decisions. You say, “That was way too complicated. That guy is not going to do 30 hours of training on that.” It's both, Paul, fearless to go out there and hear the bad news and interested in hearing it so that we do better.
Paul Giannamore: That makes perfect sense. Patrick, I'm commandeering a lot of questions. I know you got something for John.
Patrick Baldwin: I've got a few. I wonder, staying with ride Aaongs, they've cherry-picked it sounds like. “You're going to the best spot and ride with the best specialist.” Do you ever play more of the undercover boss and show up? The next thing you know, you're riding in a truck unannounced.
John Myers: No. Do you know why? It's not fair to the colleague. If he's not ready, if it terrifies him, if he goes home and he thinks, “My career is over because I was a doofus,” I don't want any of those things. Interestingly, Patrick, I'm old enough to remember Jack Welch. He used to talk about the top 20, the middle 70, and the bottom 10. I want to see the top twenty. If they're getting it, then there's hope for the middle 70 that I can make sure they're getting it. If I go to the top twenty and they're not getting it, we're toast.
Paul Giannamore: You got problems.
John Myers: I don't do any surprise stuff.
Patrick Baldwin: I wonder if you could hire me out to do some ride alongs with a microphone and put me in the truck. Paul gets some crazy stories.
John Myers: We could do that.
Paul Giannamore: I always hear crazy stories.
Patrick Baldwin: At M&A, you go into sales mode for lack of a better term. You're explaining to the potential seller, “Why choose Rentokil?” What are those differentiated capabilities? What makes Rentokil attractive compared to some of the others out there?
John Myers: This is in no particular order. There is a little bit of a benefit that I can say about the fact I've been there twelve years. There's continuity of thought and process. My boss has been involved for twelve years. You're not going to get flipped upside down routinely about how we've changed all our strategies. The second thing is we're in growth mode. If you want to be part of an organization where we're creating jobs, this is a great place. Every one of our jobs internally is posted for people to apply.
We only have two requirements. One is you talk to your boss before you apply for another job. It's only fair. The other thing is you have to be good at your current job, which is not going to move garbage around. If you're not having a good year or you haven't had a couple of good years, have a couple of good years before you apply for a job. Career progression is very much available. Sometimes it might even be lateral. They always want to live in Phoenix, Redding, Pennsylvania, or whatever. Every job is posted and we're happy to have people move around.
Patrick Baldwin: Are you looking for that from people that are flexible and where they move?
John Myers: I'm a dinosaur in that. I don't think people move anymore. Back in the day, the corporate life was every 2.5 years, a moving company came and the company paid for it and you picked up the kids and they went to a new school. That doesn't happen as much. 10% of the jobs that we fill are filled outside of the market for one reason or another. Someone's been living in the cold and they want to live in the warm or they've got a sick parent may be and they want to be closer to them and help out. We had one of our best guys move from Richmond, Virginia to West Texas. He's got an ailing father. The job was posting and he was good at what he did and the like. No, Patrick. Those days are over.
The other thing I should tell you is to forget the specialists. Somebody has to be local now to do their job. Several years ago, I decided I wanted to hire the best talent in North America to work for me regardless of where they lived. I grew up in that era where you had hallway conversations. You bump into someone and you say, “Patrick, good to see you. I've been wanting to talk to you about X, Y, and Z.” I could tell if you were having a good day or bad day and all those things that allow you to be better at your job. What I found was we were limiting our search capabilities to those that were in that geography.
My head of HR lives in DC. My head of marketing lives in Nashville. My head of sales and marketing lives in Memphis. The COO lives in Anaheim. What I’ve always said is if you've got a travel job, you’ve got to be willing to travel. Hopefully, don't pick a place where you can't get where you need to go because that's probably going to affect your capabilities. Every once in a while, I have to remind the West Coast guy, “Sorry, it's an 8:00 AM East Coast call.” If you don't want it to be 5:00 in the morning, move to Kansas City or something.
Paul Giannamore: You're always getting up at 4:00 and 5:00 to get on those UK calls.
Patrick Baldwin: I did sidetrack you on the HR. I did ask you about the salesman, John Myers, making the pitch to Rentokil.
John Myers: Those three especially are important. One of the most important things that we try to impart is a willingness to hear about better ways to do things. We have bought more companies that have solved problems that we've been in search of a solution for. We’re excited when we hear how they did that and have taken those ideas and made them the North American solution.
Patrick Baldwin: Can you give us an example?
John Myers: I remember when we bought Steritech. I’m dating myself a little bit. Years ago, Steritech was a good company with good specialists. I thought we had good specialists. We got our two training directors together to train newly hired specialists and then ongoing training. Their training program was different from ours. We took about 5 of their elements and about 5 of our elements and it became the new 10 and it was better. When you bring that much diversity of thought into your organization, you're going to get better ideas.
Patrick, the tricky part is it would be much more efficient for me to go, “Let me tell you, we're $1.5 billion. You're $5 million, $15 million, $50 million, or whatever. This is how the big boys do it.”
That would be super-efficient and ineffective. We're careful to make sure that we're not going in too fast and saying, “X, Y, and Z.” I could keep going.
The in-car telematics for safety, for example, we've wanted those. We tried them and it didn't work. Someone else now has a different method for doing it. They seem to have a way to get accident rates down. We're not going to say, “We tried it. It doesn't work.” We're going to look at their data and see, “Did they solve a problem? Maybe the technology's moved on since we did that last.” There are lots and lots of examples. It does take humility. It does take a few good listening skills as you might imagine.
Paul Giannamore: John, I've got a couple of thoughts in regard to the question that Patrick raised about some things that differentiate Rentokil. I'm talking about Rentokil North America vis-à-vis the other players rather than Rentokil globally because I do deal with Rentokil all over the world. You and I talked about this over dinner where I said, “I can't believe you've been around as long as you have, John.” That means something. It means something in an organization.
Patrick, I've talked about this on The Buzz before. It makes a difference if I do a deal right now with a firm to know that I am going to see John, Bruce, and Alex a year from now, all these guys that have been around for a long time and have institutional knowledge. There's continuity and discussion. That gives me trust and faith that the same people are going to be around.
John, this isn't for you to say but I'm going to say it because everyone in this industry knows that I don't mince words. One of the main issues I've had with ServiceMaster is that if I do a deal today, I don't know if I have a disagreement if those people are going to be around. At least historically, John Myers and John Wilson and all these guys have proved to me that if I’ve got a problem a year from now, I can likely call John’s cell phone number and he's going to pick it up and say, “What's the problem? Let's talk this through.” To me, that's an important thing.
A couple of the other things is when I think about the capabilities of Rentokil North America's M&A team, it was rough starting it. Back in the day, it was Alex Nigh doing everything. He is by far one of the best in the industry. Over the years that you guys have continued to augment those capabilities, your team is now extremely effective and efficient. Kyle has done a great job. You got Bruce Gelting. Your general counsel is out on the scene. All these guys are working together in a tightly choreographed process.
With regard to Rentokil North America, I don't have to worry about deal execution risk. I've got a team. Alex started in ’05. Bruce has been around longer than that. They’re guys that I've dealt with for a long period of time. The other thing that I will say is I've never had an indemnification claim with Rentokil. In your long history of deals, you maybe have had 1 out of 150-plus deals. Your team has always been reasonable. That's not to exclude others. Rollins, for example, has always been reasonable.
Patrick Baldwin: Can you explain that? I'm not familiar with indemnification claims.
Paul Giannamore: In a deal structure situation, Patrick, when you sell a business, these sellers are indemnifying the buyer in case something pops up out of the woodwork. For example, you've got a bad environmental issue where you sold a software program that you don't have title to. There can be a variety of things that go wrong. Most of the time, in my experience, they're inadvertent and not intentional. It’s like, “I didn't know that was a problem.” Whether it's a government regulatory agency or a third party now sues Rentokil and says, “Rentokil, you've got this environmental issue.” It's not Rentokil’s issue. It was historically related to the company prior to the ownership.
An indemnification situation is Rentokil or any of these guys would get sued and they'd go back to the sellers. Rentokil does a great job from a DD perspective to mitigate those types of things and they do raise them. I've been involved in situations where John Myers’ guys have raised this, “Paul, this is a potential issue that could result in an indemnification claim. Let's have these discussions about it now as opposed to when the deal is done and everyone's pissed off.”
John, your team has done a fantastic job over the years. I have nothing but respect for those guys. I want to bring up some potentially uncomfortable situations that we can talk about a little bit. John, after the Allgood transaction, I remember in the Southeast, there was a lot of smoke and hot air blown around the Southeast about how Rentokil did the Allgood deal and axed a lot of heads. You deal with this stuff too as all acquirers do.
When you're sitting down with a seller, the sellers are worried about his people and the people are worried about losing their jobs but you're in the service business and it's done by people. You need to keep all the people. You feel like you're chasing your tail. Back to Allgood, there was a lot of smoke that blew around some years ago when you did that deal, “Rentokil axed a lot of folks.” I wasn't involved in that transaction. I don't even know any of the details. Anything that you heard on the street or anything that you can talk about? I know getting out of left field here but I wanted to ask you.
John Myers: It’s not left field at all. Allgood was a great acquisition for us. Even the best ones, you'd look at it and you go, “We could have done that better.” This one was interesting. I'll preface it by saying Chuck Tindall still works for us. Mike Tindall still works for us. Perry Tindall used to work for us. She decided to retire. As clunky as this might have been, the people that took a large amount of money from the sale of their business don't have to work for me if they could find another place to work. They still work for us. It was a combination of good strategy with average to below-average execution.
When we bought Allgood, there was an overlap of leadership teams. What we wanted to do is follow our structure, which is we think an operations manager, which is the person that manages specialists, should have X specialists to one manager. An ops manager would work for a week on district managers but like a branch manager. A branch manager can manage up to four ops managers. We took that model where we had an overlap of Ehrlich managers. We also had our Ambius business in Atlanta. We then had Allgood. We started to build out the structure.
We never move quickly on that because there's the stuff you don't know, operating systems, branding, strategy, and all that stuff. We were getting feedback from the Allgood leadership team that the uncertainty of their future role was becoming debilitating, which is pretty unusual. Usually, people are saying, “Tell me the story. I'm going to win the job because I’m the best in that role.” The feedback we were getting was they wanted to move faster. They want to know what their job was. We did the restructuring before we built the level of trust that you need for people to trust you that this is all going to be in their best interest. With that in mind, it didn't go as well as we should have.
The good news is Chuck, Mike, Perry agreed with what we were doing. There wasn't a strategy. It was the execution of the strategy. I don’t know whether it's personality or the famous nurture-nature thing. I take criticism pretty well. I'm always in a space where I'm worried about failure. We have this thing called positive discontent. I stole it from Cintas. I‘ll give them credit. Positive discontent says that even when you win, you're taking another look at how you won and you're saying, “That was a little clunky even though we got what we wanted.”
We all know about that. We brought something to a close. We're like, “That was amazing.” In the back of our minds, we're going, “Next time, I'm not doing it like that.” We did an all-nighter. We did whatever the stuff was that you did. All I can tell you is learn and grow type mode with us. We'll own it. I wish it all could’ve gone better. From an acquisition, business case, performance, growth, happiness of colleagues that did stay with us, it's been a super win.
Paul Giannamore: When I think through it, between MCS, VDA, and all the other deals I've ever done, I spent hundreds and millions of dollars of transactions with Rentokil over the years. I'm trying to think personally of one bad client experience I had. I can't think of any. You and I talked about the Brandon Hier episode, which we wanted to do. Brandon has a small business up there in Vermont. It’s a great story. This is a kid that didn't want to be part of a big company. He's like, “Paul, I'm not going to stick around for more than three months.” The next thing you know, he's trying to figure out how to move up in the organization. That's a great success story. There's a lot of them.
John Myers: Patrick, you were delving into what's the value proposition. I'm going to flip it the other way. One of the town hall questions they say to me is, “Tell me about the next big deal.” Of course, I say, “I can't because it's confidential.” I always say to them, “This is how we think about acquisitions, they have to be for sale.” It's okay that you talk to someone that's not for sale but until they're ready to sell, there's no sense in asking for the business.
It's like if you're walking on a beach and every time you walk on the beach, you look at the white house that you've always wanted. You can go up to the door and say, “I want to buy your house.” The guy says, “It's not for sale.” You say, “I'll make you an offer you can't refuse.” It’s that whole thing. It's okay that you talk to the guy that owns the white house before he's ready to sell. When he's ready to sell, you're at the doorstep and you're saying, “Let's talk seriously.”
The second part is, and I always say to them, “This is the most important part.” It’s got to be a culture fit with the business you are. I always tell people that the fact that they're not a culture fit is not a criticism of you or them. I talked about hiring, training, and development before but I've made lots and lots of hiring mistakes but it's never been because they couldn't do the job. An accountant can add down and across. A sales guy, I wouldn't have hired them if I hadn't seen that they can sell. It's because they weren't a culture fit.
If you hire someone that's not a culture fit, you agreed to have a divorce at some point. If you buy a whole company, 40 technicians and 10 managers and they're not a culture fit, you can't fire them. The reason why our deals typically work out, Paul, is they fit the way we're thinking about things. When they do, you'll see, Paul, we've stretched far on some deals. You brought up MCS, VDCI, VDA, and Solitude. We weren't quite sure about that but we were sure about the people in there.
Paul Giannamore: At the time with VDA, you were pretty sure you weren’t going to do the deal in the beginning. You were like, “I don't know if I want to get into this whole vector municipal thing.” If I remember, the guys from across the Atlantic thought, “Maybe this is the time to do this.”
John Myers: It was that and one of our top guys, a guy named Dave Fisher. He was passionate about it. We all learned this lesson. If you have someone in your organization that you trust and are passionate about something and you know it's not going to blow up the company, you're smart to listen to those folks.
Paul Giannamore: Talk about a guy who's a true North for the business. He's a guy that's been around for over 35 years.
John Myers: I hate to do that to him because it probably allows someone to figure out his age.
Paul Giannamore: You take one look at him and you’ll know he's old.
John Myers: Let's say he was with the company for 35 years. Let's say 23 years when I showed up. I show up in the room and I'm asking him questions about how we're running the business and why. Twelve years later, he's adapted to a new way of thinking and doing things. It’s so much about him. He was a bellwether for a lot of what was inside Ehrlich, Presto-X, Western, and the like. They were the keystones of our business.
Paul Giannamore: He’s a lovable guy. Honest as the day is long. A smart guy. He's been in the trenches over the years. I have a lot of respect for David Fisher. Patrick, this will be the last question I’ll ask. One of the things that you and I never talked about and I'm curious as to how you would even think about this, having all of the experience that you've had up to this point in life, now running this large pest control business.
If I had a parachute and dropped you in as CEO of a $5 million business, you run a $5 million pest control business. Let's say that your goal was to create a good life for your family, grow an asset, and build a great place to work. What are some things that you would do? I'm not taking this from the standpoint of like, “What do acquirers look for in regard to targets to make an acquisition?” How would you think about that business from the CEO’s perspective if you're running the $5 million shop? I bet you don’t think about that often.
John Myers: I don't. I do know that I'd have to think differently. I'm not so sure it's that big a leap. I came from a family where we did the stuff. If my mom said she wanted a pine tree planted in the back, my dad us three boys would get shovels and we started digging holes to put the tree in. We didn't call some guy to do it. Even now, if I go to the photocopying machine and it's out of toner, I'm opening the cabinet. I’m more inclined to put the toner in.
The thing that I found when we were running the smaller business is I felt like I had to be the smartest guy in the room in all things. That's a dangerous place to be. I was writing the brochure. I'm an incredible brochure writer. I would be the guy picking out the truck that we would use and the colors and all those types of things.
As we've gotten bigger, I've been careful to ensure that I have some folks that are experts that are looking for my opinion rather than dependent on my expertise. I would love it because I'm inclined to change the copier and load the truck and want to be out in the field and want to kill stuff and the like. It would be an important transition for me to remember how to be more hands-on on the stuff that you have to be hands-on when you're a $5 million business.
Paul Giannamore: One of the most important things about growing the firm is a division of labor and that coordinating mechanism and having those different baskets of expertise. Now you're surrounded by all sorts of subject matter. Talk about Rick Bilderback, maybe ten people at the firm know that guy. He's fundamentally important to your organization. He's a real specialist. You're running a small $5 million business. You're wearing a lot of different hats. What else pops into your mind?
John Myers: I'd probably be the, “I'll sell it and you do the work,” guy. I'd be the guy that follows up to make sure that they are giving us five stars because we nailed it. On one hand, this business is super hard to run because it's a decentralized service model. Going back to my factory, I could walk out on the production floor and I would say, “Bob, why is that guard not on that machine? That's a safety violation. You're going to get hurt.” I walk over to Mary and I say, “Mary, why are you running out a speck here for the past hour? Let's shut this piece of equipment down and change out the tool or whatever that thing is.”
What $1 million, $2 million, $5 million companies have to do out there is they have to provide these training mechanisms to allow people to do the right thing when no one's around. It’s incredibly hard to do and incredibly successful when you figure out how to do it. How do you do it? Hiring, training, and development. You hire the right people and you train them how to do as well as the why to do it and you give them a constant feedback loop about what's going well and what isn't.
When you do that, you win because we're all using the same vehicles, whether they're Colorados, the Tacomas. We've all got DNG sprayers. We're all using Termidor or whatever. The differentiators aren't in those elements. The differentiators are the frontline technicians and the CSRs that are taking calls from customers and sales reps that are identifying needs. That's why it gets harder for the 5-guy to go to 10, 10 to go to 15, and 20. Those leaps mean instead of twenty people servicing accounts, you now have 80.
My dad used to talk about the knucklehead factor. Let's say 1% of your population at any one time decides to do something goofy. That means 99% are doing it perfectly. They're doing their best. As you get bigger and bigger, you get some knucklehead moves so then you've got to, first of all, tighten how you hire, train, and develop those people. It's not 1%. It’s 0.1% or something like that.
Paul Giannamore: Do you remember Jim? He used to work for Vic at Ehrlich. I don't know how long ago this was but this is going back at least a couple of years. This may even have been before your time. When I first met Vic and Jim, we were at Reading Terminal down in Philly, having a bite and Vic was talking about growing Ehrlich.
What they did with the people and all that was one of the smartest moves that they made. Early on, they were figuring out the way to get to $10 million revenue inside Reading, the small middle of nowhere, like, “We need to get to a significant scale in this finite area before we start.” He said, “One of the best decisions that we made is to focus a lot of our efforts in a small area to own market share.” What thoughts go into your mind when you think about density, market share, and running your business? Are those discussions you have with your managers?
John Myers: Route density does three things for us. First of all, it's better for the customer if I'm in a zip code. All I do is work in this zip code. If there's a problem, I'm in that zip code. It's easy for me to have a problem or there's an extra service or someone's got whatever. Do you remember my Atlanta story? If you're on the north side of Atlanta, you have to get down to the southeast side of Atlanta. That could be a real challenge. If you could zip code yourself, these guys only work these zip codes and never leave it, that's good.
The second thing is our specialists make more money if they do more revenue in the same amount of time. The way to do that is not to take an hour job and to do it in 40 minutes because if you do an hour job and you do it in 40 minutes, you're coming back because you didn't kill all the pests. Someone's going to call up and say, “I've got blank.” No kidding. If you did the whole job, you wouldn't have to come back. The way to solve that is through route density so you have less time in front of the windshield and more time in front of the customer. When they have less time in the windshield, then their billable hours go up in the same amount of time that they work in a day.
Finally, we make more money because revenue per hour in the labor business is important. There's a metric that we use called Time-on-Job and we know out of an eight-hour day how much was billable hours versus non-billable hours. Every time you can do a little bit better in that portion of the total eight hours, you're going to make more revenue. On that revenue, you're paying off the vehicles faster and covering the labor pieces.
We spend a ton of time thinking about that and there are four ways to solve that. One is you could make acquisitions. You've got low route density. You buy a company that increases your route density, then you distribute the territories accordingly so people aren't spider webbing all over the place. The other thing is you look at low route density markets and put a sales rep in there and spend some marketing to build up the territories. You can do a little bit on price increases. More revenue per hour helps you to be able to support some of the other spendings you want to make on marketing and the like. Finally, the one that we all know but we sometimes forget is 1% improvement in customer retention is 1% organic growth.
The most profitable organic growth you can have is when you've already paid the commission, the specialists already know where it is, and the equipment's already installed. Hold on to the accounts you have and you become better. When you do that, Mrs. Smith asks Mr. Miller next door, “Who should I use?” You got the account. One last thing on route density. Paul, we talk about marketing, sector focus, and things. Once in a while, we say, “Do you know who’s the best next new customer? The one next to the one we serviced.” You might not like pizza parlors but if it's right next to the school, it might be the right answer to that question in some markets.
Paul Giannamore: One of the things that I do appreciate about Rentokil, in general, is it has been one of the most transparent pest control industries with regard to Wall Street as well as the city. Not only do you folks publish a lot but you have a lot of presentations. Not that the other ones don't but I always felt Rentokil was transparent. I know I hadn't been in the industry for long and you didn't work for Alan Brown long. He’s a nice old man. I will give him credit for the fact that I was a young kid in the UK. In the brief conversation that I had coffee with him, we discussed his KPI dashboard, things that he looked at as the CEO of Rentokil.
Rentokil was a different business in the early 2000s than it is now. It wasn't a pest control business for the most part. It was everything else with 35% pest control and now it's majority pest control. I always like to have conversations. I know that you and I have had these discussions in the past. For our readers, can you talk about maybe 3 or 4 things that you use from a performance indicator perspective as you manage the business whether it's on a monthly, weekly, or quarterly basis? What qualitative and quantitative data do you like to have in your hands to understand how you're running your business?
John Myers: Every once in a while, we'll be in a long discussion about something. This is comical to me but we still do it. We'll go, “Time out. What problem are we trying to solve here?” We've morphed into opinions, beliefs, and stuff. We now have a set of rules. Why are we doing this? Amongst all the other stuff that we could be working on, why are we doing it now? By the way, great companies ask the first ones. Good companies probably ask the second question and really good companies ask this third question, which is, “Are we resourced to successfully deliver this solution at this moment in time? Are we thinking the regular suspects are going to do a little bit more?” It’s easy to get into that trap.
If you're creative, you're dynamic, and you have a bias towards action, you start thinking about solutions without the why. As soon as you've answered the why, then the KPIs become evident about what you should track. Let me give you an example. If you look at your specialist/technician retention rates and you decide that they're not high, you could say it's because we're not paying enough. They're quitting for other jobs. Most of us know that people don't quit for other jobs for a small amount of money. They typically quit their boss.
Let’s say we’re going to work on specialist retention, we would start looking at why they are leaving us in the first place? Is it about money? Is it because their first day at the job was horrible? The boss didn't even know they were coming. Did we get them trained up to our standards within a reasonable amount of time? Why is that important? If you're doing a job and you feel you're not doing it well, it's not satisfying and engaging. If that was our example, we would then be looking at metrics to measure whether we're having an influence on those metrics.
Where are we in core tiles against pay, the zip codes, and the markets that we're working against? What percentage of our specialists are within their training standards? If they're supposed to be chapter one after month one, chapter two after two, what percentage are on schedule? Is my span of control right? If I'm saying that managers should only manage 9 people and a guy's got 16, how's that likely to turn out?
I'm giving you maybe not the level of detail you want on KPIs but the point is we then decide if this is the solution, how do we measure success? How will we know that we're doing the right thing? When you do that, great things happen. When you don't, you're on to the next adventure and you said, “How did that thing ever work out over there?”
Paul Giannamore: First off, get the relevant data and understand the cause and effect behind it.
Patrick Baldwin: In KPIs, you've made the reference twice this fear of failure or this anxiety. I don't know if there are certain KPIs that bring red flags and haunt you at night. With 9,000 employees, what things can keep you up at night?
John Myers: I worry about 2 or 3 things all the time like a safety issue. I'll give you an example. We drove 150 million miles in 2020.
Paul Giannamore: You guys would have gotten to the moon and back.
John Myers: I don't know that step but that's a whole lot. I worry about driving safety because car accidents kill. I worry about our colleagues. One of the things that we say and one of our values is we value long-lasting relationships with our colleagues and customers. Embedded in there is an obligation that they are going to return home safely to their families. Every day, I see every accident report in North America. Some of them are, “The dog bit me on the ankle.” “I got stung by a bee in my ear.” “I got into a car accident.” “I fell off a ladder.” “I twist my ankle in the backyard.”
I think about safety a lot. When you brought up safety meetings, maybe bureaucratic, in my business, it's an incredible tool that tells the guys that are doing a lot of work that you care about them. If I hear that we have lots of slips, trips, and falls, I'm immediately wondering, “Is our shoe program correct?” We give all of our colleagues free shoes. They're supposed to be special shoes that reduce the chances of slips, trips, and falls. In this COVID world, I'm thinking about PPE a lot. Are they wearing the right masks? Are we doing the right stuff?
First and foremost is safety. I do think about wage and hour a fair amount because it's hard to be in compliance on wage and hour in a distributed model sometimes. On the factory floor, I would walk the floor and I'd say, “Bob, have you been on your break?” He'd say no and I'd say, “It’s time to take your break.” Out there in the field, our folks are pretty dedicated to the task at hand. They're a little bit behind because when they were at, XYZ location, it took longer. Now they're trying to play catch up and they have this feeling of ownership.
Paul Giannamore: In the United States, you can have one specialist choosing five different wage and hour jurisdictions in one day. Go to California and go into a couple of different counties.
John Myers: One of the things is that we are dedicated to doing it the right way, the legal way. As a result, I'm always worried about whether we're doing it the legal way with 9,000 employees. We work a lot on that and maybe it's the fear of failure thing that I'm always rethinking our strategy. It's spinning in my head. Why aren't we selling a little more of that? Why didn’t this customer take our price increase when we're providing world-class service?
I will tell you that I sleep well at night. I'm not one of those who wake up at 2:30 AM and can't sleep. One of my previous colleagues, a guy named Scott Cook, who was head of HR and a real helper to make me better as a manager said, “We got to work on your ability to compartmentalize things and put them into boxes. After they're in the box, let it go for a little bit.” As soon as I started doing that, it is a release. We got that right. I'm not letting it go but I can check that box and say, “I don't have to look at that for 2 weeks, 1 week, 1 month, or whatever,” rather than spin and spin until, you can't sleep at night, and you're not fun to be around and all those types of things.
Patrick Baldwin: John, with the resources you have at your fingertips and the size of the company you have, I'm asking you from a town hall transparent answer perspective here, if you will. Going back to safety, is there something you could give to our readers as they're running their businesses on a much smaller budget. What are some things that they should be doing proactively to keep their employees safe?
John Myers: We want our technicians/specialists to back into the parking spot. If you watch FedEx and UPS. if they can't do a pull-through their backing in. The reason being is, at that moment, they know what's behind them. Afterward, they don't know what's behind them. It sounds like a little thing and we require all of our acquired companies to back into space. Of course, it eliminates fender benders and all that kind of thing. Heaven help you if you ran over a little kid. You don’t come back from that kind of stuff. The symbolism of we want you to act in safe ways, then pervades throughout the whole organization that they care about me. They're not trying to hurt me. They're trying to help me if you will.
When we don't enforce the back-end policy and you walk by it and they know that it's a policy, let's say I walk right by it and they go, “It's not for real.” He saw that. He didn't say anything. I remember learning that lesson early on in the factory setting where safety is a big deal. There are OSHA requirements in addition to the fact that someone could get hurt and you could never walk by a safety issue. If you frame it in, “I care about you,” issue not, “I'm trying to avoid higher medical bills or whatever,” it's amazing what happens, Patrick.
Patrick Baldwin: I appreciate that. That is a reminder and a great tip.
Paul Giannamore: In PR, we have to back in from a safety perspective. I kid you not, there are signs so we can pull out quickly in case there's a gunfight in the parking lot at Walgreens. I kid you not. I'll take a picture of it. I promise the two of you that I'm going to take a picture of it when I leave here. It’s in case there's some altercation.
John Myers: Every time I back into the spot my wife goes, “Really? We're backing into the spot?” I said, “Safety first.” What can I tell you?
Patrick Baldwin: A couple of these brands have been mentioned. Down there in PR, Paul, you've got Oliver and I’ve got Presto-X in my neck of the woods here in Texas, Ehrlich, Western Star tech Anderson and Rentokil umbrella over that. Can you speak to your thoughts on keeping these large platforms separate? What are your thoughts on brand equity?
Paul Giannamore: John thought he would avoid one day where there's some person on the planet that didn't ask him this question.
John Myers: It's the obvious question. At Cintas, if we bought a company on a Friday by Monday, it was rebranded. Their paychecks, uniforms, signs, and trucks. We're all over it. It’s a little bit different and 100% commercial. Explaining to commercial customers is no longer blank, it's blank. It’s a little bit easier. Cintas has a good brand name so it could be considered an upgrade. When I came to Rentokil a couple of years ago, I was predisposed to say, “Why are you doing this multi-brand thing?”
There are 3 or 4 reasons why we're where we are. First of all, about 70% of this business is residential, in the US. Whatever brand you pick has to resonate with the residential customer. That's first and foremost. On top of that, it has to be a brand that will allow you to hold your business, not lose it. If I was to convert from Allgood to XYZ and a year later, someone's saying, “They used to be called Allgood. What are they called now?” They're googling it or something. They come up with Orkin as a result and we lose business. That would be crazy. That's the first two.
The second thing is these brands that we're talking about have been in the marketplace for more than 80 years. If you're in marketing, you dream up brand equity. As a matter of fact, when we bought the West Coast Western, some people call it the Best Western. I don't know how you guys are when you're on a plane but I typically don’t talk to my seatmate much.
Patrick Baldwin: Especially if it's my wife.
John Myers: You’re a big liar. I hope she's not even in your zip code. You're in trouble if that's the case.
Patrick Baldwin: She's on the other side of the ocean. She doesn’t even know this podcast exists so I'm safe.
John Myers: Five minutes before we land at LAX the guy said, “What are you in town for?” I was like, “I work with a company called Western.” He said, “The little man with the hammer.” It’s the logo on the vehicle getting ready to hit the rat with the hammer. You go, “Oh my gosh.” It’s that fast. Patrick, that's the challenge. If I had a magic wand, $30 million, or something, and I could spend it and go, “Let's get all these brands supported under a master brand that would help me to grow the business faster,” I would do it in a minute.
In today's digital world, it's hard to support multiple brands through Google and the like. What we've done is decide to go to regional brands. You're in Dallas. If we bought a company in Dallas and was 100% commercial, it would be transitioned probably 12 to 18 months to Presto-X. If it was residential, you'd probably take three years to transition it.
There are always exceptions to the rule. For example, Allgood in North Atlanta and South Atlanta is amazing and active. What problem am I trying to solve? They're growing at a high teen double-digit growth and you go, “What am I going to get from doing that?” As a result, sometimes I feel like I'm treading water in the deep end, Patrick, about this branding thing. I look at it and go, “What problem am I trying to solve? Is this the problem I need to solve today?” I look at it and I say, “It’s an important problem but not today. Some other day.”
Patrick Baldwin: I didn't mean to bring it up. I didn’t know it was a scar that picks on daily.
Paul Giannamore: Every time the guy sits down, especially with sellers, that's always one of the first questions.
Patrick Baldwin: Do you just introduce yourself, “I'm John Myers.”
Paul Giannamore: He should record himself doing it and have his guys play it.
Patrick Baldwin: Let’s do it right now. Give him the clip. You mentioned Jack Welch earlier. I remember that he was big on being number one in a sector and you're number three and I love the underdog story. Although, you’re pushing $1.5 billion. It's a big underdog. I'm sure you're shooting for that number 2 to number 1 spot? What does that strategy look like?
John Myers: There are a couple of things that come to mind. With Jack Welch, a lot of the stuff that he put together was meant to be considered as a common denominator way of thinking, 20/80, 10/20/70, and the like. They went wrong when someone was at 9%. He said, “You got to find 1 of your 70s and jam them into the 10 so we're rigid to that.” I'm not sure that he ever thought it should be that rigid. Your number one or you should be out also is sector-specific. If you have an $8 billion marketplace, maybe it's closer to $9 billion now depending on whose data you use and you're the third largest pest control company in North America and you have a 10% market share, is that a good place to be?
Patrick Baldwin: It's great. I'm thinking in terms of competition. I didn't mean it to come off in any way.
Paul Giannamore: Are you saying that he’s doing a shabby job, Patrick?
Patrick Baldwin: I'm in Texas so I got time to hide. You want to be better, I’m sure.
John Myers: First of all, I didn't take it as a shot at all because it's an amazingly good place to be. Forget COVID for a minute. A marketplace is probably growing 4.5% to 5% every year. We've got a 10% market share and we're the third largest. The question is, how do you grow profitably? Going fast to say, “I want to be 2 and I want to be 1,” doesn't match up with the things that we want to do for our business, which is to grow profitably. Fast and chaotically means not profitably. Talk about cultural pain points, that could be one of the things.
I get that question as often as I get the question about branding. We're going to be methodical about organic growth rates to be more than the industry rates and we're going to match it up with selective acquisitions. If we can grow 12 to 14 between the two of those let's say every year, I don't know when we'll be at number 2 or 1 but the shareholders will be happy during that time period.
Patrick Baldwin: Paul will be happy with any more acquisitions that you do.
John Myers: We're going to have to take our vitamins based upon how active Paul's made us over the past couple of months.
Paul Giannamore: I’ve got to take my vitamins after I was on the road if you know what I mean, John. Going back to when you talk about strategy, I was going to ask you how Orkin, Terminix, and Rentokil North America missed the boat on residential mosquitoes or how all of you guys are so far behind. Granted, you buy businesses that do mosquitoes and I get all that. Would you agree with me that the big three are essentially behind a lot of the smaller players in mosquito control services, at least on the residential side in North America? Would you disagree with that?
John Myers: I'm going to talk for ourselves. We're behind. The lawn care companies have beaten us to the punch and some regional medium to large regional players have beaten us to the punch and we're not getting our fair share. It infuriates me because we already owned the customer. Mosquitoes are a form of pest control. We own them as pest control providers and we've got a lawn care company killing mosquitoes. That drives me crazy.
Patrick Baldwin: Arguably, disease control is from a greater extent than the general past.
John Myers: This is the stuff that keeps me up and frustrated, Patrick. I do have one more to add to the list. We're not doing a good job at tick control, either. Anybody who had a disease transmitted by a tick factor will tell you that's more likely than West Nile and the like. Once again, that’s pest control in our customer’s yards. We should be taking care of that better. We haven't broken that code. I agree with you, 100%. We're leaving a lot of opportunities to be fulfilled on the table.
Patrick Baldwin: In your earlier career, you spoke about bringing your A-game every day in speaking to yourself to your Rentokil employees and even to me. What does that mean? How do you get yourself in the mindset to be successful every day?
John Myers: First of all, I work for a boss that is bright. He’s a good people person who understands how people are thinking. As you're talking, he's locked into not only what you're saying but how you're saying it. He helps to make sure I'm on my A-game. The other thing, Patrick, is this job is a lonely job with the people reporting to you. You’ve got to have your A-game every day. You've got to hold your emotions in check. I don't mean robotic because we're all allowed to blow up once in a while and then apologize later. That helps me to be prepared. The final one is I don't want to fail. I want to win so I do my homework. As a result, I'm usually in a pretty good spot.
The last thing I would tell you is I have changed my mind more often in meetings. I go in thinking black and white. I said, “It's black.” With facts, they've allowed me to change my mind. When you create that environment even when you didn't bring your A-game, you're smart enough to hear a better answer and you react accordingly.
Patrick Baldwin: I appreciate that. Working with Paul, I have to bring my A-game every day or else, I don't know what people would do.
Paul Giannamore: John, you've built an incredible organization in Rentokil North America. I know it wasn't you single-handedly but the way that you've done that is building a fantastic team around you. There are a lot of people at your organization that I care deeply for on a personal level. I appreciate you coming out and talking to us. You're genuine and candid. I'm happy you stopped in to chat with us.
John Myers: Thank you for that. I warned you that sales guys like to talk but there are some items in here that you heard that I'm passionate about. It's taken me a while to be able to get my understanding of how this all fits together. What you heard is what I believe and it's not well-scripted but it usually works as a result. Thank you.
Patrick Baldwin: John, it was great to visit with you. I appreciate your time. I’m going to have you back.
John Myers: Thank you. Anytime. Take care, everybody.
---
Patrick Baldwin: Paul, thanks for getting John on The Boardroom Buzz again. He's been at Rentokil for over twelve years in that longevity that you all spoke about. He had previous experience at Cintas for eight years. What does that do? He steps in on day one and he already has route-based service, business experience. What does that do for him as a CEO?
Paul Giannamore: Are you talking about longevity or coming from Cintas?
Patrick Baldwin: Both. He's got over twenty years of route-based service business. That's kind of a Rockstar.
Paul Giannamore: He's been around for a while. He learned a lot at Cintas. Listening to him talk about Cintas reminded me of Jarl talking about Securitas and Loomis, the certain aspects of their model that he was able to bring to Rentokil North America. Bringing in an experienced leader from another organization, they can apply things that they learned that were specific to their past employers. John's been around. I joked in the interview that the last time I saw him he and I were talking about the fact that I was surprised that he's still around because it's not uncommon for chief executives to head off to other businesses.
In pest control, it's been relatively stable. Look at the Rollins guys. They've been around forever and ever. The anomaly in pest control has been Terminix or ServiceMaster. Brett took over. It's my high hope, as I always say, I need a strong Terminix in this industry. We all need a strong Terminix. As I had high hopes for Nick, I have high hopes for Brett and I wish him the best of luck there with that organization.
Patrick Baldwin: With Rentokil, I don't know if you can speak to this, but you talked about how they spend their time. John did on uncovering things during due diligence. Are there things that you've witnessed where Rentokil is handling due diligence differently or did they think about it differently?
Paul Giannamore: My experience coming out of Bulge Bracket Investment Banking, prior to getting into pest control, I was dealing with extremely large transactions. When I came into pest control it was new for me. I’m dealing with lower middle-market deals. I was surprised at the lack of DD that was conducted in pest control acquisitions. I had Vis-à-vised everything that I had done historically around the globe.
Over time, when about Rentokil versus Orokin versus Terminix versus Anticimex, for example, as the M&A market has continued to heat up in years, all of these players had to get more sophisticated. Back in the day, it was largely Alex Nye at Rentokil North America running the acquisition program. He had some subject matter experts that he pulled on. For the most part, it was him doing everything from the front-end valuation submitting the approval memo, the Investment Committee to going out conducting DD and executing the deal. It didn't take Rentokil long to bring PwC on to execute a lot of their buy-side diligence or at least financial accounting diligence.
All of the players have gotten more and more sophisticated over the years. Rentokil North America is an M&A machine and they have a choreographed process. Some other acquirers are continuing to learn how to do that but that is an effective capability that Rentokil North America has built now. Does it matter to a seller out there? No, not so much. Around the edges, it's helpful but that's not something that you would use to choose Rentokil versus any other acquirer necessarily. It's more about the process, that Rentokil is built to help itself and they have done a great job with that.
Patrick Baldwin: I don't know as much about Rentokil as you. What I know about Rentokil is from meeting with John Myers and seeing Presto-X truck here in the area.
Paul Giannamore: They're thin down in Texas. Texas is a tough market for all acquires. It's a market where Rentokil is thin and Anticimex isn't there at all. Rollins and ServiceMaster have a decent footprint but Texas has largely been dominated by private businesses. It's a market that has yet to consolidate my mind and that'll happen at some point in the future. I've talked to you and Bobby about this for years. Didn't I tell you many years ago that Texas hasn't been an extremely consolidating market? At some point in the future, it will be which will lift valuations in that market. We haven't gotten there yet.
Patrick Baldwin: Let's do it. Everyone reading now in Texas, call Paul. My limitations for Presto-X is we had a couple of clients that needed some commodity fume and they developed a relationship where we could call them and send out some commodity fume. There are good people there. In the past, you've said that 80% of sellers choose the highest bid. If money and terms were equal, I want to know, how would you describe Rentokil in comparison to other strategic buyers? As an outsider looking in, how would you describe Rentokil culture?
Paul Giannamore: First off, sellers have a different degree of consideration when they're selling their business. Some people are extremely hell-bent on investigating the acquirers. I'm fine with that and I like that because it's 100% their decision and not an auction process at the highest price. Rentokil, from a cultural perspective, is interesting in North America because it is an amalgamation of a lot of different businesses.
If you think about it, years ago, that business was doing less than $100 million in revenue prior to buying Ehrlich. For so long, they were doing $25 million in revenue year in and year out in North America so they buy Ehrlich, Western, and the list goes on. There are hundreds of deals that they have done to build that business. When we interviewed Brandon Hier, one of the things that interested me was, is there a consistent culture across radical North America? Does each of the individual businesses retain their own culture?
What we heard from Brandon is that they did a good job and allowed his business to retain its own unique culture, but layered on Rentokil North America type, policies procedures. My gut tells me Rentokil is somewhat of a hybrid. In a lot of ways, Rentokil is similar to Anticimex. Rentokil has done a great job acquiring quality platform businesses, allowing them to run somewhat standalone but still taking some key people.
Some of the deals that I've worked on, they've taken some key individuals within the platforms that they've acquired and allowed them to ascend the throne to greater regional or even national type positions. When I look at companies Rentokil and Anticimex, I start to think about the fact that both of them provide a lot of upward mobility for sellers people.
Patrick Baldwin: That makes sense. Thank you.
Paul Giannamore: The other thing I'll say is John talked a lot about remote working. It’s 2020 now and everyone's remote working. For example, Rollins is not a company that is interested in having a $20 million business in Illinois and the CFO of that business lives in Wyoming. They are focused on having everyone there in that business versus Rentokil, Anticimex, and others that have kind of been a lot more flexible. It’s finding the best talent irrespective of where they are in the world.
Patrick Baldwin: That is interesting. The contrast makes sense. You've said something about command and control of Rollins, haven't you?
Paul Giannamore: Yes, I have.
Patrick Baldwin: It sounds like brand equity. Rentokil retained those names based on regions or localities? What's your thought? Is that the way of the future? others are doing that?
Paul Giannamore: I never get hung up on this whole brand issue. Everyone always talks about it. Sellers always have questions about it. To me, pest control is a local business. I don't know if John said it in this interview, but we've talked about it quite a bit. It's slightly frustrating for him to have 150 brands in North America.
On the other side of that equation is do you care? Does it matter? Pest Control is local. Western was largely a residential business out in California. With Rentokil North America, it’s using Ehrlich as a residential brand. Does it make sense for Rentokil to rebrand Western in California whose business has been around since 1913 to Ehrlich? It makes no sense to do that.
Anticimex has realized it. To a large degree, Rollins has a portfolio of independent brands. You've got HomeTeam, Crane, and Northwest. The list goes on. It’s the same thing with Terminix. There was a huge push over the years to harmonize the brand. Let's buy everything and call it Terminix. Starting in around 2015 and accelerating into 2017 and 2018, they've decided to buy standalone brands, Gregory, McLeod, for example, and these types of businesses. It’s leaving them as the local brand that they're known for in the market.
Patrick Baldwin: In episode seven with Mike Givlin in Certus, they were talking about doing a brand equity study.
Paul Giannamore: When I think about what Givilim was talking about, Certus has bought a lot of small businesses. You go into the Seattle market, and you buy a $2 million player, a $4 million player, and a $5 million player and you jam it all together, it makes sense to have a consistent brand there. When Anticimex, ServiceMaster, Rollins, or Rentokil goes out and buys a $25 million business when somebody goes out and buys Mike Rogers Killingsworth in Charlotte Metro that's been there for years that’s well known, it doesn't make sense to change that name. JP McHale. It doesn't make sense to change that name.
These are businesses that have been around for a long time and have a lot of brand equity in the market and are of a size. At that point in time, you do what you learned from Scott Stevenson. You’ve got a business like Modern doing about $20 million in revenue. You do 7 or 8 acquisitions and you plop them right into Modern, change their name and grow it that way.
Patrick Baldwin: Got you. Shifting away from Rentokil specifically but in some of the takeaways that I heard John said was,”1% in customer retention is 1% in organic growth.” I have not personally thought about customer retention that way. We tend to think about an unsexy industry like sales is cool and flashy. The customer attention doesn't get our intention. We don't incentivize for. We're not celebrating it when we save a customer. I didn't know if you're focusing on your clients improving customer retention or when you're taking them through the process of customer retention is a big deal.
Paul Giannamore: That's a great point that you picked up on from a mathematical perspective on the surface. You’re saving 1% of the customer base from a retention perspective is equal to one percentage point in new sales. That's a fact. He’s 100% right on that. I always like to look at cause and effect in the impact on the bottom line. We have spent many years over here and I know I'm a pain in a lot of my clients' asses because if any of you know my clients, you'll know that I tend to use everyone's business as a living laboratory.
Years ago, I had a client who was sophisticated with the use of technology and had a business with around 10,000 customers. It was largely a residential kind of general pest business. It didn't do a whole lot one time so it was a pretty homogenous customer base, which was good for testing. I wanted to understand far more than the top-line impact that customer retention has on a business. I was interested in what the bottom-line impact is.
One of the theories that I had is, and I know, this is common sense to a lot of folks, but I wanted to understand why older customers are more profitable than newer customers. If you think about it kind of logically, you're running your business, you get a new residential pest control customer, that customer probably has some problems, so it's more expensive to do the cleanout. Once they stick around with the business for longer than eighteen months, the technician builds a relationship. They know the shortcuts to the home. They know the hot spots of the house and they know whether the issues are. You build this knowledge of a service history with that customer.
One of the things that we didn't know, and we didn't know until we tested it was I had the hypothesis that newer customers are more of a pain in the butt than older customers. One of the things that we did is we tracked every single customer that came into that business and tracked their duration. We also tied the customers' phone numbers, emails, texts, and all that stuff to the phone system which allowed us to track how many incoming calls for each unique, discrete customer and the duration of those calls.
The question was, “Where does this pest control company spend most of its service time, as far as calling.” It turned out that approximately 70% to 80% of phone time with the office was spent on the phone with new customers because, with new customers, there's a lot they don't understand. This might be the first time they had a pest control service. They might have switched a provider to you so they're trying to understand how everything operates. They've got a lot of questions.
Older customers that you've been servicing for years it’s like, “Patrick’s guys are coming out. I've known Jim forever. I don't even need to see him.” We noticed the customers who have been around for a while are more inclined to text or email, “Patrick, the ants are back. Can you send Jim out? I’m around Thursday and Friday.”
The new customer, though, calls up, “You were out here a month ago. Why are these ants here? Why are they back?” It’s because we're not completely eliminating pests. They come back. That's why you have a service and that's why we've got your back. We're going to send somebody out and ten minutes of phone time wasted. Older customers are more inclined to send emails about changing credit cards so on and so forth.
It's you getting that working relationship with the customer and they become less and less expensive or inversely more and more profitable to serve over time. It's an important factor. Tim Mulrooney and I were talking about how we measure customer retention. That's an entirely separate episode on customer retention measurements.
Patrick Baldwin: Rule of thumb, with the span of control, John said the numbers. There are nine specialists or technicians. For every nine technicians, there's an ops manager and there's four ops managers or service managers underneath a district or branch manager. I thought about things that could get out of whack. You might have too little or too many direct reports in the organization. They've scaled a $1.5 billion pest control company based on that 149 number. That's a good takeaway for me.
Paul Giannamore: When you're a pest control operator, and you listen to something like The Boardroom Buzz, for example, everyone wants to hear, what's the best way to advertise, market, hire people. All these kinds of tactical things that fit into a bundle of things that you have to deal with as a manager. Big things that allow businesses to scale rapidly are having the appropriate organizational design and having the appropriate incentive structures. If you set that up, right on the front end, in a lot of ways, you can almost set it and forget it and I know that's not right but it covers all sorts of manners of sins if you have that stuff set upright.
Patrick Baldwin: It's been days since we've interviewed John Myers so I did my research. He was big on safety but the thing that stood out to me was 150 million miles a year. That's incredible and I can see why safety is such a number one concern. I've always thought the potential likelihood of something catastrophic happening is on the road and not necessarily Mrs. Jones’ backyard. I could think of one actual pest control claim in my time in the industry. It was relatively minor. It had to do with some fish. It’s no biggie. I think of the fatalities, the accidents. Mike Rogers spoke about it. It was a big impetus for them to sell Killingsworth.
Paul Giannamore: We were a week away from a deal a couple of years ago with a $40 million transaction with Rentokil. There was a road fatality with one of the technicians. The technician didn't die, but there was an accident. A motorcyclist died in a fatality a week before the closing. You've got all sorts of potential liability issues. You’ve got so many people on the road. I don't know if this is still the case but there was at least one year when Rollins was Ford's largest customer. They bought more Ford vehicles than any other entity on the planet. Pest control companies put a lot of people and a lot of vehicles driving a lot of miles so the road is a big issue for all of us.
Patrick Baldwin: Mike Rogers spoke about doing 60,000 miles a week or 2.5 trips around the Earth. Paul, have you ever looked at revenue per mile?
Paul Giannamore: We've never looked at revenue per mile. I've got this big dashboard here of metrics that go up and down the P&L. That one's not there. There are a lot of them on this list that I would like to be able to utilize but I can't because a lot of companies don't have those records. I don't know if you take ten pest control companies out there, maybe one of them would be able to tell you how many miles are technicians have driven? The data is there. They've got odometers and WEX cards. You calculate all that, but it's getting down in the minutiae is a pain in the rump to collect but I'd like it, Patrick, it's a good idea to explore revenue per mile.
Patrick Baldwin: John spoke about being out in the field being on the front lines riding along with those technicians. No surprises from John Myers. If an owner is considering selling in the next year or two, maybe they shouldn't be out in the field, maybe they don't need to get back into the business. They don't need to be the face of their company. I don't see Rentokil being sold anytime soon. What recommendation would you have of an owner that reads this episode and thinks, “I need to be on the field no but I'm selling in a couple of years. Maybe I shouldn't.”
Paul Giannamore: One of their most important jobs for these CEOs is to get out in the field and talk to customers. It's important to show up at a customer's operation and talk to him. It’s an important aspect of it. That’s why I was curious when I asked John the question. Is it him being the sales guy and wanting to get out there and kind of get his sales on? Was it him going out and trying to talk to customers to understand what the organization is doing right or wrong?
A lot of owners started in the field. Over time you build an organization, and I can think of a lot of guys who haven't gone out. They'll talk to customers when they call in or whatever, but they're not proactive out on the field. They're not taking ride alongs with technicians at random intervals. A lot of them have managers that do that.
We've heard Jarl and John Myers talk about it. These CEOs who run these billion-dollar organizations do get out in the field and do ride alongs. The core of your business is creating value for the customer unless you get out there and talk to the customer. It’s hard to understand and formulate a strategy around grading value if you're not getting that direct feedback. Those are great discussions. That's a great point, Patrick.
Patrick Baldwin: That question came up in my head like, “John does that.” What about other CEOs? Paul, this might be the most selfish thing I've ever said to you on the show. I'm glad Andy Ransom said no back in 2008.
Paul Giannamore: Patrick, you had to bring that out. I know where you're going at. You’re going at my attempt to buy Rentokil North America.
Patrick Baldwin: You could have made it happen. I believe in you.
Paul Giannamore: That was back in 2007, 2008. I was young and in my late twenties at that time. I come out of private equity. I'm doing deals in pest control. Rentokil North America does maybe $200 million in revenue. This is a business I can buy. It was the financial crisis and I thought, “I’ve got some mezz debt lined up, some sub-debt, some preferred equity, and common equity. I have the old capital structure built out.” I'd value that business. I was ready to go at it.
I sent a letter to Alan Brown proposing the acquisition. I went over to London and he was kind enough to sit down and kind of giggle at me and look at me like I’m a young kid trying to buy Rentokil North America. He kicked off the letter to Andy who returned a letter to me with his own commentary. That's true, Patrick.
Patrick Baldwin: At least it was a polite letter. Did you know why I’m glad they said no?
Paul Giannamore: I have no idea.
Patrick Baldwin: It’s because now we have The Boardroom Buzz.
Paul Giannamore: We wouldn’t have The Boardroom Buzz had I owned Rentokil North America.
Patrick Baldwin: You’ll be Paul G driving the diamond-studded Rolls Royce.
Paul Giannamore: Quite frankly, Patrick, we would have never met because I don't think we met until 2010.
Patrick Baldwin: I would have bought Rentokil North America in 2008. There you go. I was selfish thinking about The Boardroom Buzz but we wouldn't have this friendship. Paul, thanks again for getting John Myres on The Buzz. It was great. I learned a lot by chatting with you.
Paul Giannamore: John Myers is a great guy. He's always full of interesting stories. For years, I always worked with John and he's such a nice and friendly guy. When we go to meetings and John shows up, and Mex is like, “I want to sit on his lap and drink hot chocolate and listen to his story.” He's a fierce leader for sure. You don't run a business like that for as long as you have but he's warm and endearing so I'm glad that he stepped in for a chat with us.
Patrick Baldwin: I've heard that the Rentokil M&A team has come to take a liking to the Mex.
Paul Giannamore: Those are stories for other episodes.
Patrick Baldwin: Paul, have a great week. Thanks again.
Paul Giannamore: Thank you, Patrick. I’ll talk to you soon.
---
This episode has been CO produced, edited, and mixed by Dylan seals of HDAudioPost.com.
John Myers
Ehrlich
Steritech
ServiceMaster
Allgood
Brandon Hier – Past Episode
Presto-X
Western
Securitas
Loomis
PwC
Mike Givlin – Past Episode
HDAudioPost.com