Sundt Construction went from the brink of bankruptcy to profitable and progressive.

It is always possible to turn a poorly performing company away from bankruptcy. In the construction industry, few individuals know this better than Doug Pruitt, former CEO of Sundt Construction and co-author of “Level Headed: Inside the Walls of One of the Greatest Turnaround Stories of the 21st Century.” In 1992, Pruitt was promoted to president of Sundt and assigned a task that some deemed impossible: bring the ailing company back to profitability. In the end, Pruitt and his team not only avoided financial fall-out, they also transformed the company into one that is progressive and consistently profitable—even through the recession. CBO interviewed Pruitt to find out what made the difference.

The Problem Areas
Sundt had been in business since 1890, starting off building houses and farm buildings in New Mexico. Over the next century, the company grew quickly and expanded the scope of its operations, becoming known for its military, highway, commercial, school and medical projects. In 1942, Sundt even constructed the facilities where the first atomic bomb was developed.

In the early 1990s, however, the company fell into financial trouble. “The company was losing a lot of money on a lot of jobs. In 1992, we had the worst year in our history,” Pruitt says. He attributes the decline in profitability partly to the company’s past success: “We had lost our discipline as a company, and because of that, other things began to break down. We were not investing in our people. We weren’t doing training and development to the extent that we needed. We really weren’t investing in technology. We weren’t investing in leadership planning or development. … We didn’t have common policies and procedures as a company.”

Doug PruittPruitt also noticed other aspects of the company’s operations that were having more immediate effects on the bottom line. “We had a lot of assets that were very poorly utilized or under-utilized,” he says. “I’m a great believer that if you have an asset, it should give you an expected return. … So, we began to jettison assets that didn’t fit our plan.”

Rethinking Work Crews
Work crews were also being utilized inefficiently. Pruitt says there was “the strong belief that building contractors could never build a bridge, and bridge builders could never do a high-rise concrete building.” He rejected this idea. “You can, in fact, cross-utilize your employees if they’re trained,” he says. One of the arguments he made to the other executives was that “it was very inefficient to have all these different crews running around when one group is laying off people and another group is trying to hire people.”

To solve this problem, Sundt consolidated the company’s crew structure. “That was a hard-fought battle,” Pruitt says, “but today we have one concrete unit that moves around with the company and does work for all the groups. A guy may come off of a bridge job and go on a high-rise concrete frame building. … We broke through that paradigm barrier.”

Addressing Equipment Concerns
Pruitt notes that in the construction industry, “there was a strong belief that you were more competitive if you owned all your own equipment. So we had a huge fleet of construction equipment. We had a maintenance facility, and we were very proud of the fact that we could tear our equipment apart and put it all back together.” Though this had become a part of the company’s identity, Pruitt saw it as a drain. “My attitude,” he says, “was that it’s great to be able to tear down all this equipment and put it back together, but the only reason we’re doing that is because it’s worn out.” Additionally, much of the equipment was under-utilized, doing little more than acting as an anchor on financial statements.

To address these problems, Sundt sold the maintenance facility, the 12 acres of land adjacent to it and a significant portion of their equipment. “Again, a hard-fought battle,” Pruitt says, “but we got rid of about 60 percent of our equipment. Now we buy equipment, and after so many hours we get rid of it and replace it with a brand new piece of equipment. … We do not have a maintenance facility, and we do not have those 12 acres.” The end result? The company became significantly leaner without abandoning its core capabilities.

Investing in Improvements
Cutting down was only the first step. The company also had to begin investing in the improvement of its operations, namely through adopting new technologies and creating training and leadership programs. While investing in the future of a company is certainly tough when approaching bankruptcy, the assets the company shed as part of the turnaround provided the resources for them to do so. Pruitt says, “As we sold the assets, we took the money and reinvested, but we invested it in areas that we wanted to improve.”

He also notes that by addressing the company’s general lack of discipline, they were able to free up more cash to invest in these areas. “We were very lax at billing and collecting,” he says. “So, there was cash out there that was our cash, but the owner had it. So, we started getting much better, again by implementing discipline and policies and processes and holding people accountable in the course of training and development. We were billing on time, we were billing correctly and we were collecting our money on time.” The discipline lost in the success of the company’s better years became important once again—and critical to the organization’s ongoing success.

Pruitt admits that there were frustrations along the way to turning the company around: “It’s amazing how you may be talking to a group that is losing money, and you start talking to them about why they’re losing money and the things they need to do to survive—they look at you like you’re kidding.” For Pruitt, though, convincing people was not the issue. Rather, it was the time involved in getting things moving. “I’m a very impatient type A. … It was the time it took to convince people that change had to happen,” he says.

Turning such a large company around in such drastic ways is certainly a difficult task, but Pruitt’s experience and mindset provided him with both the understanding of what needed to be done and the confidence that the changes would result in a turnaround. “I never thought it would not work out,” he says. “I believed in my heart of hearts that we knew what we needed to do. I believed we had the talent to get it done, and I believed that we would succeed.”
Since Sundt is such a large company, the turnaround process took several years to finish, but in the end, Pruitt’s team was indeed successful in bringing it back to profitability. Pruitt says that the final touches of their plan were completed in 1998, and following that, “We turned around in 1999. All the non-performing units are gone. … Now that we had gotten all the better-performing parts of the company and we’ve made a lot of changes, we had a very good profit in 1999.” He adds, “We’ve had a profit every year since then,” including during the recession.

The company’s goals of improvement did not end when it turned profitable, however. Pruitt’s philosophy is that any time a goal is met, a higher goal must be established. “I’m a great believer that if you raise the bar on performance, people will get there,” he says. With the company turned around and on a path to continual improvement, Pruitt has retired, and today Sundt is as strong as it has ever been.