John Erskine Jr., president of Racine Federated Inc., openly acknowledges that his company has made great decisions in hiring the right people, acquiring other companies and selecting its product lines.
However, Erskine doesn’t boast about such decisions. Instead, he usually speaks in humble terms about Racine Federated’s success.
"We’re probably a lot more lucky than we are good planners," he said. "We’ve done our best over the years to position ourselves so we can take advantage of opportunities that come along."
Racine Federated has worked with banks and other lenders to maintain a good credit rating so the firm can acquire other companies that complement its current services. The company now has seven divisions.
The combination of good luck, recognizing talent that needs to be held onto and treating employees right has paid off for Racine Federated. The company’s sales rose to $28.5 million last year, and Erskine is projecting more than $30 million this year.
The recent spikes in energy prices, which have reenergized the search for new sources of energy, also have fueled sales in two of Racine Federated’s divisions that manufacture flow meters. The flow meters are commonly used for searching for and extracting oil and other petroleum products.
"We have two divisions that are somewhat competing, but they’re now both doing extremely well because of the high amount of energy (consumption and research)," Erskine said.
Racine Federated was formed in 1970 by John Erskine Sr. and George Miller. They formed two divisions in the company’s early years – Racine Construction Tool Co., which later became Racine Hydraulic Tool, and Wyco, its first acquisition. Racine Hydraulic Tool was sold off about 10 years later.
"It was the most difficult (to walk away from) because it was the first one we started," Erskine said. "There was a huge amount of pride in it, and we thought we should have been able to make it work. We thought, ‘Yes, there may be an answer to this, but we don’t have it.’"
Wyco manufactures vibrating tools used in concrete paving.
While Racine Federated was still in the hydraulic tool business, one of its engineers came up with the idea of making the company’s own flow measurement tools to measure hydraulic pressure. That idea resulted in a product design, which was later patented and spun off into its own division of the company, named Hedland, after Harry Hedland, the engineer who has since retired and passed away.
Until recently, the Hedland and Wyco divisions comprised about 80 percent of Racine Federated’s annual revenues. Now, they provide about 60 percent of the company’s revenues, due to growth in other flow meter businesses.
"About 70 percent of our business is in flow meters," Erskine said. "The remaining one-third is with Wyco."
With the likes of Racine-based S.C. Johnson & Son Inc. in its back yard, attracting top-notch technical help is a challenging task for Racine Federated. The company has become quite creative in finding ways to attract and keep its competent people.
Racine Federated provides college scholarships of $1,000 per semester for the children of its employees.
Another employee benefit is Racine Federated’s profit sharing incentive (PSI) program. The monthly program is paid to all employees when the company exceeds its monthly budgets for revenues. The employees received a PSI check in April of 4.3 percent of their annual income, after the company had a record month, said David Perkins, Racine Federated’s vice president and chief financial officer.
"They had to scrape me off the floor when they told me how much the checks were for," Perkins said.
The PSI program serves as an extra motivator for employees, who are able to tell if they’re getting close to making its criteria, Perkins said.
"They know when they’re having a good month," he said. "And they push for it."
The PSI program is an example of how the company "puts our money where our mouth is," Erskine said.
The company holds monthly meetings for all employees, in which Erskine and other leaders bring workers up to date on the company’s goals. During those meetings, Erskine and other officials also review the previous month’s numbers, hand out PSI checks if they are to be issued and issue reports explaining the numbers.
"We feel like that gives them a tool to understand how the company’s doing, and how we can do that again," Erskine said. "And that’s the point of the program."
The company also does biennial employee surveys, which are anonymous, allowing employees to give neutral feedback.
"The main thing is that we do make an effort to include our employees in not just what is happening but what will happen – what’s our plan," Erskine said. "We’re all in this together."
Racine Federated moved to a new headquarters earlier this year, when it consolidated all of its facilities into a 160,000-square-foot building at 8635 W. Washington Ave. (Highway 20), formerly occupied by Danfoss. That company was later acquired and ceased operations in Racine, leaving the site vacant for more than three years.
The move to the new headquarters meant Racine Federated had to absorb some expenses with a higher lease and the costs of moving, but those have been offset by savings from reduced transportation and communications costs, because all workers are now located in the same building, Erskine said.
"And some of the extra costs of being in this building have been offset by the elimination of duplication in staff," he said. "When everybody’s here, our efficiency rises significantly. And for the community, we’ve taken a vacant place with high visibility, and Joe on the street is happy because he can see people working here."
The rewards for the employees are being reciprocated.
Because of the move to the new headquarters and an unexpectedly busy December, Racine Federated’s employees were asked to work 56-hour work weeks, which included Saturday shifts.
Erskine told workers about the situation, and he offered them the chance to take off every third Saturday. However, many of the employees asked if they could keep working all Saturdays until the company was caught up, "so they wouldn’t have this hanging over their heads," Erskine said.
"We’ve had the payback – the support from employees that they’ve made when the chips were down," he said. "They come through for us again and again.
The loyalty also is reflected in the company’s low employee turnover.
"They like it here," he said. "We treat them well, and they just don’t leave."
Racine Federated Inc.
Address: 8635 W. Washington Ave., Racine
Web site: www.racinefed.com Industry: Manufacturing
Revenue: $28.5 million for 2004 Employees: 120
Guts!:
• Creating a sense of ownership – Employees’ bonuses are tied to the company’s monthly revenue goals, keeping them motivated to boost sales.
• Making business heroic – Many of the company’s products are used in energy source exploration. Employees take pride in helping the United States reduce its reliance on foreign energy sources.
• Bold moves – The company has grown by acquiring other companies that provide complementary products or services. The company also had the guts to walk away by selling off one of its original divisions, accepting the fact that it was not profitable.
May 27, 2005, Small Business Times, Milwaukee, WI
