7.16.18 – SSI
A dearth of capable and congenial employees and resultant inflated wages is inspiring security integrators to refocus recruiting tactics. Find out how they are contending with that and other challenges, as well as plum opportunities in SSI’s annual exec roundtable.
Be careful what you wish for. As the owner or operator of a security systems integration company, the notion of finding yourself with an abundance of projects and customers is typically the stuff of entrepreneurial dreams.
Rightly so as that is the underlying goal of any profitable business. However, the fantasy becoming reality can be a harsh slap in the face and sometimes an all-out disaster if that provider’s abilities and resources are overwhelmed by growth and demand.
For security integrators, that scenario is all the more challenging in an era of fast-changing technology and a shrinking, ever more expensive talent pool.
“We’ve actually contracted with an HR and headhunting company for the first time ever,” says Eva Mach, president and CEO of Pro-Tec Design, Minnetonka, Minn. “We were always able to also rely on union contractors, so there used to be such a thing as a bench. Now, there is nobody on the bench. We had to look outside and employ additional resources to be able to find people.”
This year’s distinguished panel also included Skip Sampson, president of Indianapolis’ KST Security; Michael Ruddo, chief strategy officer with Integrated Security Technologies of Herndon, Va.; and Trevor Stewart, president of Security Control Integrators in Pinebrook, N.J.
In addition to manpower maneuvers, these integration leaders discuss how 2018 is shaping up and run through a host of opportunities such as the Cloud, maintenance agreements, managed services, vertical markets, cybersecurity and much more.
As you will see, success springs from deep dives into your clients’ worlds.
What so far this year is bringing a smile to your face?
MICHAEL RUDDO: We’re in the D.C. area, so the beginning of the year for us is always kind of a low hum, as I like to say. It consistently picks up with our main verticals being federal government, higher ed and education. Their new money has either just arrived or is getting ready to arrive in some cases. It’s allowed us to not have quite that peak and valley at the end of September because a lot of our business is federal. We’ve got a solid forecast on the commercial side, and it looks like it’s going to be a good year.
SKIP SAMPSON: Typical integrator, what I’m smiling about is our backlog. We have a very strong backlog right now. It also makes me frown and will probably be another one of your questions. Our order to deployment time is getting way too long because we’ve been successful in landing some very sizeable projects and some great work. It appears to be it’ll be a great year for us in 2018.
EVA MACH: I think my people. We have made some changes in our people. We have started using an EOS, the Entrepreneurial Operating System method. I brought younger managers into the team. They’re excited about some of the things happening in the industry, and it’s been fun.
TREVOR STEWART: Two things I’d say have made me happy this year. One is that we’ve focused the past two years on recurring revenue maintenance contracts. We were able to hit 30% last year for our business. Even though last year for us was slightly down, we hummed along. As a smaller company we’ve been self-financed and not borrowed money for the last two years. The other thing is we were struggling training our people or identifying people and training them to be more technical, more computer literate.
Last year, we hired two people completely outside the industry with computer science degrees and backgrounds, and they knew nothing about commercial security. We just needed them to look at cameras, servers and be able to speak that language. They’ve both worked out tremendously, to the point where now I have some of my higher operations guys freed up. I think the mindset of looking outside the industry to fill different roles is the way to go.
There’s two sides to every coin. What are you wrestling with now or particularly challenged by?
STEWART: Externally, some of the consolidation has created pressures in that the larger companies are overpaying for talent and driving the market up. For example, we lost somebody we shouldn’t have. The guy was with us for almost three years and was going to be a superstar. He had an opportunity to get a 50% raise. I told him, “You’re worth it. We can’t afford to give you a 50% raise.” It sets a bad precedent.
We instituted a program for hiring people out of school so within three years instead of inching up 5%-10%, they could go right into that midrange. You could start in the mid to high teens, and within three years be at about $30K. If you’re a superstar, you could potentially double your salary in those first three years. If you’re really good, you could have a 60%-70% increase. For us, the investment’s in the first two years. That third year, you’re starting to reap the benefit and that’s when the big guys will come in and poach your guys.
Because of our culture and everybody knows everybody, they don’t want to leave. But I can’t blame somebody to leave for 40%. There’s not that many times in your life you have the opportunity to have that kind of a raise. Internally at our size, we struggle with at what point do we try to automate more things. We run a pretty tight ship, but there are certain things, for example we acquired a large insurance company where we do work around the country for them. We picked up literally 71 sites around the country in two weeks. To flip that switch you start feeling the pain of that work as opposed to the normal customer acquisition cycle.
RUDDO: We’ve become one of the largest independent dealers in the D.C. area due to competitive acquisitionsthat have taken place. They’ve really gobbled up our traditional competition at that level. Now there’s a void. It’s good. Our growth since Day 1 has all been organic. We do everything in-house. We don’t subcontract anything. So any peaks of dramatic growth stress the organization.
I’m seeing one of those on the horizon, maybe not too far off. Being ISO [International Organization for Standardization] keeps it very structured, very organized. Procedures are there with an easy foundation to build on, but taking a huge spike in growth is not the easiest thing to do. Fortunately, those competitive acquisitions often spur some availability of good people. You try to grab them when you can.
But we’ve been pretty good in our pay scale and training regimen, and our employee retention has been really good over the past 20 years. It’s about getting good, quality people to mold into the organization and culture. It’s a total work in progress, 24/7.
SAMPSON: We are in what you’d call second-tier cities. We’re in good-sized cities but they’re not Minneapolis, Atlanta or New York. Some of the larger competitors have moved in. They’ve rented brick-and-mortar space, sent the manager in, but then hired executive recruiters to fill the sales and operational roles. Where do those people come from?
They come from the people that are in those cities already operating. So recruiting and retention has been tough this past year. To what Trevor said, it has changed the whole pay scale of our technical folks. They know they can go someplace else tomorrow if they’re unhappy. There’s that much opportunity out there. There’s only so much culture that can offset a 40% increase.
You can put a ping-pong table in the warehouse and have popcorn, but it’s hard to fight some of the pay that is being offered to these young men and women today for these roles. It has forced us to look at doing, again what Trevor’s talking about, building our own people up. That takes a while longer.
You have to look to high schools, colleges, trade schools. We offer a career where I’ll send people to training, get them certification. Some have a take-home vehicle. They’ll make a good living. We look for smart, bright, dependable young people with good attitudes, things I can’t teach but I’ll teach them the technical skills necessary to become a technician in our industry. We are making progress there. I’ve plugged into all the major high schools in the greater Indianapolis area.
The second thing causing me consternation is we are adding or switching to a new ERP [enterprise resource planning] system that we’ll run our whole business on. Anybody who’s been part of that knows while you’re trying to do your everyday business as well as integrate and implement a new ERP system, there’s not enough time in the day to do both but somehow you do.
MACH: One of the things that keeps me up at night is we’re trying to do more recurring revenue. We’re working with more IT folks rather than the traditional facilities manager. We’re shifting some of the things we’re doing. We’re growing, shifting, making a lot of changes. How do you keep the pedal to the metal while you’re building the road?
We have to respond to our customer needs, and have to have steady growth. That’s what your share price is based on, building the value of the company. How do you change things and keep going, satisfy all your customers, meet the needs and satisfy the demands?
That’s one thing. I guess we can all talk about the pressure of salaries, shortage of people. Minnesota has full employment across the board. In our small industry, specialized skills, it’s even worse. There is pressure on salaries, and I have to react to that.
We really promote our employee ownership and the culture that goes with it, because to me that gives us that extra, but it has to be the right person. Not everybody understands this. If you can find the right person who sees and buys the vision, who sees the possibilities of building and being part of ownership of a company, that helps retain and attract talent.
Let’s get into technologies you’re finding success with and niche markets you see as a sweet spot and why.
RUDDO: Being from the D.C. region, the federal space has been changing for the past 15 years. The whole concept of authentication, PIV credentials, HSPD-12, all of that is really just now starting to come to fruition. It was easy to say everybody has to have a card, it has to look like this, has to have their picture, has to have their information.
But as far as how that transitions to an access control system, nobody thought that all the way through. The industry has really struggled. Now it’s up to the government to put its money where its mouth is and start spending to get to that single credential. Federal is probably 50%-60% of our business so that’s a big deal for us.
I really think the hosted, managed Cloud stuff is coming hot and heavy. It’s going to continue to take a while to become commonplace, but when you see companies putting their email in the Cloud, their financial systems in some cases in the Cloud, when everything starts going that way from a business perspective, the next logical thing is security.
Nobody wants to house a bunch of servers to run all their security. The general acceptance of just because that box isn’t under my roof doesn’t mean it’s not secure was a huge hurdle. Just because it’s in the Cloud doesn’t mean it’s less secure. In some cases, it’s actually more secure.
SAMPSON: We’re pushing our business to the professional services side of it. We really view the marketplace and the devices we’re selling to be more commoditized every day. The price our people are demanding now, we need to demand higher prices. One way to do that is professional services. We have put a program together for system optimization for our big access control users.
We have preventive maintenance agreements for our video users. We’ve put a lot of time and effort into the documentation forms and the background things you need in place to do that type of job. It’s proving to be well worth the effort. We all need to push our current RMR number from whatever it is now to 30% or 40% of our revenue because as we grow as companies, that number just gets bigger every year.
It can’t all come from projects, because you don’t have that backlog of projects. If you have it under contract, and you know you’re going to start the year with 40% of your revenue already guaranteed, it gives us integrators great comfort.
MACH: We are doing exactly the same thing. I remember a conversation with some of our technicians about Cloud four years ago and they looked at me like I was crazy. Who would want to do that? I think its time has come. You’re not going to flip 100%, but the time has come.
Then there’s mobile credentials, everybody carries a smartphone and with that there comes a lot more demands for being able to manage, view and do everything on a mobile device, so we have to react to that. That’s an opportunity, and we are pushing very hard into that space. We work in healthcare as one of our big verticals. Finally there’s managed services and maintenance agreements. The commoditization of the hardware is happening. We work on services specific to our verticals. We’re doing what we call health checks for customers to help them identify gaps.
STEWART: We’re doing a lot of the same things. I’d say a big focus is on cybersecurity. We hired somebody from outside the industry to do penetration tests for us, look at cameras and VMS, and really control what we put out there, what our names are on. We don’t want to be on the wrong side of a news story. We’ve done some things with mobile credentials.
To me, when we talk about technology advantages it goes down to one big thing: partnerships. We create partnerships with our customers. We have programs where if we have a maintenance contract with you then yes, we’re looking at your hardware. We’re trying to switch it out as opposed to repairing something.
So that piece of it becomes a tipping point. You partner with them and look out for their best interests. That takes the commoditization of the products out of the equation. We have to be honest with our customers.
MACH: When we talk about services, it’s also understanding their business and servicing that partnership. We do a lot of work in K-12 schools. Some of it is understanding the policies they have and understanding the training they have to go through on their side, and how we fit into it to make sure we’re true partners in that endeavor.
RUDDO: It’s not only having the program and technical expertise, you’ve got to always be looking down the road at new technologies and educating those clients on why it’s a good thing, why it’s going to help their business run smoother, more efficiently. If you can play that role, you’re there for life.