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By Mary Jo Martin
The journeys of our lives often take a lot of different routes, and sometimes it’s hard to even imagine what’s ahead or how we’ll navigate the next curve. Some of these journeys have been well documented over the years in The Wholesaler — stories of humble roots and hard work abound.
I’d venture to say that the path that Dr. Donald McNeeley took to lead Chicago Tube & Iron is one of the most fascinating.
I’ve been in attendance at a number of industry events over the years when Dr. McNeeley has been a featured speaker, and always admired his economic and market insights. But it’s been my good fortune to get to know him and the fine team at Chicago Tube & Iron during the last few years as he has been contributing a quarterly column to The Wholesaler.
When he first shared with me the intriguing story of his youth growing up on Chicago’s Southwest Side in St. Mel’s parish, his pursuit of his dreams, and all the pivotal moments that brought him to this point, I knew it was a story I had to share with our readers. And this year, as Chicago Tube & Iron Company marks its centennial anniversary, is the perfect time to pay tribute to both legends.
Steel distributor and fabricator CTI now encompasses 11 branches, with approximately 400 employees. Their inventory investment of $50,000,000 is comprised of 30,000 SKUs that range from carbon steel to various alloy products. They serve customers all over the U.S. and selected international projects. In addition to distribution, CTI offers an array of value-added and engineering services including:
• Laser fabrication
• Production cutting
• End processing
• Vendor managed inventory
For two days in June, CTI brought together more than 1,500 customers, vendors, friends and associates from around the country to their Romeoville, Ill., headquarters to share in this celebration. Members of The Wholesaler staff were delighted to attend and share our support with Dr. McNeeley and the talented, passionate team he has built.
In preparation for this feature, I had a chance to talk with Dr. McNeeley and several key members of the CTI family to give you a look inside this very special organization and the leadership that guides it — as well as the special celebration they hosted for their 100th anniversary in business. Following is my Q&A with Dr. McNeeley, and please be sure to check out the sidebar articles based on conversations I had with Centennial Chairman Susan O’Dea, Account Manager Tony Vitkauskas, Marketing Manager-PVF Rob Powers and Director of Operations Bruce Butterfield.
MJM: First, I have to thank you so much for your hospitality! We’re delighted to be here at Chicago Tube & Iron as you celebrate this remarkable milestone, and to see the excitement among all of your team. We’ve got a lot to talk about when it comes to this renowned company, your leadership, the team around you, and all the efforts that have gone into marking this momentous occasion.
But like any good book, we need an introduction. Several years ago, you shared with me the intriguing story of your youth and the series of occurrences that brought you to this point. It would have provided a terrific plot for Horatio Alger himself! So I’d love it if you’d set the stage and first give our readers a glimpse into your background.
McNeeley: My mother’s family came to the U.S. from Ireland. Her father died when she was eight and she grew up fatherless in the Jane Adams Housing Project in Chicago with three siblings and a hard-working widowed mother. My dad was from a farm in central Illinois and the youngest of nine. As the story goes, at 16, he fibbed (Catholic euphemism for lied ) about his age and joined the Army to serve in Korea. Presumably, fighting the war was easier than the unrelenting hardship of working a farm. In combat, he was hit by a mortar shell and was immediately transported to a field M.A.S.H. unit. He incurred debilitating injuries for which he was awarded the Purple Heart and Bronze Star. He spent a year recuperating in a hospital in Japan, and had to learn to walk again. Subsequently, he was sent to a VA Hospital in Chicago, where my mother happened to be a volunteer. Ironic isn’t it? As little as they had, she still found time to volunteer. It shows you that one need not be wealthy to be generous.
After rehabilitation from his war injuries, my dad worked in a quarry for Material Service Corp., my mother was a switchboard operator for the railroad, and times were very tough. We often joked that we moved when the rent was due because we just didn’t have the money. I suspect neighborhood demographics in the 60’s played a role…migration occurred by nationality. I am the eldest of 7 siblings. When this occurs in a family of modest means, you learn how to lead, you learn how to work, and you learn how to share.
I remember a major snow storm hit Chicago in 1967, stranding my father at the bottom of a quarry and my mother downtown. For three days as a mere 7th grader, I was responsible for feeding, bathing, and laundry duties for the “little ones.” What a great defining moment from which to learn. My mother taught me fairness through very simple measures. For example, when my brother and I were going to share a candy bar, she had one of us cut it, and then allowed the other to pick which piece he wanted.
From an early age, it was recognized that I had a math aptitude. My dad and his friends liked to bet on the horse races, and they’d bring me along to the race track to calculate their winnings. What better way to hone a math aptitude? I was also a good athlete, and it led to college baseball and a very short stint — long enough for a try-out — at the AA level of the Montreal Expos organization. I quickly realized that while I was good at this level, the other players were great Thanks to a fastball that broke my nose, life’s “Plan B” was born.
Vietnam was going on at the time. Like every Irish kid in Chicago, I had uncles who were Chicago cops. If I became a police officer and ended up drafted, I could go in as an M.P. (Military Police). So I went through the Cook County Sheriff’s Police Academy, and met another deputy, Bob Haigh, through the combat pistol team. Bob was an army veteran and a graduate of Denver University. His dad, John, ran Chicago Tube & Iron, and his grandfather, Herb, had been a founding influence as early at 1918. He offered me a job in the early 70s, and I started filling orders and then welding and cutting tube. This was a temporary stop while awaiting the draft, which in the end, stopped short of my number. I caught their ownership’s attention when I did the unheard-of thing of telling a salesman that I could handle an order from a customer for cutting pipe at a 60° angle.
At the time, our machine’s limit and that of the entire industry was 45° and we never accepted orders for anything more. But I figured a way to use a 15° wedge to expand the cut to 6°. Subsequently, they wanted me to teach employees at all the branches how to convert cutting equations, as well as fractions to decimals, kerf drop, multiple optimization, etc. and so I made up little “cheat sheet” cards and laminated them for everyone’s hard hats. Our reject rate went to zero. The industry was rather basic then, and I self-effacingly refer to the proverb “In the kingdom of the blind, the one-eyed man is king.”
John Haigh and his son Robert saw something in me, and made the extremely generous offer to put me through college. They paid for the completion of my undergraduate degree and all of my higher education — including Harvard — and never asked me for a thing. The Haigh family made a significant investment in me for which I will be eternally grateful. They provided educational opportunities my family could not afford. As Robert Frost said, “Two roads diverged in a wood and I — I took the one less traveled by, and that has made all the difference.” Unfortunately, John developed Alzheimer’s, and Bob and I ended up taking over the business at ages 28 and 34, respectfully. As generational transition resulted in family members with other interests, I secured an equity position, which, with Bob, grew to controlling interest. We were together for 37 years before he retired.
MJM: Tell us a little about some of your predecessors at CTI and how their leadership contributed to the company’s growth and success?
McNeeley: There are four founding principles that we have adhered to at Chicago Tube & Iron. I credit our founding fathers for that very sacred foundation:
1. Sound fiscal conservatism — we were and continue to be debt adverse.
2. The embracement of conservative, capitalistic principles where risk should be rewarded with profits and those profits are to be reinvested.
3. Treat our employees with respect providing a safe working environment and competitive compensation.
4. Finally, love of our great country. Each and every day every one of our facilities proudly flies our country’s flag. We enjoy the blessings of being able to ply our trade in one of the best countries the world has to offer.
MJM: It’s truly amazing how all the pieces fell into place to get you to this point, and it’s evident there were some very influential people in your life who were great examples of leadership.
McNeeley: A company is a reflection of their CEO’s office. In too many companies, that is a revolving door. In public companies, CEOs typically stay for about four years, but it is actually16 quarters, for that’s how you’re measured. And because people who ascend to those roles tend to have a healthy ego, they want to put their new mark on it the enterprise. Each successive — note successive, not necessarily progressive — CEO has the concept du jour. A “student body right…no, no…student body left” environment begins to emerge, but all they end up doing is confusing the hell out of people.
At CTI, one of the things that defines us is how we’ve stabilized the CEO position and thus were able to navigated those transitions. We’ve only had five CEOs in the history of the company. Each serving as CEO for over two decades on average, and none of us came from outside the company — it’s always been a promotion from within, which has allowed the transitions to be seamless.
I always had a real awareness about my predecessors; I wouldn’t be here without them. Their style may have been different than mine, but business conditions were different during all of our tenures. It’s interesting to match skill set strengths of CEOs with the era they served. I’ve followed a series of brilliant, tactical, strategic leaders, the latter two in John Haigh and Bob Haigh, who were also mentors. In addition, we had a quality board of outside directors beyond our size. That also provided a rich pool of mentors, with names like Stetson, Reed, Axley, Ashley and Malec.
MJM: One of the things that everyone seems most proud of is the fact that there has never been a year that CTI didn’t turn a profit.
McNeeley: Our leadership has always had a strategy and philosophy of conservatism and an embracement of capitalism. All of our expansions and growth was funded through operating cash flows. For example, if an expansion was to cost $20 million and we only had $15 million in our pocket, we put it back and waited until we had the $20 million. While we often get credit for financial sophistication and appreciate the recognition, much of our success is the fundamentals of blocking and tackling where and when it is needed. We are a charitable organization, but such comes from our capitalistic profits. We would never borrow money to make a donation, for such would be socialism, the bane of capitalism.
MJM: Let’s switch gears a bit and talk about your customers. In such a competitive market, describe the importance of those relationships, and how you keep them so solid?
McNeeley: Our customers are loyal to us, and we are loyal to them. We believe that customer relationships are the purest form of quid pro quo. We never — in our history, or in our future — have ever exploited a customer. If a dynamic has prices deteriorating, that customer will learn such from us — directly from us. In turn, when prices increase, we expect the customer to understand based on the relationship equity we have built.
There have been occasions in our history where demand has far exceeded supply. One only needs to harken back to 2008. We had millions of dollars’ worth of inventory, in fact, 10s of millions of dollars’ worth of inventory on our floor committed to customers at an agreed upon price. That very inventory could have been sold elsewhere at significantly higher margins, yet that temptation never exists at CTI. We honor our word.
As a result, our customer relationships are measured in decades and quarter centuries as opposed to the all-to-prevalent two bids and a buy. At our recent Centennial, we visited with a customer to whom we have been selling continuously since 1918! We accept the role we have which enables our customers to be profitable. We understand, better than most, if we don’t contribute to our customers’ profitability, we are irrelevant in their world. Early on in history, we focused on relevancy, and see no reason to change.
MJM: What do you see as CTI’s — and the industry’s — biggest challenges in the near term?
McNeeley: The primary issue is talent across all disciplines — leadership, welding, CNC operators, programmers, etc. There is a significant talent shortage in our country, which results in a smaller pool from which to draw workers in the future. Companies, including ours, will need to hire right out of the university and supplement that education as we mold talent to our specific needs.
The second challenge is a global economy where North American producers/distributors are forced to compete with others whose very existence is subsidized by their government. Simply stated, the challenge is the abysmal record of enforcing trade laws already on the books.
And third, increased government regulations — the cost of which is an astounding 14% of our GDP — shows no sign of abatement.
MJM: Let’s tackle the issue of talent. You’ve got an incredible team here at CTI. How do you cultivate passion among your employees?
McNeeley: We have the best VP team a CEO could ever desire. They are indeed a dream team. They have a passion for our country, our industry and our company. They lead by example. Not a single one of them would ask another to do something that they wouldn’t or haven’t done themselves. They are working VPs, not policy administrators and are extremely well-educated and experienced.
This establishes a wonderful optic at the helm of our enterprise. As young people aspire to be bigger and better, they emulate those above them. If the culture is right at top, it will be right at bottom. We have people that fit our cultural profile who typically find a comfortable fit and further that fit and our enterprise with the best practices, which they bring from previous experiences. When one slips through the cracks, they will soon find the fit uncomfortable and leave, or they will be invited to leave. Reaffirming this philosophy in practice over 100 years, and voila! The flywheel kicks in and it’s on auto pilot. Indeed, we have problems that we deal with every day, but culture, motivation and passion are not among them.
MJM: You are such a proponent of education. Why is continuing education so critical for a person’s growth?
McNeeley: People talk about degrees, the sheepskin, the expense, the market value or lack thereof. However, understand that a college degree represents a confirmation that a certain skill set exists. It validates certain competencies. It is those very competencies that an organization needs. I believe college is a must for the next generation. For my generation, the Baby Boomers, it was a college degree “or equivalent.” For the next generation the “or equivalent” no longer gets the applicant in the door.
While college is essential, it is too expensive — and ridiculously so. Therefore, our 100% tuition reimbursement program is sacrosanct and remains intact throughout the economic cycle. Looking at the bigger picture, you build loyalty among your employees when you invest in them. And that’s important, because in the end, you’ll be turning your life’s work over to them.
In addition, our trade association, the MSCI and our parent company, Olympic Steel, have scholarship opportunities for the sons and daughters of our employees. I am proud to say when I was Chairman of our association, we implemented the program which to date has granted in excess $3 million to over 850 applicants. Education is indeed expensive in both time and money. However, I am reminded of the quote of Derek Bok, one-time President of Harvard, “If you think education is expensive, try ignorance.” Finally, having been a product of this myself, it is indeed a protected perk.
MJM: Is that what intrigues a busy man like you to continue to make the commitment to teach a class at Northwestern?
McNeeley: I also benefit by being able to keep my finger on the pulse of the next generation of leaders. I would say it keeps me “hip,” but my daughters would die of embarrassment. At CTI, I can prepare the next leaders of our company. In a classroom, I can prepare the leaders of 30 companies at a time.
MJM: What have been some of the highlights of your career?
McNeeley: I have been so blessed in my career. Not only in the company I have led, but the industry in which we participate. Our highlights are numerous. Specifically, over the course of one’s leadership career, you are going to encounter strategic points of inflection, which must be navigated. These are the periods where an enterprise is most vulnerable. One thing of which I am most proud is how we as a team have been able to navigate those points of inflection.
It used to be common for companies in the steel industry to have fatalities. It’s always been a priority for me to get our workers home to their families safely. It keeps me up at night; thanks to our diligence we’ve gotten to 100 years without a fatality.
I came here by chance, and stayed by choice. I’ve now been here 70% of my life. Compared to when I started, we now do the same volume every 14 working days that we did in a year. And now, with the Olympic merger, we can together generate in about 45 minutes that which we used to do in a year.
As an academic, I used to think about what this business could be, and what role I could play in ensuring its perpetuity. We’ve never had a year that CTI didn’t turn a profit. And I was determined that record was not going to be broken on my watch. I am also proud of our marriage with Olympic where I am on the board and also a shareholder. We share similar passion and moral fiber.