For almost 30 years, Tom Kelly has nurtured his employees and his community. Using a combination of teamwork and business analysis, the forward-thinking remodeler has set a new standard for quality, growth, and success.
For elevating the industry to new heights in ethics and professionalism, Remodeling awards Tom Kelly its Foundation Award for 2003.
Soon after taking over the company named for and established by his father, Neil, Tom Kelly was faced with steering the company through the harsh recession of the 1980s. He battened down the hatches at the Neil Kelly Co. by cutting his staff from 135 to 45 employees and asking creditors to bank on the company's stellar reputation.
"To carry us through a recession that dropped sales revenue from $12 to $2 million -- to carry us through that and still be a thriving company -- shows sacrifice on his and the management team's parts," says design/build salesperson J. Byron Kellar.
After surviving rough waters, Kelly was ready to grow the company, a goal he accomplished through education, teamwork, and community involvement. He is now at the helm of a thriving $13 million company with 95 employees and two showroom locations -- a company that is a fixture in the Portland, Ore., area.
Kelly also grew the cabinet shop, started in 1966 by his father, and spun it off into a separate $2.5 million corporation with dealers in 10 states.
He achieved all this without compromising quality -- in fact, under his guidance, the company earned the NAHB National Quality Award in 1996 and a national Better Business Bureau award for medium-sized companies in 1999.
Though Kelly is the sole owner, he says he feels more like a steward, and he takes that role to heart. He is often ahead of the curve on trends, but he doesn't jump in without thoroughly researching an idea. His deliberate ways belie the passion he holds to create a great work environment that encourages employees to succeed while contributing to create a better community.
In the mid-1970s, Tom Kelly spent a few years in Washington, D.C., where he worked for an Oregon congressman and thought about pursuing a political career. His father persuaded him to return home and join the family company full time. Vice president Martha Kerr recalls a young man with a ponytail and beard who willingly pitched in at different jobs at the company. "He was a carpenter, worked in accounts receivable, then in the office, and spent time managing the cabinet manufacturing facility," Kerr says. Kelly eventually headed up a transitional team and in 1980, when he was 29, took over from his ailing father.
Kelly's novice management skills were immediately put to the test by the harrowing recession of the 1980s. Even after all his years leading the company, Kelly calls the recession "the hardest business issue" he has ever faced. At that time, financing interest rates for remodeling were 15%, but through a federal program, veterans could take out a second mortgage for remodeling at a reasonable 6.6%. When the program was cancelled, the 70% of the company's business that was financed through this program ceased almost overnight. In one day, the company lost $1 million in sold jobs that were never built.
The company took several steps to stay afloat. In addition to the drastic staff cuts, Kelly eliminated commercial remodeling, a weatherization/solar division, and a floor covering store. "We used to have a showroom manager," Kerr says, "but we asked salespeople to man the showroom and take leads." In addition, the management team and the remaining employees took a cut in pay.
Kelly learned two important lessons from this trial by fire. First, he needed to structure the company not just to survive during downturns but to thrive. That meant diversifying and keeping good cash reserves.
Second, the company should never stop marketing. "You must reinforce your brand recognition for the down swing," Kelly says, noting that constant marketing helped in the recent downturn in Oregon's economy, during which he was able to decrease his marketing budget yet maintain a strong market share.
Ken Keudell, former administrator of the Oregon Construction Contractors Board, admires Kelly's management skills. "He was able to come through severe economic conditions, primed and ready to do bigger and better things when the economy improved," Keudell says.
One central reason for Neil Kelly Company's success is the team system Tom Kelly uses. A project manager heads a team that includes carpenters, designer/salespeople, and administrative staff. "We reduce a large company to a mom-and-pop operation," Kellar says. Kerr explains, "You can't know all 45 carpenters in the company, but if you know the few on your team, you feel connected." Kellar adds, "You have a large corporation behind you so you can focus on the client." The teams are formed based on the volume of sales they can produce.
Design associate trainer/coordinator Lois Shamberger says the team system has also "increased our profitability, because we can make judgment calls based on past experience with our team. If something comes up in one team, we can address it across the board with all teams."
A scaled down team system is used for the home repair division, says Walt Harwood, vice president and manager of that division. "The team approach is a huge advantage to the client" because of faster decision-making, Harwood explains.
The teams meet once a month to discuss their jobs as well as company policies. Management doesn't "make major decisions without input from at least some employees," Harwood says. Kerr adds that teams became more important as the company expanded. "It was important to maintain the family feel of the company," she says.
One example of how the team approach influences internal processes is how Kelly went about incorporating the sustainable principles of Natural Step, an international movement to promote business practices that don't harm the environment. After attending a seminar on the topic, Kelly asked all members of his management team to attend a similar workshop. He actively sought their opinion and buy-in before signing on with the program.
"It's a clear example of Tom's leadership. He believes in it, but he got everyone involved," says Julia Spence, vice president of human resources and communications. Now, the company recycles in the office, uses a deconstruction service company to remove and recycle jobsite materials, and actively seeks suppliers of sustainable materials.
Kelly prefers not to micromanage, and the team system allows him to practice hands-off leadership. "I hire good people who can be entrepreneurial and work without day-to-day supervision," Kelly says. "Then I just give them good advice and coach them."
"The individual employee has a lot of autonomy and flexibility," Harwood says. "It's like having your own business with someone else's money."
Spence says Kelly is good at customizing his management style to the employee. He also excels at matching the job to the person, Harwood says. "He is more proud of being acknowledged as one of the top companies to work for than about making $100,000 in profit," says friend and colleague Mark Richardson of Case Design/Remodeling in Bethesda, Md.
Kelly also has the smarts to seek help from outside his company. He created a board of directors to monitor his management. Though some board members have an interest in the company, Kelly still feels accountable. He chose smart people who are successful in their own businesses. The board meets twice a year. "Just to have outside businesspeople look at your financials and question and challenge you is great," Kerr says. "It can be a painful process, but I appreciate having someone to hold us to task."
"He's one of the first remodelers I know who set up an advisory board," Richardson says. "It shows that Tom is smart, but he doesn't have trouble listening."
It's all marketing
"The remodeling industry's capital sin is not staying in front of previous clients," Kelly says. He uses every source at his disposal to make sure he does.
The company's core marketing comes from offering free seminars to educate homeowners who want to hire a professional remodeling company. The company also participates in two home shows per year and updates print advertising every year or two. Kelly keeps the lead reports at his fingertips -- the binder on his desk holds printouts of the number of leads and their sources.
"Through advertising and how they deal with customers, they make an effort so the public hears of good stories," says subcontractor Shannon Nelms of Nelms Construction in Gresham, Ore.
Besides direct marketing, Kelly has found his deep-seated belief in community service and green remodeling have further strengthened the company's brand.
Regina Hauser, executive director of the Oregon Natural Step Network, works with Kelly in his position on the advisory board of the network. "Educating consumers about sustainability and helping build that demand is forward thinking and socially responsible," she says. "It increases his respect and value in the community." Kelly found that even if clients do not choose green products and practices, just the offer is enough to raise their belief in the company's quality services.
Kelly also continues his quest to increase the industry's professionalism. Keudell was administrator of the State Contractor's board when Tom served on the board. Kelly pushed for contractors to pass a test for licensing. "He is a believer in contractor business abilities and in their ethics. He fought for us to have this test as part of licensing."
Keudell says Kelly is patient and knows how to be satisfied with small victories. "He believes that if the government has reasonable regulations, administered in an accurate and timely fashion, they do not present an obstacle," Keudell says. "He believes in getting involved to make sure there are good regulations."
Kelly is always searching for other markets to diversify the firm's revenue and says his next step will be entering the new home market. As usual, Kelly is not leaving anything to chance. He's using customer surveys to research the market and presenting the idea to his board for their input. "If you focus on it and formalize it, you can do it well," he says confidently.
Richardson sees more in Kelly than just a company leader. "It's not about remodeling. His story is a parable about life success. About overcoming obstacles and making a positive influence on the home and remodeling business," Richardson says. Career & Business Highlights
Northwest Weatherproofing purchased by Neil B. Kelly for $100 and The Neil Kelly Co. established
Company launches its own cabinet line
Company offers design/build services
Tom Kelly joins the company permanently
Company expands showroom in northeast Portland
Tom Kelly takes over as president
Elected president of Oregon Remodelers Association
An ad touts the company's longevity
Served on NARI national board
Served as chairman of Contractors Council of NARI
Purchased company from his father
Company launches home repair division, The Home Repair Team
Company received National Quality Award from NAHB;
Kelly creates outside board of directors
The Neil Kelly Co. becomes founding member of Oregon Natural Step Network and begins implementing the Network's sustainable principles
Awarded Portland and S.W. Washington Better Business Bureau Integrity Award
Neil Kelly Co. leads the pack at green building
Oregon Business magazine names the company one of the 100 Best Places to Work in Oregon
Neil Kelly Co. is first remodeling company awarded Better Business Bureau National Torch Award for Marketplace Ethics (medium-sized company)
Founding member of The Oregon Business Association, formed to lobby the Oregon state legislature on education, transportation, and the environment
Opens second showroom in Veridian Place, built in partnership with two other companies; the three-story building earns the U.S. Green Building Council's LEED certification
Neil Kelly Cabinets becomes a separate corporation, Kelly Cabinet Company
Earth Advantage Legacy House green remodeling project completed and shown
Joined Sunset Western Home Alliance of Sunset magazine