Family values: Building a billion-dollar business

Risk management is the major change that has swept the construction industry in the past decade, according to Robert G. Hunt, chairman and chief executive officer of Hunt Construction Group. In a speech before the W. P. Carey School's Economic Club of Phoenix, Hunt described how a family business that is one of the largest construction firms in the country builds success.

Robert G. Hunt, chairman and chief executive officer of Hunt Construction Group, attended a dinner some years ago with his father and executives from Western Electric. The meal ended with a handshake, and 48 hours later Hunt Construction began work on a plant in Kansas City. No lawyers, no contract. Hunt told the story recently to illustrate a major shift in the construction industry. Up until nine years ago, Hunt Construction did not have a staff attorney.

But today, he said, his company spends a huge amount of time drafting contracts that spell out expectations and the range of possibilities for a project. You insure where you can, he said, you make sure you understand the owner's expectations, and you form a team. "We still build buildings, it's still bricks and mortar, we still place concrete the same way, we drive nails the same way, measure the same way," he said.

"But the risk is not in what you're building, it's in managing the contract, managing the expectations of the owner. If the owner has expectations [up] here and you're performing [down] here, you've got a problem." "We've become in our industry much more risk managers, probably, than we are builders," he said. "We've still got good builders but the learning about risk has been much more significant in our industry and in our business."

Family business

Hunt is the third generation to head the company, which completes approximately $1.8 billion of work annually, and which averages between $6 and $8 billion worth of projects under contract at any given time. According to its web site, the company has "never failed to complete a project. Not in the last 60 years. Not ever."

Started by Hunt's grandfather, Paul B. Hunt, and continued by his father, Robert C. Hunt, the Hunt Construction Group's huge footprint now encompasses airport terminals in Indianapolis, Phoenix and Detroit; hospitals in Los Angeles, Carson City, Nevada, and Carrolton, Texas; resorts in Louisville, Kentucky, and Orlando, Florida. The company has now built more than 40 stadiums, including the Louisiana Superdome, completed in 1975, which holds a place in history as the site of the first ever Super Bowl game and as a shelter of last resort during Hurricane Katrina.

Hunt Construction's resume also lists the University of Phoenix Stadium — the first nationwide to feature a retractable roof and a rollout, natural-grass field — and the 1.3 million-square-foot New Busch Stadium. Then there are the industrial plants, performing arts centers, government buildings, shopping centers and casinos. Annual revenue tops $2 billion. Hunt said it's his dream to see his children become the fourth generation to steer the business.

If they do, he added, they'll first have to learn to cope with a certain level of "dynamic tension" that periodically drives the drama at family-run concerns. "Dynamic tension is entrepreneurial," he said. "It always exists in a family business, that is part of what makes it very strong." Describing Hunt Construction Group's multi-decade evolution to business leaders gathered in Phoenix on February 27, Hunt said that this dynamic "can be good or bad," affecting everything from employee morale to CEO succession.

And since the company has key shareholder employees, who buy company stock with after-tax earnings, this dynamic can make an impact even beyond the blood line. The company remains privately owned by the family, but the presence of employee stock holders makes for a more egalitarian environment, in which non-Hunts feel they've a role in steering the company as well. The resulting culture encourages employees to take ownership of their jobs, an attitude even reflected in the company's Web site tagline: "The right people. The right results."

They're on the right track, according to John L. Ward, author of "Perpetuating the Family Business: 50 Lessons Learned from Long Lasting, Successful Families in Business" (Palgrave MacMillan, 2004), both by stressing voluntary accountability and by hiring non-family executives to fill important roles. But the Hunts retain final say in company matters because family members control the majority of the shares, and thus, the vote. They did this purposely, to avoid future shareholder battles, Hunt explained.

Steering growth through change

That was smart, because over the years, there have been several power plays launched by high-level shareholders striving to limit the family's decision-making reach. Hunt recounted one incident, in the mid-80s, after Hunt Construction opened its Phoenix office. The corporate headquarters, back then, was in Indianapolis. "A partner in the company tried to lure me from Indianapolis to Phoenix, then kicked me to the curb. We struggled alone," often unable to get return telephone calls from corporate. Hunt built up the Phoenix division, eventually bringing in the Los Angeles office.

By 2000, when Hunt decided to transfer the company's headquarters to Arizona, an entrenched "old guard" had settled in at the Indianapolis office. They were content to relax and rake in $300 million a year. "At a time when construction was exploding one said, 'let's let people come to us for a while,'" Hunt said. He knew he could push things to a higher level, in terms of projects and profits, but not with that dynamic tension worsening the mandarins' set ways.

"It was time for the old guard to move on," he said. So he hopped a plane to Indianapolis. There, he was confronted by the Indianapolis chief, who had known Hunt since he was a 12-year-old boy. "He said, 'Why are you here? We wish you were not here.' I wanted to take him outside and point to my name on the building," Hunt continued. Back then, the same old guard had an unspoken policy of "usually keeping the younger people down until they were near death, then bring them up," he noted, so Hunt cleaned house.

There was a round of retirements and job changes, and the corporate office was moved. Then Hunt wrote an internal, 30-page "cultural manual" that explains his vision for the way Hunt Construction employees should treat each other, customers and vendors. The remaining old guard "pooh-poohed it, but the younger employees appreciated it. And that was the beginning of the turnaround" that pushed annual revenue past $2 billion, he added.

These days, Hunt is at ease with the dynamic tension that still resonates, even though his grandfather and dad have passed away. "I'm the guy with the cattle prod running around herding cats. I manage egos," he explained. "My power base is better the more I empower [employees] and let them run." And yes, he's hoping that someday, his teenage daughter and son may have offices down the hall from his. "My plan is for the company to survive me. It's my absolute dream," he said.

Bottom line:

• HCG is ranked Number 27 of the top 400 construction companies ranked by Engineering News Record and at any given time, has projects worth from $6 billion to $8 billion underway.
• Chairman and CEO Robert G. Hunt has an unusual hobby: he collects machine guns.
• Hunt Construction Group offers construction management, engineering, design/build, design management and consulting.
• Hunt joined HCG 35 years ago, as a field engineer, and has worked his way through a variety of roles on the way to becoming chairman and CEO.