The industry’s pacesetter has stepped up its stride. Terminix International, the $900-million ServiceMaster subsidiary has in place aggressive plans for growth, proactive marketing strategies, and a new leadership team that is gearing up for a dynamic year ahead.
And while the leadership team is technically “new” — two of the company’s top officers have been at their posts for only about a year — it’s not lacking experience. In January 1997, Donald (Don) K. Karnes was named president and chief operating officer of Terminix International, succeeding Dickie Gauthreaux, who retired after 18 years of service, and 39 years in the pest control industry.
Just four months after Karnes was named to his post, Terminix’s Norman Goldenberg was named vice president of government and public affairs, licensee operations and technical services. Goldenberg essentially filled the role left after Charles Hromada, the long-time leader, pioneer and corporate technical guru of Terminix, announced his retirement.
The previous leadership team of Hromada and Gauthreaux, in place for close to a decade, was an effective, powerful force, which in their tenure saw the company increase its business by more than a third to become the largest pest control company in the nation. Under their leadership, the Terminix brand name grew to become a household word.
The new management team, meanwhile, hopes to build upon that solid foundation while also streamlining the company, enhancing its professionalism, and speeding up decision-making at all levels. In short, they want to super-charge Terminix. For a company that now employs close to 11,000 worldwide, it’s an aggressive goal, but one that will be watched by all within the industry.
“Terminix has created a very good image in the marketplace,” said Don Jamison, president of Jamison Pest Control, Memphis, Tenn. But because Terminix is part of a publicly held corporation, Jamison added, the company also has a responsibility to its shareholders. “Their basic motive is to produce a profit,” he said. Furthermore, Jamison pointed out, the current federal/state investigation of the termite market may not bode well for Terminix, simply because the largest companies are the easiest targets. “This industry has real problems in the coming days,” he said, “and I think Terminix, along with Orkin and Sears, are at the forefront of that. But I don’t think they could have a better management team in place.”
Karnes, Goldenberg and Bob von Gruben, group vice president and general counsel, recently shared Terminix’s plans for growth for 1998 and beyond with PCT, and talked about their team approach toward management.
“Collectively it’s a group of people that run the company,” says Karnes, who jokes that his job is to listen while everyone one else talks. “Especially with my lack of experience in the pest control business, you have to be a good listener,” he said.
THE LEADERSHIP TEAM. Karnes, 46, is no newcomer to leadership, nor to the demands of managing an international service company. He has been president and COO of Terminix’s sister operation, TruGreen ChemLawn, since 1991, where he rose through the ranks as a branch manager, regional manager, and finally, senior vice president. In 1996 he was named group president of Lawn Care and Pest Control Services for ServiceMaster, a position he still holds.
Goldenberg, too is an experienced industry leader and pioneer, having grown up in the pest control industry. His circuitous route to Terminix started when he sold his Miami, Fla., pest control company to Waste Management, which was later purchased by the ServiceMaster subsidiary. He joined the company as vice president of governmental affairs, the same position he held at Waste Management. During his career, Goldenberg, now 57, has served as president of the NPCA and of the Florida Pest Control Association.
And while Karnes and Goldenberg may well represent a breath of fresh air for the conservative corporation, they are also part of a larger group of managers that is leading the company forward. The executive team now in place includes von Gruben; Albert Cantu, vice president of operations (and son of Carlos Cantu, president and CEO of ServiceMaster); Steve Good, vice president of marketing; Jim McMahon, vice president and chief financial officer; Bart Mallory, vice president and general counsel; and David Gray, vice president of management information systems.
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“The days of running the business from Memphis are over.” Terminix’s Don Karnes |
THE PLAN. As you might guess, the Terminix plan for the future starts and ends with growth. Karnes and his staff have set a goal of both top- and bottom-line growth in excess of 15% for 1998. And achieving that aggressive number is hinged upon the company’s new service philosophy, along with its aggressive acquisition plans and management restructuring.
Goldenberg, who was previously based in Miami, views this as a time of great opportunity for Terminix. “We’re looking at a bunch of scenarios to do some changing,” he said. “That is what really attracted me to come up here, to hopefully make a difference in the way we do business and to make some changes where they’re needed, if they’re needed.”
Karnes, who plans to implement some of the programs that have been effective within the TruGreen ChemLawn operation, also notes that the pest control industry has many issues to be dealt with in its own right. “Certainly the greater emphasis right now is on the pest control side of the business,” said Karnes. “Both businesses have to be run, but we think there is some opportunity for improvements on the margins of the termite side of the business. We also think there are more acquisition opportunities on the pest control side.”
Perhaps most important, Terminix will this month roll out its new, broader selection of pest control service options for consumers. Services will be designed around customers’ needs and schedules, providing them with more options as to the frequency and type of service that is being delivered. Historically, the company offered only a monthly pest control service. “We’ll be providing an array of services that the customer will be able to choose from,” said Karnes. “And we see that as a positive, not only for us but for the industry.”
“It’s basically the philosophy of one size doesn’t fit all as far as the customer goes,” Goldenberg explained. “We’re going to cater the service to the customer, regardless of when it is and what the frequency is.”
Steve Good, vice president of marketing for Terminix, says the new service offering is a concerted effort to sell customers a much more convenient service than has been offered in the past. “Traditionally, Terminix has been a monthly provider of service,” he said. “We still believe that monthly service is the best for controlling pests, however, we also recognize that our consumers’ lifestyles have changed dramatically over the last decade.” Good explained the company’s ongoing acquisition strategy also necessitates this change, since the companies being acquired collectively offer such a wide range of services.
Growing Terminix as a whole also means, in effect growing the revenue from each of its branches. Karnes plans to increase average branch revenue from its current $1.7 million to between $3 million and $4 million in the next few years. Along with this, the company is gearing up to consolidate, put more business responsibilities on its branch managers, and step up its pace of acquisitions.
The company has already made progress toward this end: Almost two years ago, the company had 36 regions, each with average revenue of between $10 million and $12 million. Today, there are 22 regions. The ultimate goal, Karnes said, is to have fewer, larger regions bringing in revenues of close to $60 million per year each. The idea is to utilize economies of scale, leverage off existing overheads, and reorganize Terminix branches so they are more self-sufficient.
In the same vein, the company is preparing to put in place a more consolidated yet decentralized management structure, a system that has been successfully applied within the TruGreen ChemLawn operation, Karnes pointed out.
“I think historically we’ve been a little more centralized at Terminix,” said Karnes, “and we would like to see it more of a decentralized system.” In effect, Karnes’ philosophy is that much of the decision-making responsibility should be pushed down closer to the field. That means consolidating some of the branches and service regions, while also putting in place key management positions. “Our idea isn’t so much to cut our branches down as it is to add to our branches and leverage off of existing management,” said Karnes. “That’s the key to our success in the next five to 10 years.”
Terminix is already experimenting with one giant region with revenues of close to $60 million. In the past several months, the state of Florida has been restructured from four regions down to one. The leadership structure now consists of a regional manager, a regional sales manager, a regional commercial sales manager, a regional technical manager, a regional information systems manager, and a human resources professional. Previously, these positions were located at Terminix’s headquarters in Memphis. All have been moved out into the regions to better serve the branches and their customers. “The days of running the business from Memphis are over,” Karnes said. “We need to get it out in the field, get it decentralized, and then it’s going to be up to the individual branch managers to run the business.” Eventually, Karnes indicates, all of Terminix’s company-owned locations across the country would be re-organized in the same way.
“We want fewer, higher paid people, doing higher quality work,” said Karnes. He explained that, ideally, large Terminix branches will have perhaps one “general manager” supported by a staff of assistant managers. And, Karnes pointed out, the assistant managers would earn the same salary as earned previously by branch managers. General managers would earn 30% to 40% more.
The key to success for such a system, Karnes noted, is having the right managers at each facility. “If we have the right manager,” he said, “they’ll take care of our people, our people will take care of our customers, and along with that, our shareholders will be taken care of.” To help make sure its managers are prepared for the onslaught of new business brought by acquisitions or regional consolidation, a multi-million-dollar training and recruiting program is now being implemented.
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A new Terminix termite rig, now in development, takes its cue from the hugely successful TruGreen ChemLawn truck. |
Another area that the new management team will focus on in the months ahead is its aggressive acquisitions strategy. “There are plenty of companies out there to buy,” said von Gruben. “To get these branches to the size we want to get them, we’re going to have to grow faster than we can by growing internally. In addition to making acquisitions, the company hopes to consolidate its business so as to increase the size of its branches, using “tuck-in acquisitions,” in which acquired businesses are worked into the existing Terminix business in each area, rather than operated as standalone offices.
“We’re looking for good solid companies with strong management and good customer service,” said Karnes. And it’s not the number of companies acquired that matters, he added, it’s the added revenue the acquired companies will contribute that’s important.
A SYMBOL OF SERVICE |
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Introduced in 1988, the “We Serve” cube was designed to link members of ServiceMaster’s Consumer Services family. This Quality Service Network includes Merry Maids, TruGreen ChemLawn, American Home Shield, Furniture Medic, AmeriSpec, and of course, Terminix. |
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A COMMITMENT TO PROFESSIONALISM. Enhancing the professionalism of Terminix’s network of service professionals across the country is another area of concentration for Terminix. One example of the company’s commitment to professionalism is the newly designed termite rig now being tested.
Built on a pickup frame, the termite truck has a 300-gallon termite tank and an in-line injection system. Molded indentations in the tank house all the tools needed on a termite job. And the design of the truck, similar to the TruGreen ChemLawn truck used by Terminix’s sister operation, is polished, clean and unmistakably Terminix.
The idea behind the truck is to provide termite technicians with everything they need for the proper termite job, and also readily indicate to the technician if a tool is missing. Not surprisingly, the truck is built by Wanner Engineering, Minneapolis, Minn., the same company that designed the patented white TruGreen ChemLawn trucks.
“I think this truck will add credibility to the whole industry,” Karnes said. “It’s strictly designed for us and it’s going to offer the opportunity for the customer to get the best job possible.” Karnes said Terminix would likely have a patent on the new truck, which will be marketed to the industy. But first the company will field-test the three prototypes that are now completed. The company aims to build about 1,500 of the trucks in the next three years.
A PROFITABLE FUTURE. Many of the new ideas being put into place at Terminix do in fact come from the TruGreen ChemLawn side of the business. “To a great extent we’re piggybacking a lot of what TruGreen has done in terms of structure,” said von Gruben. “The systems are proven. They’re worth repeating at Terminix.”
Where this will affect the company, say outsiders, is likely at the bottom line. “I think TruGreen ChemLawn is a money-making organization,” said Jamison, whereas, he added, “the Terminix organization, historically, pays more attention to detail.”
If history is a guide, then borrowing ideas from the lawn care side of the business will likely be a smart move for the company, as well as for an industry that, some would say, hasn’t paid enough attention to profit. No one understands that better than the management team at Terminix.
“We have to continue to deliver value, and that value is going to change every year,” said Karnes. “We’ve got to make sure we’re delivering exactly what the customer wants. We need to be on the leading edge.”
The author is managing editor of PCT.
The Insect Conspiracy, Revisited |
1998 will be a big year for Terminix, not only in its service offerings and growth plans, but also in how it presents itself to consumers. That’s where advertising comes in. The pest control giant has incorporated new messages in its advertising and promotions strategies that mirror the service and organizational revisions being made throughout the company. The company has hired a new advertising agency, Stone & Ward of Little Rock, Ark., and will be kicking off its updated advertising campaign around mid-March. “We really are very interested in trying to make the phone ring more this year,” Karnes said. “We also want to leave consumers knowing that we’re a friendlier company.” According to Steve Good, market research from surveys and focus groups has indicated that consumers see Terminix as an organization of competent, capable and amiable professionals. New advertising, therefore, will reinforce that positive Terminix personality. “Our research has shown us that 60% of the people who purchase pest control service don’t necessarily shop it,” said Steve Good, vice president of marketing for Terminix, “so we’re interested in capturing top-of-the-mind awareness.” The premise, Good explained, is if Terminix is on the top of consumers’ minds it will be the first company they call. Terminix’s new advertising campaign reinforces the company’s friendly, confident image, and like previous campaigns, depicts a lighthearted conspiracy pitting insects against humans. But one important difference concerns the insects themselves: In previous advertisements, the insect characters were heard but were never seen. This year, says Good, “consumers get to meet the bugs.” “We believe it’s going to be an exceptionally strong campaign,” said Good. “We believe it’s going to provide a dramatic lift to our business.” The campaign contains television, cable, Yellow Pages, and direct marketing components. 
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