Meet Canada’s Best Managed Companies of 2013
Mary Teresa Bitti, Special to Financial Post
Windsor-Essex Company - Centreline (Windsor) Limited makes the list at #8 - see below for their profile
Depending on which economic forecast you read, or where in the world (or the country, for that matter) you are, the economy is either going to get better or it’s not. Perhaps no time during the 21-year history of Canada’s Best Managed Companies program has there been such a divergence in expectations when it comes to business performance. What is consistent is the resolve and ability of Best Managed companies to do what it takes to build and grow sustainable businesses for the long term.
This year’s pool of Best Managed Companies collectively achieved double-digit revenue and income growth. These remarkable statistics were achieved during a period when the Canadian economy grew by less than 3%. “If you look back at the last five years, arguably one of the worst, sustained recessions we’ve seen in decades, Best Managed companies have not only survived, they’ve grown,” says John Hughes, Deloitte Canada’s managing partner, growth enterprises, and national leader of Canada’s Best Managed Companies program. “They have a clear strategic direction and are focused on executing that strategy by putting the right people with the right skill sets in place, because that’s what drives financial results. They are providing lessons to help all private companies grow, and that’s important for Canada as a whole.”
Some of those lessons will be featured in Deloitte’s inaugural CEO Program Case Study, which will take place during the Canada’s Best Managed Companies symposium on April 1. In part, the case study will leverage the skills, experience and expertise of Best Managed CEOs in a peer-learning session that will focus on the challenges all Canadian CEOs face.
If there is a singular hallmark of Best Managed companies it’s their ability to adapt and adjust to market conditions. They are nimble, they see opportunity in challenge and they use that opportunity to grow. This year in particular, a few key trends and themes highlight that ability and showcase what it takes to compete both here in Canada and on the global stage:
Focus on profitability
Having navigated the global financial collapse by building efficiencies and driving down costs, Best Managed companies are unlocking the levers to profitability. This is taking many forms, including growing in new markets. “We are seeing increased exporting to Asia, Europe and South America among Best Managed companies,” says Hughes. “Canada
represents only 3% of the global economy. If you want to grow significantly, you have to go outside Canada.”
He points to Oakville, Ont.-based Levitt Safety, which became the largest supplier of mining safety equipment to Japan, as one example of a Best Managed company doing just that. “Levitt Safety saw the opportunity for growth in Japan and went for it.”
This success outside Canada also offers another key insight that has important implications for the country. “It’s becoming clearer to us that successful Canadian companies that are going to close the productivity gap look a lot like Best Managed companies which are more willing, prepared and likely to export into new markets than other private companies,” says Glenn Ives, chair of Deloitte Canada, which has conducted extensive research into the widening productivity gap between Canada and other OECD nations. “In order to succeed globally, you have to be more productive than your competitors.”
M&A as a growth driver
Best Managed companies are looking to grow significantly and they are putting their strong balance sheets to work to acquire businesses that will expand their product lines, build capacity and allow them to enter new markets quickly. “M&A allows them to reach further into their customer supply chain, find economies of scale in procurement and build their talent pools, which allows them to set and achieve aggressive growth strategies,” says Hughes. “In some cases we are seeing particularly bold moves where companies are making transactions that will be transformational and significantly change the markets where they play, the customers they serve and who they compete against.”
For example, Toronto-based toy industry leader Spin Master purchased the Meccano brand, further building out its growing product line. The growth in M&A activity among Best Managed companies reflects the nature of business today, says Mr. Hughes. “The economy is moving too quickly to build from scratch and scale up. Best Managed companies are particularly adept at identifying acquisitions that will drive synergies and grow quickly and significantly in this slow growth environment.”
Increased M&A activity also reflects the demographic shift taking hold as Baby Boomer owners prepare to retire. With valuations increasing to pre-2007 levels, business owners are focused on succession and are reimagining what the business could look like. “At the same time, the next generation is moving into leadership roles with an eye to building on the legacy,” says Hughes. “They are focused on the next stage of the story and building something bigger. This is good for Canada, because we are seeing the next wave of growth.”
Private equity funders in Canada, the United States and United Kingdom want to be part of that growth and are making that interest known. “Canada is seen as a strong long-term investment, which is good news for private companies,” says Hughes. “We’re also seeing more companies looking at initial public offerings as a means to raise capital for growth.”
Closing the productivity gap
It’s no secret there is a productivity gap between Canadian and U.S. companies. Today the gap stands at 25% — and it’s growing. The average Canadian generates $13 per hour less in GDP than the average American. Worse, Canada has been struggling to close the gap for more than 30 years. Despite government adoption of many sound economic policies, the productivity gap is widening at an alarming rate and will put our standard of living at risk.
Over the past three years, Deloitte’s research has uncovered some of the key factors that have prevented the productivity gap from closing. The research indicates that a significant portion of the gap comes from a lack of investment in capital assets and technology by Canadian firms, particularly as the business ages. Deloitte’s research shows that for each dollar that a U.S. company spends to equip its workers with the latest machinery or tools, a Canadian company will spend 65¢. Similarly, for each dollar a U.S. company spends to enable communications between its workers, buying computers or updating systems, a Canadian company spends 53¢. These statistics demonstrate that Canadian companies simply are not giving their workers the tools to be more productive.
Deloitte’s research also shows that a large part of the problem is one of perception. Some 36% of Canadian private companies believe they are investing more than their peers. Actually, they are investing less than the average, relative to their size and sector. Deloitte calls these firms “overconfident” and suggests that while they share some characteristics with the 32% of Canadian firms that are leading productivity gains (such as a higher tolerance for risk, pursuit of innovation, and awareness of competitive pressures), a poor understanding by these overconfident firms of their competitive position may drive a significant portion of the investment gap.
This, too, is an area where Best Managed companies set themselves apart from their private-company counterparts across Canada. If anything, the inverse is true of Best Managed companies, which have not only made the connection between infrastructure spending and productivity and are investing more than their peers in machinery, equipment and technology but feel strongly they should invest even more. “Canada’s Best Managed companies are an excellent example of how to achieve above-average returns with an investment mindset in capital assets and technology,” says Ives. “Their performance is consistent with those companies achieving above-average revenue and income growth by investing in assets that create greater employee productivity, allow companies to accelerate growth and develop new products and services that can be taken to market and give them a competitive advantage. When you have a strategic focus and competitive intelligence, you make decisions to invest in assets that make you more productive. That’s what Best Managed companies are doing.”
Innovation and disruption
Best Managed companies are also always looking to improve and do things better and smarter. It’s this innovation mindset that consistently finds them leading the way when it comes to investing in research and development, adopting new technologies and methodologies and creating new products or services that address gaps in the market.
When it comes to technology specifically, Best Managed companies are investing in enterprise resource planning and customer relationship management systems, to bring them closer to their customers. “Best Managed companies understand what their clients want and what they might need in the future, sometimes even before they do,” says Ives. “They want to identify future challenges and help their customers meet them.” And they are automating processes to serve those customers as efficiently as possible.”
Their focus on innovation is also leading Best Managed companies to tap into the power of “big data” to turn all the information now readily accessible via analytics solutions into cost savings and increased revenues. Ives points to a Best Managed company that is using analytics to benchmark the performance of its depots and drivers to find opportunities to drive performance. “If you want to stay on top, you innovate more. Big data is an innovation that can give you an edge, and Best Managed companies are adopting it faster than other private companies,” he says. “They are not afraid to use disruptive innovations to their advantage.”
The same is true of social media, which Best Managed companies use to better communicate and engage with employees and customers and to build their brands. This willingness to experiment also speaks to another key differentiator of Best Managed companies: their approach to risk.
While their private company peers view investing in R&D and new technology as a risk, Best Managed companies believe it is far riskier to be complacent. As a result, they are committed to investing in new innovations and are always focused on improving. They do not want to fall behind their competitors. That said, they are deliberate about where they direct their resources to ensure greatest effect. As a result, Best Managed companies are more aware than ever about the importance of risk management and are building it into their growth strategies, says Hughes. “Risk management is about determining the best options for success. Brand risk, contract risk, geographic risk, political risk are now part of the growth agenda. They are weighing the pros and cons of decisions from a risk standpoint.”
Perhaps most important, they are growing and growing aggressively and profitably. Best Managed companies refuse to stand still. They are setting well-thought-out strategies to expand operations and to win evermore complex projects by vertically integrating operations to become one-stop shops for their customers. It’s working. “That’s why we feel it is important to shine the light on Best Managed companies. The vision for the Canada’s Best Managed Companies program is to help all Canadian companies build their businesses by highlighting success stories so everyone can see what’s possible,” says Hughes. “Best Managed companies have important lessons to share.”
#8. CenterLine (Windsor) Limited
Peter Diekmeyer, Special to Financial Post | March 25, 2014 | Last Updated: Mar 19 7:45 PM ET
Location: Windsor, Ont.
Sector: Welding equipment
Market: Canada, United States, Mexico
Size: 500 employees in Canada
The increasing automation of global manufacturing facilities has boosted demand for equipment and tools that can facilitate the process. CenterLine (Windsor) Limited, whose president, Michael Beneteau, recently announced a major expansion program, does just that.
The company designs and builds a variety of “metal joining and forming automation component products.” It also markets stationary welders, welding guns and welding electrodes.
“Business has been great for the last couple of years due to a strong rebound in the auto industry,” says Beneteau, who has overseen the nearly doubling in size of the company’s Canadian operations since he took on his current role in 1998.
“The recent drop in the Canadian dollar, which makes our exports more competitive, should help to continue that trend.”
Beneteau joined CenterLine (Windsor) in 1988, shortly after graduating with a degree in electrical engineering from the University of Waterloo. A decade later, he took on the CEO spot.
“I had big steps to fill,” says Beneteau. “My father Donald, who founded the company, has more than 20 patents to his credit. But I quickly realized it would be hard to top him on that score.”
Beneteau cites several reasons for the tool and die company’s success. These include international expansion, conservative capital management and a relentless focus on quality control. Centerline (Windsor) Limited’s $7.3-million three-year program to build a centre of welding excellence and expand its manufacturing space is also a factor.
Attracting and maintaining a skilled workforce made up of millwrights, electricians and machinists is a constant challenge. The company hires promising workers when they are still young and encourages them to go to night school, to complement their on-the-job training.
In many cases the process costs more than hiring general labourers, but it creates a team environment in which both the employee and employer gain.