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Anatomy of a comeback.

When Gary Thacker took over as president and CEO of The Thacker Organization in August 1989, it didn't take him long to realize that the family construction business he had been asked to lead was in big trouble.

Item: For the second time in two years the firm was reeling from the devastating loss of its CEO. In 1987, Gary's father and the company's founder, Floyd O. Thacker, died from complications following triple-bypass heart surgery. Two years later, Gary's stepmother, Sandra, who had assumed control of the company after her husband's death, drowned in a swimming pool accident.

Item: The Thacker Organization, like all construction companies, has been hit hard by the recession. According to Ralph C. Thomas III, executive director of the Washington, D.C.-based National Association of Minority Contractors (NAMC), $66 billion less was spent on construction projects in 1991 than in 1990.

Item: Gary Thacker estimates that the 1989 Croson decision, which struck down Richmond's minority set-aside program ad set the stage for the dismantling of several others nationwide, has since cost his company $15 millio a year in lost revenues.

Says Robert L. Tyler, Thacker's vice president of corporate business development: "We started to wonder if everything was going against us. You can't imagine the impact that the death of a CEO has on a black-owned company. But when you have two of your top officers die within a two-year span, it's almost unbearable. We asked ourselves, 'How are we supposed to overcome this?'"

How indeed. The Thacker Organization, which in 1983 reported revenues of $86 million, watched its sales plummet to $30 million by 1988. Worse, the firm's cash reserves were depleted, no projects were pending, and no substantial marketing efforts were underway to acquire new business. With a staff of nearly 100 employees, overhead was grossly out of proportion to sales, and assets were not being effectively managed. "We had a $5 million investment that wasn't earning us any money," says Gary Thacker of the construction equipment, a 15,000-square-foot warehouse and 8 acres that languished at the company's headquarters in Decatur, Ga.

Gary's challenge: to bring expenses in line without harming the company's ability to market itself and take on additional work. His solution: to liquidate fixed assets. Onto the auction block went $3 million worth of trailers, trucks, backhoes and bulldozers. Also sold: The company's two private jets--a Lear and Citation II. Gary Thacker says the company netted $2.6 million from its fire sale.

Some human assets were also liquidated. In his attempt to rightsize the company, Gary laid off 20 managers. "There was no way we could service that kind of expense with the workload we had then," says Thacker, who was 33 when his four brothers, all one-fifth owners in the company, elected him president.

With the proceeds from the sale of the equipment, Gary quickly moved to replenish the company's cash reserves. He invested $250,000 into an aggressive marketing plan designed to establish The Thacker Organization as a regional power in the construction industry by the middle of the 1990s. Having staked out a market area that spans the eastern seaboard from Miami to Boston, Gary established permanent Thacker offices in New Orleans; Washington, D.C.; Newark; and New York, with Atlanta remaining as corporate headquarters.

Also as part of its new strategy, the company has been pushing different services. In the early 1980s, 80% of the company's work was in hard services, including general contracting and hard-dollar construction. This year, Thacker expects 70% of the firm's work to be in soft services, including construction management, engineering and management consulting. "That strategy is brilliant," says Thomas Clark, professor of management at Xavier University in Cincinnati. "A key term in business today is value engineering. Companies achieve that through the application of intelligence rather than expensive assets."

But that strategy came with a price. By placing greater emphasis on construction management jobs, The Thacker Organization watched its 1991 sales plummet to $30.8 million from $45.6 million a year earlier. "We didn't anticipate that much of a drop," Gary admits. "We expected a $5 million to $7 million drop in sales."

Despite that dramatic decline, Gary says The Thacker Organization will continue to pursue construction management project. "That's part of our overall strategy," he explains. "You can make a real good profit on some hard-dollar jobs, but there's more risk involved. We believe that our sales will hold steady at our $30 million and will gradually increase in the next two years."

Ultimately, Gary Thacker says his goal is to be able to bid multiple jobs in a month in the $15 million range and to acquire 15 construction management jobs per year. (Thacker took on nine construction management jobs last year.)

Two-and-one-half years into the new five-year plan, Gary Thacker says he's pleased with how things are going. Since decentralizing its operations, The Thacker Organization has picked up more than $500 million in construction work, including contracts for a $25 million project to widen a 22-mile stretch of the New Jersey Turnpike, a $65 million project to build the five-story Towsend-Harris High School in Queens, N.Y., and an $80 million project to make a runway and terminal building improvements at New Orleans International Airport.

How It All Began

In the late 1960s, Floyd Thacker made what would turn out to be a shrewd business decision--he founded The Thacker Construction Co. in Alton, Ill. However, Thacker had no experience in the construction industry when he was approached about starting a construction company that could capitalize on the Department of Transportation's minority set-aside program. In fact, at the time, Thacker was as far removed from the field as you can be--he was the owner of the Happy Hour Tavern. But he agreed to the new venture and became a partner in Kern Construction Inc. In 1970, Thacker bought out his partners and launched his own company. By the end of its first year of operation, Thacker Construction grossed $300,000.

Two years later, Floyd Thacker joined the Small Business Administration's (SBA) 8(a) program, which was designed to help develop minority contractors by facilitating their access to noncompetitive government contracts. Thacker acquired a number of lucrative jobs under the program, including construction and construction-management projects in Illinois, Ohio and Texas. By 1978, Floyd had outgrown Alton and relocated his firm to Decatur, Ga., where it continued to thrive. In 1980, the company began its largest project under the SBA program--a four-year, $80 million contract for the U.S. Department of Energy Strategic Petroleum Reserve in New Orleans.

Then, reality hit. In 1983, The Thacker Organization, which over an 11-year period had been awarded a total of fifteen 8(a) contracts worth $95 million, had grown too large to qualify as a disadvantaged business and was "graduated" from the program. No longer able to count on government contracts, which had accounted for 65% of Thacker's revenues, the company had a hard time making the transition to competing in the private sector.

But Floyd Thacker was determined to allay concerns that his company would not survive in a post-8(a) era. So he focused on finding opportunities in municipal markets. Taking advantage of new minority set-aside programs in cities across the country, Thacker competed and won contracts for multimillion-dollar runway construction projects at airports in Atlanta and Miami, and a $38 million capital improvement project for American Airlines at Chicago's O'Hare International Airport.

After winning a contract to build an $11.7 million bus and maintenance facility in Miami's Liberty City, a depressed black neighborhood, Floyd made a public commitment to hire all the labor for that project from within a 15-block radius of the site. Given that the area was made up of mostly unskilled workers, people said he'd never do it. But by persuading his staff to buy into his vision, Floyd established a training program, achieved a 75% minority participation on the project, and completed the project six months ahead of schedule and $1 million under budget. That feat helped establish The Thacker Organization's reputation as a firm that focuses on training and using minority contractors.

Concern for the inclusion of minorities is one of the points Floyd Thacker was negotiating with the New York/New Jersey Port Authority and the Newark Economic Development Corp. for its proposed $45 million office tower. Thacker was under consideration to serve as construction manager for the project. But before those negotiations were completed, Floyd, complaining about not feeling well, checked himself into an Atlanta hospital, where doctors advised heart surgery. Even from his hospital bed Floyd, ever the dealmaker, was still making plans, developing strategies and directing his company. But on May 26, 1987, the 52-year-old Thacker died unexpectedly of complications from diabetes following his surgery. "Floyd's death had a crumbling impact," says Billy Gaitor, Thacker's vice president of construction. "Floyd did everything. It was pretty difficult to pick up the pieces after he died because he had them all in his hands."

Passing The Company Torch

Family business experts say that the issue of succession--who takes over the management and ownership of a company when its founder dies--is one of the most critical questions family-owned business face. Still, most company founders fail to plan for who will succeed tham if they die. Some can't come to grips with their own mortality. Others have trouble reconciling what is best for the business with what is best for the family. Still, others wait too late to formalize and communicate their plans. "Founders often have a specific plan but nobody knows it," says Abigail Barrett, a consultant with Management Development Institute, a Minneapolis-based organization, which develops management plans for family-owned businesses.

In Floyd Thacker's case, he had a plan, albeit one that surprised just about everyone. Instead of leaving his eldest son, Gary, in charge, Floyd's will left 100% control of the company to his wife, Sandra.

Although she had worked alongside her husband for 17 years as a corporate secretary and knew as intimately as anyone Floyd's dream for The Thacker Organization, Sandra, unlike Gary, had no technical experience in the construction industry. And as a woman in a male-dominated industry, she faced an awesome task as she tried to fill the president's chair. It was a task she would have to perform without the one person who could help her most--Gary Thacker. For what he now admits were "human and petty" reasons, Gary left The Thacker Organization to start his own construction business one week after his father died. "I felt a little insulted that the transition did not include me as a central player," Gary admits. "I didn't think it was fair."

Sandra took Floyd's death--and Gary's departure from the company--hard. However, with the assistance of various members of her staff, Sandra picked up where Floyd left off and closed three out of the four deals he had been negotiating when he died: The Northeast Inlet, a $16 million, 130-unit townhouse development in Atlantic City, N.J.; the Clyde C. Jordan Memorial Stadium, a $6 million, 7,000-seat facility; and Bron Elementary School, a $1.2 million, 3,000-square foot project in East St. Louis, Ill.

Sandra also helped bring to fruition what turned out to be one of The Thacker Organization's most profitable deals in recent years, the Newark Legal and Communications Center. The project included four components: a $73 million office tower and a $2.7 million restaurant, for which the company was construction manager; and an $18 million parking garage and a $2.7 million pedestrian bridge. (Gary estimates that the company was directly responsible for $69 million of the work on the project.)

Alma Smith, now the vice president of operations and business development for The Thacker Organization's New York office, was the project officer with the Newark Economic Development Corp. when the company was awarded the contract. According to Smith, Sandra Thacker made it a priority to reassure her clients that the project would continue as planned. She accomplished that by including The Thacker Organization's most experienced employees on all critical client meetings. "We saw a technical staff that respected her as president, and deferred to her decision-making," recalls Smith.

By 1988, a slow economy was taking a heavy toll on the construction industry and on The Thacker Organization in particular. Several projects, including a second office tower in Newark, were put on hold indefinitely. And the American Airlines expansion at O'Hare was cut almost in half--from $350 million to $200 million. As if things weren't bad enough, in January 1989 the U.S. Supreme Court handed down its decision in the J.A. Croson v. City of Richmond case. The ruling, which said preferential treatment of minority contractors is unconstitutional without clear documentation of past discrimination, eliminated the municipal set-aside programs that minority-owned construction companies had come to depend on for a substantial portion of their revenues.

In cities across the country, where minority participation goals on public projects had ranged from 25% to 35%, minority contracts after Croson fell to near zero. The Thacker Organization felt the effects immediately. Just five years earlier, the company had completed construction of the North Miami Bus Maintenance Facility, a contract it won through the city's minority set-aside program. But by the time the city decided to build another bus facility in 1989, Miami's set-aside program was all but defunct. The Thacker Organization, suddenly thrust into competition with larger, majority-owned contractors, lost the second contract.

Even as revenues shrank in the face of these blows, Sandra Thacker maintained a conservative posture with respect to marketing. So as not to spread company resources too thin during the economic hard times, she scaled back operations and held the line on current projects.

However, without Floyd's leadership, The Thacker Organization often appeared to lack direction and focus. "The company worked on my father's force of will and his ability to market the company," says Gary. "Without that, a lot of people were left floundering."

Life After Sandra Thacker

When Sandra Thacker died in August 1989, she left ownership of the company equally divided among Floyd's five sons. Gary, who studied civil engineering at Southern Illinois University for nearly three years, was unanimously elected by his brothers to take over as president and CEO of the company. "Gary had more construction experience than any of us, plus a background in marketing," says Wayne Thacker, a 34-year-old partner in the Atlanta-based law firm of Gardner & Thacker. "So he was a natural."

The five brothers make up the company's board of directors. Wayne Thacker, who has a degree in criminal justice from Western Illinois University and a law degree from Atlanta Law School, also serves as general counsel for the firm. According to The Thacker Organization's current succession plan, he would become president should anything happen to Gary. Keith Thacker, 32, is vice president of Thacker Service Systems, which develops housing projects for the elderly. Michael Thacker, 28, is president of the company's food service operations, which includes a restaurant at Atlanta's Hartsfield International Airport. Russell Thacker, 20, is pursuing a career in the record business.

By so easily coming to an agreement about who would take over as head of the company after Sandra's death, the Thackers averted what might have spelled the end for the company. According to statistics compiled by The Family Firm Institute, a national association of family business consultants, academicians and entrepreneurs in Johnstown, N.Y., only one-third of family-owned business survive to the next generation--especially when there is no clear-cut succession plan, and when more than one sibling can legitimately challenge for the throne.

While he and his brothers don't always agree on every matter regarding the company, Gary Thacker says that he does enjoy the full support of his family. "We're close as brothers, and we always have been," he explains. "That helps with the our business."

As he began to implement his strategy for the firm, Gary relied heavily on his management team. He reassigned Gaitor, Legra and Tyler in other cities to work from company headquarters in Atlanta. Then Gary Thacker moved from Atlanta to Washington, D.C.--the center of national politics. "The best person to speak for me is me, so I decided that's where I needed to be," says Thacker, who had opened an office in the nation's capital and relocated his family there just two months after his stepmother's death. "I intend to become politically aware and use that no enhance the goals of our company through law and public policy."

He already is using what he understands about the relationship between business and politics to implement the company's new market strategy. The cities targeted for The Thacker Organization's permanent offices meet very specific criteria: They are large municipalities that are planning major capital improvement projects, and that have large black populations with solid black political power structure in place.

Proud as he is of being on the comeback trail, Gary Thacker is the first to say that his new plan for the company has not yet borne fruit. "Even though we have a number of large construction management jobs all over the place, and a few hard-dollar construction jobs going on, we're not successful with the change in strategy yet to the extent we want to be," he says. "Fundamentally, you have to measure yourself based upon your profit margin. And if we compare what we do now to what my father did, then he far outstripped our achievements today. I only hope we can match his success within the next five years."
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:20 Years of Black Business Leadership; Thacker Organization; B.E. 100s Profile
Author:Harris, Adrienne
Publication:Black Enterprise
Date:Jun 1, 1992
Previous Article:A measure of profits.
Next Article:Competing in the mainstream.

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