Wayne Baum's roots in the construction industry go back to his days growing up on the family farm, a heritage he deeply appreciates. Baum, along with his three brothers and other key associates, owns and operates seven construction companies in Illinois, Arizona, Florida, and Texas. In addition to being the president of Combined Construction Group, Ltd., Baum is also the president of Diversified Buildings Inc., vice president of Otto Baum Company, Inc., and CEO of Southern Gulf West Construction, Inc. (Naples and Orlando, Fla.).
As a life-long resident of the Peoria area, he has served on the boards of several business and civic organizations throughout central Illinois including: past chairman, board of trustees, Progressive Health Systems; past chairman, board of trustees, Pekin Hospital; member, board of trustees, Eureka College; member, advisory board, Union Planters Bank; 2nd vice chairman, board of trustees, Easter Seals/UCP; and member, advisory board, Central IL Memorial Kidney Fund. He was also elected earlier this year to a four-year term serving as a trustee for the Village of Peoria Heights.
Give us an overview of how your family became involved in the construction industry.
At the age of 21 my father, Otto Baum, came from Germany in 1925, where he was trained as a bricklayer. He could not speak any English, and was required to work for a very strict German farmer in the Morton area who came to this country earlier, and sponsored Dad's trip to America.
During Dad's first winter, which was very severe, his hands were cracked and bleeding. He asked the farmer if he could have a pair of gloves. The farmer's reply was "When you have worked long enough to repay me, I will give you a pair of gloves, not until." Well, Dad's perseverance not only got his gloves, but also gave him the ambition to start a small masonry business building barn foundations and cisterns for area farmers.
My parents were married about the time Dad went into business, and over the years had seven children. My brother Glen passed away at the age of 19, leaving four boys and two girls. As each of us boys reached the age of approximately 16, we were required to go to work as laborers, and at age 18 enter into the union bricklayer apprenticeship program. During this time, our family lived on a farm which sustained us through the early years of the business. I remember as a teenager showing my Brown Swiss cows at the Tazewell County 4-H Show and the Heart of Illinois Fair. I still cherish the memories of the first 18 years of my life spent on the farm. It gave me a sense of security, as well as dependency on one another, which I feel contributed greatly to our success in business.
During his many years as president of Otto Baum Company, my older brother, Mel, was responsible for taking that company to a much higher level as we ventured into new markets and areas of service. As each of us entered the business, we assumed different areas of responsibility. This enabled us to take on larger projects.
In September of this year, we held a retirement dinner and open house to honor the service of 51 former employees of Otto Baum Company and Diversified Buildings, who have retired in recent years. The theme for the evening was appropriately titled, "The foundation of our success has been built with the quality of our employees." The reputation established by these former, as well as our current, employees has allowed us the opportunity to look at other areas of the country in which to do business.
Tell us about your background. Was there any question as to your career choice?
I'm not sure Dad gave me a choice, but I am glad I was given the opportunity. I have always loved the construction industry. It is a very sophisticated industry, and many times the highly technical aspect is underrated or taken for granted. Working in this business from an early age has helped me to appreciate the cooperation, effort, and expertise of the many professions drawn upon to successfully create a tangible product which meets and exceeds the expectations of the customer.
I attended Bradley University in the building construction curriculum, and completed my bricklayer apprenticeship simultaneously. I greatly benefited from this experience by supplementing my college education with direct on-the-job training. After approximately four years in the field, I entered the office as a masonry estimator, and subsequently, with the establishment of Diversified Buildings, started the Combined Construction Group companies along with my brothers and business associates.
Many people associate the Baum family with two local construction firms, Otto Baum Company, Inc. and Diversified Buildings, Inc. What's the connection with Combined Construction Group, Ltd.?
Otto Baum Company and Diversified Buildings have more than 100 years combined presence in the central Illinois area, so our roots run deep in the construction industry. Over the years, due to various circumstances, we've been very fortunate to have opportunities to establish additional construction companies in other parts of the country.
Subsequently, my brothers (Melvin, Robert, and Kenny Baum) and I, along with two other partners (Scotty Sullivan and Steve Roeschley), established five additional construction firms, in Arizona, Texas, Florida, and most recently Nevada. We added shareholders in each organization who are directly employed by their specific company, and who are responsible for their respective operations. In essence, each company is run independently.
However, due to our common ownership, and to allow for the ability to share management services, information, and project experience among all the companies, we established the Combined Construction Group, Ltd. as a management company. Today, CCG companies offer construction services in most industry sectors, including commercial, industrial, health care, institutional and residential, with a combined annual sales volume of approximately $400 million.
What type of construction services do the companies provide? How are they different? The same?
Otto Baum Company began in 1928 as a masonry contractor. Over the years, the company expanded into other skilled-trade areas. Today, in addition to being the largest masonry firm in central Illinois, the company also performs concrete and earthwork construction services, as well as general contracting work that includes road and bridge construction.
A general contracting division is located at our Decatur office. My brother Mel served for many years as president. Currently my brother Kenny holds that position.
Diversified Buildings, Inc. established in the mid-60s as our first venture into general contracting. DBI operates as a full service general contractor, providing all methods of project delivery such as hard-bid, design/build, and construction management services within a 120-mile range of our Morton office.
Sun Valley Masonry, Inc., of Phoenix, Ariz. was established in 1979 as a masonry contractor serving the greater Phoenix area, under the management of my brother Robert Baum, and Ken Nessler.
The downturn in the economy and the resulting stagnant Midwest construction market in the late 70s and early 80s were contributing factors to having Robert follow Ken to the Phoenix area, which remains to this day one of the fastest growing metro areas in the U.S.
Sun Valley will be celebrating their 20th anniversary this month. Among the top 600 specialty subcontractors in the United States, Sun Valley was recently ranked by Engineering News Record magazine as the second largest masonry contractor in the United States. Robert and Ken were both with Otto Baum Company prior to our establishment of Sun Valley Masonry. Several of our former central Illinois employees are also working for Sun Valley. I sincerely believe the work ethic our local people took with them to the Southwest has contributed greatly to that company's success. Sun Valley now serves all of Arizona, with a branch office in Tucson.
Southern Gulf West Construction, Inc. was established in 1981 in Naples, Fla. We originally went into the southwest Florida market to build a specific project for an individual with whom we had previously worked on projects in the Peoria area.
The Florida project was a large adult congregate living facility. During the course of that project's construction, we examined the market and determined that there was a large sector of building needs for multi-family residential units--apartments, condos, adult living communities, and nursing homes. In 1983, we established a permanent presence by assembling a local, fully staffed office. Southern Gulf West recently opened a branch office in Orlando due to the increasing number of projects located in a corridor between Naples, the Gulf coastline, and the Orlando/central Florida region. Again, several members of our Florida team have their original roots in the Midwest and central Illinois area.
Target General, Inc., also located in Phoenix, was established in 1982, and operates as a full service general contractor. My brother-in-law, Howard Maurer, is the president and director of operations. Currently the second largest general contractor in Arizona, TGI recently received the distinction of Engineering News Record magazine's 13th ranked educational facilities builder in the United States. They performed as one of the three major general contractors on the Bank One BallPark stadium in Phoenix, home of the Arizona Diamondbacks baseball team. TGI recently opened an office in Las Vegas, primarily to pursue an expanded marketshare of educational facility construction in the Southwest.
Diversified Construction Services, Inc. of Dallas was established in 1990 as a full service general contractor serving the Dallas-Fort Worth area. Keith Roeschley, originally from Morton, is the director of operations. Although DCS is a full service general contractor, they found a successful niche with the construction management approach to project delivery. This method is more prevalent in Texas, particularly with public projects.
In 1993, we purchased the assets of Stobeck Masonry Inc., following the retirement of the company's owner. Based in the Decatur area, Stobeck operated as a successful masonry subcontractor for more than 25 years, and was a respected competitor of Otto Baum Company's masonry division in the Decatur-Champaign-Springfield market. It was felt this company would fit well into our organization in the market area it served. Keith Moser, Jr., is the director of operations. Unlike the other CCG affiliates, this is the only company we did not start from the very beginning.
What services does Combined Construction Group Ltd. provide the companies under its umbrella?
All of the principal shareholders of the seven companies are employed by Combined Construction Group, Ltd. to provide management services to the companies, allowing us to collectively draw upon the many years of construction experience shared by this group.
The performance bonds for all of the companies are provided by our bonding company through Combined Construction Group, Ltd. This "strength in numbers" has been a major impetus to our expansion into new locations and markets. In addition, all areas of insurance coverage, including workers compensation, fleet, liability, and umbrella coverage are provided through CCG.
Safety policies and enforcement for each company are coordinated through Combined Construction Group's insurance risk manager and safety engineer. Our companies have a very comprehensive safety program and, as a result, have an extremely favorable Experience Modification Rating of .58, as compared to the industry average of 1.00.
CCG also provides shared information reports regarding monthly work-in-progress, schedules or backlog summaries, and weekly cash flow reports on all companies. I use the backlog summary to determine the bonding capacity available for the Combined Construction Group companies.
Recently, CCG established a marketing and business development department. Randy Belsley, formerly with the Economic Development Council for the Peoria Area, is the director of this department. He provides information, marketing support, and business development assistance to each of the respective offices. This allows us to demonstrate our collective experience, capabilities, and resources to our clients.
In April the Combined Construction Group companies held their first annual retreat in Phoenix for purposes of marketing, succession planning, and various other topics. Subsequent retreats will allow for specific training and sharing of ideas beneficial to all companies.
How many employees did you have when you began? Today?
Dad started out as, literally, the sole employee--laying block and mixing the mortar himself. Over the course of several years, he trained several area farmers in the mason trade to help supplement their income, and growing to approximately eight masonry crews by the 1960s. Today, we are very proud of the fact that, with employment of more than 1,200 people among all the companies, there are several instances of second and third generation employees from the same family.
To what do you contribute the growth of your business?
First and foremost, Dad founded and operated our company on the Christian principals of fairness and hard work. He always gave full credit to God for what we have accomplished, and for the opportunities given to us; principles we strive to continue throughout all of our operations today.
Additionally, there were other key factors cited as contributing to our growth: quality customers, skilled and dedicated employees; having family members from two different generations successfully working together; planning for the future; and last but not least--not giving up when times got tough.
How has the construction industry changed over the years? What impact have these changes had on your business?
There have been several changes in the construction industry over the years worth noting.
Although the traditional competitive-bid approach continues to be the most commonly used method for an owner to obtain construction services, the design-build approach continues to gain popularity.
The design-build method is when the contractor works in tandem with a design firm to design, price, and construct a project to the owner's specifications. Twenty years ago, the design-build method accounted for a small percent of the market. Today, this method accounts for approximately 50 percent of the non-residential construction market. Design-build has become widely accepted by owners, architects, and contractors as a beneficial method of project delivery.
Partnering is also a widely-used practice today, especially on large projects. In essence, partnering is a charter, signed by and mutually benefiting all parties involved in a project, whose goal is to provide value to the owner in the form of a quality built project, delivered on time, within budget, and in a safe manner. The charter also provides a method for dispute resolution, which eliminates finger pointing, delays, and costly litigation by outside parties. We have worked favorably under the partnering agreement on several projects.
Construction management is also becoming prevalent in our industry, whereby the owner is more integrally involved in how the project costs are determined. The construction manager works closely with the owner in the procurement of individual subcontracts and material packages in lieu of one general bid package under the traditional hard-bid method.
Which method to use is usually determined by several factors, along with the owner's desired level of involvement.
As you might imagine, heavier, more mobile, and versatile equipment and material handling systems, combined with the latest in materials technology have drastically changed our industry. In years past, outdoor construction would virtually be shut down in the wintertime. But today, with the use of state-of-the-art weather forecasting equipment, combined with the right jobsite machinery and equipment and a skilled workforce, outdoor construction in the Midwest can essentially take place year-round.
And like any other industry today, computers can facilitate every aspect of the business; such as design, estimating, scheduling, and cost accounting. There was a time in the early years of Otto Baum Company where most all of our company records, from billing to payroll were kept in a plywood box, used by my brother Mel to transport the information from the jobsite to the bookkeeper. We referred to it as "Otto Baum-in-a-box."
Do you see any emerging trends in the construction industry in the next couple of years?
Although the traditional methods of project delivery have been fairly well established, we are seeing an increase in negotiated projects throughout all our locations. Owners and contractors have established relationships through past experiences with each other or through favorable qualifications and the reputation of the contractor. This aspect of the business has certainly contributed to situations where we have performed multiple projects for the same customer over several years.
To most individuals, the largest expenditure they will ever make in their lifetime is building their home. Likewise, the largest expenditures for most businesses will be the investment in their offices, manufacturing plants, warehouses, or retail shops. And for the public sector, the same holds true for the construction of their facilities. Therefore, owners are going to be extremely careful when making these decisions. They would rather know who they are making this large expenditure with instead of with a contractor unknown to them.
The importance of relationships can not be understated.
Your relationship with the local construction unions goes back many years. What has been your experience?
I would consider the relationship Otto Baum Company and Diversified Buildings has with the unions to be very favorable. We highly respect our union employees. I believe there is much greater communication between the contractor and the unions through organizations such as TRICON, PALM, Illinois Laborers-Employers Cooperation and Education Trust (LECET), and the Greater Peoria Contractors and Suppliers Association. Obviously, it is extremely important that the union and contractors collectively send a message to the business community that a cooperative work environment and productive labor market exists for those wishing to locate in this area.
You personally have been involved in many civic and community organizations. What impact has this experience had on your life?
Several years ago, I heard it said, "We have all been warmed by fires we haven't built, and taken a drink from wells dug by others." That little phrase reminds me that many times throughout our lives, we have benefited from those that have served others while asking for nothing in return. We all have the responsibility to do the same.
I consider myself very fortunate to have been surrounded by many role models in my life, beginning with my Christian parents, who have served others through the giving of their time, talents, and monetary support to enrich the lives of those less fortunate.
Throughout our companies, we strongly encourage involvement by both management and our employees to become involved in charitable and civic organizations to give back to the communities we live and work in. Additionally, Otto Baum Company and Diversified Buildings established foundations for the purpose of supporting local charitable organizations.
With several family members, and others, involved in the business, what steps have been put in place or consideration given to ensure the orderly succession of business?
Maybe I'm a little biased, but I'm very encouraged and excited about what the future holds for our companies, based on many of our existing employees in key leadership positions, as well as several third-generation family members currently involved in the day-to-day operation of these organizations. It is very important for us to understand that the successful perpetuation of an organization is strongly dependent on a smooth transfer of ownership in a fair and equitable manner.
To help facilitate the transferring of responsibilities in future years, we recently put into place what I consider to be a unique restrictive-share purchase agreement, which outlines a method of share sale or transfer to those who will be running the company in the future, without negatively impacting the companies' cash reserves. This allows for the ownership to belong to those who have an active, day-to-day stake in the business.
Is there any one part of your career that has been particularly rewarding?
Without a doubt, the friendships established over the years through this business have been the most rewarding aspect of my career. This has not only included customers and associates, but some of the finest employees a company could ever hope to have work for them.
Over the years, our companies have been very fortunate to have prospered and grown in an industry that's known for its tough character and competitive spirit. In spite of some uncertain economic times and the challenges of running diverse operations, we have truly been blessed with good fortune and success. And although our goals and objectives may have evolved over the years to reflect our desire to continuously improve, the common denominator that was always present was the quality of our employees.
With the third generation family members and people we currently have throughout our companies, I'm extremely encouraged about the prospects for our companies' future. IBI
