What Employee Ownership Really Means at Baker Roofing

[00:00:01] John Matthews: Most people want their hard work to mean something
more than a paycheck, and I think that comes in the form of pride and the quality of
what they do.
[00:00:16] Todd Kavanaugh: Hey there, and welcome to Under the Roof, the official
podcast of Baker Roofing Company. I’m Todd Kavanaugh.
[00:00:23] Matthew Elban: And I’m Matt Elban. We’re here to connect the dots
between field and office, leadership and crew, values and action.
[00:00:30] Todd Kavanaugh: In each episode, we dive into the stories, lessons, and
updates that matter to our team.
[00:00:37] Matthew Elban: From safety and career growth to company milestones
and good old-fashioned storytelling, it’s all about living out what makes Baker, Baker.
Let’s get into it.
[00:00:48] Todd Kavanaugh: Welcome back to Under the Roof. Today, we’re talking
about competitive strategy and why Baker’s structure as an employee-owned company
gives us real advantages in the marketplace.
[00:01:01] Matthew Elban: The roofing industry is consolidating rapidly. Private equity
has reshaped a lot of the landscape, and we’re now one of the few large independent
contractors left. But being different isn’t always enough. The question is: Does being
employee-owned actually make us better positioned to compete and grow?
[00:01:20] Todd Kavanaugh: Our guest today is someone you all know. He’s been at
Baker for a long time and has been on the podcast before: John Matthews, who helped
make the strategic decision to transition Baker to 100% employee ownership. John, we
want to dig into the competitive advantages this creates, not philosophically, but in
practical terms that affect how we win work and serve our customers. Welcome back
to Under the Roof.
[00:01:50] John Matthews: Thanks for having me.
[00:01:51] Matthew Elban: John, before we dive into the heavy stuff, you’ve been in
the industry for a long time and seen many changes. What is one thing about the

roofing business that you think will never change, regardless of who owns the
company?
[00:02:05] John Matthews: I think we are an industry that is dependent on people.
Regardless of organizational structures, the need for qualified, hardworking, and honest
people is never going to go away. Ownership structures are about business continuity,
strategy, and financial management, but everything else we do, every wheel that gets
turned, every job that gets started, is highly dependent on good people.
We are a people-centric business. While other industries are rapidly moving away from
that, we continue to embrace that reality while attempting to improve not only work
conditions but the opportunities that exist within them.
[00:02:55] Matthew Elban: That makes a lot of sense.
[00:02:56] Todd Kavanaugh: Yeah. The funny reality I joke about with friends is that
it’s going to be a very long time before AI starts putting down roofs.
[00:03:07] John Matthews: Or robots or anything else wild thrown out there. We will
likely see the evolution of material products that ease the burden of installation. But as
you know, the products installed in our business are made to last 25 to 30 years. It’s not
as if technology changes every one to three years. Technology enhancements may
come in within a 20-year period, but broader technology stays in place for at least one
or two generations over a 20- to 30-year warranty cycle.
[00:03:45] Todd Kavanaugh: I’ve been here a long time, and the landscape has
changed broadly since I started back in 2003. Let’s talk about the present landscape.
When you look at what’s happened to roofing over the past few years in terms of
organizational structure and consolidation, platform companies and roll-ups, how has
that changed the competitive environment?
[00:04:17] John Matthews: Industry consolidation can take many forms. Really, we’re
talking about companies coming together to create a larger or more diverse entity.
These forms can be intentional large roll-ups, for instance, Tecta or General Roofing,
which we saw 25 or 30 years ago, or Roofing Corp of America, which we see now. The
corporate design strategy is to acquire companies of a certain size in various markets
to gain market share by having 5, 50, or 100 companies under one umbrella.
Another form we’ve seen recently in the commercial roofing industry is the acquisition
of smaller companies. For example, a company operating outside the U.S. or on the
West Coast might want access to specific markets. If you’re Flynn in Canada and want

access to the U.S. market, you set up a U.S. organization. The quickest way to do that is
to acquire small competitive companies within those geographic territories and roll
them into that entity.
Initially, this doesn’t necessarily change the competitive landscape because most of
those companies operate under their same brand or management. But it gives that
larger umbrella access to different markets. Consequently, the top 10 roofing
contractors in the country by volume become more meaningful as competition
because their reach has increased. You essentially have a separated industry: those
known nationally or super-regionally, and those operating in a single market.
Multi-asset customers tend to utilize those in the top category, whereas localized
owners utilize a blend of both local and national installers.
[00:07:18] Matthew Elban: That makes sense. Consolidation supposedly offers
advantages of scale, like centralized operations and buying power. But you chose to
keep Baker independent. What competitive advantages does independence create that
outweigh those economies of scale?
[00:07:44] John Matthews: Economies of scale can be achieved regardless of the
entity structure. It’s more about replicating practices such that they become
automated or efficient. Whether we’re an ESOP or not, we are a growth company,
which is where economies of scale become very relevant.
We have multiple branches throughout the Southeast that share a common culture and
common processes. Take lead generation: you have localized sales reps in every
market, but we can also have a centralized business development format. All 27 branch
locations share that cost, whereas an individual office wouldn’t be able to have that
asset on its own.
The same is true for our Premier Accounts program. A single branch wouldn’t service
that program because they focus on a 150-mile radius. But collectively, we can have a
centralized program that everyone benefits from because we can perform on a wide
geographic basis.
Sometimes economies of scale just mean “penny-pinching”, finding the cheapest way
to do something to save a few cents. That’s hard in our business because it’s so
labor-intensive. What we’re looking for, more than cost savings, is an “economy of
culture.” That is: how do we maintain one consistent culture across 27 branch locations
that resonates with our employees and our customers? Coming together, we have a lot
more power than we would as 27 individual companies.

[00:11:05] Matthew Elban: That’s a great segue into how customers make buying
decisions. When we’re sitting across from a facility manager or portfolio director, why
does Baker’s ownership structure matter to them?
[00:11:44] John Matthews: Customers want attentiveness. They want to know that
they are known and that we care about their project. They also want consistency in
historical performance, our quality, and consistency in our communications. Are we
consistent with what we say and do?
Most importantly, they want honesty about the process. Many companies are just
driven to make the sale. It’s incumbent on us to talk honestly about the realities of
construction. One of the first things we say is: Construction isn’t perfect; there will be
mistakes. However, over the past hundred years, we have been intentional about
rectifying those mistakes so the customer gets the product they want.
The ESOP structure suggests that these qualities, people, history, performance, and
honesty, remain important to this company in the future. It demonstrates this in action,
not just words. With outside institutional ownership, like private equity, you can lose
flexibility in your culture and message. Being an ESOP gives us the freedom to talk
honestly with the customer and show them that “Profit if we can, but a loss if we must”
is very real to us.
To clarify “private equity”: usually, these are investment companies that want majority
control or at least a 50% stake in a company. They take seats on the board and exert
control over the P&L, culture, and operations. In the past, they weren’t as interested in
niche, high-risk businesses like roofing. But they’ve realized the consistent, steady
business model roofing offers. It’s not a “home run” return, but it’s technical and
necessary on a continual basis, which is why we’re seeing more private equity entry.
[00:17:20] Matthew Elban: You mentioned “economies of culture” as an advantage,
and I agree.
[00:17:34] Todd Kavanaugh: I wrote that down too. John, you said the ESOP structure
suggests these values will endure. That “suggestion” indicates there is still an onus on
all of us to ensure it happens. Now that everyone has a stake, they can ensure that
consistency remains for generations beyond us.
[00:18:32] John Matthews: The burden of the legacy of “Always Good Work” falls on all
of our shoulders now. It’s a light burden because the premise is simply trying to do
good business for ourselves and our customers. Our commitment is to the customer
and installing the product correctly. There is clarity in being open, honest, and earnest.

It’s a wonderful opportunity to continue on a respected platform that we can all be
proud of.
[00:19:45] Todd Kavanaugh: I love that. Mark [Lee] has said that regularly: When you
do the right thing the first time, you don’t have to have a long memory because you
can rest in the foundation that you did it right.
[00:19:56] Matthew Elban: How does employee ownership help us recruit and keep
better people than our competitors?
[00:20:16] John Matthews: I’m a firm believer that most people want their hard work
to mean something more than a paycheck. That comes in the form of pride in quality,
the relationships they build, and what they can do for their families. Those things are
accelerated when you go from being an employee to an owner. Having even a “thin
slice of the pie” broadens that pride.
The organizational shift to an ESOP accentuates our culture. It’s not a game-changer;
it’s a game-enhancer. We were all moving in a common direction, and now we move
with perhaps a greater purpose for both the collective and the individual. Our
investments in employee growth and training won’t change, as those are the most
important investments we can make to improve performance.
[00:22:38] Todd Kavanaugh: We’re actually going to take a pause here and turn this
into a two-part episode. That wraps up this episode of Under the Roof. Thanks for
being part of the Baker Roofing family.
[00:23:11] Matthew Elban: If you liked what you heard, share it with your crew and hit
the follow button.
[00:23:17] Todd Kavanaugh: We’re here to keep you informed, inspired, and included.
[00:23:26] Matthew Elban: And as always, we’ll leave you with this: We shall do good
work at a profit if we can, at a loss if we must, but always good work. See you next
time.