[Cover Story] PCT Exclusive: Transforming Terminix

Thomas Brackett and Katrina Helmkamp.

At first glance, the pairing of Katrina Helmkamp and Thomas Brackett to lead Terminix during a time of dramatic change in the pest management industry seems like a surprising choice, tantamount to mixing oil and water. Helmkamp — reserved, analytical, the consummate team player — is a former vice president of The Boston Consulting Group, an international consulting firm with a client base that reads like the "Who’s Who" of the Fortune 500. Brackett — passionate, intense, stalwartly independent — was recently promoted from division vice president to chief operating officer of Terminix, working alongside Helmkamp, who replaced Albert Cantu at the top of the company’s organizational chart in early January when he was promoted to group business president of ServiceMaster. His responsibilities include American Residential Services, ServiceMaster Clean, Merry Maids and Furniture Medic.

ServiceMaster’s board of directors is betting that by combining the strategic management skills of an industry outsider with the operational expertise of a Terminix veteran, the sum of the company’s parts will be greater than the whole, resulting in a dynamic leadership team for a firm eager to break the $1 billion mark in annual revenues while improving its customer loyalty rate and growing its market share.

"We continue to strengthen our management team by bringing in talented executives and moving our experienced leaders into positions where they have the best opportunity to accelerate our growth to transform the customer’s experience," said Jonathan Ward, chairman and chief executive officer of ServiceMaster, parent company of Terminix. "These new combinations of leaders with complementary skills increase our ability to maintain our current momentum and build new sales going forward."

Larry Shulman, senior vice president of The Boston Consulting Group, where Helmkamp worked before joining Terminix, believes it’s a winning strategy. "Katrina is very interested in Tom’s success and development, and I think Tom is equally interested in Katrina’s success," he said. "They want each other to succeed, and they recognize they bring different things to the table and that those things complement each other. As far as I can tell, they are working exceptionally well together."

"Katrina brings many years of top-level business experience to the team," Ward added. "Her bias to action and focus on the customer coupled with Tom Brackett’s extensive operating experience will help the Terminix team build on their industry-leading position and move to the next level of accomplishment."

PCT Publisher Dan Moreland recently traveled to Terminix headquarters in Memphis, Tenn., and sat down with Helmkamp and Brackett shortly after they were named to the two top posts at the nation’s largest pest control company. Excerpts of that two-hour interview follow. A complete transcript of the interview appears on www.pctonline.com.

MORELAND: Why do you think you were tapped to lead Terminix into the future? What is it about each of you that appealed to the ServiceMaster executives responsible for selecting a new leadership team at Terminix?

HELMKAMP: I think what I bring to the table is customer focus and a fresh perspective to the business. I also have a fairly deep knowledge of Terminix, having worked with the company for several years as a consultant while at The Boston Consulting Group. I will rely heavily on Tom and others within the organization to provide me with the necessary operational expertise to effectively run the business.

BRACKETT: Terminix, first and foremost, is a performance-based organization. You have to be able to perform. You have to be able to plan. You have to be able to implement and execute to be effective. And you have to do all of those things within a team environment. When a team performs, it creates opportunity for everybody, and that’s what I like to do — build teams. I think that’s the biggest thing I bring to the position.

HELMKAMP: I think we have complementary strengths. I have a deep understanding of the customer, as well as significant sales and marketing expertise through my work as a consultant. Tom obviously has the deep operational experience. He’s done a great job of setting high standards for various operating units within Terminix and then helping them to achieve those goals.

BRACKETT: I would agree. I have a lot of experience within Terminix, while Katrina — having worked outside and having seen many different types of industries — brings an outside perspective to the job which will be beneficial to the organization. We’ll be able to tap into her knowledge of the consumer and apply that knowledge to the Terminix culture for effective implementation and execution.

MORELAND: If a deep understanding of the modern-day consumer was a key factor in the decision to bring you on board, Katrina, what is it about the consumer that has changed that will allow you to move Terminix forward in the years ahead?

HELMKAMP: I don’t know if much has changed, but certainly understanding the different customer segments and making sure we have the appropriate offerings in each of those segments is critical. Putting in place the right active ingredient technologies and right services, combined with the right follow-up, will result in greater customer satisfaction and less customer turnover, which is one of our most important goals as a company.

MORELAND: It sounds like The Boston Consulting Group has developed a very close working relationship with Terminix over the years. As a result of that experience, did you have a deep understanding of the business from the start, Katrina?

HELMKAMP: To some degree, but no matter how well you think you know a business, the bottom line is you’re still a consultant. You don’t know it as well as you would working within the business. But there’s still a huge benefit of working with an organization and getting to know its people and culture. That’s why I was so excited about this opportunity.

MORELAND: Terminix has traditionally promoted from within its own ranks, so what’s been the reaction of your colleagues to hiring an "outsider"?

HELMKAMP: On a personal level, I have found people to be quite open to me coming in. I knew the management team from having worked with Terminix as a consultant in the past, so I already had a fairly deep knowledge of the company. People have been very open and welcoming.

BRACKETT: You’re correct. Terminix has traditionally looked inside the organization for leadership. In that way, it’s a very traditional company. But by tapping someone from the outside, we’re getting a fresh perspective on the business, creating new opportunities to enhance our sales, service and administrative efforts. It’s going to take Katrina some time to get to know the inner workings of the organization, the people and the culture. But I think she’s done a good job getting to know the organization in a very short period of time.

MORELAND: You were a vice president at The Boston Consulting Group. What drew you to that organization and what has that experience contributed to your understanding of how the consumer thinks?

HELMKAMP: The Boston Consulting Group was founded in 1960 and works with Fortune 500 companies throughout the globe. What drew me to the company initially was the ability to work on tough issues across numerous industries. In my previous consulting work, I focused on one industry and didn’t always see projects through to their completion. I wanted to broaden my experience and work with clients to implement strategies, so that’s why I joined The Boston Consulting Group. BCG is particularly good at understanding the customer’s perspective. They don’t stop with simply acquiring customer data, but they go on "shop-alongs" and "ride-alongs" so they understand all aspects of the customer experience, and they really tear apart the economics of the customer experience.

MORELAND: What do you mean by "tearing apart the economics" of the customer experience?

HELMKAMP: Really understanding not just what the cost of a customer transaction is all about, but where the value gets added in the relationship from the customer’s perspective.

MORELAND: What projects did you work on with Terminix while employed at The Boston Consulting Group?

HELMKAMP: We worked on identifying priority markets for Terminix, including specific geographical areas that offered the most opportunity for growth. We also worked on what choices were important for customers as it related to the company’s termite offerings. And we looked at the long-term growth plans for the company.

MORELAND: Changing gears, from an operational perspective, what are the key challenges currently facing Terminix?

BRACKETT: I think some of the challenges we’ve already addressed in our reorganization of the company. Effective Feb. 1, we went from 23 regions to 44 regions. Our reorganization effort addressed a number of issues that I think were impeding our ability to grow long term, including span of control. So if you look at our regions today, the span of control has been significantly reduced, sometimes by as much as 50 percent. We now have a regional management team in place that is impacting performance rather than reacting to performance. We have taken our division vice president teams and placed them in the field rather than at the headquarters in Memphis, so I think they are more engaged. As a result, we are already seeing some traction and performance that is beneficial to the company since they are closer to the customer. I think this strategy will pay big dividends for us in the future. By being closer to the customer, we can be more responsive and address customer concerns more quickly, thereby enhancing our customer retention efforts.

MORELAND: You mentioned the term "span of control." What does that mean in layman’s terms?

BRACKETT: Span of control relates to the alignment of the business. For instance, in the past, as a regional manager, you were responsible for managing up to 30 branch offices. With this new alignment, the ratio is closer to one region manager to eight branch offices. The new alignment is geographically based, so the branches are much tighter so they can get lots of attention from our regional managers. Therefore, the span of control is much smaller, which allows our regional managers to have a greater impact on the individual branch offices. The new structure was implemented this year after a lot of meetings and a lot of input from branch and regional personnel. One of the biggest issues that came up repeatedly during those meetings was our ability to impact the performance of our staff at the branch level rather than simply responding — or even worse, not responding — to problems as they arose. The other big change that occurred is prior to Feb. 1 we had three divisions. Today, we have five divisions. We’re confident our new structure is going to play a big part in Terminix’s future success.

MORELAND: It’s not unlike reducing the number of students in a classroom, is it? As you reduce the size of the class, theoretically, you should have more time to mentor students and enhance their performance.

BRACKETT: That’s correct. We’re attempting to create a much more focused environment. One of the biggest things we’re concentrating on as an organization is continuity in everything we do — sales, service and administration. From the East Coast to the West Coast, from the North to the South, we want it to be one company sending one message.

MORELAND: What do you see as the primary challenge facing Terminix in providing the continuity of service that the company desires?

HELMKAMP: From a customer perspective, we already have great customer awareness due to our strong brand name. That’s a good start. We also tend to get good feedback on the quality of our technicians and on the strength of our guarantee(s). Nonetheless, I would like to see us become a clear No. 1 in terms of which company our customers would recommend to their family and friends. To do that, we are very focused on improving our problem-resolution skills so when a problem does occur, we’re able to resolve it quickly and to our customers’ satisfaction. We not only want to retain customers for many years, but have them frequently recommend us to others.

BRACKETT: There’s going to be a lot of focus in the coming year on what we call our "customer satisfaction index scores" at both the branch and region level. What are we doing well? What are we not doing well? It’s a comprehensive strategy that collectively monitors and evaluates the "voice of the customer" and the "voice of the employee."

HELMKAMP: We have branch-level customer satisfaction surveys that measure the branches on their performance. We also have branch-level employee satisfaction surveys that provide us feedback on how the branches are being managed.

BRACKETT: And all of the data we collect is tied to employee compensation and continuous improvement goals.

MORELAND: How exactly do you tie it to compensation?

BRACKETT: Basically, through the individual branch office’s customer satisfaction index scores. Every month a portion of each branch’s customer base is surveyed. From those surveys, each branch will receive quarterly and annual scores and be compensated based on their performance. And we’re placing a much greater emphasis on problem resolution within each branch office so we can positively impact those customer satisfaction scores. We’re sending the message that it’s very important our staff be as responsive as possible to our customers. That means they need to show up on time, address their customers’ needs in a pro-active fashion and follow up appropriately.

HELMKAMP: The other thing I would highlight on the customer side is what Terminix is doing as a company to attract more customers. We have added sales reps in a number of geographies and we are looking at further expansion in those markets that we believe are under-penetrated. By adding sales professionals, we’re putting ourselves in a position to be much more responsive to both current and potential customers. Where it makes sense, we’re also adding branch offices to increase our presence in key markets.

MORELAND: One of the challenges facing Terminix is differentiating itself from the diverse cross-section of companies currently serving the marketplace — from large regional players to sole proprietors actively involved in their local Rotary Clubs. How do you differentiate yourself from the competition with such a wide array of competitors all aggressively competing for a piece of the pest control pie?

BRACKETT: That’s always been the challenge in this industry and it starts with investing in our associates. When you talk about community involvement, the key thing to remember is that they’re all local folks in our branch offices. They are directly involved in the community, and so the key for us as a company is developing those people resources. Ultimately, the scoreboard for differentiating yourself as a business requires that you take care of your employees and they, in turn, take care of their customers. If you do that well you’ll succeed.

HELMKAMP: To come back to how we differentiate ourselves as a company, I would say that being the largest company is certainly not an entitlement by any means, but it should allow us to make the necessary investments to differentiate ourselves with our associates and our customers. With the associates, we’re able to offer benefits and make investments in training and technology that make their lives a little bit easier and ensure good retention. On the customer side we have invested in the best possible line of products and services — providing choices that matter to our customers — and made additional investments in technology designed to enhance our customer service.

BRACKETT: The best thing we can do as a company is listen to the customer. You can never become complacent. You constantly have to be looking at and evaluating your service offerings. Take the termite market, for instance. I think a lot of organizations became one-sided in a lot of ways. Many companies — ourselves included — became a bait organization when there was still a lot of demand for a liquid remedy and vice versa. I think understanding the customer is the biggest thing, listening to them and being responsive to their needs is critical. The key is not to dictate to the customer.

HELMKAMP: There is clearly an operational challenge to offering both bait and liquid treatments, but that is where I think Terminix has done a great job. It is in Terminix’s best interest to figure out how to offer both bait and liquid treatments because that’s the best thing for the customer. We need to be able to offer them a choice of treatment options.

BRACKETT: Operationally, when you talk about productivity per technician, you constantly have to refine your business model to make sure you’re being responsive to the customer so you can continue to retain and grow your customer base. It creates a lot of operational challenges to provide both services, but it’s something we need to do.

MORELAND: How do you get your arms around such a challenging undertaking? Can you walk me through how you made that strategic shift from primarily baits to a more comprehensive range of termite services?

BRACKETT: Obviously, Terminix started as a liquid organization, and when baits came along, we gravitated towards that technology. In time, as we re-entered the liquid arena, there has been a lot of capital investment in vehicles, equipment and, most importantly, training. You have to invest a lot of capital on training. It’s amazing how you get a little bit of a brain drain if you’re not careful. We have people who came into the organization seven or eight years ago who only know baits. They never had to deal with liquids, so it’s required us to invest in some additional training to offer both bait and liquid treatments.

MORELAND: From a customer perspective, Terminix has a broad palette of treatment options. Isn’t there a risk of overwhelming the consumer with so many choices? How do you develop the proper balance?

HELMKAMP: The feedback we have had from customers is they appreciate being offered a variety of choices with clear pros and cons. You’re right, it could become overly complex. So the description of our termite services needs to be simple enough to be presented to the customer effectively, yet comprehensive enough to cover all the bases. We need to provide them with several options and then ask, "What do you think is the best fit for your home?"

BRACKETT: It’s really a matter of choosing one of two very good options (baits or liquids). At then end of the day, what the customer cares most about is the guarantee. And in both cases there is no differentiating one from the other.

MORELAND: Regardless of the treatment option they choose, you’re saying that what they really care about is the guarantee?

BRACKETT: Yes, the guarantee is essential to the transaction, even more important in many cases than the choice of termite treatment itself. That’s why we spell out the treatment options to them and they make the final choice, knowing they are fully protected either way with our guarantee.

MORELAND: Is that the upper level of termite treatment options in your opinion? Two? There are some companies offering an entire menu of termite services including borates, fumigants, heat treatments, natural products, etc.

BRACKETT: You’re seeing more and more borates in the pre-treat market, but as far as the most popular remedies for subterranean termite control it’s likely going to be a liquid application in one form or another or a baiting application in one form or another.

HELMKAMP: I don’t think there’s a magic number. I couldn’t say we would never offer more than two options, but I think we would say it’s always going to be a short menu because of the operational complexity that goes with termite treatments.

MORELAND: Is there one particular market segment you plan to focus on in the coming year?

HELMKAMP: We will continue to pilot new offerings and look for new growth opportunities in various niche markets, but the core of our business is still termite control and general pest control.

BRACKETT: We view ourselves as a comprehensive provider of pest control services, including a wide range of auxiliary service offerings — bird control, fly control, moisture control, etc. There’s not one service we do not provide to the marketplace, so we’ll do whatever is necessary to serve our customers. When it comes to the commercial arena, we’ll be targeting some specific segments of that market, but we’re not prepared to go into specifics at this time.

HELMKAMP: Needless to say, the commercial customer is very different from the residential customer, requiring different service frequencies, more thorough documentation, etc.

BRACKETT: While customers are becoming more sophisticated in both markets, you’re seeing some very specific things in the commercial market that need to be addressed to satisfy the customer. They are very concerned about documentation, which is playing an increasingly important role in commercial accounts. We plan to meet and exceed those documentation requirements by continuing to invest in technology and training.

MORELAND: So the commercial sector offers a significant market opportunity for Terminix moving forward?

BRACKETT: I think there’s tremendous opportunity on the commercial side of the business, but we want to make sure we’re generating profitable growth, not simply revenue growth.

HELMKAMP: We actually feel there’s significant growth opportunity in both the commercial and residential sides of the business. Pest control is still a very fragmented industry, so there’s ample opportunity to grow across the board.

BRACKETT: We’ve made significant investments in our termite and GPC services in the past year and it’s time to realize a return on some of those investments. I think the next three to five years are going to be very, very critical. We have an opportunity to capture market share if we take full advantage of the investments we’ve made in recent years.

MORELAND: Terminix has a unique corporate culture. It’s a publicly traded company with strong Christian values. That’s a tough balancing act, requiring both financial accountability and personal sensitivity. As a leader, how do you manage such diverse responsibilities?

BRACKETT: I think it is profitable growth that creates an opportunity for our associates to grow and develop. It’s very difficult to create a highly motivated work environment if you’re not performing financially. You have to perform financially to create opportunity for your employees. Fortunately, we’ve been able to do that over the years.

HELMKAMP: If you look at the companies that have performed well in the long run, they’ve treated their people properly. And if you’re talking about a service business, I don’t know how you can grow profitably in the long term unless you’re treating your associates right and they, in turn, are treating their customers right. That’s the most direct long-term path to success. A different, less humane strategy might give you a financial spike in the short term but it will hurt you in the long term. I don’t see treating people right and giving them opportunities as incompatible with profitable growth at all.

BRACKETT: When you talk about growing a large organization, I believe you have to be true to your core. Otherwise you can spend a lot of time going off in a lot of different directions which isn’t healthy.

MORELAND: Terminix was involved in a number of high-profile acquisitions in the past, but in recent years your acquisitions activity has slowed. Why?

BRACKETT: In 2001 and 2002, we purchased the third and fourth largest companies in the industry, so that’s a lot to digest.

HELMKAMP: We view acquisitions as a key part of our growth strategy, particularly in those geographic areas where we want to have a stronger presence. We definitely have the capital budget to increase our acquisitions activity, so it’s something you’ll see more of in the future.

BRACKETT: The beauty of acquisitions is they create a lot of opportunity for people who worked at smaller firms we’ve purchased. In a number of cases, those people are now running our branch and regional operations. It’s been a win-win for both the associates of companies we acquire and for Terminix.

HELMKAMP: That’s why we’re confident some of the local, state and regional companies that are interested in selling will choose Terminix when the time is right.

MORELAND: We recently reported that several members of the TruGreen management team — a division of ServiceMaster — left to launch a business that is going to be active in the pest control acquisitions market. How did your ServiceMaster associates react to these high-level departures?

BRACKETT: As you mentioned, most of the folks were on the TruGreen side of the business — not the Terminix side — so it really didn’t impact us.

MORELAND:  I know there has been some desire on the TruGreen side of the business to develop a presence at "big box" stores like Lowe’s and Home Depot. Are there any plans for Terminix to do the same?

HELMKAMP: We continue to look at alternative channels for all of our service offerings, including non-traditional channels. A presence in retail stores would be one of many channels we would consider.

BRACKETT: Suffice it to say that customers today are a lot more sophisticated than in the past. They want to be communicated with in lots of different ways, some traditional and some non-traditional. I think we have to be aggressive and diligent in our marketing efforts to maximize the value of all the different channels available to us. The ability to be flexible is critical to our success.

MORELAND: In closing, is there anything else you would like to share with the marketplace regarding Terminix’s future plans for the industry?

HELMKAMP: We’re committed to helping grow the entire industry by doing a better job serving our current customers and a better job reaching out to the non-users and communicating to them the value of pest control services.

Dan Moreland is publisher of PCT. He can be reached at dmoreland@giemedia.com.