Volume 8,  Issue 4                         July/August  2006

Talking with Diamond Triumph's 
New Management Team

The new top management of Diamond Triumph Auto Glass, Douglas M. Boyle, chief executive officer, and Karen A. Christopher, president, recently spoke with AGRR magazine editor Charles Cumpston in an exclusive interview at the company’s offices in Kingston, Pa. 

AGRR: There has been a lot of speculation that the Safelite lawsuit was the basis for the FBI investigation which began the end of last year. Do you think that’s true?

Doug Boyle(DB): We don’t know what the basis of the investigation was and we don’t want to speculate on why it might have begun. All we know is that in November we became aware of an investigation and we have cooperated fully with it.

AGRR: Has this resulted in any internal investigation?

DB: We have a working group, our internal audit operation, which is always looking at our processes and ways to improve things, and it has been working with our attorneys and our forensic accounting firm to review any policy or procedure that needs to be looked into. We have always had this working group, but the investigation has accelerated its activities.

AGRR: Have you found out anything from this?

DB: We can’t say any more than what is in the statement (see below). I would say that we’re always improving our policies and procedures, but beyond that I can’t comment.

AGRR: What is a forensic accounting firm?

DB: It is an independent group within an accounting firm that helps a company look at policies and procedures. This is an independent accounting firm hired by our attorney, not our regular accounting firm. They look at any topic we give them or any matter we ask them to look into.

AGRR: Can you explain how the company’s processes have changed because of what the working group has found?

Karen Christopher(KC): One thing which has come up on the AGRR Magazine message forum lately is the question of employee theft and this group has played a big role in that historically. They make sure the policies we put in place are followed and that people are held accountable. This has been one of their key functions over the past few years and it has been accelerated in the past year.

DB: In the past year we have implemented a zero tolerance policy for employee theft. The same is true of employee conflict of interest. It’s our goal, as a company, to have an atmosphere that is theft- and conflict-free so that employees feel comfortable. It has been an historic issue for our company and I think for other companies in our industry. Employees taking things to use for work on the side or doing work on the side is not unique to us. What is unique to us is that we’re so spread out that being able to detect such behavior is more difficult. But we’re scaled up and we feel that we’re making real progress in this area.

AGRR: How you found much of this behavior?

DB: For a company our size, it is more prevalent than we would like it to be, but it’s getting better. There are still too many incidences.

KC: What is happening is that employees are coming to understand that we have this zero tolerance policy and we enforce it. We’re making progress.

AGRR: How widespread would you characterize this type of behavior in the company—1 percent, 10 percent?

DB: We don’t know. If we did, it would be easier to manage. The majority of our employees are honest, hard-working people and a lot of the feedback we’ve gotten on the zero tolerance policy is that employees think it is great. We are pleased that our employees have responded on this and it is clear it is not so widespread that it can’t be handled.

KC: It was definitely in the minority but it was pretty widespread throughout the country which makes it harder for us. 

DB: This is a low-barrier entry industry. It’s also retail. And it is also dispersed. When you have these three circumstances, there is more of this type of behavior. 

AGRR: How about the allegation that employees have to work overtime without being paid?

KC: Our policy is to pay employees for the hours they work and we have found instances in which this has not happened. But it was not widespread and it has been corrected. 
Last October we set up a phone number that employees can call to comment on anything. When we get allegations, we vet them and take appropriate action. A lot of what we found was a lack of understanding and so we have done more education to be sure our managers understand what is expected of them. 


AGRR: What is the status of the FBI investigation?

DB: FBI investigations such as what we’re undergoing typically take a long time. We don’t know what the time period is going to be, but we are prepared to cooperate with the government as long as they ask us to cooperate. We’ve put it into our mindset that this is going to be lengthy. We focus on that when we need to and we focus on our customers and service every day. The ongoing investigation has not disrupted our day-to-day operations much. It’s been a process that we’ve been able to manage well in terms of running our business. 

AGRR: Traditionally, the company’s marketing plan has been to be price competitive. Has there been any change to this?

KC: We’re trying to focus more on differentiating ourselves on quality and service and we’ve implemented some internal programs to support that in the last few months. We’re making investments where we need to. An area where we’re investing heavily is technology, particularly in our online capabilities. We want our Web site to be more user-friendly. We’re in the process of converting to the GlasPac system and plan to have it in place by September or October. Previously, we had developed our own software. We’ve put some custom programming in our GlasPac package because of our distribution. We’re also installing a new phone system. We want to make it easier for our customers to access us and work with us. One thing we know is that we have to be paid fairly for the services we provide. 

DB: Our strategy is to be balanced, so we’re taking a long-term focus in three areas: our employees, customers and investors. We’ve set out a set of values and we’re trying to build a culture around pride, integrity, teamwork, accountability, innovation and leadership. This is the basic for our three-pronged strategy. 

AGRR: Do you view the service and quality issues coming to the forefront?

KC: Based on conversations I’ve had with a number of our customers, that’s what they would like—service and quality. Price is always a factor, but you have to have all three of those qualities to be successful. 

DB: The market is shifting to be more consumer-oriented, a cash market. We believe the individual cash customer is going to value quality and service. We think this is going to continue to grow and we want to be the one to provide the service when and where they need it. And I think people are willing to pay for this.

KC: We’re also focusing on improving our brand. We’re making investments in the appearance and location of our branches. We want to be in the best location so that consumers notice us. We’ve upgraded our fleet with new GM vans. We’re also implementing an employee screening process for new hires which we think will upgrade the quality of our technicians. It’s a more stringent process than we’d had in the past.

AGRR: How are you finding better people?

KC: There’s been a lot of recycling of people in our industry and what we’re doing is looking at other automotive areas to find people. 

DB: We partner with various technical schools throughout the country to train students and then we hire them right out of the schools. We have found that tech schools across the country are very open to this. We have people go into the schools and make presentations and we have an apprenticeship program. The program at each school is different depending on the circumstances. There is a shortage of people and we value all the people we have, but we see a need to bring in a new generation of techs.

We also want to partner more with other companies in the industry to see how we can work together to move forward. 

AGRR: Can you give an example of what you’re talking about here?

DB: There is an overwhelming desire to take the industry to the next level, to professionalize it. The key players in the industry want to go in that direction, and we’ve not been able to do that individually. 

We’re talking with our fleet and insurance customers and we’ve been doing customer surveys of our individual customers to get feedback from all our customer segments. It’s a lot of work to get it started, but what we’re finding is that they want us to be in the right spot, our employees to look good, to provide quality and service; price is not the only factor.

AGRR: What percent of the company’s business is insurance work?

DB: Right now, our revenues are pretty evenly distributed among the three channels (individual, fleet and insurance).

AGRR: In which of the segments are you looking for growth?

DB: The individual consumer segment is just naturally increasing because of deductibles. And the biggest challenge in this segment is being fairly compensated for the service provided. 

AGRR: Do you think service and quality will resonate in the insurance segment as it does in the individual consumer segment?

DB: Yes. I know there’s a lot of skepticism, but I’ve met with the insurance companies and they are very focused on service and quality and the repair percentage. Obviously price is part of the equation. But we think they are very open to seeing quality and service as being important. 

KC: Our focus is on the long-term and, if you want to be there for the long haul, then you can’t just focus on price. You need a balanced scorecard. It is a lot of juggling but we’re trying to make sure that we have initiatives in all the areas to support them. 

AGRR: What other steps does the company anticipate taking?

DB: We want to expand through acquisition and recruitment in key markets. But we want to do it smartly. We want to look at our customers and see what markets they want us to be in. See where we have holes in our current network and grow in those areas. Whether we grow through a small acquisition or an acquisition like we did with Settles or set up a shop from scratch or recruit away somebody from a business which is finding it hard to compete in the market, which we’re seeing a lot of—small businesses that say they can’t make any money in today’s market. We think there is a lot of opportunity out there. The market should look for us to be doing more things like the Settles acquisition.

AGRR: How does this fit into your recent move to get out of markets?

DB: We closed 15 branches and exited four markets. We didn’t have enough density in those markets to achieve what we wanted to achieve. When we go into a market, going forward, we want to have a solid plan—know what our marketing plan is, our operations plan; we want to go into a market with strength from the get-go. When we exited those four markets, we weren’t saying they were bad markets; what we were saying is that we need to regroup and rethink what we want to do. We’ll probably be going back into some of those markets either through acquisition or starting off in a different way. We’re looking to continually grow. None of those closings were anything other than short-term cost actions which we needed to take. 

AGRR: How many branches do you have?

KC: Approximately 240.

AGRR: How many employees?

DB: About 1,800.

AGRR: In the last six months, how many employees have been let go?

DB: Employment at the company is probably down 100 to 150 in the last year. If you look at the overall scope, it’s not mass reductions, like you might hear. It’s been smart strategic moves. We’ve added Settles in the last year, which is 19 shops so that’s a lot of employees. 

AGRR: What is the projection for the year ahead?

DB: We don’t have projections because it all depends on the market opportunities. Maybe we’ll do a large acquisition this year and the number of employees will jump dramatically. Or maybe we’ll do a whole bunch of small ones. We don’t know. We don’t anticipate any additional branch closures at this time. But we do expect to grow through acquisition so I expect the number of employees to grow in the coming year.

There are a lot of great businesses in our industry, but they have one or two locations and they’re coming to us and saying they can’t compete in this environment anymore; they say ‘work with us to give us a job in the future and we’ll help you in this marketplace.’ We see a lot of this and it’s very interesting to us, because when we make an acquisition we want to get the right people with the move. We don’t want to go into a market and have people jump ship so this seems like a better and safer way to go.

AGRR: Do you think there are still many mid-sized companies available for acquisition?

DB: Yes. We have maybe three to six mid-size companies we are looking at right now across the country. But we’re seeing more inquiries coming from the one- to two-shop size, which to us is a more interesting strategy because we think we can get a lot of good people in our organization by going that route.

Also, we’re looking at our product segments. We’re doing some flat glass out of our Scranton location and through our Settles locations, and we’re looking to do more. We want to get more into fabrication and flat glass and many of these smaller shops which we’ve just been talking about are in both segments which we think is great. If you have a mild winter like we did this year, then your people can be working on the flat glass when they can’t do the auto glass and vice versa. There’s a different skill set and there’s a training gap you have to get through to do that. But we think as a company we would be much stronger if we had that offset. So you’ll see us expanding on that side of the house.

AGRR: You see the market moving back to full-service operations?

DB: We think it is a smarter business strategy. It’s harder to manage from a people perspective, but we think it’s a more sound business model in the long term. It’s less risky.

AGRR: What happened to your expansion in the Midwest?

DB: It’s a very competitive marketplace. To do well there, you have to have good market share and be very nimble and quick. We’ve regrouped and are thinking how we want to go after this market again. It might be the perfect place for an acquisition. Because it’s so competitive, it’s hard to go in with a branch here and a branch there. We need to think through it more about our marketing and distribution and the whole package. We do want to be in the Midwest and we will be. We just need some time for how we will approach it.

AGRR: A lot of what you’ve said indicates Belron is very much a competitor. Is what they’ve done in the market and what they’re doing in the market what you were expecting?

DB: Yes. We think Belron is a great competitor and there’s room in the market for a lot of good competitors. We don’t mind competing with them because they’ll have an approach and they’ll be professional and that’s how we want to come to market. We see their coming into the market as a good thing because they’re trying to achieve the same goal that we are as far as professionalizing the market. We think they will continue with their strategy but at what pace we don’t know. They made a couple of smart moves and maybe they’re digesting that getting ready for their next run at it.

AGRR: Norm Harris [former CEO] is still involved in the company?

DB: Yes, he is still on our board of directors and he serves as a consultant to the company. Norm decided to retire and the company values his opinion and knowledge. He wanted to remain in some capacity but not the level he had been. It was a change but not a dramatic one.

AGRR: In terms of everything that’s going on at the company, allegations, the FBI investigation, you’re talking about expanding, about an industry becoming more professional and quality and service coming to the fore in the market, do all these things fit together?

DB: Yes, we think they do. We think the competitiveness and the financial distress in the industry are going to create change. If the industry was in good shape and everyone was making money, there’d be no reason for change. So we think the people who can drive this change and stay focused through this time period are going to be big winners. That’s what we want to be. We want to stay focused and execute our strategy. 

AGRR: Do you think there is opportunity in the market at all levels?

DB: Yes. We think it is harder for the regional players and the mom-and-pops to compete because they don’t have the leverage. But those markets aren’t going to go away. It’s a big industry and there’ll be niches for everybody as long as they’re doing it smartly. But raising the bar and the quality and professionalism has to happen too. If a company can’t do that, then it’ll go out of the market.

AGRR: So to those who say that Diamond Triumph doesn’t do quality work, you would say that going forward that is not going to be true.

DB: We have pockets of greatness in our company, but we don’t have best practices. So it’s inconsistent. As we put these best practices in place and get these systems in and these policies and procedures, the ante is upped on all the branches. We need to get consistency everywhere.

KC: As far as what we’ve seen on AGRR’s message forum—yes, we read it; of course we read it—we don’t focus on it, but that information is important. At times there has been information which has led us to investigations. We think we have addressed everything we’ve seen there.

AGRR: You said that you’d heard of these allegations before the FBI investigation started. You had a work group in place looking into the situation. What I’m hearing you say is that you’re putting into effect more specific policies and procedures to deal with these things. While you don’t really like it, you don’t see it as being any more pervasive in this company than any other company this size. 

DB: We don’t like it but we understand it. It’s part of being a national company. 

Employee Theft Issues
Over the past year, our company has implemented a zero tolerance policy concerning any form of employee thief or conflicts of interest. The company has an internal audit group that works with data and the field to detect violations to this policy. We have found instances where violation of this policy has occurred and we have taken a most aggressive stand in these cases. We know we are not there yet as a company in obtaining full compliance but our position is that we will continue to identify violations and take action. 

Employee Overtime Issues
The company’s policy it to pay employees for all hours worked. Our human resources area works to ensure this policy is followed. Where we have found instances of noncompliance we have taken action to remedy the situation and will continue to do so. We have set up a toll-free number for our employees to call with any issues they see in the workplace including compensation practices. All these calls are logged and investigated. We are committed to improving the company’s environment to reward our employees. We have implemented employee bonus programs as well as expanded our vacation policy. Our employee recognition programs also have been expanded and we will continue to seek out ways to become a top company to work for.

FBI Investigation Statement by Diamond Triumph
In November of 2005, we learned that the government was conducting an investigation related to the company. Since that time we have been cooperating with the government and we are fully committed to continuing to do so. The company has established a working group to review its practices and develop policy and procedures as needed. The company also has retained outside counsel to review past business practices, and counsel has retained an independent forensic accounting firm to assist in that review and to aid with process improvements.


AGRR
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