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Join Derek Hudson as he explores Essential Dynamics, a framework for approaching the challenges facing people and organizations. Consider your Quest!
Welcome to Essential Dynamics. I'm your host, Derek Hudson. Really excited to continue our conversation today with Tal Paisi, CEO of Acuren. Essential Dynamics is a framework that I've been working on that helps us understand the dynamics of organizations and in particular, one of the things that we're looking for is trying to get systems to flow. So I talk about system dysfunction and system flow.
Derek Hudson:Last time Tal and I talked, he talked about Acuren's incredible progress over many years and we talked about the importance of just good management. And so today I want to dig in to Tal's systems and understand some of the philosophies and execution that he experienced and was part of and led that allowed Accurent to grow and develop into what it is today. So Tal, thanks for coming back, first of all.
Tal Pizzey:Yeah, happy to be here.
Derek Hudson:So one of the things I'm really interested in is how business leaders think about their business and then how they talk about it and how they talk within their organizations about it. And so in our previous episode, talked about the three major business lines of Accurin and I found that very interesting and how they all fit together. Can you talk a little bit maybe about how you think about and how your organization is set up to deliver value to customers?
Tal Pizzey:Sure. You know, first of all, I mean, the work we do is is inherently of value, but, you know, others can do that work also. So where is it that we excel is is maybe the question. You know, when we put those three service lines together, we that that is really differentiated surface service that isn't matched in the industry. So we have engineers that can help solve problems.
Tal Pizzey:So a nondestructive testing technician, for example, they they really aren't allowed to render opinions. They they do an inspection. Say they take a radiograph of a weld and they say that that weld either conforms or does not conform to an industrial standard. And if it doesn't conform, our customers need to do something about it. And if it's new construction, it's sort of an easy decision.
Tal Pizzey:You grind it out and fix it. But if it's an in service defect, our customer needs to know, do I need to shut my plant down or can I keep running? And our field technicians really aren't of much benefit in that question. But our engineers can now look at the pressure, the temperatures, the materials, the material thicknesses, the information from nondestructive testing, and can make a fitness for service decision to help those customers know what to do. And they might say, look.
Tal Pizzey:It it's it's got a a good safety factor. If we continue to monitor it, we can wait till the next outage to replace the part. So when when these two work together, it it's really providing a higher level of value. And then on the rope access side, it's really maybe back up a little bit. We recognized years ago that and in particular in the oil sands, that's where it hit us most, you know, acutely is that our customers are in a competitive market.
Tal Pizzey:They're selling commodities on the world price. And the only thing in their control is the cost per barrel of oil. And how can we help them in that journey? You know? And it's you know, I suppose to some degree, you might say, well, you know, you're charging by the hour.
Tal Pizzey:So one way you can help them is to, do less work, and that's not the best business strategy. But if it meant, you know, if we could have a risk based inspection program that would reduce the amount of work they do, I think we're bold enough to help them because we know there's a long term relationship. But we also found ways to help them that didn't reduce the work we do and reduce the work others do. But we found that they were spending an enormous amount of money on scaffold. You know, some of our clients are spending close to 80,000,000 a year on scaffolding.
Tal Pizzey:And we can eliminate more than half of that by doing the work off ropes. And and that includes the cost of, doing the work. We eliminate that total cost and also the time. Time is important to them. If you're on an outage and you're on a critical path project, if you can do that inspection in four hours instead of a week, that's big value.
Tal Pizzey:So, you know, we look for these value opportunities to help our customers because we know the work we do is long term relationship based. And the one thing I did mention in our our last episode is that nondestructive testing can be done at point of construction, like a new casting needs to be inspected or a new weld on a pipeline needs to be inspected, or it can be done as maintenance to maintain existing facilities. And because of the recurring nature of maintenance and the less lumpy that work is, we've really focused our business on the maintenance side. And the maintenance side also comes with longer term relationships because on new construction work, you're often work you're often working for a general contractor who is different every time. And so we like the relationship.
Tal Pizzey:We relate like the stability of paychecks for our employees. And we like recurring revenue streams for our investors.
Derek Hudson:And the other thing that I sense that you would get from that is, well, it's part of the relationship. You get to know the customer. Your people get to know their facility and every time they go out there, they're building on the knowledge that they have from previous visits. That's that's gotta be better than starting cold every time.
Tal Pizzey:Yeah. A hundred percent right. That provides incumbency advantage on contract renewals and the opportunity to demonstrate value.
Derek Hudson:So the process of adding value is developing a relationship with the customer. I'm putting words like I'm just putting this out there. Developing a relationship, getting a new customer and continuing the relationship and then providing these services that fit together. And do you have do you do a lot of work on standard operating procedures for the actual testing and things that need to be done and for the failure analysis?
Tal Pizzey:Failure analysis is more sort of bespoke things you do depending on the failure, but certainly the non destructive testing has, you know, a lot of standards and regulations and work processes to follow.
Derek Hudson:And some of those would be unique to Accurin and others would be regulated. Is that right? Other other standards?
Tal Pizzey:The codes and standards dictate acceptance criteria and what type of tests need to be done. And then our work procedures would indicate how to do it.
Derek Hudson:And then I suspect there's this different level of standard procedures for rope access.
Tal Pizzey:Yeah. They're focused on safety. So the you know, rope access in and of itself is no service. It's just hanging around on a rope. But what you do on the end of the rope is is a service.
Tal Pizzey:So, at the end of the rope, we do painting, coating, insulation removal, asbestos removal, welding, pipe fitting and inspection. But the focus on ropes is all about working safely and efficiency and the creativity involved in doing things efficiently.
Derek Hudson:And a lot of times, most situations, they haven't encountered it before. So they have principles by which they can set a rigging up so that it's safe, but they have to do it live every time.
Tal Pizzey:That's right. Yeah. There's equipment standards, there's inspection of equipment, there's, you know, these guys working off ropes, use two lines on separate anchor points, you know, all of those are well established rules and some practices are unique to Acurin and others are part of a worldwide standard called IRAD or SPRAD.
Derek Hudson:We talked about this emphasis on good customer relationships. We talked about, I'll call it management excellence. When you put it all together, what's the experience like for, let's say, a new employee? And how do you bring them into that, what sounds like a very high level of service and safety and precision?
Tal Pizzey:Yeah. It's a it's a big question. I mean, there's lots of training required for these disciplines. Our a nondestructive testing technician is is not very fungible. Like, there's so many disciplines, you know.
Tal Pizzey:It's like a plumber is different than a welder and an electrician, and nondestructive testing has radiographers and ultrasonic technicians and about six disciplines at different levels. So there there's a starting point of a significant amount of training both in classroom and in the field on the job training. But I think there's also, you know, a broader answer to the question would be, you know, how do you adopt the Akron culture? And and we have a very safety quality conscious culture. And and I think, you know, we certainly benefit from what we talked about last podcast.
Tal Pizzey:We benefit from technical people tend to follow rules and be a little bit more black and white. Our safety performance is is really outstanding. So and and the reason that's so important, of course, it's important for safety reasons. We want people to come home every night safe, but it's indicative of many other things. It's indicative of people who follow rules.
Tal Pizzey:It's indicative of people who follow procedures, who care about the company, care about their coworkers and look out for each other. So just to if some of your listeners are aware of injury frequency rate, that's sort of the key safety metric. Ours is point one five. You know, a lot of industry is at one. And and one an injury frequency rate or total recordable injury rate of one means essentially that one in a hundred people have a medical aid or worse per year.
Tal Pizzey:So, you know, we're closer to one in a thousand or one in eight hundred people have a medical aid in an entire year. So think about the block you live on, if there's 800 people, if any of those people in an entire year see a doctor for a prescription or have, you know, a back muscle relaxant or a stitch on a finger, you're exceeding the one in eight hundred. Right? These are people working in at heights, in boilers, in tanks, in vessels, in ditches, in radiation exposure zones. You know, we are in a lot of risky areas, and we don't have safety incidents.
Tal Pizzey:So so anyway, that that's a culture, and that needs to be translated quickly to new employees. And and that sort of following rules and standards and codes is is what our culture is and and existing employees and supervisors ensure new employees are looked after till they absorb that.
Derek Hudson:It's part of your culture to transmit the culture, I guess.
Tal Pizzey:Yeah. That's everybody's job. Look out for each other.
Derek Hudson:You've made 58 acquisitions. Each one of those would have included some kind of cultural integration. Yeah. What have you learned from from those experiences?
Tal Pizzey:You know, a a lot of those yeah. Probably more than 40, maybe even 50 of those are regional tuck ins. So, you know, we have our our company, by the way, is divided into US and Canada. There's executive vice president of each country, and then there's 10 regions and about 90 divisions. And those division managers are, you know, managing one or 200 employees and they are responsible.
Tal Pizzey:They know the names of the people working for them. They know their customers. And so when we buy a company, it gets, you know, it's it's kinda like hiring 20 people at once. It gets brought in. Sometimes they have bad habits or sometimes they have good things we can learn from for sure, but it's it's kind of a regional job to take on that responsibility of bringing these these employees on and and having that oversight.
Tal Pizzey:The the other bigger deals, you know, for sure, you know, any kind of merger or significant acquisition has takes some time to work through and learn from each other and land in the right place.
Derek Hudson:So I'm hearing two things from you there. One is that you've got this huge emphasis on compliance and safety and customer relations. But then you're open as you bring new people in to if there's anything you don't have that they're bringing to the culture, to the way you operate.
Tal Pizzey:Yeah. Just as, you know, the word diversity implies, there's opportunity to learn good things and and try to prevent bad habits as quick as you can. But a lot of opportunity for, you know, for getting rid of the bad, but also, you know, there's lots to learn from these companies even today with our size.
Derek Hudson:So your your organization has has been doing well. Growth profitability, integration of these various elements as they come in, new business line. It's not that new anymore, but it's it was a very interesting addition to your suite of services. If if I was to describe system flow as it's not perfection, but everybody kinda knows what their job is and there's a good level of stress or demand on the system. Things happen and you know how to respond and it's it's the way it needs to be.
Derek Hudson:Would you say that you feel like your organization has experienced or is experiencing that kind of flow as a huge organization? Is that even possible?
Tal Pizzey:Yeah. So, I mean, there are different things to talk about on that front. So for sure, the codes and standards and procedures and what to do when you show up in a job site, you know, there's a pretty good structure on that, and and there's a real opportunity to be consistent and resilient to to dysfunction. But from a business perspective and business development perspective, there there are different things at play here. So, you know, we we have a lot of discipline around financial performance, for example, and and data that supports that.
Tal Pizzey:And and we are we recognize with humility that we are a decentralized business. And I think that, you know, MBA one zero one would suggest as you get bigger, you want to reduce your cost at at the front lines and build kinda scalable infrastructure. But I I resist that. And I think that, again, with humility, we recognize that the relationships with the employees and the relationships with the customer occur at the 90 division manager level. And so our effort is in helping to train, develop, set expectations, and incentivize those 90 division managers to be successful and to help pick the right ones, to make changes when you don't have the right ones.
Tal Pizzey:There's a lot of great people who are very technical and who do good work, but they're lousy managers of money. And so we just need to make sure we have the right people managing the money. And so we provide them with tools and monthly reviews to look at profitability at the technician or the individual person level, to look at billable hours and utilisation and to teach them what a P and L is. And I think one of the biggest things we did more than ten years ago is created annual incentive programs for these division managers to grow EBITDA. And most technical people would not know what EBITDA means, so we help them know how their decisions impact EBITDA?
Derek Hudson:That's what I was looking for. That may not be your total secret sauce, Tal, but you have the system that's focused on the critical point in the organization, which is the division manager because they have face to face with both the employees and the customer. And you're just trying to give them the system and the tools that they can, that they need to operate. And you're giving them the information and the context for making good decisions that fit the whole system.
Tal Pizzey:Yeah. And and of all those things you said, a hundred percent, but you gotta add incentive and motivation.
Derek Hudson:I guess that was the context that I was...
Tal Pizzey:Sure.
Derek Hudson:Is that incentive and I've seen lots of bad incentive systems. How do you make sure that this one isn't rewarding the wrong behavior or can't get distorted somehow?
Tal Pizzey:Yeah. It's a challenging question. You know, first of all, it's consistent. It's been applied for many years. So, you know, there's not newness to it.
Tal Pizzey:We have to have controls in place for, you know, financial systems and programs and month end close and accruals. You know, we Yep. We have those controls in place to prevent, you know, any any kind of playing with numbers. But, you know, the these divisions will pay for lawsuits. They'll pay for rework.
Tal Pizzey:They'll and and they'll be rewarded when they're profitable, and and we we help them make those decisions that could impact them long term. And so I I would say we have a number of controls in place, but the the biggest one is hiring good people and and setting expectations.
Derek Hudson:And then giving them the information, the tools that they need.
Tal Pizzey:On a regular Yeah.
Derek Hudson:Okay. That's fantastic. I want to bounce to another topic. So there's the system flow and I am getting a sense about that from Acuren. Within the system, there are factors that affect the flow and then they're sort of like sitting on top of the system.
Derek Hudson:So senior management, let's say, is responsible for designing and updating the system as opposed to running it in a sense. And the critical resource there is the time and attention of people like you. There's not that many of you in a big organization. How do you decide what to spend your time on?
Tal Pizzey:Yeah. And I and I think it's a good question. The of late, you get sort of pulled in different ways. So I I feel like there's been almost a year of some distractions that aren't healthy long term. So we hope to get back to some form of normalness.
Tal Pizzey:But selling the business takes a lot of time and becoming a public company takes a lot of time. Investors are now phoning me and and, you know, I think my time long term might be better spent with customers and investors. But, you you know, you gotta react to what's needed at the time and then create the right balance over time. So I I think that leadership, whether it's me or others, is best developing the people and the leaders of the company and also supporting our customers. And so we you know, for a company our size, we have a pretty lean sales team because we believe our operations managers are who the customers want to see most.
Tal Pizzey:They wanna see either technology experts or decision makers. And so we encourage our leaders to be in front of customers on a regular basis and to be connected to our staff and, you know, getting away from the screen. And, you know, if we could eliminate computers and offices, we'd like to do that more and more so that our leaders are out in front of the people.
Derek Hudson:That's fantastic. So Tal, just another question as we wrap up here and that is, you've had a number of different owners that you've worked with as COO and CEO and before that. I presume that each of them have had a different corporate governance structure with influence or appointing members of the boards of directors. What are some of the best sources you've had over time for external help either in a governance role or perhaps even like in more of a guidance role and maybe those have been combined? But where have you gone outside to get advice for the big decisions that you make?
Tal Pizzey:You know, you would expect someone like me to have a good list of outside. But to be honest, I've been extremely fortunate to have internal leaders that have helped shape, you know, who I am today, but also where the company is today. And so I mentioned five different owners. I've learned a lot from each of those owners. You know, the guy Peter Scannell, who bought the company in 1991, just think about his life for a minute.
Tal Pizzey:He bought a company in 1991 that was 3,000,000 revenue. Now he had some financial backers at the time because he's a very young man. He decided on that day that he would grow this business for thirty years and he did that. Picked us up along the way. He sold the company thirty years later for $890,000,000, no debt.
Tal Pizzey:I learned a lot from that guy. Yeah. I've you know, the guy who just bought us from I learned a lot from American Securities, great private equity firm, a lot of structure, a lot of resources, some really good people, had a nice board. I was CEO for five years under American Securities. We had a big team and and annual conference with 26 other CEOs, guys running big companies for a long time that I was able to meet and and work with.
Tal Pizzey:And then this new acquisition is pretty exciting and interesting. Even though we are public, we were bought by a UK public company that was a shell looking for a great company to buy. And the person who led that company is sir Martin Franklin, and he's co chairman of our board now. He's done a few things in his life, extremely interesting, lots to learn. He created Restaurant Brands International, bought Burger King and Tim Hortons, you know.
Tal Pizzey:He's bought five other companies, built some from scratch. I'm learning every day from this team. So and and he talks about private equity as renters and public as owners. It's an interesting sort of thing to think through. But so, yeah, I've been very fortunate even from my first two years working for the Hansen brothers and then, you know, the owner of CanSpec and the owner of Rockwood and then American Securities and now the new board.
Tal Pizzey:So I really haven't had to rely on external forces. For sure, I could tell you about, you know, my dad and my grade 11 math teacher and, you know, there's some good stuff out there. But from a business perspective, it's been I've been very fortunate with this journey I've been on.
Derek Hudson:Oh, that's fantastic. And maybe I'll clarify. I need to work on my explanation of this because part of the model, the way I think about it is, there's a leadership function where the buck stops and people have to make decisions. And good leaders have access to governance.
Tal Pizzey:Mhmm.
Derek Hudson:And I work with owner managers who don't have that. You know, the board of directors is themselves signing the minutes every year. Right? So to have to have a structure where you've got an owner, you've got a board of directors, that's powerful help to a leader. And then from those people and others, there's a difference between governance, which is to say we're not gonna approve that budget and guidance, which is all of the soft stuff about, you know, why aren't you thinking about this?
Derek Hudson:And here's a story about the last time I tried something like that. And I'm sure you got both of those from that list of luminaries that you've been working with. And I think that there's a lot of organizations that don't structurally build that in to leadership. So I'm You passed my test, not that I'm evaluating you here, but that's something that I think a lot of people in any form of leadership, you don't have to be the owner of a company. Where do I get my guidance? Where I get governance? And then usually they're not the same place.
Tal Pizzey:So Maybe I just add to that one thing that we didn't talk about is that part of that evolution is the talent within as well. And and I could tell you that, you know, the CFO of a $3,000,000 company is a lot different than the CFO of a billion dollar public company. But chief HR officer, you know, we we ran this business twenty years without a corporate HR person. But, you know, as we grew, bringing on talent appropriate for the size and complexity of the business has created a lot of outside experts with great contribution to the company's governance and strategy.
Derek Hudson:If you look at the leadership team that reports to you, do you feel you get both governance and guidance from your direct reports?
Tal Pizzey:I do. Yeah. Because they are experts in their area, and they are willing to share their opinions with me on a regular basis.
Derek Hudson:Yeah. That's fantastic. I continue to learn about that and I've had the opportunity for a long time with different CEOs to be one of those trusted advisors from the inside. And I learned a lot from the people that I work with, but I feel like from time to time, I might've contributed to the learning of my boss.
Tal Pizzey:Yeah, I'm sure you did.
Derek Hudson:And you've explained that I think very well. So Tal, I really appreciate your time. I think it was worth waiting for. All the best in your journey as a public company with interested investors. And hope you're able to thread the needle well in terms of keeping them happy and spending your time with your people and your customers, which is where your heart is, I know.
Derek Hudson:Thanks so much, Tal, the insight and the wisdom. Bren, thanks very much for keeping us sounding good. I'm Derek Hudson from Unconstrained. Tal is at Acuren and until next time, consider your quest.