Shields, Harper & Co.

Pure distribution is the hallmark of this 90-year-old company.

The mention of the names Nick Kemsley and John Queen throughout the petroleum equipment industry typically elicits a moment of respect and awe at what these industry legends accomplished. Both men served as presidents of PEI: Queen in 1967, Kemsley in 1983, and both brought to that role a wealth of knowledge and expertise from their time at the helm of Shields, Harper & Co. Add the name Swede Wieslander, the man in charge around the time of the Great Depression, who built Shields, Harper & Co. into one of the largest distributors of petroleum marketing equipment west of the Mississippi by establishing branch locations throughout California, Washington and Oregon.

COMPANY SNAPSHOT President: Bart Scowley Year Founded: 1917 Headquarters: Oakland, California Locations: Fresno, Orange, San Diego, West Sacramento, Phoenix, Reno, Las Vegas Employees: 70 2006 Sales: over $40 million Web Site: www.shieldsharper.com

Today, the dynamic force of this 90-year-old company no longer rests with these former owners. The force of Shields, Harper & Co. is a direct result of its 70 employee owners, all of whom share the same goal—to bring the best products, information and services to their customer base.

A Rich History
Shields, Harper & Co. was established in Oakland, California, in 1917 for the primary purpose of providing hoses to Standard Oil of California. As the customer base grew and needs expanded, other products were added, including tanks, dispensers, nozzles, valves, fittings and, most recently, payment systems, POS and software for facility management and security.

Shields, Harper was closely held until 1959 when it was acquired by the Symington Wayne Corporation, a New York Stock Exchange-traded manufacturer of dispensers. In 1968, Dresser Industries acquired Wayne, and Shields, Harper became a distribution division of Dresser. Two years later, Dresser sold all of its distribution operations, including the Shields, Harper division, to two of its long-time employees, Nick Kemsley and Ken Martin.

During the years under the ownership of Kemsley and Martin, the company continued to prosper and expand. Six locations covering the western United States and 12 shipping locations through two affiliates in the East and Midwest were set up.

Today, Shields, Harper continues its long tradition of distribution from its Oakland headquarters and branch offices throughout California in Fresno, Orange, San Diego and West Sacramento; in Phoenix, Arizona; and in Reno and Las Vegas, Nevada. Its products and integrated systems are installed in commercial and retail sites throughout these states and beyond.

Powerful Competitive Tool
Nick Kemsley understood that Shields, Harper's success was dependent upon the ability and commitment of his employees to serving customers. In 1992, he sold the business to an Employee Stock Ownership Plan (ESOP) and gave employees shares in the company. The establishment of the ESOP set Shields, Harper on the course of developing a company of people who think and act like owners...because now they were.

A 2000 Rutgers University study found that ESOP companies outperformed both their own pre-ESOP operation and non-ESOP companies. The study reported that among 343 companies followed from 1988 to 1999, annual sales growth was 2.4 percent greater than what was projected. The average sales per employee also increased by an additional 2.3 percent. The study also showed that ESOP companies are more likely to still be in business several years later, and that ESOPs increase company productivity and strength through a sense of ownership, responsibility and accountability among employees.

Shields, Harper & Co. headquarters in Oakland, California

In 2006, Shields, Harper completed its 14-year transition to 100 percent employee ownership. It was a milestone in the company's history, recognizing that the employees have always been the backbone of the company's success. The 100 percent ESOP put the company's ownership directly into the hands of those who were going to continue its success and make the future even brighter.

Shields, Harper employees are a diverse group of talented individuals who possess one common thread that unites them. As company owners, they are partners in this enterprise and they share a single agenda and common goals—personal growth, company growth and customer growth.

CEO and President Bart Scowley and his management team—Executive Vice President Dave Sarginson, Vice President of Finance Jim Fuchs and General Manager Doug Delong—work hard to provide employees with the tools they need to be successful owners. In addition to technical and product training, employees learn the intricacies of ownership at regular meetings and are reminded that, according to Scowley, “The improvements they make and the thoughtfulness they put into their work will end up in some fashion in their own pockets.” Employees have made many suggestions that have saved or made the company money. Scowley adds, “Our culture of ownership breeds a willingness to step up and do a little more. There are lots of eyes and ears around who want to find ways to make it work. When a customer calls, he or she is talking to an owner, an owner who is dedicated to that customer's well being. And that is a powerful competitive force.”

Unlike many PEI presidents, Bart Scowley did not grow up in the petroleum equipment business. Nick Kemsley was looking to find the perfect individual to take Shields, Harper to the next level. Kemsley recognized in the early 1990s that the industry was changing. Microprocessor-based products were becoming more predominant, and Kemsley realized that employees would be doing more tasks than simply storing and moving product around, especially as the price of fuel was rising. In addition to being an environmental concern, spilled and leaking gas was expensive. Kemsley came from the vapor recovery transition era, the mechanical world, and he wanted someone with an electronics background to guide the company into a new era.

That was Bart Scowley. At the time he was recruited by a search firm hired by Kemsley, Scowley was working as the executive director of the American Electronics Association. Prior to that, he was a branch manager for the Burroughs Corporation (later Unisys) and did sales and marketing at 3M. He credits several manufacturers who took him under their wing to teach him about the petroleum equipment industry and their products, which were quickly evolving into advanced, technically demanding systems. Scowley was an eager learner. Joining the company as a vice president and member of the board, he became president in 1992 when Nick Kemsley retired and the company became an ESOP.

New Markets, New Ideas
Shields, Harper's long tradition of distribution marks it as one of the few remaining petroleum equipment companies dedicated to what some call “pure distribution.” Its integrated systems are installed in airports, fleets, commercial and retail sites throughout its market area. A 30,000 sq. ft. building in Oakland contains millions of dollars' worth of inventory. There's also a 12,000 sq. ft. warehouse in Orange, California, and smaller facilities at each branch location.

While independent fuel marketers make up a portion of Shields, Harper's business, approximately 75 percent of sales are to contractors and service companies. At one time, the company had a service division. “We had to either grow it and it had to become the tail that wagged the dog,” Scowley says, “or we could support the large number of independent service organizations within our market.” Shields, Harper chose the latter and reduced the size of its service department to a handful of key people who knew how to work with highly specialized electronic systems. It was a decision that resulted in significant growth.

The latest technology in equipment is on view in the Oakland lobby. Dispensers from years back have been replaced with current, state-of-the-art equipment.

To keep up with the latest technology, Shields, Harper spares nothing. Technical staff receive all the manufacturers' training and are cross-trained in a variety of products. As a result, the service group often functions as an ombudsman for half a dozen different products that might be on a site. Scowley explains, “Often there is a POS device by Manufacturer A, a dispenser by Manufacturer B, a monitoring system by Manufacturer C, and when a problem arises, someone needs to sort it out. Because of our relationships with the manufacturers, we think we can do that better than anyone in our market.” Shields, Harper has become adept at mustering resources from a variety of suppliers and getting them to work together so that a system functions as a system rather than as independent parts.

In its marketplace, there are about 20,000 retail sites that sell fuel to the general public. There are also commercial, private and government fueling sites, golf courses, police and fire fleets, airports and marinas. One of Shields, Harper's customers is the Federal Aviation Administration site in Southern California that handles air traffic control for the southwestern United States. Scowley calls it “an amazing site. If they lose any control, even for five minutes, it's a problem.” Shields, Harper is supplying all of the backup fueling systems for generating emergency power at this site.

Generators are a growing part of the company's business, currently accounting for almost 10 percent of sales. Scowley expects this number to grow significantly. “Twenty-five years ago, if the power went out, we'd wait till it came back on, or maybe there were coal- or wood-burning capabilities. Not anymore. People require more security, and in some places need power to maintain operations. Besides, every hospital has an emergency generator, and most hotels and many businesses have a backup generator.”

A 30,000 sq. ft. warehouse holds millions of dollars of inventory.

Sales were strong last year, and Scowley expects them to grow considerably in the next few years. “We have the systems capability to handle three or four times our current level of sales, and we expect to double them within the next two to three years.” He acknowledges that the industry rises and falls with the regulatory environment and things are not slowing down in California. As the state finishes its push to control water and soil pollution, work has returned on controlling air emissions from fuels. Currently, the deadlines are April 2009 for the majority of the vapor recovery upgrades and April 2010 for finishing the vapor recovery program. Scowley also expects a robust ongoing parts and replacement business for the maintenance of this equipment.

Looking Past Ninety
Bart Scowley talks about the evolution of the petroleum equipment business. “Fuel used to be measured with a 12-foot-long stick. You'd pull it up and see what level of fuel you had in your tank. We sold many of those 30-dollar sticks. Now we have an electronic measurement device that sits in the tank and is wired to a computerized console on the counter. The console is connected to the cash register and, more recently, to sensors around the tank. That 30-dollar stick has turned into a 30,000-dollar system. I think that represents the evolution of our industry over the last couple of decades more than anything else.”

Shields, Harper & Co. has powerfully transformed itself from a mechanically oriented old line products company into a company at the top of its game in a digital world. This transformation, while challenging and requiring great commitment and dedication on the part of the entire company, was never up for discussion. Says Scowley, “Everything that happened in the past is history. Yes, it is a rich history, but we learned that we can never say, 'Let's do that again.' We have to keep growing and developing and doing the best we can for our customers, who are also growing and developing. That is how we will get to year 91, 92 and beyond.”

Cory Rosen, executive director of the National Center for Employee Ownership, details the growth of the Employee Stock Ownership Plan and what it can mean for your company.

Shields, Harper's early owners and leaders, those hallowed and respected men, left a legacy to their now 90-year-young company, a company that has rejuvenated and re-energized itself over the years. The legacy is strong and is held close by each and every owner. Customer First. Whatever it takes. Customer First.

With this legacy, all of the owners of Shields, Harper & Co. are dedicated to learning all they can about being the best at all they do. Based on this guiding principle, Shields, Harper & Co. is creating itself as a company of tomorrow.

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The PEI Journal • Third Quarter 2007 • Volume 1, No. 3 • Contents are Copyright © Data Key Communications, Inc.
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