Focus on Leadership: Richard Friedman talks about his unconventional leadership style - Oct 2021
Interview by Kemp Harr
Richard Friedman, CEO of California-based commercial contractor DFS Flooring, grew up in South Africa, the oldest of five boys. With a loathing of apartheid and an accounting degree in hand, he sought to emigrate to the U.S., and in 1986, moved with his Zimbabwean wife, Sylvia, to Los Angeles for an accounting position at a large firm. The couple, who met in college and recently celebrated their 33rd wedding anniversary, have two sons: Josh, 30, who joined him in the business, and JJ, 27, a computer engineer.
Today, DFS Flooring believes itself to be the nation’s fifth largest commercial flooring contractor, focusing both on products and installation, along with flooring maintenance, with California locations in Anaheim, Fresno, Inland Empire, Van Nuys, Los Angeles, Sacramento and San Diego, and one location in Salt Lake City, Utah. Here, Richard explains how he transitioned from accountant to leader of a commercial flooring company.
Q: What brought you to California from South Africa?
A: After graduating from the University of Cape Town, South Africa, I went to work for an accounting firm in Cape Town that was part of a multinational accounting company with offices throughout the United States. I requested a transfer to Los Angeles, and after passing the certified public accountants exam, I was offered a position.
Q: Tell us how you ended up focusing your career on the commercial contracting business.
A: One of my clients in public accounting was Paul Singer Floor Coverings-one of the largest commercial flooring companies in California. In 1988, Paul Singer was expanding and growing rapidly and Paul Singer and Mark Oliff offered me the position of chief financial officer.
Q: You’ve been labeled by others as unconventional. Do you see yourself that way?
A: I look at myself as being fortunate and lucky: fortunate because I was able to work with and learn from the best and brightest minds in the industry, and lucky because I was in the right place at the right time and was able to take advantage of the opportunity afforded to me. In making the most of such opportunities, it is sometimes necessary to think outside of the box and find solutions and methods of operation that are not always obvious.
My philosophy is that I don’t spend a lot of time concerning myself about budgets, projections, forecasts and sales meetings. Instead I focus on monthly bookings (new contracts) and on empowering people to reach the compensation level they wish to achieve.
The reason behind this is that I have limited control and impact on monthly revenue numbers as I cannot control when a project will begin and end, and so as long as I focus on monthly bookings the revenue will eventually take care of itself.
The concept around compensation is that a person should “earn” rather than get “paid.” The easiest way of understanding the concept is commission salespeople whose compensation is tied to the gross profit they produce and the more they produce the more they earn. In other areas, compensation earned is tied to predetermined metrics and the amount that is earned is determined by the responsibility and the ultimate profit that the person is contributing to the company. Consequently, we endeavor to keep annual bonuses and annual salary increases to a minimum. When a person feels that they have maximized their earnings at a certain role, we look to move them into another position, such as moving an estimator into sales. What I have seen throughout my career is that most companies pay annual increases and eventually price a good person out of the position in the market. By adopting the earn concept, changes in the business environment and economy adjusts compensation accordingly and consequently prevents good people being retrenched.
Q: When you decided to buy your business from Koch Industries, you opted to go into partnership with Greg Keyes. Tell us about that decision. Did you feel you guys complemented each other, and how did you divvy up the work?
A: Greg and I started working at Paul Singer Floor Coverings within three months of each other and became really good friends. Greg would mentor me in the flooring business, and I would teach him finance. During our time with DuPont, Greg was responsible for the business on the East Coast, while I was involved with the various mergers and acquisition opportunities. When DuPont sold its textile division to Koch industries, and Koch decided to divest themselves of the commercial flooring division, Greg and I both wanted the Southern Californian division where we started. Greg moved back to run the San Diego division, and I ran Los Angeles. As we expanded and grew, Greg was responsible for all the outlying offices, while I was responsible for the financial and administrative sides of the business.
Q: As the commercial flooring market starts to recover from the Covid-induced recession of 2020, where are you seeing most of the business?
A: Our main focus area is corporate tenant improvement work that has remained slow. What we are finding is that the order entry has dropped, but the projects that we are winning are much larger, particularly in the segment of multifamily housing, healthcare, education, hospitality, state and local government.
Q: What will the corporate office policy be in your service area, and how will that affect your business?
A: What we are finding with our large corporate clients that are in occupied buildings is that all persons who want access to work in their properties have to be vaccinated. This has been a major challenge for us, as a large percentage of our installers will not get vaccinated and trying to get work covered has been extremely difficult.
Q: What is your “work in the office” policy for your team?
A: We have been encouraging everyone who comes to our office to either be vaccinated-or show current negative tests results-or work from home.
Q: You’ve seen how this business functions for both a corporation (DuPont Invironmentalists) and as a collective group of entrepreneurs (your Starnet friends). Why do you think the entrepreneur route is more successful in the long run?
A: The business is fundamentally a service and relationship business. People deal with people and have a confidence level that they will be able to execute on a project. Since every construction project is different, with its own quirks and idiosyncrasies, flexibility is required, and unfortunately, large corporations have rules and regulations that make it very hard for their people to be flexible. We, on the other hand, do not have a complex corporate hierarchy and are capable of making various quick decisions.
Q: You’ve been in a recent acquisition mode with the purchase of Diversified in Salt Lake City, Utah. What is driving this urge to invest in a broader service area?
A: Diversified was a natural fit, as expansion and growth into new areas is all about finding the right people. I have known Ken Clifford and Lee Westover for over 20 years. The two of them had run a very successful business for over 30 years, and they were looking to expand and grow in Utah and the surrounding states.
Q: Your son, Joshua, recently joined your operation as a next-gen leader. What attracted him to this business? How does that change what you focus on?
A: Josh always had interest in the business, but I wanted him to have outside experience before joining me. Josh spent a couple of years with a major certified public accounting firm in order to become a licensed CPA, and he then moved into private equity and real estate. Josh has assumed the operational role, which has allowed me to focus more on the sales and vendor relationships.
Q: What are a few of the key challenges that you face today, and how are you overcoming them?
A: The major challenges in today’s environment are labor shortages, supply chain and increasing cost. As an industry, we are doing a poor job of attracting youthful talent into the trades. The mills aren’t doing what they need to do to make sure we have the influx of young people, although they have the ability and money to do so. Consequently, the industry is feeling the effects of having insufficient trained labor to take care of the current demand. On the supply side, production keep getting moved as manufacturers are experiencing longer lead times and higher prices.
Q: What are a few of the biggest changes you’ve experienced in your 30+ years in this business?
A: Automation, Internet and computers are some of the biggest changes. When I started in the industry, you would attend all job walks, where hopefully you were given a set of plans from which you would do a manual take-off. If not, you would go to the general contractor’s office plan room to do the take-off there. You would then write up a proposal and mail it to the customer. Most deals were done on a hand shake. On the manufacturing side, broadloom carpet has been replaced with carpet tile, while on the resilient side, VCT and sheet vinyl have been substantially replace with LVT.
Q: How do you choose which partners to work with from a product supply standpoint?
A: This business happens on the street level. The relationship my team has with a supplier can be greatly influenced by who they pick to represent them in any given market. Sure, product design and performance is part of the equation, but who a company chooses to represent them is also important. This relationship varies from location to location and person to person.
Q: What’s the most satisfying aspect of your job?
A: That’s an easy one; I love the people. The people make this business. I have made some really good friends and have some great relationships.
Q: Who do you consider your mentor?
A: Through my years in this industry, many people have been very good to me and helped to educate me in both the business and leadership.
Paul Singer was my mentor. His advice was “Even on your bad days, stay positive. Things will work out.” Also, “Take care of your people because they will then take care of you as they are part of your family ” He too was a people person that really cared about all his employees.
Q: What is your advice for young people entering our industry?
A: In the flooring industry, there isn’t a playbook. In a lot of industries, you get training, and they teach you what to do and how to do it. In our industry, that’s the good and bad. The good news is that every day is exciting, every day you are learning. I’m still learning. The bad news is that it’s hard to train a person in a short period of time about all they will encounter in this industry.
So, depending on who you are, it can be either very exciting or very scary. If you are a person who wants and needs to have all the answers, this is the wrong industry for you. But if you want to wake up every day and be entrepreneurial, this is the right place for you.
Q: How do you balance work time with tennis time and family time?
A: When I am not traveling, I have a pretty set routine, balancing all three components, which both my work family and actual family know. I am also fortunate that my family and friends like to participate in my interests.
Q: What is the greatest benefit of being a member of Starnet?
A: The biggest benefit of being a member of Starnet is the collaboration between members of sharing ideas and best practices. Although we haven’t had a Starnet meeting during Covid, I still interact and speak to members on a regular basis on items such as PPP money, Covid protocol and pivoting into areas of business in which we did not always engage.
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