Contractor of the Year Finalist: Kerry Stemler

Kerry Stemler admits he had an unconventional start in the construction business: with the help of a community bank, he launched into home construction at 18. “I’ve only known one job and this is it,” he says. At the age of 51, he has 33 years of hard-won construction experience.

After selling his first company to a partner, Stemler launched KM Stemler in 1981, writing down company goals on spare 2 x 4s. He credits persistence and focus with the fact the firm has grown from its garage start to a multi-million dollar company. “I believe in staying with your core business, and doing the things you’re passionate about,” he comments.

That doesn’t mean that Stemler rejects diversification. Taking a look at his transportation costs, he started KM Stemler Trucking in 1996, which hauls industrial forklifts, machinery and heavy construction equipment in six states. The trucking company now has a variety of clients with specialized transport needs, including industrial plants and machinery movers. Its fleet consists of roll offs, triaxle dump trucks, roll backs, landolls and lowboys.

Since 2000, Stemler has also been involved with several commercial real estate property leasing and development firms in southern Indiana, which allow him to construct, lease, own and manage properties.

Cash in hand
Stemler maintains his current growth by paying attention to capital reserves. Cash on hand allows the company to resist pressures to take on projects with slim profit pictures. “Most small contractors really struggle with the business aspect,” he comments. “You have to know how to do the work and also know how to be a good business person.”

An early lesson: tightening up receivables. When he tried to establish a line of credit early on, a banker gave Stemler what he calls “a huge favor” and told him to focus on his receivables. After digging deeper, he found a major account that would likely have problems paying. So Stemler proceeded as if it wouldn’t – which was almost the case since he only got about half of what was owed more than five years later.

Partner Insights
Information to advance your business from industry suppliers
8 Crucial Elements of a Tire Safety Program
Presented by Michelin North America
How High Fuel Prices hurt Your Business
Presented by EquipmentWatch
Selecting the Correct Construction Tire Solution
Presented by Michelin North America

“We now pursue customers that appreciate value and quality,” Stemler says. This underlying philosophy even prompted him to downsize, cutting his firm’s annual revenues in the late 1990s. The firm had grown to 100 employees, and mistakes were made, including leaving out a $200,000 concrete line item in a bid, an amount the firm had to absorb. “Build those cash reserves to carry you through when times aren’t so good,” he now instructs. “Financing’s fine, but be cautious about how you use it.”

Looking back, Stemler also critiques his own management mentoring abilities. “Building managers is a real talent and I didn’t do the best job at the time,” he says. Now the firm’s managers are capable of doing the job of those under them. When needed, key superintendents jump in the ditch or put a steel beam in place.

Stemler is a hands-on manager, seldom seen in his office. “I do sweat the small stuff some,” he admits. “I’m not the easiest guy to work for – I expect a lot.” But building a construction firm isn’t a 9-to-5 proposition. “You almost have to be willing to commit your life to working seven days a week if that’s what it takes,” he says.

Maintaining a professional image is foremost in Stemler’s dealings. Appearance – whether the personal appearance of an employee or that of the company’s equipment – requires detailed attention. All crew members receive a uniform. Stemler insists acting and looking like the professionals they are gives an owner confidence in the company’s abilities.

His pickiness about appearance extends to jobsites. “At the end of the day, his guys clean up every piece of loose debris on the jobsite,” says Bill Scott, president, Scott Funeral Home, Jeffersonville, Indiana, and a past client. “You just have to look at a jobsite and the condition it’s in to know it’s one of his.”

Self-performing crews
KM Stemler self-performs the majority of trade work on its jobs, including excavation, concrete, steel fabrication and erection, rough and finish carpentry, electrical, drywall and finishes. Stemler believes this do-it-yourself philosophy helps him control his jobs, which are primarily private, commercial buildings.

Crews are divided into trade divisions, but employees are cross trained to work on several crews. “If you’re careful about managing the work,” Stemler says, “you should always be able to redirect your available labor when those rainy days come.”

Stemler is cognizant his high-school education has made some avenues more difficult. “I can get the answers, but I have to work harder at it,” he says. This makes him more determined to see that not only his people get training, but others get the skills they need to enter construction. “Construction is much more technical in nature now,” he says. “It’s not so much with our backs as with our brains.” So Stemler has worked with Purdue University to help establish a construction technology degree in the Southern Indiana market and talks with students at the high-school based Prosser School of Technology.

There, Stemler goes over the four things he looks for in an employee (see sidebar on page 69) and then offers this example of how one of these traits – dependability – affects the all-important safety: Four guys are scheduled for a masonry crew, but only two guys show up. One of the crew members needs more material, and climbs down a scaffold because there is no one there to help him down with a man basket-equipped telehandler. As he climbs back up, holding the material, he misses the top rung and falls, shattering both heels. The real safety issue, Stemler insists, rests with the people who didn’t show up – the worker never should have been in the situation where he had to climb holding materials.

Stemler calls workforce issues “the single greatest problem this industry faces. I wish I had the answer. You can really make a good living, but you’re going to work hard.” Stemler’s efforts concentrate on what he calls “planting seeds.” “We’ve got to demonstrate the value of a career in construction.”

“For example, this company is a great opportunity,” he says. “Any young person can come in here and prove themselves, and there would be nothing stopping them. At the end of the day, you’ve really created something you can be proud of in construction. I tell people, ‘I’m not looking for you to come here for a job. I want you to come here for a career.'”

Fleet philosophy
Stemler’s belief in self-sufficiency extends to his 25-plus machine fleet, which includes skid steers, tracked compact loaders, backhoes, telehandlers, excavators, compactors and dozers. The company’s two mechanics do it all – only going outside the company for highly technical work or for equipment still under warranty.

And he primarily buys new equipment. “We buy to keep it,” he says. “If you maintain it extremely well you can do that.” Case in point: he still owns a 1990 truck and a 15-year-old backhoe. That doesn’t mean, however, he doesn’t replace units, but these older, well-maintained machines play backup if something goes down.

“The life expectancy on his equipment far exceeds that of other contractors,” says Dave Heck, with local dealer Whayne/The Cat Rental Store. “We have seen a huge financial benefit from owning and operating our equipment with an eye toward retaining a higher market value at resale,” Stemler says. This includes repairing before failure and oil sampling and changes at 100 hours. “If it’s larger than a generator, we’ll oil sample it,” he says.

He expects his subs to maintain the same equipment philosophy – if a curbing contractor, for example, has a machine go down, Stemler expects him to have a backup machine ready to go. A few hours down is OK, but not two days. “He will have just cost himself another job, because I’ll call another contractor,” Stemler says.

Competitive environment
Stemler believes in having a great relationship with his competitors. While they bid fiercely against each other, they’ll also work together. “As long as you do it fair and ethically,” he says, “you’ll always be able to work with them and have their respect, and they will have yours. Something may happen you’re not going to like, but just get over it and go on to the next thing.”

“He only hires contractors who have the same values as he does,” says Scott. “He treats them well, pays them well and they stay with him. I don’t think any of Stemler’s competitors could say anything bad about him.”

“When he takes on a project, he tries to make it the best possible job,” says Ken Bell with Stock Lumber, Sellersburg, Indiana. “He’s in the upper one or two percent of the contractors I work with. He’s also one of the real leaders in our community. His conduct is one of utmost professionalism.”

Stemler is a community involvement champion, serving on several economic development and bank boards, plus hospital and community foundations – work that both helps him give back to his community and stay in touch with local developments.

On to larger jobs
Stemler says his company has “served its apprenticeship” and knows how to do larger projects – which is where he wants to concentrate future efforts. For KM Stemler, that means projects in the $6 million and up range, where $2 to $3 million jobs used to be its maximum. This doesn’t mean, however, the firm will not take on much smaller jobs.

“We really run lean,” Stemler comments. “We have a very small office staff – including my wife Debbie who does accounting work – only five in all, counting myself. And these larger projects can be managed by basically the same people.”

For a man who doesn’t see himself ever retiring, he’s still looking for the next generation of KM Stemler leadership. “But I really get a joy out of what I do,” he says. “When our people are really clicking, I’m thinking, ‘Man, this is so cool.'”

Asked which of his projects he would consider a signature job, Stemler pauses and then grins. “I don’t know,” he says. “We haven’t built it yet.”

Pride in performance
“Our people are trained to approach work as an exciting opportunity,” Kerry Stemler says. And so he stresses to incoming employees the following characteristics as essential – factors that lead to an overall pride in performance. “And none of them have to do with their knowledge of the construction industry,” he points out.

  1. Attitude
    • Positive/enthusiastic
    • Cooperative
    • A team player
    • Good interpersonal skills
    • Good personal appearance
  2. Dependability – “I can’t create a future with you if I can’t depend on you to be here,” Stemler says.
    • Good attendance
    • Punctual and reliable
    • Self management
  3. Productivity – “You have to get something done,” he says. “We’re not here to just put in time.”
    • Are progress goals being met? Are you working smart? Does the project make money?
    • Generating new and creative ideas to solve problems
    • Applying learned knowledge/skills/techniques
  4. Accountability
    • Avoid damage to equipment, tools, material and property.
    • Avoid injuring yourself and others.
    • Realize these types of incidents could make a difference in the company’s success.
    • Work every hour for which you expect to be paid.
    • Exert a high level of effort towards goal attainment.
    • Be honest and have integrity.