We Live in Interesting Times - From the Chairman
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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SECTION: From the Chairman

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Contact Kim Phelan at (800) 388-0650 ext. 340.


We Live in Interesting Times

By R. Dale Vaughn

Article Date: 01-01-2005
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.


"I have been honored to serve this great organization."

Last year at this time, I addressed the AED convention on the fact that for 85 years, AED has been a stage to discuss and debate issues that are relevant to our industry. As we close the book on 2004 and open a new chapter, the adage, "We live in interesting times," has never been truer. Allow me to make a few observations about last year, and where we go from here. Review
In 2004, we have dealt with the reality of shortages in equipment components, and we have braced for increases in both equipment and transportation costs due to the high cost of steel and fuel. Remember, this is in addition to being at war with an insurgence that has no flag and experiencing one of the most mercurial elections ever.
While dealing with this, we have seen margins that have ostensibly improved over the last couple of years. Yet, the biggest benefit to tight supplies is the ability to move old inventory that in the past couple of years has established "squatter's rights" in our yards.


Capital and keeping the "family" in business
The business of equipment distribution is no doubt a capital-intensive and competitive business. What has not changed is the ongoing challenge to garner an acceptable return on investment. Regardless of whether our businesses are public or private, capital is attracted to returns, and the landscape of our industry depends on who can attract capital.


Our industry has a high percentage of family owned businesses. These businesses face a sobering reality: The statistical odds on long-term success are bleak. In fact, a number of studies suggest that only 5 percent will continue to create shareholder value beyond the third generation. This statistic should come as no surprise given the business challenges any companies face in increasingly competitive markets. The difficulty of keeping growing numbers of family shareholders committed to continued ownership is a challenge.

By the time the third generation takes over, the scene is set for squabbles among members and branches of the ever-expanding family. Ownership is both a blessing and a curse, giving a family the power to destroy the business, as well as to shape it and enjoy its returns.

When a company is young, the entrepreneurial founder often makes managerial decisions using gut reactions and experience. As the company moves into the second and third generation, it is important that checks and balances are in place for carrying out the family's role in the three vital dimensions of governance: ownership, board supervision, and management.

Outsiders may wonder why the family should bother with all the hard work; why not just sell the company, and let each family member invest the proceeds in capital markets? I would argue that a pooled and professionally managed business stands a better chance of surviving and growing than it would if it were split, sometimes into several parts, each invested separately. I realize that is arguable and not all agree. Nevertheless, the reality is that unless these businesses generate a return at least as high as a relevant stock market index, their survival is in question.

Distribution's Workforce
Personnel cost accounts for the single largest expense in our businesses, and productivity is very important to profitability. The AED Foundation promotes workforce development in an attempt to attract talent to the equipment distribution industry. Our industry workforce is not a "tomorrow" issue but rather a current event.


For the first time since the Industrial Revolution, four generations are working side by side. In 2005, "traditionalists" (59 and older) make up 10 percent of the labor market, the "boomers" (42 to 58) will comprise 45 percent of all workers; "generation Xers " (24 to 39) are 30 percent; and "Millennials" (23 and under) are 15 percent.

It is important to understand the differences between each of these generations in order to attract, retain, and manage towards productivity. For example, traditionalists are described as being "loyal to a fault." Generally, they expect to build a lifetime career with one employer and value security and a sense of community. They trust hierarchy and authority, and are challenged by ambiguity and change. Most served in the military and it is not uncommon to expect the same discipline in the civilian workplace.

Baby boomers, my generation, are idealists who have found their self-worth in their jobs. In our younger years, we learned to be competitive and politically correct.

The Xers and Millennials require a different management style. The Xers are fiercely independent and resourceful, and count on their technological acuity and business savvy to stay marketable. With a large percent raised in a single parent home, many have learned to rely on themselves and to strike a balanced work ethic.

While they share traits with Xers, having come of age using the Internet, cell phones, satellite TV, CDs, Gameboys and microwaves, Millennials are hi-speed junkies. They have enough skepticism to keep them asking healthy questions, enough political savvy to know who's who, and enough respect for character development to incorporate individual responsibility into their jobs. Accustomed to immediate gratification, Millennials find being patient difficult.

The biggest difference among generations may be in what each requires. Traditionalists typically feel "no news is good news," while baby boomers expect documented feedback. Meanwhile, Xers need constant direction to know they're on the right track, while Millennials are in need of praise and many times mistake silence for disapproval.

Unless managers have a career path for these younger employees, they won't be aware of any change of direction, until someone who is paying attention comes along and steals the talented Xers away.

Epilogue
Throughout the year, I have written about several issues I felt affected our industry. Some were specific, while others were generic. In reality, problems that affect our members can only be solved by those parties that are involved. AED can only carry the flag and provide a conduit for information on relevant issues.


I have been honored to serve this great organization and look forward to the industry's bright future.


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