No Roles Left Unfilled: A 100-Year-Old Equipment Manufacturer Keeps the Energy Flowing
Main photo: Brian Baker, left, speaks with employee Chris Skladanic at one of Sentry's steam and water analysis systems for wastewater sample testing.
Being steady and respected in the market you’re in, but always having another angle in your back pocket, is a secret to business longevity. That’s been the story for Sentry Equipment in Oconomowoc, Wisconsin, for 100 years.
The employee-owned manufacturer of process and sampling equipment began life 100 years ago as a manufacturer of “blowdown systems”—boiler sanitizing equipment—for the dairy industry. Its founder, Roy Henszey, had been the head engineer for the Carnation condensed milk company, so—big surprise—the business’s first client happened to be Carnation. But by the 1950s, that business was drying up, as dairy plants joined the electric grid and did away with boilers.
Fortunately, the processing technology also had applications for the electric power industry, where Henszey had been cultivating customers, so the company was able to pivot to serve coal-fired power plants and soon, oil and gas refineries.
Today, one of Sentry’s longest-serving employees is also its CEO, Brian Baker. Baker arrived as CFO in 1995 after a couple of early-career finance roles, then stepped into the CEO role in 2013. Like his predecessors, he keeps one eye on opportunity and the changing energy market while making sure the core business is airtight. During Baker’s tenure, Sentry has acquired a couple of smaller companies in an adjacent market, wastewater treatment sampling and processing, while adding a service component for power plant equipment in response to years of workforce downsizing.
With 200 employees—most in Wisconsin, the rest in Houston and Salt Lake City—Sentry feels the pain of smaller manufacturers that have trouble filling roles. But currently no roles go unfilled, and the turnover rate is under 15%, thanks in part to investment in high-tech equipment like robotic machining centers and Baker’s involvement in state and local organizations. He’s on the board of the Waukesha County Business Alliance, which runs a Schools2Skills program that has been bringing groups of high school students to tour Sentry’s Wisconsin facility for a dozen years, while also cultivating additional partnerships with high schools and colleges.
IndustryWeek talked with Baker about workforce challenges, pivoting with changes in the energy industry and the nuances of running one of the 6,000 U.S. employee-owned companies—officially an ESOP, which stands for Employee Stock Ownership Plan.
IndustryWeek: How are tariffs affecting Sentry?
Brian Baker: Sentry Equipment operates in over 50 countries with about 25% of our company’s sales being international. Certainly, we along with other manufacturers are navigating and constantly evaluating the changes that come with the changing news on tariffs, however, we also have strengths in our business that ease concerns. Most of our supply chain is located within the United States, so we haven’t seen the same large increases in prices when sourcing products.
Where we do see the impacts of tariffs is in the lead times for receiving these goods – in some cases with lead times more than doubling.
The greatest impact of tariffs for our business comes more in concerns for Sentry Equipment’s clients in international markets like Western Europe, South Africa or South Korea and Taiwan versus in our business itself.
You have eight welders at your company, and seven of them are in their 20s or 30s—nowhere near retirement. That’s an enviable crew. How do you recruit and retain these skilled workers?
Machinists and welders are the hardest positions to hire for. We’re always willing to interview them, just because they’re so hard to come by, but we aren't short right now. We have great manufacturing work that’s highly skilled and challenging—you use your mind and your hands.
We work with GPS Partners, a nonprofit that was started by several Milwaukee manufacturers to build a high school pipeline. It targets students that are, say, juniors in high school, who might do better in a technical path than an academic path. The students sign up for this program, and they actually go to class in the morning at manufacturing sites. Several of the bigger manufacturers in Milwaukee actually have GPS classrooms.
They do their academic learning in the morning, and they go to work in the afternoon. We’ve been part of that for more than a dozen years. At any given time, we have three or four GPS students that are working in our plant.
On the other side of the business, electrical engineers and electrical designers are hard to come by. In that area, we have an engineering co-op program with Marquette University in Milwaukee. We always have about three or four co-op engineers working in our business. Two people out of seven on our executive team came to us as engineering co-ops, and now they're both vice presidents.
How do you develop leaders at your company?
We actually have a succession-planning process. There are competencies that we want every Sentry employee to have, but then we have competencies that we want every Sentry leader to have—things like change management, the ability to have a vision and communicate it to people, having a leadership presence, having people look to you when there's something challenging going on.
We put those people in our leadership development program, even though we don’t have a job for them. We want to build their skills, and then when a leadership role opens up, we have a pool of candidates to pick from. That’s worked out really well. On our seven-person executive team, four were developed internally.
Do people come to work for you because you’re an ESOP? Is that a selling point?
People in their 20s and 30s honestly don’t focus on that. They are more interested in having a great culture, having great work, doing good for the world. Employee ownership is nice because it gives you more of a sense of pride, of ownership but, really, I find that people generally don’t start appreciating the ESOP until they get to be in their 40s or so.
How does governance at an employee-owned company work?
It’s run like a normal, professionally managed organization. There’s a trustee, because there’s a trust that technically owns the stock. So even though the employees call themselves employee-owners, they’re really beneficial interests. They have a beneficial interest in the trust. A board of directors oversees the CEO and management of the company. So, in a way it’s a lot like a public company, except instead of being owned by the public or an individual, the trust serves as the owner. The law requires an employee vote if you are going to sell the whole business, but that’s about all they vote on. The law doesn’t require an employee vote on acquisitions.
What’s the benefit of an ESOP for your employees?
Every employee receives [an additional] 8% of his or her salary in new shares of Sentry stock every year. And we have a 401K that matches 4%, so we have literally 12% [matching] going into their retirement plans. But the real benefit for our people is when the stock price goes up. We have an independent stock appraiser that does nothing but appraise ESOP companies. They determine what our shares are worth. When a person leaves, we buy their shares back. If we can grow our stock price by 8% or 10% or more every year, it really gets exponential how people can accumulate wealth.
Our company has created 12 ESOP millionaires. A couple of them were executives, but a lot of them were just normal people. The only bad thing is that a person that retires with $500,000 or $800,000 extra from the ESOP, lots of times, can retire at 62 or 61 and so most people at Sentry don’t work until 65.
Sentry has acquired several small companies since you became CEO in 2013, including a wastewater clarifying company, two water treatment sampling companies and a manufacturer of oil separating equipment. What’s been your approach to growth, and what does water have to do with your core business?
When I started at Sentry, our sales were about 90% in the power industry. And that was great, because over the long haul, the power industry has grown steadily as the population grows. There was this nice linear relationship, and our customers could plan many years in advance for building their power capacity.
When Enron happened, it sent the power industry into a tailspin. There appeared to be more demand for power than there really was. Our customers put the brakes on spending, and the power industry was in a dark place for the first decade of the 2000s. It started to come back, but around 2014, our customers saw green energy coming, and they weren’t sure how it was going to play out. So they just sat on their hands and stopped spending money. They shut a lot of plants, converted a lot of plants from coal to gas, laid off a lot of employees.
The power industry, for the last 12 or so years, has been a slant—probably more like decline—but in declining we saw that, if you take the power industry and combine it with our work in oil refining and petrochemical processing, 75 or 80% of our sales were dependent on fossil fuels. We decided to go look for an acquisition candidate in an adjacent market. We know a fair amount about the wastewater industry. We have one of our sampling products that we sell into the wastewater industry. We had a small presence there, so we knew a little bit about the industry. People are always going to need clean water, and the acquisition diversified us away from fossil fuels.
Looking ahead, does Sentry have any strategy around serving the renewables market?
Unfortunately, our power and oil/gas industry products (about 70% of Sentry's current sales) cannot be applied in a renewable setting. That is why Sentry did M&A to diversify our industries beyond fossil fuels (instead of trying to develop products for renewable energy).
How does the service component of Sentry fit with the rest of the company?
In 2013, we bought a small company that had three or four service techs, and they did work in the power industry. We've built it up over the last 12 years to almost 30 service techs. We operate in the power industry, oil refining, and also in the wastewater space. And because the power industry let all of their people go—you used to go to a power plant, there’d be hundreds of people there, and now there’s like, 12. If they have to do any kind of maintenance or refurbishment, any upgrades, they either have to hire a contractor or get somebody like us to help.
We found that our heart and soul is still manufacturing, but we are able to go to our customers and say, “You need this piece of equipment? We have service techs that we can send in and tear the old piece out. We can install the new piece, we can start it up, we can teach you how to operate it, and we can even give you a maintenance contract and run the equipment for you going forward.” Our customers like that because it’s a turnkey solution. They only have to write one purchase order to us, and if they wanted to try to manage it themselves, they don’t have the people.
What percentage of your revenue comes from the service aspect?
Twenty-two percent. It was a small, single-digit part of our revenue in 2013. I would say it’s grown by at least 10 times.
As we wrap up here, what’s on your mind as a manufacturing CEO
I honestly think manufacturing in our country is in a really good spot. The U.S. has all this cheap energy, all this oil and gas. [The U.S. is] an energy exporter, and we have abundant, reliable, cheap natural gas and other forms of energy. We have a great power supply. We have this highly educated workforce, where the average manufacturing worker is well-educated by standards of the rest of the world. We’re the biggest consumers of manufactured goods in the U.S., and we have this proximity to the market. Why would you build something in China or in Asia or in Europe when it's going to be consumed in the United States? Then we also have the best technology. There's so much technology in our factories that we've already deployed. You take all that together, manufacturing in the U.S. is smoking.
Are you seeing the perception being changed around manufacturing? Has it hit a critical mass?
I don't have any data to support that, but just talking to people, absolutely. Students, parents, educators, all can see the great benefit of having some sort of technical trade. Another thing that's really helped is the cost of academic education going up so much that we have people who graduate from high school and can come in and make 50 or 60,000 bucks working in our factory. That’s a great living for a 19- or 20-year-old. I think that's helped. I think we’ve moved the needle, but there’s still work to do.
