ABC Contractor of the Year: Interstates Companies Stays Grounded in Its Core Values While Building Relationships for the Future

In 1967, Larry Den Herder landed a summer internship with Interstates Companies in Sioux Center, Iowa, where he installed window air-conditioning units, performed electrical apprentice work, washed trucks and tasted what it would be like to pursue a career in the construction industry. Back then, the company had about 15 employees and was just beginning to offer design-build electrical services in the agricultural sector. It was an exciting time for a 16-year-old high school student to be around, especially when field workers and office managers alike were willing to answer his questions about the electrical business.

That family atmosphere and spirit of outreach remain intact at Interstates, which generated $100 million in project revenues last year. And today, that 16-year-old is chairman and CEO of a firm with more than 600 employees who provide turnkey design-build electrical services, including engineering, construction, instrumentation, control and automation services internationally. Through the years, Interstates has been a leader in training, behavior-based safety, prefabrication and lean processes, as well as a long-time supporter of Associated Builders and Contractors (ABC). For these contributions to the merit shop construction industry, Interstates won ABC’s 2013 Contractor of the Year award.
John Franken
Change Ready
As Interstates celebrated its 60th anniversary in 2013, Den Herder made it a point to share the firm’s history with younger employees. John Franken founded the company in 1953, selling TVs off the back porch of his house and installing cable and antennas for folks around town. Within 20 years, Interstates moved from commercial and institutional work into the industrial market and began providing design-build services in response to customer demand. That collaborative approach still accounts for the majority of business today, and the ability to meet client needs eventually led to the creation of separate business units.

In 1975, the company joined the ABC Iowa Chapter for legal support navigating a mixed labor environment, as well as to network with other contractors and industry stakeholders that took a similar approach to completing projects.

“My family has grown up with ABC; it has been a part of my professional and personal life,” Den Herder says. “We earn business from people we have relationships with and with whom we have invested some time and energy.

“Even though the union threat has subsided to some extent, we still promote free enterprise,” he says. “Our team members are rewarded on their individual merit, as well as the mutual success of Interstates Companies. We get to decide how best to meet our clients’ needs. Consultants have told us how much more ‘change ready’ we are than other organizations. The merit shop philosophy gives us the flexibility to train on and execute whatever is needed to be successful.”

In the 1990s, under the leadership of Franken’s son Jim, Interstates leveraged its experience in the feed, seed and grain industries by branching out into the food and beverage, pet food, milling, renewable fuels and oil seed processing sectors. The firm’s volume was less than $10 million in 1995; six years later it was in the $20 million to $30 million range.

During this time, Jim Franken was working toward his dream of redirecting the company to put greater emphasis on personal growth and leadership development. Interstates was in the midst of setting the building blocks that would really allow the company to flourish when Jim Franken passed away from a heart attack in 2001. Den Herder, who had been the company’s operational leader for most of his career, was next in line to carry out the client-focused approach to project delivery that the Frankens had established. 
Interstates' leadership team
“After Jim died, the outreach from our ABC partners was amazing. Everyone was asking what they could do to help,” Den Herder says. “Those relationships helped get us through a very challenging time, and a lot of the things we learned about succession planning came out of what we observed from ABC friends.”

Core Values
Interstates’ growth is rooted in anumber of things—market diversification, solid core values and a willingness to adopt lean processes—but for Den Herder, success is inextricably linked to relationships.

“We work with people with whom we have longstanding relationships,” he says. “They are not only our customers and allied contractors, but also our friends.”

The same goes for Interstates’ employees, who are spread out among regional offices in Colorado, Nebraska, Ohio and South Dakota. In fact, “family” is one of the core values Interstates emphasized in the late 1990s in an effort to help the firm’s largely technical staff leverage communication skills and reach their maximum potential. The company’s other core values are integrity, trust, dependability and quality.

“The family piece is so important because we work together and spend so much time together. We have both celebrations and stress. If you don’t have solid relationships with people, it’s hard to work through strife,” Den Herder says.

Working on remote jobsites can present some of the biggest challenges. Interstates decided to invest in a company plane 30 years ago as a way to shorten business trips for employees traveling to rural communities without commercial air service. When a project manager’s son became seriously ill at the beginning of a two-week critical shutdown project, Interstates was able to shift personnel, put a new plan in place and fly that employee home within a couple hours.

“The plane is an example of a tool that supports our core values,” Den Herder says. “If you know what you stand for and what your business is based on, it’s easier to move decision-making to the appropriate people. Our people are empowered to make decisions, and because they know our core values, they typically make the right decisions.”

Thirty-seven employees also are empowered as shareholders, ranging in age from their thirties to their sixties. This broad leadership base allows Interstates to provide for the 600 employees who rely on the company for their livelihood.“

Interstates is owned by the people who lead it, which is very fulfilling,” says Den Herder, who was one of only five shareholders for many years. “One of my biggest challenges has been making sure we’re organized so the business can thrive in the future.”

Pre-Planning and Prefabrication
As an early adopter of the design-build delivery method, Interstates has a 30-year track record of working with customers from day one to turn a concept into an operating system. With the shortage of craft professionals across the country, pre-planning and lean, agile processes are more crucial than ever.

“We’ve had to look at ways to leverage our field personnel,” says Interstates Construction Services President Dave Crumrine. “Pre-planning projects allows us to know what we’re doing before we do it. We do almost no re-work because we work out the problems early.”

Additionally, Interstates has performed prefabrication for the past decade, ever since learning about the merits of making assemblies ahead of time from an ABC Peer Group. Last year, Interstates bought a 50,000-square-foot facility and dedicated half of it to prefabrication. Previously, assemblies were built in a small shop in Hull, Iowa.

“We initially thought prefabrication would only apply to projects such as schools and hotels, but we’ve been able to apply it to our work. For example, we’re shipping materials from the prefab shop to the Bakken Shale in North Dakota so workers can put the finished product in place rather than doing detail work onsite,” Den Herder says. “It improves our quality, production, safety performance and customer satisfaction.”

Interstates also relies on 3-D modeling to guarantee prefabricated assemblies fit. Drawings are available to all parties (in the field, office and shop) so everyone works off the same information. “We’ve seen a significant reduction in our field labor hours during the last seven years because of pre-planning,” Crumrine says. “And frankly, we’re more productive.”

Looking ahead, Interstates is optimistic about its pipeline of opportunities in 2014. In a few months, the company will wrap up an EPC project for a plant in Minnesota that turns solid waste into energy and steam. Although this is the first time Interstates has executed an EPC contract, it aligns with the firm’s strength of putting a team together to solve a problem by understanding both the client’s technical needs and unique business challenges.

Additionally, several multi-billion-dollar industrial projects are coming to Iowa that Interstates may become involved in, each of which poses licensing, planning and staffing challenges. 

Canola crushing facility in Hallock, Minn“There aren’t enough workers in this region to support these mega-projects, plus other big datacenter projects going on in the Midwest,” Den Herder says. “Finding and training enough craft professionals is a big concern.”

A Way of Life
In light of the workforce shortage, Interstates employs a sizable HR staff that devises different ways to recruit, onboard and retain employees. The company has a Department of Labor-certified apprenticeship and journeyman program, and the training doesn’t stop once a person is hired. Interstates has a mobile training program that allows employees to continue their education wherever they’re located. Nearly 100 field leaders also spent a week in Iowa in January for technical, safety and efficiency training, as well as leadership development training so they can continue to advance their career and become better leaders.

At the university level,the Interstates Foundation endows scholarships via several technical and four-year colleges in the areas the firm needs to hire people—from IT professionals to engineering, project management and craft professionals. The company also hires 25 to 50 interns every year, usually during the summer busy season, ranging from college accounting students to apprentices and high school students.“

It introduces young people to our great industry. Having them exposed to opportunities in the construction industry is pretty inspiring,” Den Herder says.

Interstates also has been connecting with younger students for the past 15 years by adopting fourth graders from the public and private schools in town. The students visit the office to learn about science, watch small demonstrations and get a feel for what it would be like to work for a company like Interstates someday. Sponsoring math and science clubs and the local Lego league reinforces these connections."

We look for the kinds of things that tie students to the work we do, then we promote and support them,” Den Herder says. “We like to give back to the industry we work in, but it also gives us an opportunity to interact with young people. You need to build relationships with the people you’re trying to hire.”

In that vein, employees are encouraged to get involved in the communities where they live and work, whether that means serving on city government, school boards and local economic development groups or volunteering as EMTs, Boy Scout leaders and Little League coaches.“

Service is a way of life here. It ties back to the whole family piece of our organization,” Den Herder says. “Our employees can become better leaders by being involved in other activities and meeting people with different skills. When they take that back to the company, it makes us better as a whole.” 

Settle for Nothing Less Than Zero Accidents
When it comes to safety, Interstates has a lot to be proud of: It’s 2011 EMR was 0.7 and its TRIR was 1.25—both below industry average—and it has been recognized at the two highest (Diamond and Platinum) levels in ABC’s Safety Training and Evaluation Process. The firm also won a 2013 National Safety Excellence Merit Award from ABC for its exceptional safety records and rigorous training programs.
Wire pulling training
But Interstates still isn’t satisfied.

“We always thought we did a great job with safety, but we have learned a lot from our ABC peers and through the Industrial Contractors Council,” Crumrine says. “Zero accidents and lost-time injuries is the only thing we’ll settle for. We are thrilled we continue to improve, but we are never finished. We look at every possible thing we can do to make sure our employees have a safe work environment.”

To that end, Interstates has a mandatory call between management and field leadership each week, and an authorized OSHA outreach trainer and dedicated safety staff regularly inspect jobsites. Crews start each day with a pre-job hazard analysis and do daily safety huddles. And just like every other aspect of a construction project, pre-planning is crucial.

“Safety training has to start early; you don’t start the day workers go onsite,” Crumrine says. “We ask: How are we going to price and execute the job, and how can we put people in the safest situations possible? Getting people to think about what they are about to do is imperative to safety results.”

Interstates also has implemented a field-driven program where employees coach each other on safety. The emphasis isn’t on catching someone doing something wrong, but rather increasing the number of times people are observed and given feedback on their work practices to help them improve. The practice makes safety more proactive and less hierarchical or punitive. 

“Safety is knit into the fabric of what we do—from the president to project executives and craft professionals in the field,” Den Herder says. “If you focus on safety as a single thing, it does not work. It has to be part of your core to perform work in the correct, safe and most productive way. Integrating it operationally is what makes a program successful.”

Employees seem to agree. In a recent poll, 96 percent of staff members said they believe Interstates is committed to having a safe workplace.

Joanna Masterson is editor of Construction Executive. For more information, email, visit or follow @ConstructionMag