July/August 1997
With business interests that run the gamut from ferrous and nonferrous scrap to elk antlers and ranch fencing, this employee-owned, Montana-based company goes well beyond its motto of “buying and selling the basics.”
By Eileen Zagone
Eileen Zagone is an associate editor of Scrap.
When people think of Montana, they think of big sky, big mountains, and wide open spaces. Images of scrap processing operations and steel service centers hardly spring to mind.
But Pacific Steel & Recycling has made scrap recycling and related interests big business in the big sky country of the Northwest. How big? From its headquarters hub in Great Falls, Mont., the company has both urban and rural branches radiating across Montana and into Wyoming, Idaho, Washington, Oregon, South Dakota, and Utah, reportedly making it the region’s largest scrap recycler and supplier of new steel products. These branches—39 in all—range in size from a few employees in some rural areas to more than 40 at the firm’s Spokane, Wash., processing facility.
The company’s broad reach is understandable—and necessary—given the sparsely populated nature of the region. As Tuck Vosburg, Pacific’s president, explains, “In the West, in order to get volume from this population, you have to reach out to them.”
And reach out it does, in more ways than one. One of Pacific’s distinguishing characteristics, in fact, is that many of its facilities offer a variety of services specifically designed to cater to the needs of the surrounding community. Another notable feature is that the firm is employee-owned. And these are only two of many aspects that give Pacific its unique character and position in the scrap recycling world.
A Family Legacy
Pacific’s road to becoming a Northwest scrap recycling giant began, as with many scrap companies, with an immigrant starting a one-man shoestring operation in the only business he knew.
In Pacific’s case, the man was Joe Thiebes, who emigrated from Germany to Spokane in the 1880s and followed his family’s business tradition of trading hides and furs. Fortunately for Thiebes, western Washington was a prime fur trading location. Business was so good, in fact, that when his son, also named Joe, was old enough, he sent him to the wilds of Montana, the very heart of the booming trade. And in the early 1920s, the dutiful son officially founded Pacific Hide & Fur Depot in Great Falls.
The critical need for raw materials during World War I prompted the company to expand beyond furs and hides into collecting ferrous and nonferrous scrap. And this foray into scrap metals eventually led the firm to branch out in the 1950s into sales of new steel products.
Along the way, the Thiebes family business continued into the third generation, with another son—again named Joe—joining forces with his father as the company steadily opened additional locations under the Pacific Hide & Fur name.
As it turned out, these second- and third-generation Joes were the last two members of the Thiebes family to be actively involved in the company. The Thiebes family owned the company and the senior Joe Thiebes continued to serve as chairman of the board until his death in 1988, though he wasn’t involved in Pacific’s day-to-day management. The end of daily family involvement in the business came with the death of the younger Joe Thiebes in 1982, at which time Vosburg was promoted from executive vice president to president.
While the Thiebes family hasn’t been part of the business for almost a decade now, its presence and philosophical legacy is still palpable at Pacific, with today’s company executives intoning words like “visionary” and “noble” to describe the family and its work ethic, business principles, and generosity.
An ESOP Fable
For many companies, the shift from being family owned and operated to being managed by non-family executives is a difficult transition. The shock of this change can be so great, in fact, that many businesses falter and ultimately fail, says Vosburg. And for Pacific, he notes, the shift in management from the Thiebes family certainly “meant a number of changes and challenges for the business.”
Fortunately, the Thiebes family had established a plan to help ensure the company’s survival beyond its ownership. Specifically—and in keeping with its forwardthinking business philosophy—the firm formed an employee stock ownership plan, known as an ESOP, in the 1970s.
Under the plan, all eligible employees accrue stock in a retirement fund without having to contribute themselves. While the stock has enjoyed considerable growth over the years, says Vosburg, more important has been the dedication and performance the ESOP has inspired among Pacific’s 562 employees. This can be seen, in part, in the fact that Pacific’s employees average an enviable length of service of 20 years in branch manager positions and seven years in other jobs.
The ESOP, by making employees part owners of the company, has also motivated them to achieve cost savings, production increases, and customer service improvements—all of which keep Pacific as competitive and profitable as possible, say the firm’s principals.
And as any scrap company owner will attest, an experienced and committed work force is undeniably the most valuable asset of any operation. “We have a really good group of people here,” says LeRoy Stevens, Pacific’s executive vice president, “and we offer good incentives with the ESOP.”
Branching Out
Employee ownership is just one of the ways Pacific encourages employee involvement. The company also elicits participation and dedication by giving employees the chance to be entrepreneurs within its network of operations and services.
This entrepreneurial approach is prudent—and necessary. Since Pacific’s many branches are far apart geographically, hands-on management by the headquarters executives is not only impractical, but impossible. Instead, each of the branches—which the company refers to as “cost centers”—is directed by a manager who is allowed to run the operation to a large degree as if it were his or her own company. Most branch managers have risen through the ranks of Pacific, which helps ensure that they “believe in and effectively implement the company’s business philosophies,” explains Vosburg.
Among its benefits, the firm’s branch management system fosters independence, responsibility, and accountability in each branch manager, explains Bret Ewer, Pacific’s nonferrous and fibers manager. (He ought to know, considering that he spent many years as a branch manager of two different cost centers.)
The entrepreneurial system also encourages branch managers to build strong and close relationships with the communities they serve, ties that are particularly important in some of the firm’s rural locations, where being perceived as part of a faraway faceless corporation could have a negative effect, Ewer says. This site-specific, local service philosophy is so successful, in fact, that it’s not unusual for some customers to think that the branch manager actually is the owner of the operation, he notes.
This independence comes with a price, of course, namely the responsibility to operate the branch profitably. And accordingly, each cost center—and there may be several at any given location—has a separate set of books maintained at corporate headquarters.
On the flip side, branch management positions also come with their share of rewards. According to Vosburg, branch managers receive an annual bonus based on the performance and profitability of their branch. The manager then shares the bonus with the branch staff, thereby involving them all the more in the success of the company. Similar to the branch management system, the bonus practice is a well-established tradition at Pacific, with company lore having it that Joe Sr.—the second-generation Joe Thiebes—established the compensation system after hearing about how a national department store chain rewarded its store managers.
A Family Feeling
While this sort of branch management system may be unique in the scrap industry, it’s been business as usual at Pacific since at least the 1950s. Vosburg, in fact, counts the system as one of the visionary developments of the Thiebes family to effectively manage the firm’s ever-growing number of operations.
And, as any scrap recycler can imagine, it’s a considerable challenge to manage and keep track of 39 operations.
One way Pacific does this is by maintaining all accounting data at its headquarters. With the accounting staff keeping a separate set of records for each branch, the home office continually knows the financial status of each cost center.
Given that the company has branches in several different states, it’s also a challenge keeping up-to-date on changing regulatory and environmental compliance issues. To this end, Pacific employs a full-time environmental and safety manager to offer guidance on these issues on both the state and federal levels.
Still, Pacific encourages its branch managers to also keep an ear to the ground for any environmental changes in their particular state that may affect their operations. After all, the branch managers, as closely connected members of their communities, are often in the best position to hear about regulatory and legislative changes in their city and state. As Ewer remarks, “They’re our first line of defense.”
Plus, since branch managers are responsible for training their own staff to handle material properly, it’s all the more important for them to understand the city- and state-specific laws and regulations that affect their particular operations.
Managing so many different locations from a central office isn’t without its problems, however. For starters, every aspect of the business is “multiplied by 40,” says Vosburg, which means communication isn’t always easy and face-to-face interaction is a relative rarity. It’s not surprising, then, that the telephone is the most-used piece of equipment at Pacific. Ewer, for one, speaks with almost every branch manager every day to discuss market prices and keep his finger on the pulse of the branches. He and others at the Great Falls office also log a lot of miles visiting different branches to foster the intimacy lost through distance. Plus, twice a year the company’s executives meet with all of the branch managers, once in the winter in Great Falls and again with their families in the summer at a regional vacation spot.
Despite having its operations and employees spread throughout the Northwest, Pacific manages to maintain the feel of a family, Vosburg says, in part because every employee has an equal investment in the company’s success and because many have worked with each other for years, even decades.
Product Di-fur-sification
As a company that operates in the wide open spaces of the Northwest, it’s fitting that Pacific’s operations are equally broad and expansive, encompassing many distinct but related businesses including scrap recycling, new steel sales, industrial hardware, agricultural products, and—still—furs, hides, and antlers.
Not every Pacific location is involved in each of these niches, of course. In most cases, the scope of each operation’s services are dictated by the needs of the surrounding community. Many of the locations, however, do have a hand in several of these niches, and one—in Helena, Mont.—even includes a small engine repair shop that fixes ailing lawn mowers and weed whackers. The branch manager of this location saw a need for this service in the community and could profitably offer it in addition to the other products that comprise the facility, explains Ewer. As long as a service or product line like this one can operate profitably—and is somewhat related to Pacific’s other business interests—the company encourages such entrepreneurship among its managers.
One of the firm’s larger locations, operated alongside the corporate office in Great Falls, includes a number of different cost centers. In the scrap niche, for instance, the operation bales aluminum cans and processes a variety of aluminum and copper scrap (while a satellite plant across town processes ferrous scrap as well as secondary fiber—mostly ONP and OCC—in a two-ram baler).
The operation also maintains a large steel service center where workers can cut, shear, punch, and drill a vast stock of new steel products to meet customer specifications. This facility also stores steel products for shipment to smaller Pacific operations that don’t have room for stocking a broad array of such products.
Just outside the steel warehouse is an assortment of agricultural products available for retail sale, including ranch gates, chicken wire, several types of fencing and fence posts, corral panels, feeding structures, water tanks, metal and plastic culverts, and roofing products, as well as a hardware store stocked with a full line of industrial hardware.
This type of product and market diversification is one of Pacific’s chief distinguishing characteristics, and nothing could seem more diverse to many of today’s scrap processors than the fur, hide, antler, and craft branch in Great Falls. Hanging on every inch of wall space in this cost center is displayed the bounty of the hunting and trapping industry, with coyote, ermine, beaver, and fox furs alongside those of skunks, black bears, mink, and even the odd musk ox or two.
Another area houses antlers purchased from enterprising nature walkers who collect the antlers shed each year by the elk, deer, and moose that dot the region’s landscape. Antler burrs and other pieces await transformation into buttons, knife handles, dream catchers, and other crafts in another area of the operation near a supply of tanned leather in every color of the rainbow.
While it may seem odd that Pacific continues to handle these “unusual” products, the practice goes well beyond a nod toward its pioneer history. According to Stevens, these materials still account for roughly 13 percent of Pacific’s gross scrap profits. While the company could continue to turn a profit without cost centers related to these products, it has a well-established supplier and consumer network for them and, as in every other branch, these cost centers serve the needs of the hunters and trappers in their communities.
Also, there’s safety in diversification. As Vosburg puts it, having different business interests has served Pacific well over the years, and there’s no reason to think the practice won’t continue to serve as a business safety net for the firm in the future. Stevens concurs, adding that it makes good business sense to diversify because “in times when one commodity might be down, there will generally be another that’s good.”
Open to New Ideas
Even though Pacific’s business formula is nothing short of a prodigious success—allowing it to serve a variety of niches through its branch system and enrich its employees through company ownership—its executives are always open to infusing the firm with new ideas to keep it successful in the future.
To this end, Pacific’s 10-member board of directors is comprised of seven directors who work for the company and three who don’t. These three, all of whom are prominent members of the Montana business community, bring their business acumen and experience to Pacific and help “keep the company’s concerns in perspective because they’ve been through it all before,” says Vosburg.
As for future plans, the company has some equipment upgrades in the cards, including the installation of a computer system—slated to be up and running by early next year—that will link all of the branches and improve communication. And while no particular expansions or acquisitions are in the works, the company is likely to bring additional branches into its fold as opportunities arise, such as its latest acquisition in Rapid City, S.D.
In the meantime, if you need some magenta leather, a new ranch gate, some rebar, or a load of No. 2 ferrous scrap, one of the company’s locations will be happy to oblige. •
With business interests that run the gamut from ferrous and nonferrous scrap to elk antlers and ranch fencing, this employee-owned, Montana-based company goes well beyond its motto of “buying and selling the basics.”