In this episode of The Sound of Automation podcast, we talk with Titus Crabb, President at Vertech and fellow member along with Bryan Powrozek of the CSIA Benchmarking Committee. They provide an overview of what the Benchmarking Committee does, the key findings that were to be presented at the 2022 CSIA Executive Conference, and also discuss key KPIs businesses can use to drive decisions.
Podcast Transcript:
Titus Crabb:
Don’t get analysis paralysis. Man, I did this for a while. I would just slice data and dice data and I’d waste days in Excel trying to figure out things, looking for that magic silver bullet that was going to make my business better. And data helps inform your decisions, but it’s not infallible. And it’s rarely just decisive in itself. You’ve got to look at the data, help it inform a decision, then just make a decision. Just go try it and stick something in a virtual Petri dish and see if that improves results. And if it does, fantastic. And if it doesn’t, throw it out.
Speaker 2:
Welcome to the Sound of Automation, brought to you by Clayton & McKervey, CPAs for growth-driven businesses.
Bryan Powrozek:
Hello, and welcome to the Sound of Automation podcast. I’m Bryan Powrozek with Clayton & McKervey. Joining me today is my guest, Titus Crabb of Vertech. Titus, how are you doing?
Titus Crabb:
I’m doing great, Bryan. Thanks for having me.
Bryan Powrozek:
No, thank you for coming on. I think it’s a pretty relevant topic given, just relevant in general for business owners, but particularly with some of the things that are coming up with the Control System Integrators Association. So, just to kind of, before we jump into all that stuff, just, could you give the listeners a little bit of your background and some of how you came to be the co-owner of Vertech?
Titus Crabb:
Sure. Yeah, so to go way back, I’m a preacher’s kid from rural Montana. So, that shaped a lot of who I am. I got an electrical engineering degree in 1993, long time ago, from LeTourneau University, which is a Christian Polytechnic university in Texas. And because of where that university was located in Longview, Texas, I wound up getting a job for a control system integrator right out of school that happened to have just relocated to Longview, Texas. So, I worked for those guys for about 12 years and I owe a lot to my mentor there, Dennis Moltsky for teaching me how to be a controls engineer and a lot about the business and how to have a vision and execute on it.
Titus Crabb:
And I left that company in 2004. I think some of my millennial friends would say I was having a quarter life crisis. They didn’t call it that back then. I was just pretty burned out and not in a real good place. So, I left and took a few months off. And then in late 2004 I decided to start Vertech. And my business partner joined me as an employee in mid-2005 and then became a full owner, or half owner of the company in January of 2006, so.
Bryan Powrozek:
Excellent.
Titus Crabb:
That’s the history in a nutshell.
Bryan Powrozek:
Well, and that’s really what kind of prompted me to want to have you on, because in getting to work with yourself and your company over the last couple of years, one thing that really strikes me about the way that you operate, or at least that you try to run your business is you’ve really focused in on the data, which I think is just second nature for a lot of engineers. But what I’ve seen in working with other business owners is that can be a challenge for engineers who are used to dealing with data day in and day out to kind of turn that microscope back on themselves and look at their business with the same kind of analytical approach that they would any of their customer problems.
Bryan Powrozek:
And I think that’s one thing that really impresses me about what you guys do and I thought would be helpful for listeners to hear about, because kind of making, we’ll talk about this a bit as we go through, but I see business owners kind of go through this evolution of maybe not using data initially to run their business. And then they start down the path of becoming more of a data-driven organization. So yeah, I think that that’s some good insights you’ll be able to share with the listeners as we go through here. But one of the areas where you and I connected was within the Control System Integrators Association on their Benchmarking Committee. So, can you tell listeners a little bit about CSIA and what its mission is and kind of how you got involved in the Benchmarking Committee?
Titus Crabb:
Sure. Yeah, CSIA is Control System Integration Association. If you Google CSIA, sometimes you get the, I think it’s the chimney sweeper, because you do something.
Bryan Powrozek:
Exactly.
Titus Crabb:
That’s not us. We’re the control systems people. And the Benchmarking Committee was the statistics committee for a long time. And its mission is to, as much as we can understand what’s going on with our members and provide them with valuable feedback in the form of data and hopefully analyzed data information that helps each of us run our businesses better. So, the Benchmarking Committee now has three surveys we call them, but programs that collect and analyze data. And the entry level one is called EZ Stats. And I’ll refer to a lot of the data from there today. And EZ Stats is a monthly survey where we ask two questions. One is, “Do you think that the things are looking up, or do you think that there’s trouble ahead?” Just a thumbs up, thumbs down sentiment question.
Titus Crabb:
And then the second one we ask people, “Do you have capacity to take on more work or are you swamped?” And then we ask some ad hoc questions along with that, just kind of the topic of the day that actually provides some cool insights as we look back at it over time. And then we have a little bit more complicated version, maybe complicated is the wrong word, more in-depth survey that we do called Pulse that looks at some key KPIs that all control systems integration companies should be looking at, honestly all services companies, professional services. And then once a year, we do that quarterly, and then once a year we have a survey that looks at benefits and salary benchmarking for companies in our industry. And that’s really super valuable to help keep you aligned with what is your largest cost of course in a services company.
Bryan Powrozek:
Yeah, and that’s so critical for someone in your position, the business owner and Vertech’s main office is out in Phoenix. And I’m sure if you look through the Google search there, you don’t find too many system integration companies that pop up. There’s, I don’t know however many might be out there, but it’s, so you don’t have a ton of companies that you can closely network with and talk to and say, “Hey, how are you seeing this on your staffing? Or how’s your business performing in this area?” So, being involved with an association like CSIA it’s good because, I mean, it gives you some peer-sharing opportunities, but then also you can kind of see how things are going across the country and potentially as you’ve seen through the pandemic now you can start hiring engineers up in Montana if they wanted to work for Vertech and work remotely. So now you can kind of get some insights on what’s going on in those different regions and things like that, so.
Titus Crabb:
Definitely.
Bryan Powrozek:
Something you mentioned there about the, and this is coming up, next week we’ve got the CSIA executive conference and the Benchmarking Committee will be presenting at that. And one of the really interesting things to me coming out the other side of the pandemic is, we have real data from kind of, as we were going through it, in those different buckets you talked about, kind of the sentiment. Real time how are people feeling when they’re being asked this question, versus the talent retention toolkit and the Pulse survey kind of showing the actual results. And so I know that that is one of the things that the Benchmarking Committee will be speaking about at the conference. But when you look at that data, what was kind of your biggest takeaways when you were analyzing it, getting ready for the conference?
Titus Crabb:
Well, the most glaring one is you could summarize with, I don’t know if you’ve ever read The Hitchhiker’s Guide to the Galaxy, but the famous quote from that is, “Don’t panic.” And the follow on for us, I think, would be that you can, you actually really can trust the numbers. And one of the companies that CSIA has speak at the conference every year is a company called ITR Economics. And the Beaulieu brothers have had a mantra for as long as I’ve been listening to them for 15 years that the economy is a slow, slow turn and it takes a lot to make it move. And you really can trust the numbers when you’re looking at the macro economy and long range forecasting.
Titus Crabb:
So, all that to say, when you look at the sentiment numbers from EZ Stats, in March of 2020, it usually hovers around 80, 80% of people think things are looking good, and 20% of people think there’s trouble ahead. And it inverted in March of 2020, hit the lowest it ever has. Dropped to 20% positive sentiment. And frankly, I was one of the thumbs down on that month. And I would love to meet the people who thought that things were looking up as we were facing going home and all that, which is what happened in March of 2020. So, we saw that huge blip.
Titus Crabb:
I actually, when I looked back at this data, I divided it into three zones. So there was the fear zone, which started in March of 2020 and ended around November of that year. And I say that it ended because sentiment got back up to 80% positive, 20% negative by about November of 2020. But if you look at actual tangible impact, what I call the impact zone was just this little small blip in April and May. And we saw about, I think it was a 16% dip in average revenue in April, and by June it was higher than the average revenue from 2019. So, we saw overall, when you look at 2020 and 2021 together, 2020 ended just a little, I think it was 5% higher than 2019. So roughly flat. But 2021 was huge. I think it was around 30% higher than 2020.
Titus Crabb:
So, the things that we were facing, if you go back and look at EZ Stats, we ask those ad hoc questions. And that sheds a lot more color on this. We panicked and in March we were dealing with, how do we get an entire workforce set up at home and connected into the server and we have access to our data still and calling our customers and trying to figure out how to keep working for them? We’re all facing things like, what do we do about vaccines and what do we do about mask mandates? And we had meetings around how are we going to acquire enough hand sanitizer for the office? We still have a five gallon bucket of hand sanitizers sitting in our shop, but I don’t know what we’re going to do with. But those were the things we were facing. And those tended to make us, our minds think that the numbers weren’t going to be good. And in the end it turned out to really not be reality. And for the integration industry, 2020 and 2021 were pretty good years across the board on the average.
Bryan Powrozek:
Yeah, and I’ll be interested to see too is as this kind of plays out, because I think in talking with some of my clients, we’ve kind of seen the opposite to some extent this year where because of supply delays and things like that, they know the demands there, their sentiment’s still high, but there’s other factors coming into play that are maybe slowing this year down compared to previous years and things like that. So, I’ll stay tuned for what you guys have to report next year.
Titus Crabb:
Yeah. And one thing that I’ve learned from the Beaulieu brothers is that you can trust the numbers in the big picture, but the events that happen, current events like the Black Swan we had with COVID, wars, recession stuff, those have an impact on the magnitude of where we’re headed, the ups and the downs. And they also can tweak the timing a bit. And I think that the supply chain crisis we’re seeing right now, what we’re going to see is a log jam where we’re not generating revenue as much as we could have, because we just can’t get the parts to complete projects. But when that starts to release we’ll see huge jumps, maybe transitory, but huge jumps in revenue from people. That’s my prediction. We can see how good of a-
Bryan Powrozek:
Yeah, I’m going to mark this down and I’m going to call you a year from now and see how it actually turned out.
Titus Crabb:
All right.
Bryan Powrozek:
So, we talked about it a little bit earlier, but some of the ways that Vertech uses data to guide its decision making, I’m assuming that that’s something that you guys developed over time. I mean, it’s not something you just came in with as you started the business. So, how did this whole thing start out within Vertech and how did you evolve to this place where you’re allowing data to drive more of your decision making?
Titus Crabb:
You touched on this earlier on, Bryan, but there’s, the tough thing about using data for decision making is that it forces you to look at reality. It’s like a mirror and if you don’t like what you’re seeing the mirror, well, it’s not the mirror’s fault. And so you kind of, we’ve gone through this progression over the years where early on you really, I don’t want to say you don’t need data, but you kind of don’t. When there were two or three of us, all of us really intimately knew what was going on. And if we had a bad month, well it’s because the code and that particular project didn’t work when we got to site, and we know those things very intimately because we’re directly involved in them.
Titus Crabb:
And then as the company grows and you add sort of layers of people between from my perspective, understanding and guiding the company and what’s actually going on, I don’t necessarily know whose code work and whose code didn’t or where we had those problems. And so the data-driven decision making really was born out of kind of frustration of, how do I understand what’s going on and be able to make a decision? So, and the limitations of being a human, I can’t be everywhere all at once. So, it evolved and it continues to evolve as it becomes necessary. So, you can view the basic building blocks of one of these companies as the hours that an individual puts in. And those all get collected into a bucket of a project, and projects get collected into buckets of either clients, or industries, or services types.
Titus Crabb:
And you need to be able to analyze the performance of those top down and bottom up. And the people that are responsible for each layer of that need to have the information that they need to know if they’re performing well and contributing to top level numbers. And that’s kind of where we are today. And the reason I say it’s still evolving is, we’re a 100-person company, we’ve just two years ago added another layer of management between me and the people actually doing the work. So, as the company continues to grow, that management structure will evolve and so will the data that we need to see what’s really going on.
Bryan Powrozek:
Yeah, and it’s something I see a lot in working with business owners as they kind of evolve through their life cycle that most business owners will start out with kind of, as you talked about, this letting their gut drive their decision making and kind of listening to that. And maybe the first key metric that they all look at is cash. “As long as we’ve got cash in the bank, we’re doing good.” And then it kind of grows from there. And hopefully as they move through that progression you go through the whole life cycle of historic and descriptive KPIs and moving into some of the predictive and prescriptive type work. But for yourself personally as a business owner, how have you changed the way that you use data as, as you mentioned now you’ve moved up and there’s another layer of management between you and the teams doing the work. How have you changed the way that you’re using data?
Titus Crabb:
I’m really dependent on it, honestly. I do my best to stay connected on a human level with everybody. But when you’re that guy that you gets seen once a quarter or something that shows up and asks someone in the hallway, “How’s your project going?” You’re not going to get the full picture. And so I’ve worked to put data collection systems and then do my own analytics on it to help me really see what’s going on. And we have an operations meeting that we do every couple of weeks, and we have a scorecard that we keep. So like the major dashboard, if you think of the, it’s kind of a tired analogy, but business as a car and you’re looking at your dashboard. The things that I look at are labor multiplier, utilization, margin on the parts that we run through our shop.
Titus Crabb:
And we have discussions around those and their purposely intention with each other. You can get a bump in labor multiplier by telling people to bill to overhead, but then utilization is going to drop, so we can really have good discussions. And I have to depend on the folks reporting to me to learn what those numbers mean and how to affect them on their teams. So, I don’t know if that answers your question, Bryan, but that’s, it’s sort of my, it really is my dashboard. It’s how I have a connection down to the actual work, but through an abstracted layer of numbers.
Bryan Powrozek:
No, no, I mean, that makes total sense to me. And that’s, it’s funny, because as I, especially within the CSIA community as I talk to business owners, and that’s probably one of their number one questions for me, or comments is, “Well, you work with all these system integrators and other automation professionals. So, what are the KPIs I need to be looking at? What should my dashboard be?” And I give them kind of the typical service provider response, “Well, it depends.” Because I can give you the general KPIs. If an integration company is not looking at their utilization, they’re probably missing something. But that’s not the end all be all. And it shouldn’t be something, as you mentioned, if you focus just on utilization, well, your folks are going to make sure that they’re getting their time in and that it’s getting recorded to projects. And now your realization on those jobs are going to fall off.
Bryan Powrozek:
And so you have to have a nice balance of that, but then, and this is something I think at least what I heard in your answer, and what I’ve seen in working with you is that you’ve kind of taken the time to do the work and look at it and like, “Okay, what if we look at this? And what if we look at it in the trailing three months or the trailing 12 months, and what does that tell us?” And kind of work to then find the specific levers that make Vertech work properly.
Bryan Powrozek:
And that’s the, I think probably the one area we spend the most time talking with business owners about is that while we can come in and I can set up a dashboard for you tomorrow, and I can show you all these metrics, it’s going to take time to build up that history of data, build up your understanding of what the data’s trying to tell you so that you can then start interpreting it, making decisions, so. And during that time you’re going to start to find, it’s like, “Oh hey, maybe these three KPIs over here are just good to have an eye on, but it’s this fourth one over here that really makes or breaks how my year is going to go.” And so it’s kind of learning that. And like most things, there’s no quick answer, even though everyone-
Titus Crabb:
There’s not. You’re making a great point that data’s just data. And if you don’t know what to do with the data, then there’s not, it has no value for you. And one of the best things I ever did for myself was I built this, I mean, it’s kind of, well, I think you’ve seen it, but it’s a ridiculously complex model in Excel for how my business works. And I have a little set of variables that I can adjust, so I can put in our entire team in there. And then I can say, “Okay, what if our utilization was this? And what if our labor multiplier was that?” And I just play with it a lot and, or played with it a lot and learned what the impact is. So, when I’m seeing an impact on the income statement, I can go look at the KPIs and go, “Okay yeah, that makes sense. I understand that compared to my model.”
Titus Crabb:
And sometimes still we have things happen. Like right now we have three months in a row with a labor multiplier that’s really high compared to what the model says we should be able to produce. And we’re having some good conversations around that, because I think that that means we may have some large projects that are recognizing revenue too fast, you know? So we can develop these theories, go look, and we can keep things on the straight and narrow, but the model is what helped me really learn how the business works and what those data points mean when they show up on my desk.
Bryan Powrozek:
Yeah, and that’s, I think that was probably one of my favorite parts of my engineering career was getting my Six Sigma certification, because that was truly focused on trying to get you to get to that point of trusting the data and inevitably sit across the table from business owners and they’ll be like, “Oh, the gross profit went down this month, but that’s because of this. Or it went up this month because of that.” And it’s always the easy answer, right? It’s that, “Well, we had this one project that went over,” or whatever it might be. But with what you talked about there of really kind of going back and trying to make sense of what the data is showing you really, in a way I view that as kind of proving to yourself that, “Yes, my assumption as to the root cause is the true root cause. And it’s not something else that just gets kind of covered up by me accepting.”
Bryan Powrozek:
Because we all kind of go through that little bit of confirmation bias that, “Oh, hey, I expect we’d have a bad quarter and we had a bad quarter. All right, good. Let’s just move on.” Rather than trying to find out. And even the more beneficial side of that I think is, when you have a really good quarter, a project goes really well. Well, let’s go and understand what happened on that job so we can try and reproduce that on more jobs. So, no, that’s great. So I guess final question here, time to kind of put your mentor hat on, and if you’re sitting across the table from Titus from 10 years ago and you’re trying to give some advice to another business owner who wants to start moving into a more data-driven direction, what advice do you have for that business owner?
Titus Crabb:
Well, kind of shameless plug for CSIA again here, but you really should just go sign up for Pulse and start tracking your data in that system. And I think there’s 12 KPIs in Pulse, and you’ll learn how you track against other people and you start that process of educating yourself of how your business works. And if you’re wondering what KPIs you should be tracking, those are the ones. You might come up with something that’s unique to your business or something, but those are core KPIs that, the collective wisdom of hundreds of years of combined experience from business owners have come up with.
Titus Crabb:
I think this is probably something you’ll find in a lot of different business literature as well, but you need to just make KPIs, scorecards, dashboards, whatever, however you want to call it or whatever system you want to use. You need to make them part of your own, your discussions with your leadership team. And if you’re a smaller company and it’s just you, you need to look at them regularly and keep them front and center and think about them. Why are things the way they are? What could I do? Like you were saying, Bryan, “What could we do to capitalize on successes?” And don’t just say, “Bad times were out of your control, let’s move on.” Go figure out why and what can you do different next time. You might not get it right. But at least you have a theory and scientific method, that thing.
Bryan Powrozek:
Yeah, exactly.
Titus Crabb:
And then the last thing I would say is, don’t get analysis paralysis. Man, I did this for a while. I would just slice data and dice data. And I’d waste days in Excel trying to figure out things. Looking for that magic silver bullet that was going to make my business better. And data helps inform your decisions, but it’s not infallible. And it’s rarely just decisive in itself. You’ve got to look at the data, help it inform a decision, then just make a decision. There’s a guy, I think I actually met him through you all, but his name is Rich Sheridan, company is Menlo Innovations, and he has this mantra in their company that they say, “Run the experiment.” And just go try it and stick something in a virtual Petri dish and see if that improves results. And if it does, fantastic. And if it doesn’t, throw it out, try something different.
Titus Crabb:
And I always throw this in, you know me, I have to throw this in at the end here. You have to remember that people are not numbers. And one of the temptations with data is to go in and try and get, like micromanage people or put processes in place or something that will force the data outcome that you want. And you have to build up your EQ skills in how you inspire, set a vision for people to do the things that will drive your numbers. Not go in and try and plaster a system on them. They’re kind of two different disciplines.
Bryan Powrozek:
Exactly.
Titus Crabb:
Analysis and leadership.
Bryan Powrozek:
Yeah, no, I, your comments here remind me of one of my favorite quotes from Patton that, “A good plan violently executed now is better than a perfect plan executed next week.”
Titus Crabb:
Yes.
Bryan Powrozek:
And you couple that with Rich’s mindset of encouraging people to fail fast and just, and that goes to your comment about the people too. If people are in an environment where they know, “Hey, if I try this and it doesn’t work, I’m not going to be ridiculed for it. Or I’m not going to be looked down upon for it.” Because you that might fail two or three times, but then you find a better way, and now everyone from the company benefits from it, so.
Titus Crabb:
Exactly.
Bryan Powrozek:
No, I think that’s great advice. So, all right. Well, Titus, I really appreciate you coming on here and putting up with me with my lack of voice here a little bit. If anybody listening to this, something you said sparks a question or a desire to discuss this in a little more depth, how can people track you down? Or if they need some system integration work out in the Phoenix, Arizona area, what’s the best way to get ahold of you?
Titus Crabb:
Well, my name is Titus Crabb with two Bs, and I think I’m the only one in the country. So, if you Google me, there I am. But my email is t.crabb@vertech.com, two Bs. And I’m easy to find on LinkedIn too, because my name is so unique. So either one of those.
Bryan Powrozek:
Excellent, well, Titus, thanks again. And Denise is going to get on me about this. I mentioned, I dated the podcast by talking about the conference being next week, which by the time people listen to this, it’ll be passed, but look forward to seeing you in a few days.
Titus Crabb:
All right. Sounds good, Bryan. Thank you.
Speaker 2:
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