The most impressive thing about Murphy Co., Contracting Business magazine's 2004 Commercial Contractor of the Year, isn't the company's $183 million top line. It's the way a $183 million company can still feel and function like a small, closely-knit family operation.

Credit CEO Jim Murphy for this. He has a very simple description of his company's structure. "The best thing to do with an organizational chart is to flip it upside down," he says. "The message is that everyone is equally important, and you need to convey that throughout your organization."

It's more than just talk, which is remarkable at a company with more than 200 salaried employees and 800 to 1,000 union associates. The feeling of a team working together -- and at the top of its form -- runs throughout this company.

A Strong Foundation

Murphy Co. was founded in 1907 by Jim Murphy's grandfather, John C. Murphy. From its humble beginnings as a two-man plumbing shop, the company has grown into a diversified powerhouse with total revenues of $120 million to $180 million each of the last five years. A record of $183 million was set in fiscal year 2003.

The company grew steadily throughout the 1940s and 50s, adding heating, air conditioning, and industrial work to its capabilities. When Jim Murphy joined the company in the early 1970s, the stage was set for explosive growth. Jim led a diversification effort that took the company outside of its traditional St. Louis boundaries, deeper into Missouri and over the Mississippi River into Illinois. Jim became president of the company in 1979.

Today, the company's services include commercial heating, air conditioning, plumbing, ventilation, refrigeration, building control systems, process piping, clean rooms, and 24-hour service. With nearly 40 engineers on staff, Murphy Co. is a leading proponent of the Design/Build process. However, the company also will perform comprehensive mechanical services via design/assist, negotiated contracts, competitive bids, or strategic alliances. It all comes down to what's best for the customer.

"We are severely customer focused," says Executive Vice President and COO Dave Hardin, P.E., who has been with Murphy Co. for 27 years.

The company's purpose statement is simple and to the point: "Provide valuable solutions to our customers." The company does this through its core values: employee well-being, enduring relationships, integrity, and professionalism.

"Our guiding principles are high integrity and high professionalism," says Vice President Tim Pederson, P.E. "Everything is always done with long-term customer relationships in mind."

Cooperation, Not Competition

Murphy Co. is structured a little differently than many large commercial contractors. Although it's divided into several broad areas of work, the various business units don't compete with each other. In keeping with the team concept, sharing of people and expertise is the order of the day, and all of the profits contribute to one bottom line rather than to several profit centers.

Being structured in this manner allows a business center that's having a good year to carry one that's not -- a favor that's likely to be returned the following year due to the ever-changing markets. It also allows the company to always take the long view of what's best, and ride out down times in markets that it knows it wants to be in for the long run.

The company's ability to do this stems from the fact that it's privately held and doesn't have to answer to Wall Street every quarter.

"I don't think it's a big secret that Wall Street doesn't particularly like mechanical contractors," says Jim Murphy. "They don't really understand us, and our markets are too volatile for most investors."

Strong Unions, Strong Company

A huge key to Murphy Co.'s success over the years is the relationship that the company enjoys with its union workforce. With anywhere from 800 to 1,000 union associates on the payroll at any given time, the company is one of the largest employers of union employees in St. Louis and Denver, CO.

Most of Murphy Co.'s union craft workers are from the AFL-CIO pipefitter, boilermaker, plumber, and sheet metal trade unions. Jim Murphy served as president of the Mechanical Contractors Association of America (MCAA) in 1998, and still maintains an active role with the association.

Murphy Co.'s relationship with the unions works both ways: the company has a great reputation at the union halls, and the company is glad to have access to the well-trained, highly skilled workforce that it needs to serve its customers and continue to grow.

"Our people feel like they're part of Murphy Co., in addition to being part of the union," says Tom Hegger, vice president of the company's commercial and institutional operations, and a 20-year veteran of Murphy Co. "They like us because we keep them working. We've taken jobs when it was slow just to keep our people working, simply because it was the right thing to do. They've helped us meet our customers' needs in the past, and we want them around now and in the future."

The feeling of a closely-knit operation is echoed even by the field foremen -- notoriously tough customers.

Ron Pleimann and Brian Herron, sheet metal foremen at an expansion to the Harrah's Casino on the Missouri River north of St. Louis, both had praise for Murphy Co.

"Murphy Co. treats everyone really well, and everything is very well
organized," says Herron. "I've worked elsewhere, and you can tell the difference here. And people know it down at the hall."

Adds Pleimann: "Our safety program is the best. It makes you feel appreciated when so much of the company's focus is on safety."

John Kobbe, the project manager at the Harrah's site, says, "Murphy Co.
isn't afraid to spend money to make sure the job is done right, both from a quality standpoint and a safety standpoint. On this job, they sent the foremen out well in advance to plan everything. Most other places, the foreman shows up on the site the same day as the materials."

"Murphy Co. is very professional and very quality oriented," says Randy Frost, a plumbing project foreman. "Murphy structures the work to really help the guys out in the field, and they're always talking safety. I've worked here for 17 years, and I hope to spend the rest of my time here, too."

If it seems like safety is a common theme among the company's field personnel, that's not an accident. Murphy Co. prides itself on its safety program, which includes safety briefings at the start of each day in every department, ongoing safety training, a safety rewards program, safety lunches, and an incident review program. It all adds up, and the important message -- safety first -- gets across at a company that sees more than 2 million man-hours worked each year.

Committed to Design/Build

Many commercial contractors talk the talk when it comes to using the Design/Build construction method, but Murphy Co. backs up its talk with a business group specifically devoted to Design/Build projects.

Headed by Mark Bengard, P.E., senior vice president of Design/Build (with Murphy Co. for 15 years) and Kevin Cook, P.E., vice president of the Design/Build group (eight years), this group is a $30 million to $40 million business in its own right. Formed in the early 1980s, the Design/Build group serves as a vivid example of the company working as one unit to put customers first.

"There's a whole different mentality to Design/Build than there is to plan-and-spec," says Cook. "It's a mentality that we're going to do what's right for the customer from beginning to end, and that's really what this company has always been about."

The Design/Build group in Murphy Co.'s St. Louis office consists of about 30 people; there are seven people in dedicated roles in the company's Denver, CO office. However, the Design/Build group will share its expertise with any other area of the company, and can always draw additional personnel from elsewhere in the company, too.

"We're a support group but we're also on our own," says Bengard. "One of the great things about Murphy Co. is that we have the personnel on every level to provide whatever method the customer needs."

About 30% of the company's total sales volume comes in through Design/Build work, but the Design/Build group also will work behind the scenes with the plan-and-spec group to perform value engineering. The group also is heavily involved with Murphy Co.'s "Quick Response" business group.

"The key to a successful Design/Build venture is scope," notes Bengard. "The end user must understand the scope of what's being delivered under the Design/Build method, and not just focus on the price."

A Quick Response to Smaller Projects

Murphy Co. is never too small to handle a big job, but it has been perceived as being too big to handle a small job. Yet the company has been working hard to change that perception, and to win smaller projects through its Quick Response teams.

The idea behind the Quick Response teams is to secure jobs in the $1,500 to $500,000 range. Such jobs are akin to "minor surgery," and are just as critical to the customer as large projects.

Quick Response jobs are handled by eight project managers and 19 installation/fabrication technicians in service vans, with more personnel available as needed from the company's service department. Projects can take anywhere from a day to a few months, and project managers can have 20 to 30 open jobs at any time.

Dennis Hixson, vice president of Quick Response (33 years with Murphy Co.), says the idea is to get a project manager out to a job quickly, per a customer's request. The project manager then works with Murphy Co.'s Design/Build group to efficiently address the client's needs.

In its first year, the Quick Response group had sales of about $1 million. In 2003, total sales in the group were $12.5 million on more than 300 projects. The company expects to handle about 450 Quick Response projects this year, and 80% of those jobs will be for less than $5,000.

Murphy Co. anticipates that within four years, 30% of all the company's projects will be performed by its Quick Response and service operations, both of which earn a high rate of repeat customers.

"It's really pretty simple," Hixson says. "Mechanical systems wear out. We want to be the ones replacing them."

Service is the Hub

The case can be made that the hub around which all of Murphy Co.'s spokes revolve is the service division.

Headed by Service Manager Conrad Philipp III (10 years), Murphy Co.'s service department has 65 trucks carrying 51 HVAC and refrigeration technicians, 12 plumbers, and two carpenters. In 2003, the company did $13.5 million in service work: $2 million plumbing, $3 million refrigeration, and $8.5 million HVAC.

Nowhere is the company's "womb-to-tomb" approach to customer service more obvious.

The service department sent 12,000 invoices in 2002, and currently has 450 maintenance contracts in place.

"We're very focused on preventive maintenance and building, through our service work, the ongoing relationships that earn us opportunities for Quick Response, Design/Build, and large projects, "says Philipp.

The service department also works closely with the Design/Build group in the building controls arena. As of mid December, Murphy Co. had contracts to remotely monitor 23 buildings for customers.

Sheet Metal and Pipe Fabrication

The company's on-site pipe fabrication and sheet metal shops crank out high-quality products and assemblies that keep projects running smoothly for the company's field personnel.

The pipe fabrication shop consists of 12,000 sq.ft. inside and an additional 50,000 sq.ft. outside, dedicated to storage and lay-down. Anywhere from four to 20 associates help Shop Manager Gary DeFosset (13 years) meet the field's calls for HVAC, plumbing, and process piping assemblies.

In the adjacent 25,000 sq.ft. sheet metal shop, 13 to 15 associates produce more than 800,000 lbs. of sheet metal ductwork and fittings annually.

Robert Grossman, who has been involved in Murphy Co.'s sheet metal operations for 17 years, says the company's strongest suit is its ability to serve a wide variety of markets.

"We can handle hospitals, schools, commercial spaces, Design/Build projects, you name it. Whatever market is hot, we're ready," Grossman says. "And now, with the Quick Response group, it's almost like supplying a small mechanical contractor as well as a large one.

"I also can't say enough about this company's foremen and project managers," Grossman adds. "The coordination that they bring among all the crafts is outstanding."

On to Colorado

The old refrain from the days when St. Louis served as the Gateway to the West, "Go West, Young Man," was taken to heart by Murphy Co. in 1983, when the company opened a new location in Denver.

The Denver operation was patterned after St. Louis' successes, and originally headed by Senior Vice President Larry Kruse, P.E., a 30-year veteran.

When Murphy Co. decided it was time to grow geographically, Denver was chosen as an expansion site for two main reasons: the market for construction in the Denver area had bottomed out in 1983; yet it was felt the market overall was going to be very favorable and growth-oriented in the long run.

Murphy Co. held out through some very lean early years as the Denver operation struggled to establish itself.

Now, at the 20th anniversary of its first project (a Design/Build job at a suburban strip mall), the Denver office is rolling along, averaging revenues of $30 million to $40 million annually. The original 2,500 sq.ft. rented space has given way to a 38,000 sq.ft. operation with more than 60 salaried employees and an average field force of 250.

The Denver location also recently added a sheet metal shop (a $500,000 investment), and has begun offering the Quick Response services that have proven so successful in St. Louis

"Denver was a great example of Murphy Co.'s ability to always take the long view of a situation," says Kruse. "They saw it all along as an investment, and were willing to wait for it to pay dividends. And it eventually has succeeded, largely because we built it on the same core values that have always driven this company in St. Louis."

"Our service business recently doubled because a couple of competitors went out of business," says Michael Knapp, senior vice president (16 years). "That allowed us to bring in not only business but technicians. It was a rough road at times, but we're in Denver to stay."

The Road Ahead

What lies ahead for Murphy Co.? Despite the stability as evidenced by the length of service of such a large number of employees (even the receptionist has been with the company for 16 years), this is not a company that is getting complacent or stodgy.

The company has been pursuing ISO 9001 certification, and expects to have it for both St. Louis and Denver in the first quarter of 2004.

New blood and fresh ideas are flowing into the company in the form of fourth generation Murphys: Patrick Jr., son of Patrick Murphy Sr., and Anne, daughter of Jim Murphy.

"Our reputation draws people to our company, and we're careful to hire only those who have similar values. We want lasting relationships with our associates so they'll create lasting relationships with our customers," says Patrick Murphy Jr., senior vice president.

"We're a family business, and we pride ourselves on treating our associates like family," he adds. "However, no one person or no one family is greater than the overall company."

CEO Jim Murphy concludes with three principles that will drive Murphy Co. into the future, and also serve as advice for other contractors to succeed in the commercial market.

First, be reasonably well-diversified in your products offered and markets served.

Second, let the service sector drive construction, rather than letting construction drive service.

Finally, and most importantly, stay close to your customers. "Read everything you can to know what's going on with the economy. That will help you identify what your customers are going to want and need," Jim Murphy says. "Strive to find out where the market is going, and be prepared to serve it. Look for niches, and provide your customers with meaningful value-added services."

As Murphy Co. approaches its 100th anniversary, one thing will always serve as its bedrock: a nearly fanatical commitment to its customers. As Vice President Tom Hegger (20 years) sums up: "We're tough, tenacious, and confident. We never, never walk away from a problem."