The more things change, the more they stay the same at J.E. Dunn Construction Group of Kansas City, Mo. Even as the firm confronts the demands of a rapidly changing industry, it has maintained the values and culture established by J.E. “Ernie” Dunn, who founded the business in 1924. “The most important thing that we strive for is to have satisfied clients, because satisfied clients give us repeat and referral business,” says Ernie’s son Bill Dunn Sr., the 85-year old chairman emeritus. “Without satisfied clients, you’re out of business.”
This client-centered approach, and the company’s commitment to the principles on which it was founded, have been keys to J.E. Dunn’s steady growth and success throughout the nation’s numerous economic ups and downs, family members say. The company, which has about 3,800 employees and 20 locations distributed strategically around the country, reports revenues of approximately $2.65 billion. In 2006, it was ranked as the sixth-largest building company in the U.S.
Bill Dunn Sr. says his father would be shocked at how large the company has grown. “He told me when I came to work [more than 60 years ago]: ‘You know, you’re in a risky business. I’ve studied this, and the average construction company is out of business in 20 years,’” Bill reminisces.
Company executives say J.E. Dunn has beaten the odds by maintaining a diverse practice, staying abreast of industry trends, strategically expanding into growth markets and, above all, doing the work well for the most economical price.
The firm has six corporate divisions across the U.S.—in Denver; Portland, Ore.; Minneapolis; Houston and Atlanta as well as Kansas City—but its roots remain firmly planted in the Midwest. J.E. Dunn Midwest, located in Kansas City, is the company’s largest subsidiary, responsible for about $1 billion in revenue. It helped reshape the Kansas City skyline with such recently completed projects as the $370 million IRS Complex, the $138 million world headquarters for H&R Block, and the Bloch Building, part of a $200 million capital campaign at the Nelson-Atkins Museum of Art. J.E. Dunn is also building the $326 million Kauffman Center for the Performing Arts, to which the Dunn Family Foundation has contributed more than $3 million, as well as the company’s own 200,000-square-foot corporate headquarters, which will bring together 550 employees currently scattered across four metro locations. “We really have a civic commitment, and we are excited to stay in downtown Kansas City,” says Bill’s son Terry Dunn, 58, J.E. Dunn Construction Group’s CEO and president.
Notable Dunn projects in other parts of the country include a Microsoft campus expansion in Fargo, N.D.; the Pikes Peak Regional Medical Center in Woodland Park, Colo.; Three Rivers Hotel Casino in Portland, Ore.; Ted Stevens Marine Research Facility in Juneau, Alaska; Mosaic Condominiums in Houston; and Atwood Hall Laboratory at Emory University in Atlanta.
Four of Bill Dunn Sr.’s five sons work for the family enterprise or its foundation. In addition to Terry, the others are Steve, 56, vice chairman of J.E. Dunn Construction Group and board treasurer; Bill Jr., 60, chairman of J.E. Dunn Logistics Inc.; and Bob, 48, president of the Dunn Family Foundation.
Family members take to heart the enterprise’s founding principles—quality, integrity, economy, performance and safety—according to Terry. “Our culture as a family business runs deep,” he says. “We cannot tolerate any shortcomings in our commitment to the values of treating people as we would like to be treated and making decisions based on integrity every time. Our values are lasting as far as our ability to continue as a company, and if we cannot continue, it’s because we have taken our eye off the ball on our values.”
These values go back to Ernie, who was known for his quick temper, his commitment to excellence and his quiet philanthropy. In the company’s corporate history book, Ernie’s oldest daughter, Mary Ellen, 87, recalled hearing her father on the telephone shouting at a subcontractor whose office was just a few blocks away. According to her account, “The subcontractor snapped back, ‘If you yell a little louder, you won’t need to use the telephone.’”
“He could swear like a trooper,” recalls Bill Sr.
The company got its start in the nation’s heartland building houses and apartments. Not long afterward, J.E. Dunn began putting up schools, hospitals, religious facilities and office buildings throughout the region, winning commercial and government contracts. Contracts from the government and religious organizations helped J.E. Dunn weather the Depression years.
Ernie, a devout Catholic, built many projects at significantly reduced rates for religious orders and Catholic organizations. “My father had seen people struggling all of his life and felt motivated to help them,” Bill Sr. says. In 1944, Pope Pius XII named Ernie a Knight of St. Gregory, one of the highest honors awarded to a layperson.
Government projects have been another important niche for the company. Before, during and after World War II, J.E. Dunn built housing for defense workers and their families, military warehouses and new infrastructure to support the needs of returning war veterans and their growing families. During the war, Ernie “opted to turn any profits on defense work back to the government,” Bill Sr. says. When it built the famous Quartermaster Depot in Kansas City in 1942, the firm underbid its competitors by $250,000, yet Ernie asked the Army to reduce the fee by $150,000 so he wouldn’t make a profit, according to newspaper reports of the time as documented in the corporate history book.
Ernie died of a heart attack at age 71 on Dec. 31, 1964. At his death, his company had a net worth of $1.4 million. His shares in the business were equally divided among his four children and his wife. By 1966, Ernie Jr. and Bill Sr. had acquired their mother’s and two sisters’ shares.
Bill Sr. ran the business together with his brother, Ernie Jr., until 1974, when he bought him out. (Family members decline to discuss the reason for the split.) Bill’s four sons worked elsewhere before joining J.E. Dunn, in part because of a company policy that stood until Bill bought out Ernie. The policy, based on a mutual decision by the brothers, encouraged any Dunn family member interested in joining J.E. Dunn Construction to first obtain work experience outside the family firm.
“One very smart thing that I did, based on experience, is that each one of my sons has a separate assignment and they do not compete with each other,” says Bill Sr. “It was intentional that they were all assigned to different parts of the business.”
His son Steve agrees that this was a wise move. “It was helpful, of course, that he gave us assignments that played to our strengths,” Steve says.
Today, J.E. Dunn continues to have a presence in health care, education, faith-based, retail, mixed-use, gaming and residential markets across the country. The company prides itself on having a diverse practice and aims to be a full-service firm; in addition to building office complexes, it also will take on home remodeling jobs. “The message to our clients is that we want to do work for them across the spectrum,” says Steve. “We can do the $200 [million] and $300 million projects, we can do the $10 [million] or $20 million projects and we can do the $10,000 projects. It keeps us on our toes, and we’re trying to do it at a very focused level.”
“We try to look at the entire marketplace as a cyclical business of a number of different industries running on different cycles,” Terry elaborates. “We are strong in about ten to 12 sectors of the construction industry, and some of them, like government projects, are strong even during recessionary cycles.”
Terry readily acknowledges that the downturn in the economy is affecting J.E. Dunn’s business, especially as materials costs continue to escalate. “We, as are all other construction companies, are operating in a time of economic uncertainty,” he says. “However, our model of diversification protects us against inevitable peaks and valleys prevalent in our economy. While some segments of the market decline, others thrive.”
J.E. Dunn is organized around “Centers of Excellence,” leadership teams consisting of professionals from diverse backgrounds, such as architecture, accounting, advertising, marketing and engineering as well as construction. This multidisciplinary approach was developed to ensure projects are created and constructed on time and on budget, according to the company.
Technology is driving many of the changes in construction. “We’re looking at opportunities where we can differentiate ourselves,” says Terry. “Where there’s a technological or quality barrier to entry, that’s where we want to be strong.” In addition to blueprints, the firm uses three-dimensional modeling so the workers in the field can visualize not only how the building should look and what materials are to be used, but also how the components are put together. “It’s a proactive management tool that can be used to address problems ahead of time,” explains Steve.
These computer-generated images are especially beneficial on projects in which visual comprehension is critical, Terry notes. “At the end of the day we can increase the quality of our construction just by better planning and visualization,” he says.
“Green” building initiatives have become the norm for many jobs. J.E. Dunn strongly encourages its employees to become accredited in the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program and currently is ranked as the contractor with the fifth-greatest number of LEED-accredited professionals on staff nationwide. “Virtually every client we are working for wants to take advantage of cost-effective sustainability,” says Terry. In the new corporate headquarters that J.E. Dunn is currently building, the company hopes to achieve gold-level LEED certification, a rating based on five areas: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. The Wayne Lyman Morse Federal Courthouse in Eugene, Ore., designed by Pritzker Prize-winning architect Thom Mayne and completed by J.E. Dunn in 2006, was the first LEED gold U.S. courthouse.
The company has a sustainability committee that is charged with shaping policy. Committee members are investigating issues such as the use of paper and the distance materials must travel to job sites. J.E. Dunn Logistics, a company division, purchases materials by volume, across multiple jobs, in an effort to curtail the rising cost of materials. “Procuring a lot of elements that go into a building [to achieve] the best value for the client is extremely important at the moment,” says Terry.
Building green requires the architect, builder and owner to work closely together. “From a technical standpoint, the contractor is probably doing more in the design application process, working with the architect, and the transparency level with the owner is much greater,” explains Terry.
J.E. Dunn Construction’s human resources policies are based on the advice Ernie once gave to Bill Sr.: “Get the best people you can get, give them interesting and challenging work and let them share whatever rewards there are in the company.” Decades ago, Bill created an annual incentive program, open to all employees. It is based on profitability and approved by the board of directors. “It gives people all the benefits of being a stockholder without any of the liabilities,” Bill explains. The company also has a 401(k) program (it matches 50% of employees’ contributions up to 5%) and a year-end bonus.
According to Steve, J.E. Dunn’s turnover rate is “less than half that of the construction industry.” Adds Terry: “Recruiting quality people and retaining those people is very strategic for us.”
J.E. Dunn’s safety program, called “Entering the Work Zone,” trains all workers and subcontractors in proper safety methods. “Safety and quality assurance are really our risk points, which is why we want to make sure we control the process and have a safe environment at the highest level possible,” says Terry.
The fact that J.E. Dunn Logistics owns, manages, maintains and operates $70 million worth of construction equipment helps ensure worker safety, according to Bill Jr., chairman of the division. “I feel my equipment is safer that what the rental companies offer because it is managed and operated by professionals,” Bill Jr. says. “The average age of our major equipment is five years, and we manage and train our operators.”
What’s more, owning major equipment creates a profit center for the business as well as a variable the firm can control in terms of productivity and safety. If equipment breaks down, the company can replace it quickly and efficiently to minimize the loss of productivity, Bill Jr. says.
Construction is unique among industries in the extensive use of subcontractors. Steve estimates that J.E. Dunn subcontracts about 75% of its work (predominantly mechanical and electrical), a situation that makes quality control and assurance critical. “From a character capacity, financial viability and experience standpoint, it’s very important to get the right sub in the right place,” says Terry.
Three years ago, the company instituted a captive insurance program, essentially forming its own insurance company to insure its subcontractors. “It eliminates any gaps in coverage that your subcontractors might have,” explains Steve, who administers this program.
According to Terry, the average life of a subcontractor firm is three to seven years, while in most states the statute of limitations is about ten years. “If you have a contractor or subcontractor that goes out of business, it is very hard to pursue any insurance for that subcontractor,” he says. “In a captive insurance program, we do have coverage going forward.”
When Bill Sr. took control of the company in 1974, he vowed to commit 10% of the company’s taxable income to charities. Today the Dunn Family Foundation donates to causes in the areas of education, health and human services, youth, the disabled, the elderly, ethnic minorities and community development, predominantly in the Kansas City area.
When the third generation was growing up, “We were all taught we had to fund-raise, whether it was by selling newspapers, candy, candles or magazines,” says Bob Dunn, now president of the Dunn Family Foundation. “It was something our grandfather instilled in his children.”
Bob meets with his father four times a year to review the many requests that cross his desk. In 2007, more than 400 charitable, community and civic organizations nationwide benefited from J.E. Dunn’s generosity. On an individual level, J.E. Dunn employees contributed more than $850,000 to the various charities supported by the United Way, representing a 9% increase over their 2006 largesse. “We are the highest per capita giver to the United Way in the greater Kansas City area,” says Bill Sr. proudly.
“Being a good citizen is extremely important and being a good person is extremely important, and having leadership live that every day is extremely important to us,” says Terry.
J.E. Dunn is committed to remaining a family business even as it hopes to expand its presence in new markets. “We are focused on improving our processes and trying to develop the quality of leadership within the company,” says Terry.
Therein lies a unique set of challenges related to large family organizations: how to strike a balance between imposing one’s values on others while fostering independent, responsible leadership rooted in those same values.
In the 1990s, growth through expansion, both internally and externally, became a strategic priority. During a span of ten years, J.E. Dunn acquired five construction companies, providing access to areas outside the Midwest. At the time of the first acquisition, J.E. Dunn Construction employed approximately 1,200 people in the field and office. Currently, the firm has more than 4,000 employees. In 1990, before the acquisitions, revenue was $144 million. In 2007, revenue was $2.6 billion, with almost half of that generated by the five operating companies outside of Kansas City.
As with all expansions, there have been growing pains, related not only to the ups and downs of the construction business, but also to the process of ensuring that the Dunn philosophy of excellence is adhered to by all employees in all operations and all locations. Terry says he feels confident that the firm has mastered the strategy, through trial and error. “The first thing we look at is the reputation [of the potential subsidiary],” says Terry. “We also look at the financial performance, the people, and how that company relates to its clients to see if it’s compatible with J.E. Dunn….When I look at a subsidiary, I’m really looking at the people component and the chemistry within that entity to grow and allow its people to reach their fullest potential.”
There are currently four (out of a potential 18) fourth-generation Dunns working in four different parts of the business. “What we want to do is provide an opportunity for those who are not in the business to be active and educated shareholders,” says Terry. “We want to make sure we respect those who do not go into the business as much as those who do and that we treat the two groups equally.”
The brothers are considering reinstituting the requirement that young family members work elsewhere before joining the firm “to show that they can bring some value to the company,” says Steve. In retrospect, they say, this requirement was helpful to them because together they brought a broader span of knowledge and experience to the firm.
In spite of the challenges facing the construction industry, Terry is optimistic about future opportunities in markets that “weren’t even on our radar screen ten years ago,” such as high-tech and biotech facilities and retirement housing. “Our horizon is really to work nationally at a much better and higher level,” Terry says. Increased cross-marketing among subsidiaries should lead to more referrals and expanded capabilities, he predicts.
“Anyone can build a building,” founder Ernie once told Bill Sr. “It’s how you do the job and whether or not the design team and owner want you back again that is going to determine whether you stay in business.”
Kathryn Levy Feldman is a freelance writer based in Bryn Mawr, Pa.