Just over three years ago, Finning International CEO Doug Whitehead publicly set a lofty target price of $40 for his company’s stock when it was languishing at $13.

Even the research analysts thought Whitehead was being too ambitious.

His own board members were taken aback by their CEO’s brash statement.

Today, the analysts and board members have come onside and Whitehead looks like a genius with Finning’s stock having been one of the highest flyers on the Toronto Stock Exchange in recent years.

Bayne Stanley photo, Business Edge
Finning International CEO Doug Whitehead proved the skeptics wrong by making the Vancouver firm’s stock one of the highest flyers on the TSE.

At $33, stock in the world’s largest Caterpillar equipment dealer is now on track to steamroller over Whitehead’s target.

Whitehead, who was CEO of Fletcher Challenge Canada before joining Finning 51/2 years ago, is a firm believer that success is a product of setting high goals. Judging by the amazing turnaround story at Finning with Whitehead at the helm, perhaps there is something to be said about reaching the stars by shooting for the moon.

1. Why did you choose to study civil engineering in university?

“It was something that excited me when I was in (grade) school. But then after graduating from university, I found it very detail oriented and boring. I worked for a consulting engineering firm in Vancouver designing transmission towers. Perhaps I chose the wrong part of engineering, but I didn’t find any excitement in working in it. Luckily, I ran into a guy whom I respected (John Dale) who had taken an MBA. So I followed him and it’s been one of the best moves I’ve ever made.”

2. After graduating with your MBA, where did you start your business career?

“I was part of a team that did the business plan and launched a new concept in home improvement retail – the Hometown stores in the early 1970s. That company was later sold to Beaver Lumber, a fabulous opportunity. I was really lucky to know a fellow named Bob Johnson (president of Crown Lumber, a division of Crown Zellerbach) whom I really admired. For some strange reason, he had some trust in me and, at the tender age of 27, he asked me to go and run a chain of lumberyards on the Prairies (Crown Lumber). It probably wasn’t the most sexy opportunity in the world, but it sure gave me a tremendous opportunity to learn how to manage at a young age. After working there for about five years, I moved to a competitor in Vancouver, Lumberland, for five years. I later returned to Crown Zellerbach (which would later become Fletcher Challenge).”

3. What did you learn from Bob Johnson that you’ve been able to channel into your leadership roles with Fletcher Challenge and Finning International?

“He taught me the importance of business strategies and having a sense of vision. He also had a very casual management style and that kind of suited me. I was able to model some of that. I think it confirmed to me that you don’t have to be a tyrant and that you could engage people by having a more casual personal style and being more people-oriented.”

4. What’s the biggest obstacle you’ve faced in climbing the corporate ladder to CEO with Fletcher Challenge Canada and your current role with Finning?

“In every job I’d been thrown into I didn’t have the industry knowledge that others had. It was a particularly big obstacle in the pulp and paper business (with Fletcher Challenge Canada), learning about the complex processes of making pulp and paper. On the other hand, because I didn’t have the technical or industry knowledge, it meant that I had to work with the people who reported to me. I couldn’t overpower them with knowledge, so I had to get their support so I could pick their brains and get the knowledge from them. That was a huge obstacle and it was uncomfortable, but I also think it made me a better manager. It meant I had to listen, I had to get people together and I had to work on consensus decisions. I couldn’t take shortcuts and make the ‘industry’ decision.”

5. Why did you leave as CEO of Fletcher Challenge Canada in 1998 to join Finning?

“I’d been there six years and I think every CEO has a shelf life. I think six, seven or eight years is a good timespan (for a CEO). The company (Fletcher) was probably in need of new and different solutions. Secondly, there was a pretty major change in the parent company in New Zealand. I’d have to say the culture changed and it really wasn’t to my liking. I worked with it for a year and then eventually I faced up to the fact that I wasn’t going to be happy. And if I wasn’t going to be happy, I wasn’t going to be productive.”

6. How did you wind up with Finning?

“I knew Jim Shepard, the previous CEO here, from business relationships around town. When I started looking at the kind of organization that I’d like to be a part of, Finning was way at the top of the list. Jim and I had a number of breakfasts and a number of lunches. We kicked around a couple of ideas for five or six or seven months and eventually we found a role (president and chief operating officer) that worked for both of us.”

7. What was your primary focus on becoming CEO of Finning in 2000?

“I think this was and still is a company that represents a great brand name, and that’s certainly one of its strengths. I think it has people with a can-do attitude. However, I’m not sure we were generating the kind of shareholder returns that we were capable of. So I really set about to put my shoulder to that wheel. We cut half a billion dollars out of the balance sheet and by that, we cut half a billion dollars out of the debt level. That kind of turned the company around pretty quickly. It’s not that we were performing really badly, it’s just that we were not living up to our potential. We also worked hard to improve our U.K. operations. The key things were to come in with cost reduction, investment reduction, buttoning things down and tightening things up from an operational standpoint, as well as growing the business.”

8. So are you content with where you’ve taken the company?

“Well, much to many people’s surprise, when the stock was at $13 about three years ago, I said, ‘look, I’m not going to be happy unless I can drive it to $40.’ I went public with that and it was a rallying cry around the company. As you probably know, we’re at $33 today. So, to answer your question, I’m not going to be happy ’til I get it to $40.”

9. What kind of response did you get in making that bold statement?

“The analysts were surprised that a CEO would be so bold. I’d have to say privately that our board was a little concerned that I would be that candid publicly about it. And I think the senior team was a bit concerned that I’d set out a target that was too ambitious to achieve. But I guess I learned a long time ago that if the top guy doesn’t stake out where he wants to get to, nobody knows where to follow. I’ve always tried to lay out fairly bold goals. I’d rather fail by setting a target too high and coming in with 90 per cent of it than to set a target that is too low and achieving it.”

10. So where’s the party when your stock hits $40?

“(Laughter) Oh, I don’t know. By then, we’ll probably have new goals in mind. Maybe by then we’ll change it to $60. Once you reach a plateau, it’s just a resting place while you formulate a new plan to get to a higher plateau.”

11. Are you now focusing on broadening the company’s horizons by acquisitions, or are you content to focus on current operations?

“We have grown fairly dramatically in the past two years. There’s no doubt that 2004 is a period of consolidation.We need to bed down and institute our culture in these acquired businesses. We need to get the operating disciplines firmly entrenched. Once we’ve done that, then we’ve got a good platform for further growth. Job 1 right now is to bed down what we’ve got and get it efficient.”

12. Where do you see the most potential for growth in the long term?

“In the big picture long term, it’s clearly Asia. We’re not represented there now. More growth in South America would be good. We’ve got a great platform down there and it’s an exciting part of the world. But I’d be disappointed if we don’t have some kind of a presence in Asia within five years. One just has to be there given the growth that is going on over there. Take China, for example. There’s so much infrastructure spending on roads, freeways, dams, transmission lines and mining. The Caterpillar product really lends itself to building the world’s infrastructure. Given the amount of road building and infrastructure, that’s why I’m so confident about going in there.”

13. Are you concerned about how a strong Canadian dollar might impact your company’s bottom line?

“I don’t worry about things I can’t control. I can’t do much about that. There’s no doubt the strengthening dollar has reduced our earnings out of the U.K. If the dollar had stayed at 65 cents US, we would be turning much better numbers last year than this year. It cost us 20 cents a share last year alone. Yes, it’s a concern, but I can’t do anything about it. We just have to find ways to manage around it.”

14. What’s your vision for Finning International?

“No. 1 is to be a Cat (Caterpillar) dealer. I don’t see us doing anything else. It’s to be the best Cat dealer in the world. We talk in terms of 15 per cent a year growth, 20 per cent a year return on equity and 30 per cent market share. We’ve drilled down and put out some quantifiable targets. You know, 15-per- cent growth means doubling in the next seven years.”

15. Your company has been recently ranked first in Canada in corporate governance (by Canadian Business magazine). What’s been the key to earning that recognition?

“I don’t think there’s anything magical. We’ve just followed sound business practices long before it was fashionable to do so. We have a highly independent board and we split the chair and president’s roles a long time ago. The performance of the company also has to be strong to qualify for good governance.”

16. What’s your view about the accounting scandal at Nortel Networks and other high-profile corporate scandals?

“No matter how well governed a company is, it is always open to human frailties. The board’s job first and foremost is to get a CEO of a high ethical standard. Too often, boards are dealing with peripheral issues and fail to really focus on having a leader of high ethical standards. Despite all of the governances processes, a management team can shade things the wrong way. I guess that’s what we’re seeing at Nortel right now. After it (Nortel) had its unfortunate fall, in the past couple of years they put in good governance practices. There are great people on the board there, but I still think you maybe had management there that wasn’t of the highest ethical order, who were able to pull the wool over the eyes of the board.”

17. What in your mind makes a great leader?

“Having the vision or sense of where you want to get to. Having the courage to strike out in different directions and a deep belief and care in people getting you there. The old notion of the one-man band is gone. The leader is an important piece of it, but by a long ways he’s not the only contributor.”

18. What’s your best advice for a young MBA grad entering the workforce today?

“Know yourself. Be really ruthless about where you’re strong and where you’re weak. Find an industry and a role in which you have an interest. Forget about the money and find a role in which you have passion. And work hard. Then, I think you’ll be successful. I would not go chasing after money. I would not go chasing after fame. Money and success are byproducts of being a good leader. If you’re chasing those things, you’re not going to find them. You also have to have a duteous care. It’s not your money (in a public company), it’s shareholders’ money. It’s not really your company. You’re there as a steward, to do what’s right for the shareholders, the employees and the customers. Once you lose sight of that, your days as a leader are numbered. You have to like to serve.”

19. You spoke earlier about shelf life for a CEO. How much shelf life is left for the CEO of Finning International?

“The normal retirement age here is 60, which is two years away for me. But the board is kind of relaxed on that. For sure, I don’t have more than four years left and I hope I’ve got two years. So it’s probably somewhere between two and four more years. We’re going to sit down with the board and assess it on a year-by-year basis, and if I’m not performing or if I’m not feeling like I’m performing, we both have the opportunity to change. I certainly want to leave this organization with a good succession, with very strong people and lots of backup. That hasn’t necessarily been the case over the years at Finning. One thing I’m working very hard on with the board right now is to get a number of people who could compete for my job. If the right person was ready in two years and I was overstaying my welcome, we’d all be foolish to have me stay on.”

20. What are some of your goals after your retirement from Finning?

“I’d like to spend a bit more time golfing and remain active in the community, which gives me a lot of pleasure. I’m on the board of governors for UBC (University of British Columbia) and the boards of Terasen and Ballard Power. These are the kinds of things I’d like to continue to do. And I ran a marathon last year, my second one (his first was 20 years earlier) and I’d like to see if I can do that when I’m 60. I sort of have a notion of running marathons around the world. That has a nice appeal to it. The marathon is a lonely thing. You’re all on your own. It’s a hell of a challenge.”

THE COMPANY: FINNING INTERNATIONAL
* Brass: Doug Whitehead, president/CEO; Wayne Bingham, executive vice-president/chief financial officer; Ian Reid, president of Finning (Canada).
* Profile: Finning is the world’s largest Caterpillar dealer. The company sells, rents, finances and provides customer services for Caterpillar equipment and engines on three continents through its subsidiaries – Finning (Canada), Finning South America, Finning (UK) and Hewden Stuart Plc. (UK).
* Employees: 11,000.
* History: Finning was founded in Vancouver in 1928 by Earl B. Finning.
* Stock (FTT-TSX): $33 (year range, $28.38-$33.75).
* Websites: www.finning.com, www.finning.ca
* Corporate Headquarters: Suite 1000, Park Place, 666 Burrard St., Vancouver, B.C., V6C 2X8
* Phone/Fax: 604-691-6444/331-4899.
* Finning (Canada) Headquarters: 16830 107 Ave., Edmonton, AB, T5P 4C3
* Phone/Fax: 780-930-4800/930-4801.

IN PROFILE: DOUG WHITEHEAD
* Title: President/CEO, Finning International Inc.
* Born/raised/age: Victoria, B.C./Kitimat, B.C./58.
* Education: University of British Columbia, bachelor of applied science (civil engineering); University of Western Ontario, MBA.
* Career: Whitehead joined Finning International in January, 1999, as president and chief operating officer and was promoted to CEO in April, 2000. Prior to Finning, Whitehead spent 11 years with Fletcher Challenge Canada, including the last seven as president and CEO.
* Moonlighting: Whitehead is a director of Ballard Power Systems, Terasen, Belkorp Industries and the Conference Board of Canada. He is a member of the Canadian Council of Chief Executives, a board member for the Business Council of British Columbia and a board member of the University of British Columbia. He is past chairman of the board of Finlay Forest Industries and TimberWest Forest. He was general campaign co-chair of the United Way of the Lower Mainland in 1997.
* Passions: Golf, skiing, marathon running.

(Gyle Konotopetz can be reached at gyle@businessedge.ca)