Irvine-based Southland Industries Inc., one of the largest mechanical contractors in the country, laid out a detailed plan five years ago for picking its next chief executive.
It was just a few weeks ago that the company tapped Ted Lynch for the top job. For now, his title is president. In two years, he will add chief executive.
Southland designs, builds and services plumbing, refrigeration and heating and cooling systems and makes its own sheet metal and piping.
The company has done work locally for San Clemente-based ICU Medical Inc., Parker Hannifin Corp.’s Irvine operation and Irvine Company’s Jamboree Center in Irvine.
Nationally, it has been doing work at the Pentagon as part of a 10-year renovation project. Other notable projects include the Beverly Hills Hotel and Washington, D.C.’s Walter Reed Medical Center.
Lynch most recently guided Southland’s Mid-Atlantic region from $6.1 million to $276 million in annual revenue, accounting for more than half of the company’s total in 2010.
Search
He didn’t get Southland’s top job on numbers alone.
The lengthy search for a successor to Andrew Fimiano started with company directors, senior managers and a number of advisers devising a check list of sorts. Integrity, business acumen and employee development topped the characteristics they wanted in a new leader.
That led to an intramural competition similar to the succession playbook written by former General Electric Co. chief executive Jack Welch. Southland chose three internal candidates to compete for the top position.
They were formally evaluated about every six months. There was homework, including essays about their vision for the company, its current position, future potential and their own careers.
Lynch was the unanimous choice to fill the shoes of Fimiano, who oversaw the company’s rise in the last decade.
He has a thorough background, starting as an intern, doing a stint laying pipe and eventually playing a key role in winning huge contracts.
“I know the company inside and out—I know the culture,” Lynch said. “That’s the advantage I have, and that’s part of the reason I was selected.”
He said the five-year test didn’t seem that long.
“It was a good learning process,” Lynch said. “The most important thing is getting the right people in the right position.”
That often means looking within at Southland.
• Headquarters: Irvine (move to Garden Grove pending)
• Business: Design, construction, maintenance of plumbing, heating, air-conditioning systems
• Yearly Revenue: About $500 million
• Notable: Recently chose Ted Lynch as president, future chief executive after five-year review of three internal candidates
“It was important the people came internally,” said Fimiano, who has seen plenty of employees hired out of college and rise to senior executives and even to major shareholders.
“There’s lots of Ted stories,” he said. “That part of the Southland story is very gratifying to see.”
Fimiano wanted to ensure a smooth transition for Southland customers, business partners and his successor. He’s relinquishing the president’s role now and plans to hand the chief executive’s job over to Lynch in 2013.
Fimiano initiated the search while he was the largest shareholder—owning nearly 60% of the company at the time. He said he wanted to ensure the company would grow as a portion of his shares are gradually sold off.
The company began in Long Beach in 1949 as a home heating contractor. Southland moved its headquarters to Irvine in early 2003, around the time the company moved from building projects to offering design and maintenance.
The change was made to take more control of projects. It limited Southland’s market but paid off as sales skyrocketed from around $100 million in the mid-2000s to nearly $500 million today.
“That has made a huge difference,” Fimiano said.
Downturn
Southland is one of the county’s largest private companies in terms of revenue. It employs about 500 people here and more than 1,500 nationwide, with projects in 30 states and Mexico. The company is a regular on the Business Journal’s private companies and best places to work lists.
Rivals include Las Vegas-based Hanson Mechanical, part of Emcor Group Inc., John J. Kirlin LLC of Maryland and San Jose’s Critchfield Mechanical Inc.
Southland avoided most of the troubles that dogged the construction industry during the recession, relying on government contracts to get through the tough times.
“The downturn really hasn’t hit us,” Lynch said. “The difficulty may be ahead.”
Lynch’s short-term goals center on improving business development and sales, he said.
“We’re very operationally focused,” he said. “We’re not the best salespeople.”
Lynch said he’s been busy building on relationships Fimiano forged in the past 10 years with the company’s financial partners, bank and bonding company.
“I’m personally ready to pass the baton,” said Fimiano, who added he’ll still be “very active as the CEO.”
The 61-year-old Newport Beach resident said his tennis game already has improved since making the decision.
Lynch, 42, plans to stay in the D.C. area and lead the company from there. Within the next few years, the company’s Irvine headquarters is set to move to offices in Garden Grove, Southland’s regional hub for Southern California.
“The strength of our corporate group is about the people, not the location,” Lynch said.
