Phil Phillips, Contributing Editor07.05.17
In our travels through the coatings, adhesives, sealants and specialty chemicals industries over the past 40 years we have met many interesting people and we plan on bringing some of those interesting characters to you in the coming months. One such person is Steve Kawaja Owner, IFS Coatings
Coatings World: Great to meet you Stephen, can you please tell me about your background and where you went to school?
Steve Kawaja: I grew up in Toronto, Canada, though I am a proud American citizen. My mother is ethnically English and my father Lebanese, but both my parents were raised in St. Kitts, a tiny island in the Caribbean before immigrating to Canada. Growing up we had a mish mash of cultures, enjoying Lebanese food and West Indian vibes. I have 3 brothers (1 younger, 2 older).
My father has a PhD in finance and was a professor at UCLA, so as a kid he taught us like he was a professor, giving me a life degree in business. By age 11, we would talk through inventory issues and by age 16, I was competing in National Stock Market competitions in Canada. My mother inspired a culture of service and I completed over 1,000 hours of community service in high school, winning a school award and ultimately featured on national radio. Our family has always had a focus on performance, service and culture.
I went to Duke which at the time was a real culture shock. I double majored in Economics / Philosophy and graduated cum laude, though at the time it seemed my real major was drinking beer. After I graduated, I joined Credit Suisse First Boston, an Investment Bank in New York City. On top of my father’s teachings, these formative years shaped my thinking and philosophy and provided the intellectual backbone for the strategy we later implemented at IFS.
CW: When talking with you over the last couple of months, one of the several very strong elements of your persona is your ability to move simultaneously on several fronts. Tell me about that characteristic.
SK: I worked doing equity stock/company research with a mentor named Michael Mauboussin (then Chief U.S. Investment Strategist), and we did some really cool work studying return on capital, what drives a company’s returns, and comparing different businesses. Actually, I just found one of my old papers on Kellogg’s MBA site (http://www.kellogg.northwestern.edu/faculty/korajczy/htm/mauboussin.feb2000.pdf). I completed a CFA (Chartered Financial Analyst) while working, which further expanded my financial and market understanding. After four years of work, I returned to Columbia an MB
I felt guilty from not working harder at Duke, so I dorked out and was chairman of student government, president of my cluster, co-president of the investment management club, TA’d 3 classes and worked one day a week at Viking Global Investors, a hedge fund. I was lucky enough to win the only award given to a first year student for overall contribution to academic and student life. I worked as a hedge fund manager for a number of years, ultimately managing a $250 million portfolio before joining IFS in 2008.
CW: Tell me about IFS?
SK: We believe IFS Coatings is the largest private U.S. manufacturer of formulated powder coatings. We have sites in Gainesville, TX and Ardmore, OK. My father started the company in 1999, and we shipped our first box of powder in 2000. Since then we have grown organically to one of the largest private US manufacturers of powder, and we grew over 20 percent in 2016. My family owns several related businesses, including one of the largest industrial adhesives companies in the USA (IFS Industries), a large polymer business and a refractories company, called RSS Dixie. We also own two appliance brands - BlueStar and BigChill.
Outside of the business, I am an active investor, as well as an advisor at SignalFire, one of the fastest growing Venture Capital firms in history that is at the cutting edge of employing artificial intelligence and machine learning to inform their process. I tried to commercialize some product development technology for the Coatings industry, but unfortunately that was a swing and a miss.
CW: What is your personal business philosophy?
SK: I believe you have to love your work; it can’t feel like work. Otherwise, you don’t want to do it and some other person who does love it is obsessing around the clock and will beat you. Leaders have to inspire their team and show people they are part of something bigger than themselves. Leaders have to clear the way to allow each team member to do their job and not waste their time on politics and internal drama. I don’t believe there is such thing as a “boss” – all a boss usually can do is decide whether or not you work at a company. The pressure to perform falls on the employee or family member as we call our team at IFS.
I also feel a lot of jobs in corporate America end up being more about internal politics and positioning than focusing on the customer and the job. Given the ever changing management and leadership landscape in a big company, employees have to constantly be angling for position and credit. We really try at IFS to get rid of the bureaucracy, reports, meetings and politics and instead focus on the job and results. Many people are shocked when they join our company - they expect to have to jump through hoops to do anything, and we really try to have a culture that removes those hoops, so to speak.
CW: What is leadership to you?
SK: Leadership is about inspiring a team to get more out of each individual and the group than they could get without you. Within the business world, the job of a leader is to define a clear vision - why does this company exist? Who do we intend to be? What are we doing that is different? You can’t be the best company without the best people. My dad is a boxing fan, and he used to say “If I have Muhammed Ali in the ring, it doesn’t matter who the other fighter is.” So a leader needs to be able to assess people and their fit with the organization, set the right incentives (formal and informal), execute on the ground, allocate capital and avoid catastrophic risk.
CW: What does IFS do that sets it apart... that is different?
SK: Our mission is to deliver unparalleled service and product to the industry while providing the environmentally responsible choice. We are a family company, driven by a mission, focused on performance, culture and fun. I believe deeply in the power of words. A mission is there to drive decisions and a mission allows a company to say NO to things. Three key ideas define IFS Coatings - unparalleled service, product and environmental responsibility. This is what makes us IFS. It defines how we compete, how we go to market, how we invest in the company, and how we plan for our future.
Also, service is a tricky work, so we have defined “IFS Coatings Four Pillars of Unparalleled Service:” Responsiveness; Expertise; Customization; and Reliability. Our customers can expect this from us and we internally expect each IFS family member to give this same service to each other.
CW: What is your view of the coatings market and how has it changed?
SK: I believe the $130 billion coatings market is a wonderful business. Our product is the first thing our customers’ customer sees. If you buy a Rolls Royce with a lousy paint job, people will think it is a lousy car. That’s why I think the idea we are selling a commodity is crazy. We may sell a product, but what customers buy is a service.
What has changed in the past ten years is a huge shift in the number and size of companies in the industry. Low interest rates, ever increasing regulatory burdens and a maturing market have led to an M&A tidal wave never before seen. This has and continues to lead to fewer and fewer companies. We are uniquely positioned in powder coatings as a result - the only mid-size player with multiple facilities that can serve global and fortune 500 companies.
Many players in the space talk about “acquisition growth.” Acquisitions aren’t growth – they are financial engineering. I point this out since I believe almost no major coatings companies are achieving true organic growth anymore. A culture of buy to build is the antithesis of organic growth - it is inward facing, not about customers. If you look at Dow/Dupont, Sherwin/Valspar, and the drama around PPG/Akzo, it all depends on “synergies” which is a fancy way of saying firing people and closing facilities. While these companies are focused on digesting their mergers, we have an opportunity to deliver unparalleled service to our prospects and customers.
I feel proud of the growth IFS has achieved. We have enjoyed continuity in ownership and management since 1999. We don’t have a bunch of people here looking to come for 3-5 years, make a bunch of changes so they can present them in a PowerPoint to get their next corporate promotion. We have a family here that has very low turnover, with people looking to be here for their whole career. Our team cares about IFS and works hard for the company because they believe in IFS and our mission. We work together and we are friends - I just got back from a family vacation with the President and VP of Business Development from IFS. Customers on plant tours have commented they’re amazed that I know everyone and everyone knows me - from the production floor to the offices. This family culture is very important to us and we work hard to maintain it, including recognizing that our customers are part of the family and we treat them that way.
CW: What are the biggest challenges you see facing the coatings industry?
SK: The industry as a whole has matured and organic growth is hard to come by. All of the major players get the bulk of their revenue from liquid coatings, and powder coatings are often the red headed step child. As a result, incumbents often try to steer customers to their profitable cash cow, liquid. Increasingly, some of the industry players are really focusing on buying business. We have seen the emergence of “prebates” - paying customers sometimes as much as 30% of a year’s purchases upfront in cash to sign a 5 year contract. I don’t believe this is good for customers or the industry, but it is certainly happening.
Technology wise, I see robotics / automation, and longer-term, 3D printing, as technologies that will really change our industry.
CW: Stephen, you ARE a very interesting entrepreneur. Any last words to share with our readers?
SK: The best is yet to come.
Coatings World: Great to meet you Stephen, can you please tell me about your background and where you went to school?
Steve Kawaja: I grew up in Toronto, Canada, though I am a proud American citizen. My mother is ethnically English and my father Lebanese, but both my parents were raised in St. Kitts, a tiny island in the Caribbean before immigrating to Canada. Growing up we had a mish mash of cultures, enjoying Lebanese food and West Indian vibes. I have 3 brothers (1 younger, 2 older).
My father has a PhD in finance and was a professor at UCLA, so as a kid he taught us like he was a professor, giving me a life degree in business. By age 11, we would talk through inventory issues and by age 16, I was competing in National Stock Market competitions in Canada. My mother inspired a culture of service and I completed over 1,000 hours of community service in high school, winning a school award and ultimately featured on national radio. Our family has always had a focus on performance, service and culture.
I went to Duke which at the time was a real culture shock. I double majored in Economics / Philosophy and graduated cum laude, though at the time it seemed my real major was drinking beer. After I graduated, I joined Credit Suisse First Boston, an Investment Bank in New York City. On top of my father’s teachings, these formative years shaped my thinking and philosophy and provided the intellectual backbone for the strategy we later implemented at IFS.
CW: When talking with you over the last couple of months, one of the several very strong elements of your persona is your ability to move simultaneously on several fronts. Tell me about that characteristic.
SK: I worked doing equity stock/company research with a mentor named Michael Mauboussin (then Chief U.S. Investment Strategist), and we did some really cool work studying return on capital, what drives a company’s returns, and comparing different businesses. Actually, I just found one of my old papers on Kellogg’s MBA site (http://www.kellogg.northwestern.edu/faculty/korajczy/htm/mauboussin.feb2000.pdf). I completed a CFA (Chartered Financial Analyst) while working, which further expanded my financial and market understanding. After four years of work, I returned to Columbia an MB
I felt guilty from not working harder at Duke, so I dorked out and was chairman of student government, president of my cluster, co-president of the investment management club, TA’d 3 classes and worked one day a week at Viking Global Investors, a hedge fund. I was lucky enough to win the only award given to a first year student for overall contribution to academic and student life. I worked as a hedge fund manager for a number of years, ultimately managing a $250 million portfolio before joining IFS in 2008.
CW: Tell me about IFS?
SK: We believe IFS Coatings is the largest private U.S. manufacturer of formulated powder coatings. We have sites in Gainesville, TX and Ardmore, OK. My father started the company in 1999, and we shipped our first box of powder in 2000. Since then we have grown organically to one of the largest private US manufacturers of powder, and we grew over 20 percent in 2016. My family owns several related businesses, including one of the largest industrial adhesives companies in the USA (IFS Industries), a large polymer business and a refractories company, called RSS Dixie. We also own two appliance brands - BlueStar and BigChill.
Outside of the business, I am an active investor, as well as an advisor at SignalFire, one of the fastest growing Venture Capital firms in history that is at the cutting edge of employing artificial intelligence and machine learning to inform their process. I tried to commercialize some product development technology for the Coatings industry, but unfortunately that was a swing and a miss.
CW: What is your personal business philosophy?
SK: I believe you have to love your work; it can’t feel like work. Otherwise, you don’t want to do it and some other person who does love it is obsessing around the clock and will beat you. Leaders have to inspire their team and show people they are part of something bigger than themselves. Leaders have to clear the way to allow each team member to do their job and not waste their time on politics and internal drama. I don’t believe there is such thing as a “boss” – all a boss usually can do is decide whether or not you work at a company. The pressure to perform falls on the employee or family member as we call our team at IFS.
I also feel a lot of jobs in corporate America end up being more about internal politics and positioning than focusing on the customer and the job. Given the ever changing management and leadership landscape in a big company, employees have to constantly be angling for position and credit. We really try at IFS to get rid of the bureaucracy, reports, meetings and politics and instead focus on the job and results. Many people are shocked when they join our company - they expect to have to jump through hoops to do anything, and we really try to have a culture that removes those hoops, so to speak.
CW: What is leadership to you?
SK: Leadership is about inspiring a team to get more out of each individual and the group than they could get without you. Within the business world, the job of a leader is to define a clear vision - why does this company exist? Who do we intend to be? What are we doing that is different? You can’t be the best company without the best people. My dad is a boxing fan, and he used to say “If I have Muhammed Ali in the ring, it doesn’t matter who the other fighter is.” So a leader needs to be able to assess people and their fit with the organization, set the right incentives (formal and informal), execute on the ground, allocate capital and avoid catastrophic risk.
CW: What does IFS do that sets it apart... that is different?
SK: Our mission is to deliver unparalleled service and product to the industry while providing the environmentally responsible choice. We are a family company, driven by a mission, focused on performance, culture and fun. I believe deeply in the power of words. A mission is there to drive decisions and a mission allows a company to say NO to things. Three key ideas define IFS Coatings - unparalleled service, product and environmental responsibility. This is what makes us IFS. It defines how we compete, how we go to market, how we invest in the company, and how we plan for our future.
Also, service is a tricky work, so we have defined “IFS Coatings Four Pillars of Unparalleled Service:” Responsiveness; Expertise; Customization; and Reliability. Our customers can expect this from us and we internally expect each IFS family member to give this same service to each other.
CW: What is your view of the coatings market and how has it changed?
SK: I believe the $130 billion coatings market is a wonderful business. Our product is the first thing our customers’ customer sees. If you buy a Rolls Royce with a lousy paint job, people will think it is a lousy car. That’s why I think the idea we are selling a commodity is crazy. We may sell a product, but what customers buy is a service.
What has changed in the past ten years is a huge shift in the number and size of companies in the industry. Low interest rates, ever increasing regulatory burdens and a maturing market have led to an M&A tidal wave never before seen. This has and continues to lead to fewer and fewer companies. We are uniquely positioned in powder coatings as a result - the only mid-size player with multiple facilities that can serve global and fortune 500 companies.
Many players in the space talk about “acquisition growth.” Acquisitions aren’t growth – they are financial engineering. I point this out since I believe almost no major coatings companies are achieving true organic growth anymore. A culture of buy to build is the antithesis of organic growth - it is inward facing, not about customers. If you look at Dow/Dupont, Sherwin/Valspar, and the drama around PPG/Akzo, it all depends on “synergies” which is a fancy way of saying firing people and closing facilities. While these companies are focused on digesting their mergers, we have an opportunity to deliver unparalleled service to our prospects and customers.
I feel proud of the growth IFS has achieved. We have enjoyed continuity in ownership and management since 1999. We don’t have a bunch of people here looking to come for 3-5 years, make a bunch of changes so they can present them in a PowerPoint to get their next corporate promotion. We have a family here that has very low turnover, with people looking to be here for their whole career. Our team cares about IFS and works hard for the company because they believe in IFS and our mission. We work together and we are friends - I just got back from a family vacation with the President and VP of Business Development from IFS. Customers on plant tours have commented they’re amazed that I know everyone and everyone knows me - from the production floor to the offices. This family culture is very important to us and we work hard to maintain it, including recognizing that our customers are part of the family and we treat them that way.
CW: What are the biggest challenges you see facing the coatings industry?
SK: The industry as a whole has matured and organic growth is hard to come by. All of the major players get the bulk of their revenue from liquid coatings, and powder coatings are often the red headed step child. As a result, incumbents often try to steer customers to their profitable cash cow, liquid. Increasingly, some of the industry players are really focusing on buying business. We have seen the emergence of “prebates” - paying customers sometimes as much as 30% of a year’s purchases upfront in cash to sign a 5 year contract. I don’t believe this is good for customers or the industry, but it is certainly happening.
Technology wise, I see robotics / automation, and longer-term, 3D printing, as technologies that will really change our industry.
CW: Stephen, you ARE a very interesting entrepreneur. Any last words to share with our readers?
SK: The best is yet to come.