Stone Finch

Stone Finch, Inc.: Young Division, Old Division
In January 2008, Jim Billings, president and CEO of Stone Finch, Inc., sat back in his office chair, contemplating his next move. A crisis was brewing, as an email from Eli Saunders, senior vice president and head of the Water Products Division, confirmed. Water Products was the foundation of the company, and Saunders had been with the company more than 25 years. Billings read the email again: Jim, I must register my grave concerns with the way things are operating. In considering my perspective, bear in mind that I’ve supported you in the past. When the firm purchased your company, Goldfinch Technologies, in 2000 and integrated it as a second division, focused on consulting “solutions,” I told
As Water Products passed through its maturity, the Solutions Division needed to be continuously nourished by new talent and fresh ideas. Billings had set up the subsidiaries partly to attract and retain star talent whose products, when fully developed, could be exploited by Solutions. Even though Stone Finch was a substantial firm, with decades under its belt and 20,000 employees in 12 countries, Billings wanted the kind of people who pursue daunting challenges in small companies, where almost every choice spells survival or death. For Billings, “A-level” employees were like peregrine falcons, which fold their wings and drop through the air at 200 miles an hour to stun their prey. He, too, was a falcon, an entrepreneur at heart. In this way, Billings was very different from virtually the entire executive team in the Water Products Division, many of whom had been with the company 20 to 30 years, since the founder began fabricating products like piping, tanks, filters, and membrane systems for water and wastewater processing plants. When the founder’s son stepped aside, the Board had wanted a leader with the vision to drive continued growth and expansion—and Billings had delivered. The company’s revenues, which topped $5 billion in 2007, had tripled in the four years since he had become CEO (see Exhibit 1 for a 2007 income statement). The second reason Billings had
The new CEO, said the committee, needed a "driving energy and vision" to continue the company's upward trajectory. Above all, the new CEO could not be "complacent." Ultimately, the Board accepted the search committee’s recommendation, and on January 1, 2004, Jim Billings became president and CEO of Stone Finch. Billings expected to fulfill the Board's mandate through further expansion of the Solutions Division. He planned to use a variety of growth vehicles for this purpose, including acquisitions and joint ventures with startups. Funds would come from excess capital produced by the Water Products Division, as well as from Stone Finch's rising stock price. His largest concern was how to build a culture of experimentation—energetic pursuit of opportunity. He wanted to attract “falcons” to Stone Finch instead of people who liked the comfort and security of large organizations. These “domestic fowl,” according to Billings, stolidly move up a company hierarchy by virtue of seniority, not drive. Billings figured out a solution to this quandary one week after his appointment. The trigger was a meeting with three of his best people from the Solutions Division. They had developed a promising concept for a microorganism and disinfection system for nuclear power plants’ wastewater and were planning to leave the company to commercialize it.