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Institutional Knowledge

Inside the minds of Hawaii’s most successful companies

(page 3 of 4)


Continuity

Clark Morgan, CEO, Alakai Mechanical

“The rest of the Big Five … they’re all gone. We’re the only one left, but we’re thriving."

Allan Doane
CEO, Alexander and Baldwin, on continuity

Another theme that came up in many of our conversations was continuity. It was an idea that took many forms. For Allen Doane, CEO of Alexander and Baldwin, continuity means knowing who you are as a company. “The rest of the Big Five — AMFAC, C. Brewer, Theo Davies, Castle & Cooke — they’re all gone,” he says. “We’re the only one left, but we’re thriving.” To explain why, he points out, “We’ve kept our focus. If you look at what we did 25 years ago — transportation, real estate and agriculture — we’re still doing those things. We’re just doing them in a lot more places.” Indeed, A&B has grown dramatically over the past 25 years; but it has been, as Doane describes it, “growth around what we already know.”

“Because we’re really good at moving containers around,” Doane says, “the first thing we did was establish a logistics division. Basically, we’ve got a business where we act as a kind of middleman. We hire trucking companies and railroads and air freight companies to handle the intermodal shipping needs of our customers. That started about 10 years ago as a backroom function. Now, 90 percent is no longer a backroom function — it’s a business called Matson Integrated Logistics.”

The company’s real estate operations underwent the same kind of scrutiny. Twenty-five years ago, A&B only had projects on its own property, which was a major limit to growth. “We’re a large landowner,” Doane says, “but, even as a large landowner, we only own about 2 percent of the land in Hawaii. We looked at that and asked ourselves, ‘Why not use our knowledge elsewhere?’ We can do what we’re doing outside of the land that we own. For example, 10 years ago, we didn’t do anything on Oahu, because we didn’t own any land on Oahu.” Now, A&B has projects not only on Oahu and the Big Island, but scattered across the Mainland as well. “We’ve reinvented ourselves around what we already were,” Doane says.

Just being local is another kind of continuity. Many of the Top 250 companies are home grown and still family-run operations. Some, like Island Insurance and Alaka‘i Mechanical, state flatly that they only do business in Hawaii. Similarly, Carl Liliequist, the CEO of Honsador Lumber, points out that, even though Honsador has a transshipment facility in Portland, “All our revenue is generated here in Hawaii.” But being “local” is becoming harder and harder to define. A growing number of the Top 250 companies now have out-of-state ties. In 2004, for example, Honsador was purchased by Key Principal Partners, a Mainland private investment firm. Still, Honsador’s Hawaii bona fides are legitimate. As Liliequist puts it, “This company is committed to Hawaii. We don’t have any interest in any other markets. And we have great owners who have invested a lot in this business.” In addition, Jim Pappas, the longtime Hawaii businessman who sold Honsador to Key, remains with the company as an active board member and a kind of local touchstone for Liliequist. In much the same manner, Robert Wilkinson, the outgoing CEO at Grace Pacific, benefited from the mentoring of the late former chairman of Grace Pacific, Dwayne “Nakila” Steele.

Kyo-ya, the Japanese-owned hotel and property company, is an example of a foreign company that has acquired local status. “In the 1960s, when Kenji Osano began to buy hotels in Waikiki,” Horner says, “people thought he was a poor businessman. But he was really a visionary.” Osano died in 1986, but Kyo-ya is still very much a Hawaii company — perhaps even more so. Ernest Nishizaki, the COO, is in many ways the quintessence of local management. “My first job in this business was in 1966,” Nishizaki says. “I was a busboy in the Monarch Room at the Royal Hawaiian. In 1993, I became the first local to be general manager of that hotel.”

Part of the sense of continuity at Kyo-ya comes from simply staying put. While other foreign and Mainland owners have come and gone, prey to hard times or quick profits, Kyo-ya has been a durable part of the community. Nishizaki arrived as COO in the midst of Kyo-ya’s decade long reinvestment in its Waikiki properties. “Since 2005, we’ve invested $65 million in renovations at the Sheraton Waikiki,” he points out. “The renovation at the Royal Hawaiian is projected to cost $40 million to $50 million. And, on the Moana, we spent like $25 million, and we’re still finishing up the spa.” That’s the kind of steady, committed investment of a local company, albeit an honorary one.

Of course, local is as local does. First Hawaiian, which is now a subsidiary of the French financial conglomerate BNP Paribas, is an excellent example of a foreign-owned company with decidedly local roots. Horner frames the issue nicely: “There has always been Mainland or foreign investment in Hawaii. There’s just not enough capital here.” But he doesn’t see out-of-state investment as inherently bad. “I call it ‘smart money,’” he says, listing large Mainland companies that have invested heavily in Hawaii in recent years: Costco, Walmart, Walgreen, Whole Foods. He adds, “Over the years, Marriott’s probably invested a billion dollars here.” According to Horner, the issue isn’t, “Is it good to have outside investment?” The question is “Do they have local people making decisions?”

“If not,” Horner says, “that’s probably not good for Hawaii.”

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