Joe Cutillo took on a tough challenge when he joined Sterling Infrastructure in 2015. The company was teetering on the brink of bankruptcy after five straight years of profit losses and the exit of its executive management team.
Sterling's chairman, who joined as interim CEO, brought Cutillo on board as vice president of strategy and development to revive the company.
Cutillo was more than up to the task. He is a turnaround expert with over 30 years of experience. Cutillo drew on a leadership approach that has helped him make big changes to achieve lasting profitability growth and innovation.
"I believe a person's leadership style has to match the situation they're in, " said Cutillo, named CEO and president of Sterling Infrastructure in 2017.
Apply Your Knowledge To New Tasks
Cutillo applied this philosophy to leading Sterling's business turnaround that pulled the company out of its decline. He established a new long-term strategy to propel growth and shareholder value.
Sterling's results have been outstanding since Cutillo came on board in 2015. Revenue grew at a 20% compound annual growth rate to more than $2 billion. Gross margins soared fivefold from 4% to 20%, according to the company. Over the same period, Sterling's stock price surged from $3 to more than $120 and its market cap has soared from $60 million to nearly $4 billion.
Since Cutillo became CEO in April 2017, Sterling's stock was up over 1,100% vs. the S&P's 109% as of April 8.
Follow Your Plan
How did he do it? In 2016, Cutillo and his team began transforming the company from a heavy civil construction business to the diversified infrastructure service provider it is today. Based in Houston, Sterling provides site development and construction services for the data center, e-commerce, manufacturing, transportation and residential markets.
Laying the foundation for the turnaround required a hands-on leadership approach.
"When I came to Sterling it was on the verge of bankruptcy," said Cutillo, 59. "My leadership had to be visionary and high level. That involved explaining to people where the company was going, and being extremely hands-on in terms of what we needed to do and having the right resources in place where they should be."
Follow Your Leadership Style
Cutillo believes his job as a leader is to set the strategy, direction, vision and structure for the company. He works to "help our team see how we go from where we are today to where we need to be in the future," he said.
He describes his current leadership role this way: "If you think of NASCAR racing, my job is to design the racetrack for the team. As the team gets more mature we have rails and boundaries around the racetrack. But it's up to the teams to win those races."
Cutillo guides the team to be successful, he says.
"When you have the right people and create a vision and support them, they tend to get there faster when they focus on the future and aren't focused on the minutia or mired in bureaucracy," he said.
Once Cutillo laid the foundation for the turnaround, he followed his template to develop a winning strategy. He says the "overarching" strategy for Sterling hasn't changed since it was put in place in 2016.
"It's simple enough and flexible enough that it helps align our company," said Cutillo. "Since 2016, we've stayed the course. People understand the strategy."
Repeat Your Successes
Cutillo uses the same fundamental tools in every business. He led successful turnarounds at Ingersoll-Rand, where he was vice president of service and contracting. He also led startup and high-growth companies at Inland Pipe Rehabilitation (now PURIS), where he was president and CEO.
Cutillo cites the philosophical elements to his strategy. "How do we continue to make what we do every day better and make sure we don't go backward? The second focus is growth in the highest margin, most profitable products and what other adjacent services or markets we can go into with existing offerings where we can grow the business?"
Focus On Profit
A third element is a focus on bottom-line growth rather than topline growth.
"If you focus on bottom-line growth, it tends to naturally take you to markets that have high topline growth and where the company can get better returns," he said.
Cutillo believes businesses go through life cycles. Each segment of the firm is at a different stage of maturity and therefore there's a different focus on each.
Sterling's transportation segment is a margin leader and one of the best performers among transportation construction peers, Cutillo says. Sterling builds highways, roads, bridges, airports and other critical infrastructure.
"It's a great cash generator," said Cutillo. "We use that cash to generate cash and investments in other segments with higher growth and higher margin trajectories. It's the model of how Sterling invests."
Tie Pay To Performance
Cutillo motivates team leaders with a shot at generous compensation aligned with aggressive targets. If they can meet ambitious goals, "they will be highly compensated," he said.
He sets a goal for business unit leaders to double their business every three to five years. And that aligns with a stock based incentive plan.
"If we make great returns and investors are very wealthy, our team leaders should get very wealthy as well," he said. "We talk about how we grow bottom line better than topline. We've seen a 30% to 40% increase in the bottom line every year since 2015."
But to get the job done, Cutillo faced several challenges. That included changing the company's mindset.
"When you come into a business that's done the same thing for 20 to 30 years, people don't necessarily believe there's a better way than what they're doing today," he said.
Aim For Higher Value
When Cutillo came to the company it relied on per low-bid heavy highway work. Today that's less than 10%. "In making the changes, you have to win over the nonbelievers," he said.
Another challenge: At the outset of the strategic changes, no one wanted to be paid with the stock, says Cutillo. Now, a big portion of compensation is Sterling's stock. And leaders see that works to their advantage.
"The incentive for the team is to move forward very rapidly, which is very exciting," he said.
Know Success Perpetuates More Success
Brad Carroll, president and CEO of Plateau Excavation, part of Sterling's E-Infrastructure Solutions segment, credits Cutillo's leadership approach for Sterling's success. Carroll has known Cutillo since Sterling acquired Plateau in October 2019. And Cutillo has been Carroll's direct boss for nearly six years while he worked with him on integrating the acquisition. Plateau is the largest sitework contractor in the country.
"Joe has an entrepreneurial spirit that is evident and cascades down through all Sterling's businesses," said Carroll.
Remain An Entrepreneur
Carroll says Cutillo maintained the entrepreneurial spirit that typically exists in smaller privately held businesses. He shows that spirit with the company's acquisitions.
" (Cutillo's) not one to micromanage," said Carroll. "He sets expectations and provides you the freedom and culture to meet them. His value to me as a unit president is he helps provide guidance and vision for us, and he supports me strategically and financially to achieve that goal."
Cutillo's upbringing and background contributed to his career path and leadership approach. He literally learned the construction business from the ground up.
Tap Your Family History
Cutillo's grandparents raised him for the first several years as he had young parents. Family members on his mother's side were construction workers and on his father's side they were factory workers.
"I spent my early years around construction," said Cutillo. "When I was three years old I recall going to job sites with my granddad, and he'd make me work. At that point work was filling a bucket with rocks. But it was work nonetheless."
Later, Cutillo learned about the business world from his father. His father was a successful executive at IBM. When young Cutillo was a teenager he spent weekends with both construction workers learning the trade and with executives at IBM, learning about the corporate world.
Those early lessons influenced Cutillo's leadership approach.
"People are people," Cutillo said. "But how you communicate with people in the field vs. the boardroom is different. Growing up with one foot in each world allows me to connect at both levels and understand how ... our folks in the field think and what they value and how to lead at an executive level."
Joe Cutillo's Keys
- CEO of Sterling Infrastructure since April 2017. Led a business turnaround that pulled the company out of near bankruptcy and increased shareholder value.
- Overcame: The challenges of transforming a company with a decades long history and culture.
- Lesson: "When you have the right people and create a vision and support them, they tend to get there faster when they focus on the future and aren't focused on the minutia or mired in bureaucracy."
