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Roanoke construction firm The Branch Group: Building on success

The Branch Group has grown into one of the region's largest construction firms by maintaining diverse revenue sources.

Duncan Adams

Photos by ERIC BRADY The Roanoke Times

Branch & Associates employee Lynn Shephard installs a door at a downtown parking garage renovation project.

ERIC BRADY The Roanoke Times

G.J.
Hopkins employees Donnie Wise (from left), Keith Bollhorst and Dennis
Wheeling review a design before continuing their work at the Virginia
Tech Carilion School of Medicine and Research Institute.

Photos by ERIC BRADY The Roanoke Times

Branch & Associates employee Lynn Shephard installs a door at a downtown parking garage renovation project.

Ken Twitchell's body rests in a cemetery across Airport Road from former employer Branch & Associates.

"Ken came to Roanoke and needed a job and he came to us," said Jim
Harrison, 62, who retired Jan. 14 as chief executive officer of The
Branch Group.

The Roanoke-based company includes general contractor Branch &
Associates among five subsidiaries. The contractor hired Twitchell in
1987 as a laborer.

"Ken was one of those guys who would do anything you asked of him,"
Harrison said. "He was always focused on what was good for the company."

Twitchell also was one of many blue-collar and salaried employees
who have benefited from The Branch Group's employee stock ownership
plan, which the company considers a key hallmark and contributor to its
success.

The stock plan is but one of The Branch Group's strategies to
succeed within a fiercely competitive industry -- one for which the
economic downturn has intensified the rivalry for work.

The group's subsidiaries also include G.J. Hopkins, a mechanical and
electrical contractor, and Branch Highways, both Roanoke-based, as well
as two construction companies headquartered elsewhere.

These five companies provide diverse revenue sources that help
mitigate the effects of recession and yield opportunities for
collaboration, Harrison said.

Twitchell retired in 1999. He died in 2001. The company learned then
that he had willed thousands of dollars to fund an endowment to help
pay college expenses for the children of Branch & Associates
employees. Harrison declined to disclose the amount bequeathed.

Succession

As a 100 percent employee-owned company, The Branch Group in recent
years has emphasized spotting employees with potential to become
company leaders. Ironically, the recession's erosion of the group's
volume of work has freed up time to plan for succession.

Will Karbach, 44, is The Branch Group's new CEO. He will continue as president of Branch Highways.

Karbach, a New Jersey native and son of a union pipe fitter, joined
The Branch Group 14 years ago as an assistant project manager for
Branch Highways.

He begins his new leadership role in the midst of rocky times for
the construction industry. Karbach said this recession is the worst and
longest he's encountered in more than two decades in construction.

"I don't see it breaking loose in 2010," he said.

Karbach said he is excited about his new job but also cautious. He
follows company leaders who have taken the Branch companies from
revenues of $10 million in 1978 to $356 million in 2008.

Family history

Branch traces its roots to 1955, when Bill Branch and father-in-law
Claude McAlister co-founded McAlister Construction Co. The company
reorganized as Branch & Associates in 1963, with Bill Branch as
owner.

"I think Billy Branch did it the good old-fashioned way -- with hard
work," said Stan Breakell, chairman and CEO of competitor Breakell
General Contractors in Roanoke.

Branch retired in 1993 and cousin Ralph Shivers became CEO.

Today, no one in the Branch family works for The Branch Group. But
the family remains well-known in the region. Betty McAlister Branch is
a highly regarded sculptor with a studio in downtown Roanoke. Bill
Branch, now 81, has long been an active supporter of Habitat for
Humanity, the Roanoke Rescue Mission and Young Life, an international
organization headquartered in Colorado whose mission is introducing
young people to the Christian faith.

Denny Rydberg, president of Young Life, said Bill Branch played a
major role in establishing Rockbridge Alum Springs near Goshen, one of
the organization's busiest youth camps.

"Bill was instrumental in not only finding but funding Rockbridge,"
Rydberg said. "I am grateful for his role in building this great camp
and for his faithfulness to the mission of Young Life."

Stock ownership

The Branch Group's employee stock ownership plan began in 1982. The
group and its companies became 100 percent employee-owned by 1992. Bill
Branch retired in 1993.

"I am proud that I could turn the company over to the employees and
that they have done an excellent job since I left," Branch said
recently.

Other Roanoke-based contractors, including Breakell, J.M. Turner
& Co. and Varney Electrical, Mechanical, Plumbing and Integrated
Systems, have employee stock ownership plans with varying degrees of
employee ownership. Varney, like The Branch Group, is 100 percent
employee-owned.

Harrison said the stock ownership plan is a good deal for employees
who stick with the company -- offering an opportunity for a well-funded
retirement.

"I think we are kind of a unique story," Harrison said. "And at a
time when big businesses are pulling out of the Roanoke Valley there
are not a lot of good options for young people to make a living here."

Owning a stake

Karbach said the stock plan helps attract, retain and motivate good employees.

Having a stake in the company's success creates an "ownership culture," Harrison said.

"There becomes a level of expectation among employees that everybody
has to have their hands on the rope and pull really hard," he said.

Wayne Duckett, a superintendent for Branch & Associates, is overseeing work on the Market Garage in downtown Roanoke.

"I've been with Branch for 26 years and, hopefully, if we manage
ourselves well, I'll have some money for retirement," he said, smiling.

"As an employee, the [stock plan] motivates you to make sure things
are done right, done efficiently and reflect well on the company,"
Duckett said.

Paul Bratton is president of Varney.

"Employees here think like business owners," Bratton said. "They
have a real stake in the game and they will benefit down the road as
the company is successful."

At the Branch companies, employees start being vested in the stock
plan after one complete year and become fully vested by the end of
their sixth.

"Suffice to say that many long-term employees who have retired from
the company have been able to do so with a level of comfort and
security that is not typically found in our industry," Karbach said.

Like any equity stake, an employee stock ownership plan carries risk
tied to the company's performance, a reality that serves, said Karbach,
as a "pretty good incentive to keep ourselves profitable, especially
for those for whom retirement is still many years away -- like me."

Employee stock ownership plans can offer additional benefits for
companies, including the potential for significant tax advantages.

Moving forward

The Branch Group's collision with the international economic crisis
was buffered by entering the downturn in strong financial condition,
Karbach said, and with "a significant backlog of work."

But securing new work has become challenging. And The Branch Group is "seeing some downsizing and some layoffs," Karbach said.

Still, as Harrison prepared for retirement earlier this month he sounded confident about The Branch Group's future.

"I really think that the next generation has all the right stuff in
place and the right systems in place and we have the bonding capacity
in place, so if the markets are there, there's no reason we can't
compete and compete handily," Harrison said.

"The company is owned and run primarily by people who had to pull themselves up by their own bootstraps."