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Leader applies a measured approach

A figurine of "The Thinker" by the French sculptor Auguste Rodin sits perched and characteristically perplexed in the center of Charles Hadeed’s desk, symbolizing Hadeed’s own analytic personality.

At the calibration and measurement company he leads, a pondering personality is almost a prerequisite. Exactitude, Hadeed explains, is a complicated business.

Founded in 1964, Transcat Inc. started trading publicly in 1968 with its calibration instrument business. It added repair services in 1989. Today, services eclipse product sales in Transcat’s expectations for growth.

With close to 300 employees, the service and distribution business at Transcat in the last full fiscal year totaled $75.4 million in revenue, up 7 percent.

Transcat turned out to be more complex than either Hadeed or his predecessor, Carl Sassano, expected when they joined the Ogden-based firm in 2002.

"I have to tell you that even though I was on the board for a year and a half before I took over as the CEO, it was more complex when I got into it than even I had thought," said Sassano, Transcat’s executive chairman.

To replace Robert Klimasewski, Sassano was hired when Transcat was known as Transmation Inc. Around the same time, Hadeed joined Transcat as chief financial officer; he succeeded Sassano as CEO in 2007.

Before joining Transcat, Sassano served as president and chief operating officer at Bausch & Lomb Inc., where he had spent some 25 years of his career and Hadeed spent 20 years of his career.

"Transcat is not just selling a product; it’s not like we’re just selling service," Sassano explains. "You really needed to understand the different aspects of being in electrical, versus pressure, versus temperature."

"Oil versus pharmaceutical industries, they have different needs. Yes, it’s calibration, but how you use it is different," he says. "Getting our arms around that was not easy."

Complex industry
The degree of calibration that an instrument requires varies not only by the tool and the company using it, but by the application. Each company has a unique set of standards, or ranges, within which a tool is deemed to work correctly, Hadeed said.

One of Transcat’s jobs is fine-tuning instruments to ensure that they meet those standards of perfection. With that task, the philosophical question arises: Does perfection exist at all, or are there only degrees of nearness to perfection?

To understand, you have to visualize the process as a triangle, Hadeed explains. The instruments at the bottom, by necessity, have a lower degree of perfection than those at the top.

"We certainly can’t use an instrument just like the one we’re measuring, because how do you know it’s good? So you have to have an instrument that has a better measurement capability than the instrument you’re testing; generally four times better is the industry standard. And we have to have our instruments calibrated the same way," Hadeed explains.

It sounds easy, he says, but the degrees involved and the exactness required make it a lot more complex.

"It’s got a lot more physics and all other elements of science and math involved than I ever would have thought," Hadeed says.

He recalls that at Bausch & Lomb he was a lot like some of the customers his company serves.

Moving from finance to operations, manufacturing and distribution, Hadeed at one point oversaw a manufacturing plant with a calibration department and technician. Within the plant’s operational budget, calibration was a minor item. Hadeed had no idea how fundamentally important it was.

"It just never seemed important to me. From my level, I sat back, and it just never crossed my mind about how important that calibration function was because I didn’t understand it," he says. "Now, thank God, the people in the plant did understand it; that was their job.

"But I sit back now thinking if only I knew then what I know now, it would have been more interesting."

With an average cost of $500, Transcat does calibration for some 140,000 instruments a year in approximately a dozen laboratories whose specialties vary according to the local industries.

In the company’s Philadelphia lab, for example, expertise is focused on temperature because of the local pharmaceutical industry. And at the company’s largest laboratory, in Houston, it is focused on pressure because of the local oil and gas industry.

Laboratory specialties also develop in relation to the availability of local talent, but in general the goal is to round out the capabilities of all Transcat’s service labs, Hadeed says, and deepen the ones that serve the local customer base.

On the product sales side, the company markets 25,000 test and measurement instruments and distributes them to approximately 13,600 customers worldwide.

Broadly speaking, Transcat serves primarily pharmaceutical and other industries regulated by the Food and Drug Administration, as well as industrial manufacturing, chemical process, energy and utilities markets.

For some time, service has had more growth potential than the sales side of Transcat’s business. Long-term projected service growth is estimated at 10 percent to 12 percent annually, while product sales growth is expected to be 3 percent to 6 percent.

Including both products and services, net revenue for the first half of fiscal 2010 was $35.7 million, down 2.1 percent from $36.5 million the year before. Net sales in the product segment fell 8 percent in the first half, while the service segment had an 11.4 percent increase.

Net income in the first half totaled $100,000, or a penny per diluted share, compared with $700,000, or 9 cents a diluted share, a year earlier.

Over the course of the economic downturn, services turned into a sort of flotation device for the company as clients made cutbacks in personnel and manufacturing operations and relied more on outsourcing calibration functions. But as clients’ own calibration departments shrank, so did their budgets for buying new instruments.

Wind industry
Fortunately, Hadeed says, Transcat was able to mitigate that decline because of its emerging presence in the wind industry.

"We bought a company last August that is providing a service to a major turbine manufacturer," he said. "We’ve been able to leverage both Transcat’s calibration and product ability to grow that business to the point that for the first six months of this year, it’s been about 12 percent of our product sales."

In an environment where the product business might have been down 20 percent, Hadeed says, instead it was down 7 percent or 8 percent.

"All in all, I think we’ve done well over the last 12 months," he adds.

Sassano agrees: "He’s done a great job in the past two and a half years. The company continues to move right along.

"The way he handled Transcat through the crisis of the past year, even though the distribution business suffered a little from the economic downturn, he made the decision that we were not going to let anyone go, that we were going to hold on to the people that we had spent all of these years training, that we would take the hit in earnings to do so, cut every other dollar that we didn’t need, but did the right things for the company and for the people."

Wind energy is one of those right things. In the first half of fiscal 2010, that business amounted to $2.8 million of net product sales. On both the service and product sides of Transcat, wind energy is a burgeoning market to which the $7.2 million purchase of Westcon Inc. provided a valuable entree.

In 2009, wind energy accounted for 42 percent of all new power generation capacity in the United States, and in April the government announced plans to provide $93 million from the American Recovery and Reinvestment Act to further develop wind energy.

In that market, Transcat serves wind turbine manufacturers with the test and measurement instrumentation to build and maintain the mechanical components of their products. Transcat is able to build on the relationships Westcon had with manufacturers and major utilities.

The Oregon company-whose business, like that of parent Transcat, is split between calibration products and services-last year added 30 employees to Transcat, bringing total employment to 280-130 of whom are based in Rochester.

Transcat’s headquarters grew by 10,000 square feet last year to a total of 35,000 square feet. The expansion was integrated into a lease renewal with the company’s landlord, Gallina Development Corp., that amounted to approximately $3.4 million over 10 years. An additional $275,000 was invested in workstation and warehouse equipment and renovations to the existing building.

The project allowed Rochester to add 2-D and limited 3-D calibration capabilities Transcat previously had offered only in its Fort Wayne, Ind., laboratory.

Expansion has been methodical, just like the processes behind Transcat’s business. And being methodical is one thing Hadeed appreciates.

That is not just due to his training in finance, Sassano says, and his talent is not limited to analysis. With a degree in accounting from Syracuse University, Hadeed started his career at Price Waterhouse LLP. Working on customer sites, he quickly developed an affinity for operations. That evolved further when he moved to Bausch & Lomb.

While Sassano and Hadeed never worked together directly there, they both developed a sense of process and structure from the culture they shared.

"Even though we were both in the vision care business, I was in the contact lens side and he was in the solution side. We never worked in the same division at Bausch & Lomb, which is fascinating," Sassano says. "We were there, but we were never directly together in an operation, and yet when we both came to Transcat, what was great for me and great for Charlie is that we could see a problem, and it was obvious to us how to attack it because of what we had been through in the past.

"We were able to talk about issues, knowing right away that we were on the same plane, where we were coming from and the right way to go at it."

Joining Transcat as CFO, Hadeed dived into the functions of the business, for example, looking at how an order is placed and how it moves through the organization.

At the time, the company was in the midst of a major turnaround, selling non-core divisions such as manufacturing and reducing debt by 50 percent.

For six to nine months in his new job, Hadeed took processes apart to make sure that every aspect of the financial system reconciled, and then he moved on to laboratory operations when he took on the role of COO.

"So he went from internal operations in the first year to getting into the way the operations were run in the second year in dealing with the customers and the sales force. By the end of year two, it was pretty clear: Not only did he understand the business perfectly, he had the capability to replace me as the CEO," Sassano says.

At the time of Hadeed’s promotion, the vice president of marketing at Transcat compared the leadership style of both men.

"Carl will sit back and try to direct the ship, where Charlie will roll up his sleeves and get on board to try to understand the problem and drive it from within," Jay Woychick told the Rochester Business Journal.

Deep thoughts
Hadeed’s wife, Judy, calls him a deep thinker. That is one reason she gave him the Rodin sculpture on his desk.

In some ways, his analytical nature clashes with her more spontaneous and outgoing nature. They have been together since high school. She is talkative and he is more reserved, Judy says.

Hadeed likes to think things through, but he says he does not let that impede him from listening to his instincts. Doing that is crucial to managing a company and steering it toward goals. Developing strategy requires vision, he says, and over the years his positions have helped him cultivate that aspect of leadership.

Integrating his analytical nature and gut instincts was something that developed naturally over time, Hadeed says. His whole career developed the same way.

He never had a specific plan after graduating from college, he says. He just did what he enjoyed, and the opportunities for advancement presented themselves.

But his wife says it was not as simple as being in the right place at the right time. Hadeed worked hard for everything in his life, starting at a young age.

He had a paper route and worked at a hamburger restaurant to put himself through Bishop Kearney High School and later through Syracuse University. And as the oldest of five children, he helped to raise his siblings after his mother died when he was 13.

"For Charles, education is a privilege," Judy says. "You work for it."

Hadeed’s education came at the expense of his youth, she says.

The key to success, though, is using the education to do work you love, he says.

In all their years together, Judy says, there has never been a day when he did not want to go to work. Following your passion is something he espoused to his three children: Shauna, 35, Peter, 33, and Laura, 29.

Good advice is something for which Hadeed can be counted on. His children call him for it, and his friends do too.

Friend Michael Petranto has known Hadeed since high school. Their families often spend time together, fishing or playing cards at the Hadeed cottage in the Adirondack Mountains.

"He’s a good problem solver. He reasons things out; he’s honest and very fair," Petranto says. From Hadeed’s earlier days at B&L, Petranto recalls when Hadeed’s plant closed. Wherever he could, he tried to find former employees work elsewhere, Petranto says.

Hard work has been central to Hadeed’s personality since high school, Petranto says, but now he has reached a state of confidence in his current role at Transcat that gives him a greater sense of being relaxed.

Part of that is due to being a grandfather, Hadeed’s wife says. That has revealed a new side of him-a softer one, she says. She has never seen him happier.

"With the grandkids, I’m seeing a completely different Charlie. It’s the time and the stories, holding them and reading a story, or taking them outside for a walk," Judy Hadeed says. "He lights up when the grandkids walk in the room."

Charles Hadeed
Title: President, CEO and chief operating officer, Transcat Inc.
Education: B.S. in accounting from Syracuse University, 1971
Age: 59
Home: Victor
Family: Wife Judy; daughters Shauna, 35, and Laura, 29; son Peter, 33
Hobbies: Fishing, golfing, spending time with grandchildren
Quote: "I’ve been fortunate in my career to be able to work with and for bosses who allowed me a lot of flexibility to expand into areas that traditionally might not have been within the scope of my responsibility. I enjoyed it because it allowed me to satisfy my inquisitive nature and think about how things work."

12/18/09 (c) 2009 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.


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