Episode Transcript
[00:00:00] Speaker A: I love the people, I love the equipment. I just love the machines, the customers, the remoteness of it. I just love everything about it. Just because we were on a major's location today and then we go to someone else's location tomorrow, our safety culture doesn't change. We bring it with us. And we started 2021 with 36 rigs, and we ended it with 300.
[00:00:21] Speaker B: Welcome to the next Imperative, a podcast hosted by A and M energy leaders tackling key issues and trends in the industry.
[00:00:30] Speaker C: Joining me today Alvarez and Marsal Managing Director Rogers Herndon and Access Energy Services CEO Ryan Phillips. Gentlemen, welcome.
[00:00:39] Speaker D: Thanks, Jeff. Thanks, Ryan. Really appreciate you joining us here today.
We were able to work together back in 20. I've become a fan of yours and always been a fan of Axis. So it's a pleasure to have you. Maybe just to start us off, would you mind just giving us a little information on your background and how you got to Axis and then bring us present? Axis has been very active over the last couple of years and bring us present on the platform today.
[00:01:12] Speaker A: Sure, rogers, thanks for having me here. Well, I was born in Houston, currently live in Dallas, but like any good oilfield services hand, houston was where I'm originally from, third generation oil field services. Dad did 35 years for Halliburton, electrical engineer from Texas A and M. So it's just my destiny to be in the oil field. I love oilfield services. It's my passion. It's all I want to ever do. I love the people, I love the equipment. I just love the machines, the customers, the remoteness of it. I just love everything about it.
Started with Halliburton, straight out of A and M and spent 15 years at Halliburton, moved nine times across the country for Halliburton. Every opportunity I had to take the next challenge, I took it. And I remember my first day at Halliburton, I got on boarded in south Louisiana. I don't remember the guy's name, but he told me there was three things you needed to remember to be able to do if you were going to be successful at Halliburton and have a long career. And he said, the first one is the oil field never sleeps. He says, it's 24 7365. You're going to miss Christmas, you're going to miss Thanksgiving, you're going to miss your birthday, you're going to miss your anniversaries. And if that's a problem, this isn't the job for you. It's like, yes, sir. Okay, I'm 22. Sure. Sounds good. Second thing he said, never burn any bridges. The patch is a small community.
Just before you open up your mouth, just think about that. The third thing he told me was he handed me a beeper, shows how old I am. And he says, when this beeper goes off, you have 2 hours to get to the yard and you have to be sober. He said, can you do that the three things that's probably the hardest, but I'm able to do all that. And it was a wild ride at Halliburton. I loved it. Ended up being a frac engineer and went through Halliburton's engineering training, which is a year long. I mean, intense and more or less gave you a pseudo petroleum engineering degree.
I remember the first time I ever went to a frac location in the Rockies. It was just beautiful. Setting a frac crew at that time was 20,000 ish horsepower, and it was just the most amazing thing I'd ever seen. The amount of moving parts, the horsepower, the machines, the equipment, the crew, the chemistry behind it, the geology, the hydrostatics, and just everything was like, oh, my God, this is the coolest thing I've ever done. And I got ate up with it bad and ended up getting assigned to a frat crew in Grand Junction, Colorado.
And that was one of the more enjoyable things I've ever done. Because the crews there were fantastic. The leadership there was fantastic. The customers were fantastic. It was hard work, though. Like, make no mistake, our yard calls, we were usually in the yard at 3330 in the morning. I'd have the safety meeting, drive to location, rig up, pump a job, rig down, pump another job, and then make it back to the yard sometime in the afternoon and get ready for the next job. And did that over and over again.
Did that for three or four years as a frac engineer and then wanted to get a little bit more diversified and became a semen engineer and started chasing drilling rigs in South Texas. And South Texas cementing is very technical. I love that, too. The technical aspect of designing slurries and then mixing them and executing those on these deep hot. At the time, it was vertical wells in South Texas.
Got my first PNL July 27, 2009. Halbern took a chance on me. That was the banking crisis, and oil had plummeted, and it was a very sharp, steep drop. End of 2008 and 2009. And so they gave me a very small PNL at the time, and I was an engineer with no leadership skills. And they say, here's your first PNL. And they don't just throw you to the wolves at Halliburton, but they give you the training kind of on the fly. Had some really good mentors. And I got ate up with running A-P-L and managing a business. Just having that scorecard at the end of every month and being an engineer and playing sports and being competitive. I wanted to win. And that PNL was my scorecard at the end of every month. And, like, this is awesome. I love wanted to I just couldn't get enough of it. That was when the Eagleford started booming.
I was in the right spot at the right time. And from the month I took over that first PNL to the month I handed it off to the next guy, month to month. It grew 22 X in two years. So it was a wild ride. Many nights sleeping on the couch.
It was like the guy told me, oilfield never sleeps. It was 24/7. That kind of growth was good to be a part of. It was stressful.
And then Halliburton just kept giving me bigger PNLs and bigger PNLs, and had another mentor named Neil Schmidt, who was a Halliburton legend. He since retired. And we built a super camp in San Antonio, and we were running a ton of frat crews. And he said, here's the keys, right? The PNL is yours. You have all the headcount. You have all the decisions for this entire business in South Texas, all product lines for all of you. Here's the keys. I'll be around if you need me, but PNL is yours. And it was a $2 billion a year PNL. I was like, I don't know how old I was, but I was early 30s. It's like, oh, my God, you all are crazy. You're going to give me this PNL? They created a monster with me because I loved it.
But I was raw at the time, right? I had been in the field for, at this point, about ten years, and I got a phone call, and they're like, hey, you need to come to Houston. We need to give you a more strategic role, polish you off a little bit more. And so the term I used to describe myself at that point is, I was feral. I'd spent ten years in the field, either at the wellhead or managing field. Folks ate up with it, loved it, but they're like, hey, we need to come take you to the corporate headquarters and keep developing you. You've got a bright future. And so I moved back to Houston and went to the corporate campus at Halliburton, and they put me in their executive development program that they called Plep. And it was an unbelievable program, year long program, and just continued to put you in situations to make you uncomfortable, expose you to the C suite. They would gave you executive coaches, intentionally stress you out, put you in situations to make you unnerved. And in one of those sessions, they randomly selected a small handful of us to attend a Halliburton board meeting. And the Halliburton board is a bunch of heavy hitters. Like, if you go look at the board, it's guys and gals with 30, 40, 50 years of oil field experience that have all been CEOs at very large and been very successful. So I got to be a fly on the wall at a Halliburton board meeting in 2014. And they're like, sit in the corner, shut up, and don't say anything.
I left that and was like, oh, my God, how do you get there, right?
The questions they asked, the values that they brought, the value that they brought to those conversations it's just like, wow, how do you get there? That was amazing.
And I just left there, jazzed up and charged up, and I want to do that one day. I don't know how to never be as good as these people, but it was impressive, and it left a mark on me. So another downturn in 2015 hit and decided to go get my MBA. I'd managed a business and very large businesses, and to get to that journey that I want to be one of those folks at that table is like, I think the next step is I'll go get an MBA. So did that again at A and M here in Houston. Did the executive program every other weekend for two years. That was tough. Had a demanding job at Halliburton. They had started to professionalize me.
I was domesticated at that point in like 2016, 2017, and wrapping up. Had about six months left in the NBA. And the boss comes in the office and know, what do you want to do next? And I says, Well, I want to run a bigger P. L. It's like what's the biggest permian is? The biggest p l we have it's. Pack your bags, you're going to the Permian. And so I went out and was the ops manager for the Permian for a few months. I was close to wrapping up my MBA, and that's when B 29 Investments, private equity company out of Dallas, called me and said, hey, you want to join our team? We're going to build some oil filled service companies, start them from scratch, and you can be a part of it, and you can sit on some of the boards. And they immediately put me on the board of Axis in April of 2018.
So I got to see Axis come together kind of from its infancy. They were in the middle of doing a couple of M and A deals that ended up closing a few weeks after I started. Just got to watch those develop. And was on the board at a board level, but was assigned to other initiatives for the first few years and then COVID hit and major downturn. And the chairman at the time was getting their retirement. And so we were thinking about our succession there, and the board called me and said, hey, we want you to be executive chairman, take a more active role in Access and step in and be more full time at Access. And so that was in 21. And my directive from the board was to professionalize the organization. We had brought a bunch of different companies together, and they needed a professional to continue the journey that Axis was on.
And that is how I ended up meeting Rogers is the board's initiative. The specific initiative was, we need a daily P L. It's like, okay, a daily P L, OK, I know what that looks like in my mind, but I got to go build a daily PNL. And the thought process there was oil field moves quick. You need to be able to make real time decisions. You need the insight into your cost daily. You can't wait five, six weeks till you close the book in the 10th of the following month and go back and make decisions. You need to be making real time decisions. So we interviewed three or four different consulting companies to help us come build this real time P. L, Alvarez and Marsal being one of them, and met Rogers. And what attracted me to Rogers was he had sat in the seat. He had been CEO, he had run an oilfield service company, and his ideas aligned with my ideas. And we started talking about, is this even possible? How complicated is this? And Rogers is like, I think we can do this. And so that's how we got introduced together.
[00:12:26] Speaker D: Yeah, that's great. Ryan.
I remember those days and what you were trying to do.
I remember getting that call because what you were trying to do, I always wanted to do.
In sitting in your seat, I always wanted to do it. And I knew it was going to be difficult, and I was no longer sitting in your seat. And I was able to think about it more objectively and bring the team and the expertise here and collaborate on that.
When we think about that, we got it done. We got it done together.
To my knowledge, it's the only one I've ever seen where when we talk about a true daily PNL, we took that PNL down, not just by district, but by rig, by job. And we came across a lot of challenges along the way. I mean, several challenges around how you allocate not just allocate we're not allocating things to jobs. We are tying man hours to jobs, and we're tying consumables or unconsumables to jobs. We're tying R and M to equipment and to jobs. And there was a bit of trial and error there, and there were some system reconfigurations.
But let's just talk about maybe that philosophy that you came to the table with that aligned with the access board and aligned with our work that obviously went back to your time in the field.
This was a tool that, I guess even back in your prior days, you hadn't had the benefit of that tool. Now that you have the benefit of that tool, let's go back to when this was all raw and new.
What were some of the challenges and what were some of the insights that that tool brought out and then some of the things that enabled I know we want to talk about, like, incentives, but what were some of the findings that you took out of that process?
[00:14:36] Speaker A: Yeah, it's pretty eye opening. So essentially what we build is a rig level PNL. Right. So every rig has got its own PNL. So not only is it a daily PNL, but every rig has its own PNL, and I can pick up my phone right now and look at it and immediately go to it. And it's about transparency, I think, is one of the biggest things that we got out of the tool is you can't hide the underperformers.
We rank the rigs at the end of every month, and it's broadcast out. And you don't want to have your rig right in the bottom quartile. And so we started really focusing on why are these rigs we called them red rigs. We just very simply red, yellow, and green. Why is your rig red? And started drilling down and focused on the underperformers. And it was clear if a guy was managing his business or not managing his business. And most of the cost in a well serviced business is labor. And it's about unbilled labor. Right. If the guys are on jobs and they're working, the rig is probably not a red rig. You become unprofitable when the rig is in the yard and the guys are in the yard with it and there's no revenue and it's unbilled labor. But it's really the transparency is the biggest thing that came away. And the immediate transparency and those that ran good rigs got elevated. Right. And we gave them more. And the guys that ran the red rigs, that a lot of them are no longer with the organization. We moved them out and this continually hygrated from there.
[00:16:10] Speaker D: Yeah, I forgot about the red, yellow, and green, because, look, I think one of the traps some companies get into is this could be too much data.
I think collectively we brought this philosophy of management by exception.
It doesn't mean you ignore everything, but we want to know where we're off relative to expectations. We always want to be improving, and so expectations are going to change. So that red, yellow, green went into that. And I guess this was a cultural shift. It was a philosophical shift. You and I totally aligned on a decentralized nature. So you took it back to districts, but this philosophy doesn't fit everybody, and I guess you found that out as well. And how has fast forward a year, two years, how has it gelled in the organization and how does it show up today?
[00:17:12] Speaker A: Yeah, that was, again, one of the reasons why I chose you is you had sat in the seat and we'd had some conversations of team design and structure, and we both were very adamant in a flat structure. Right. You've got to be lean in this business. You don't need eight layers between the CEO and the guy at the wellhead. The flatter, the better. You can just move quicker. And I think we both aligned on a decentralized model. And a decentralized model is empowering. Those I use the term district manager. Those are the guys that run. They're the head honcho in a geography, and they'll know yards underneath the district managers. But I've had that role at Halliburton, being a district manager and having A-P-L. And what you want when you sit in that seat and you're sitting in Odessa, Texas, or whatever, isolated, like, you need to feel empowered to run your business. But you also need the tools to make the right decisions, right? You don't just need to be left on the island and unsupported. So there's this balance. We don't want to micromanage, but to be successful, there has to be, as the executives at Access have, to give these district managers the tools they need to be successful. The financial tools, the safety tools, the equipment, the standards, safety management systems all have to be there. But empowering these district managers to run their business like it's their own, me and you, Rogers, you talked about this a lot. They are small business owners, and that's the way I treat them. It is. Their P L, they're accountable for it. They're accountable for the safety of the troops, and they're accountable for hitting their numbers, right? And if they don't hit their numbers, they're going to hear from me. If they hit their numbers, they're going to get patted on the back, and we're going to keep feeding the studs and keep allocating capital their way.
[00:19:08] Speaker D: Yeah, I never went into a district because I would always ask, you want to run your own business? I never went into a district and asked that, and had somebody said no, but they'd say, yeah, I want to run our own business. And so, well, what if we put you in business? What if we take care of your working capital? What if we provide you the books and the records and the PNL and help educate you on the way we construct the PNL? And quite frankly, what if we give you your fixed cost burn and divide it over 30 days and show you the amount of revenue you have to do to break even?
And I think once you get to that point, everybody says, yeah, I'll take the keys. Okay, well, let's take the keys, and let's see how far we can run with it.
And it really is so educational, and like you said, Empowering, and without that, you sit back and you say the old way of doing the business, what's gratifying to your district manager? Well, what's gratifying without that empowerment, without that PNL, without running your own business, is you get in the mode of, I never want to miss a job. I always want my trucks to roll. Safety is clearly important, but, hey, I want to hire Joe's brother Jimmy's Aunt Et know, the more the better, because I'm never going to miss a job. I always want to have people to go. Well, that's obviously suboptimal, but if your bonus and your comp isn't tied to something truly transparent and objective, that's where gratification. That's the common denominator.
And I don't want to paint the whole industry with a broad brush, but I think you could think that way about lots of different jobs across lots of different industries. So you mentioned your expectation is, are you tracking to where we thought you were? Are you green or you're red? But now this tool is out there and you're held to that same accountability.
But I think we've talked about this. You don't have to wait for five weeks after a month or three weeks after a month for the books to close. You can make decisions real time, and your line of communication with your board is much cleaner and fewer surprises. Is that fair?
[00:21:30] Speaker A: Yeah, boards don't like surprises, and we have an active and engaged board and constant communication with them. And we're usually able to, halfway through the month, realistically know where we're going to land. Like, you're tracking that way and you've got a handle on your cost. And so we give a mid month, like here's where we think we're going to be maybe within a few percentage points. Usually every now and then there could be some major variance there, but supports expectation. In the middle of the month, we know where we're going to land, and if I miss the mark, I'm going to get a phone call. But we've really got it tightened at this point, and the fluctuations are out of the system. But that ability to know where you're at real time and make those real time decisions allows you just to move quickly. Guys don't wait six weeks if they need to make a change and pull a lever like they do at mid month. Right? They don't have to wait. And we've had cases where the guys pull those levers, have to make some hard decisions mid month and salvage a month because they were able to do that. That is a huge benefit.
[00:22:37] Speaker C: Does that give you the opportunity as well to move a rig from one area to another if the month's better in Eagleford instead of permian?
[00:22:45] Speaker A: I think that's my number one job as CEO is capital allocation. I give the district managers all the power in the world to run their business. But if they're underperforming that rig's got wheels, y'all have heard that there's a reason why that rig's got wheels is we'll move it where we can get the best return on that asset. And I will not hesitate to move a rig from an underperforming district to a high performing district.
Moving these rigs aren't cheap, right? So they can cost hundreds of thousands of dollars to move a rig across the country. And so before you do it, you've got to make the right decision. But we've got the rig ranking every month. We know where we're at real time. And I can tell you this week we're moving rigs from one district to another. I mean, it doesn't happen every week, but it happens and it allows us to go capture the best opportunity. Absolutely.
[00:23:39] Speaker C: So in my mind, you've got a great pulse on what's going on in the industry and where the activity is moving before many others, I would think.
[00:23:45] Speaker A: Yeah, real time, we're making decisions real time and we make decisions quick. Right.
When you talk about capital allocation, and I'm a big stick to your budget kind of guy, too, but also we've got to be nimble with our capital allocation decisions. And if we've got a need, for example, just this week we had a need come up and it was a need that was related to a tender. Right. And we knew if we want it, we're going to have to acquire some additional toys to do that on a Tuesday, we sat down and we looked at the business case and approved it on a Wednesday and we'll have the stuff by Friday. Right. We moved super quick. And that's a testament to having a good FP, a team, a good finance team to have those business cases there ready to prove. But you've also got to have confidence that the data that is being presented to you is accurate. Right. Because everybody in this business, they want the toys, right. Because if they've got the toys, then they can hit their bonus, they can hit their budget, they don't have their toys, they can't hit it. So you've got to be careful and make sure that the assumptions in the business cases are conservative because everybody tends to inflate the opportunity and be over aggressive with the assumptions. And so there's also these guys are incentivized to get more equipment. So you just got to be careful how quick you move sometimes.
[00:25:16] Speaker D: And then I just want to make sure core, we're talking about purposeful and philosophy and some of the foundational elements of access. And I go back to probably 2019 was the first I'd heard of the Core technology.
And digital is talked about a lot, but I think Axis was one of the first that I became introduced to that actually used that operating data to the benefit of the customer, to the benefit of access. You married that with the financial data. Right. And maybe that marriage. Maybe that's a good segue to talk about. Rig of the month. I always like seeing who's the rig of the month and would like to dig a little deeper as to how does a rig get to be rig of the month.
[00:26:03] Speaker A: Yeah, and that's our favorite post on LinkedIn. When we get to post those and gets the most views and the most guys, you know, seeing the picture of the crew in front of the just, it's a great deal getting to celebrate those rigs. What Core has brought to us is the same thing we talked about with the P L is transparency. It's helped know elevate the rigs.
And the way we calculate rig of the it's, the heaviest weight in that formula is on the safety side, right? Are the guys doing their daily startup inspections? Are the guys reporting their near misses?
Are the guys working incident free? Right? Are they doing all the right things on the safety side? That's definitely the most heavy part of that equation. But we're also using the PNL, right? We're also using Core.
Are they entering their data properly in Core? Is every sensor working? Did their job logs make sense?
And it's three or four different factors that go into it. And the guys take it very seriously. And it's competitive. Like, if a guy thinks he deserves Rig of the Month, there's people that get upset when they don't get it. I wish they could all get it.
We give them a plaque, right? We give them a little bit of incentives and a bunch of access swag. And it's just a positive camaraderie. And just positive peer pressure is a good thing. And the competition amongst the crews, it's a healthy competition, right? But yeah, it just continues to drive the behaviors that we want.
[00:27:37] Speaker C: You mentioned Core. Can you elaborate a little bit for the audience?
[00:27:42] Speaker A: Drilling rigs have pace on, right? And drill. An engineer can sit in his office and look at everything. And frag jobs have been remoted forever. And coal tubing can do it, wireline can do it. But workover rigs didn't really have something like a real time data.
We have that at Access. We branded it Core. All of our completion rigs have it. So it's real time data. I could pull it up on my phone. I can see every Core rig running today. I can see what they're doing. You see how many plugs per hour they're drilling. I can see their connection times. I can see the trip speeds at the end of it. We've got a Core engineer that puts together a post job report, packages up after every well, sends it to the customer, and gives that transparency of how well we did. And we even wrote an SB paper on it. You can go look that up. And it just talks about how we become more efficient with Core using the data. And we're not rushing, we're not telling the guys to work faster, but how do we put more weight on bit or apply the right chemistry or have the right pump pressures? And all these things that go into drilling frac plugs faster. And Core gave us that visibility to that. We had really good team of engineers that are behind that, and it's just helped us compete in the completion space.
[00:29:09] Speaker C: Do your customers have access to that course?
[00:29:11] Speaker A: Yeah, absolutely.
If you sign up for a completions rig, you can do that online.
We set you up and you have that ability to go look at your rig 24 7365.
[00:29:25] Speaker D: It's probably also good for troubleshooting when things don't go right. The data is right there. You can correct it quickly, and everybody can get to. The answer.
[00:29:35] Speaker A: Yeah.
Most workover rigs, when there's a job problem, everybody's pointing the finger, right. We've go over some specific examples where Core is like, okay, you can see exactly what happened. Right. And it's definitely brought some light to some practices and some improvement opportunities there.
[00:29:56] Speaker D: There's just this tone of purposefulness and planning, and I'd like for you to just expand on that, because I've really seen Axis move up the food chain in terms of the type of customers you go after and then also the way you have used M A, because you've grown organically as well as through M A, and it seems very purposeful.
[00:30:25] Speaker A: Right. It's definitely been my mission since I've stepped in full time at Axis is to keep aligning with the majors.
Don't want to forget about everybody else. Half our revenue today comes from the majors, the other half comes from all the other ENPs out there. But every day the majors are consolidating more and more like, it's real and it's happening. And what I like about the majors is they have the highest standards, and if we can work for them, we can work for anybody. And I try to make sure my team has a positive attitude regarding that, that they say, okay, we accept this as a challenge. Like, we're going to have the best standards, we're going to have the best rigs, we're going to have the best people, and if we can go work for the big guys, we can go work for anybody and also talk to the guys is like, we control the safety culture on location. Just because we were on a major's location today and then we go to someone else's location tomorrow, our safety culture doesn't change. We bring it with us, and we're like a thermostat. We control the safety culture on locations. So I think it helps us elevate our game to align with those majors, and they continue to consolidate, and we continue to grow with them, and we're very focused on growing with them. And speaking of growth, during COVID we were very opportunistic on the MNA front, and I kind of jokingly, but it's not an exaggeration. We started 2021 with 36 rigs, and we ended it with 300. Wow. So huge growth. Right. And that's part of why I focus more of all of my time on Access. We got really big really quickly. And when we founded Access originally, we're very completion focused. We were focused on the long laterals, drilling out these three, four, five hour long laterals. We wanted to be the guys, and we had the biggest rigs in the business. We had the Snubbing, we had the pumps, we had everything needed to go out and drill the longest laterals. And we've done that, and we do that still today. But with those acquisitions that we did in 2021, we expanded more into the production realm and more into the PNA realm. And now we're kind of almost equally balanced in completions, production, and PNA. And it's a really good blend for us. You get less of the variability in the production side, and the PNA side has really taken off. But those two M and A deals that we did in 2021 were transformative for us. We've now got over 30 yards in North America, and we've got the rigs. Right now, the question is, do you think the capital is the opportunity worth? And the last thing this world needs is another junkie rig running down the road. So we're very careful with how we think about bringing rigs off the fence.
We've scrapped a lot of the rigs. A lot of them were never needed to see another job in their life, and they were 20 years old. But coming up with those M and A deals, I think the board saw those deals coming. And that was a lot of why we went down this initiative with A M, was they wanted us to be ready financially, have the financial acumen. So that way when these deals came, we were able to apply our accesses procedures to these companies. And these companies didn't come with management teams. They were through bankruptcies, and they were run really lean at the time. And we were able to kind of, before the deals closed, take their data, put it into our P L, our rig ranking, and make some really interesting decisions, know where the rigs were making money, where they weren't making money, and really guided us through our integration plan.
[00:34:30] Speaker D: I think that's remarkable. You and I talked about that in the M A process and you looked at dozens of critical to your getting to the finish line was being able to take a disaggregated, or rather aggregated, consolidated, non decentralized P l. And then break it back down into your standard so that you could understand the true drivers and the opportunity for improvement. And that's no small task to do with third party data. So commend you guys for that? Yeah, just one of the last things for me, at least here is very purposeful, very transparent, decentralized ownership in the field.
It's clear that's allowed you to position yourself for the organic and the M A growth. It's allowed you to really improve margins. It's a tough business, but we might have touched on a little bit. But really, how has it allowed you to compete for talent in terms of have you seen it show up in attrition or lack thereof, or less thereof? And the incentives, it's got to be appealing to a certain type of district manager or team member. How have you seen that play out?
[00:35:59] Speaker A: Yeah, absolutely.
I think it ties back into incentives very closely to the P L conversation. And we worked on this together. I think you helped me roll out our first compensation plan kind of tied to the P L today we have districts, and then underneath the district, we have yard managers is the term I use. Everybody uses a different term, but I use the term yard manager. And this is a manager that he runs that yard again. And that's his P l. Those are his rigs. And every month he's the he's got the real time P L and he's got the transparency to see all this cost on every rig. And just this year, we started incentivizing those guys on their yard specific PNL just on gross margins.
In my opinion, they control 100% of gross margins. These yards. Managers control the pricing, they control the hiring, they control the firing, they control the wages, they control the maintenance, the unbilled labor. And it's all right there, right at the fingertips in power bi. There's no excuses that I didn't know. And being able to have that transparency because there's nothing worse than having a bonus system that's confusing, that guys don't understand or that guys don't have control over. So when you incentivize a guy on his yard level, gross margins that he has 100% control of, he's empowered, right? He's bought in. And there's nothing worse than throwing people into a huge bonus pool that they don't have effect of, and that you've got another yard in your district that's weighing you down, and you've got these underperformers that are affecting your variable comp. And so we took all that out and just gave I call it the profit sharing bonus. Pay it monthly. So you've got that instant, like real time gratification. We've got thresholds that they have to meet. Right. There has to be a certain level of profitability for them to meet. But what it's done is it's drove Efficiencies into their business. Right. It's made them tighten up their business. But at the end of the day, the biggest thing it's done is empowered them. Right. It's given them complete ownership. And I think that's the dream if you're in that position.
[00:38:20] Speaker D: That's excellent. Well, Jeff? Yeah.
[00:38:24] Speaker C: Another question. Through all this data you're gathering in real time, and you're finding out a lot of things about your business, have there been discoveries that have made you think, I need to get more involved in this part of the business, or maybe we need to exit this part of the business? That things you might not have uncovered otherwise.
[00:38:39] Speaker A: Yeah. Again, the transparency, you can't hide with those transparencies.
With that transparency, I won't go into specific details, but everybody sees it. Right. It makes it to the board level very quickly too. And you can't hide. And we have exited, I guess since I've taken over a CEO. We've exited a couple of lines of business, right. We've done that. And it's like, why are we in this business? It doesn't generate cash. If it doesn't generate cash, why are we doing it?
It's actually been an easy decision when you can look at the P L and it clearly is destructive to your balance sheet. And yeah, once. Once that data is there in front of you, you have to act on it.
Absolutely.
[00:39:27] Speaker C: Right.
Really enjoyed the conversation. Learned a lot. Appreciate everything you shared with us. And congratulations on really a job really well done with Axis. Excited to see what's coming in the future for you guys.
[00:39:39] Speaker A: Yeah.
[00:39:39] Speaker D: Thank you. Ryan. Really proud to be able to count you and access as partners.
[00:39:46] Speaker A: Yeah, I'm proud to be here, too with you guys.
I guess we've been working together for three years now and it's been fun. And the fact we're still living in the tool we built three years ago, and it's nearly the exact same tool we built and we still live in it every day. And the value we've gotten out of it, it's been tremendous. So appreciate you all's help.
[00:40:05] Speaker D: Thank you.
[00:40:06] Speaker C: Fantastic. Thank you into our audience. Thank you for joining us for this episode of The Next Imperative. We hope you found it as informative as we did and we look forward to seeing you again soon.
[00:40:17] Speaker B: Thank you for listening. Make sure to subscribe to The Next Imperative so you never miss a new episode. Also visit our website, alvarez and marsal.com, to learn more and to connect with us.
