Trane Changes Its Business Climate

By Mark Jr.

Nov. 9, 2007

When Morgan Stanley approached Trane to install a climate control system in its Purchase, New York, office, the heating and air conditioning company did more than sell and install equipment.

    Trane considered the different activities that occur at the investment bank’s 750,000-square-foot facility. It’s a data center, a trading floor and an office.

    In Morgan Stanley’s business, losing a few seconds—let alone a few minutes—to an infrastructure problem could cost millions of dollars.

    So, Trane engineers developed a thermal storage system that makes ice at night to cool the facility the next day. Such a process lowers Morgan Stanley’s electricity consumption, provides a more reliable source of air conditioning and helps protect the environment because it keeps the climate system off the electrical grid during peak business hours.

    A similar system devised for Credit Suisse’s Manhattan office saves the financial company about $1 million annually. Morgan Stanley enjoyed a further benefit when its green effort was rewarded with a $300,000 grant from the New York State Energy Research & Development Authority.

    The results emanated from a new mind-set that Trane has been instilling in its workforce for many years: The company is moving away from transactional equipment sales to developing strategic customer relationships.

    The company still sells heating and air conditioning systems, but now its engineers and salespeople must develop a deeper understanding of their customers’ businesses and look holistically at a building.

    That dynamic was at the heart of Trane’s work with Morgan Stanley on its Purchase facility. “We created a solution,” says Rich Halley, district manager for Trane in New York and New Jersey.

    What the financial firm sought from Trane was a way to apply environmental best practices to its building, says James McAleer, Morgan Stanley’s facilities manager. The result was a reduction in emissions and energy consumption.

    “This in turn benefited the environment and improved the overall efficiency of our facility,” McAleer said in an e-mail interview. “We are currently partnering with Trane on a Manhattan building to provide the same environmental benefits realized in Westchester.”

    The company took a similar approach in working with New Jersey schools. Ultimately, Trane’s charge was to help them meet their bottom-line goal—raising standardized test scores.

    The ideas that Trane developed, such as portable thermostats, were designed to raise air quality and improve the comfort level so kids could concentrate better.

Clients demand more
    This broader view of the client came from the people signing the contracts.

    “Our customers realized before we did how much impact we could have on their businesses,” says John Con over, president of Trane Americas. “They say, `You sell us a piece of equipment, then you go away. I don’t see you until I’m ready to build my next building.’ “

    The clients wanted Trane to do more for them and develop a deeper relationship. “We now stay with the customer,” Conover says.

    With this inspiration, Trane in 2002 began to formally make a transition from being a company that focused on equipment sales to one that emphasized customer account management.

    This evolution required the company to fundamentally change the curricula of its extensive training programs. Over the course of a year, 6,000 of the 7,000 Trane Americas employees are in some kind of development program.

    When Conover attended Trane’s signature Graduate Training Program in 1977, it essentially gave newly minted engineers that Trane had recruited from colleges advanced instruction in thermal heat transfer.

    The emphasis of the curriculum was on what Conover calls “back wheel” skills. “It was all technical,” Conover says.

    Now the new Trane hires, who study in La Crosse, Wisconsin, for six months, followed by six months of training at local Trane facilities, take an additional set of classes designed to hone “front wheel” skills—such as teamwork, listening, account management, leadership and interpersonal relationships—that will help them communicate with clients.

    “We want them to have that focus on the customer so that they can interpret what the customer’s real needs are, understand what the customer’s business needs are, and then bring technical solutions to those issues,” Conover says.

“We’ve made the business that
we have much more profitable.
This transition is what’s allowed
us to do that.”
–John Conover, president, Trane Americas

    The key for Trane and other companies going through the transition from transactional to strategic client relationships is to develop a workforce that is adept at soft skills, says Rich Thompson, vice president of training and development at staffing and workforce consulting company Adecco, where he concentrates on coaching, mentorship and skills development.

    This means that a salesperson is a good listener and can ask good questions that prompt a customer to reveal more than what he or she needs in the next order.

    For the customer, “it’s just as important now to have a consultant as it is to have an answer man,” Thompson says. “You have to consult with the client to get the answer, to get the solution.”

    This change has been fostered in part by the Internet, which promotes price transparency. “The consumer is smarter,” Thompson says. “They’re better educated. They’re more sophisticated. They’re savvy. You have to show them you have the best solution long term.”

    One salesperson usually can’t establish such a complex relationship. That’s why Trane has put a premium on internal collaboration.

    “It’s really important now that our salespeople, our account managers work together on teams with other people in the office,” Conover says. “That’s a different way to behave than the sales skills we were using 20 years ago.”

‘Ahead of the storm’
    The new approach is producing bottom-line results, according to Conover. Over the past three years, Trane has achieved double-digit growth, all of which has come “organically” rather than through acquisition, he says.

    “We’ve made the business that we have much more profitable,” Conover says. “This transition is what’s allowed us to do that.”

    Trane’s parent, American Standard Cos., announced in February that sales rose 8 percent in 2006, to $11.2 billion, with Trane accounting for $6.8 billion of the total. The company predicts 8 percent sales growth again this year and is projecting an increase of 18 percent to 22 percent in its earnings per share. In July, American Standard sold its bath and kitchen products company and announced that it would change its name to Trane.

    Trane, which employs 29,000 people worldwide, says that its 2006 sales—$4.9 billion from equipment systems and $1.9 billion from services—represent a 129 percent increase compared with 1995, when American Standard went public.

    So, for the past decade Trane has generally been in good shape. When it decided to transform its sales orientation from transactional equipment deals to strategic customer relations, it was essentially turning around a ship while the ocean was calm and the weather was temperate.

    “It’s harder to drive change when you’ve been successful, as opposed to driving change when you have a burning platform,” Conover says. “We haven’t had a crisis. We wanted to stay ahead of the storm.”

    In some ways, that makes a transition more challenging. “It’s a big change management issue,” says Shelly Heiden, executive vice president of global operations at Plateau Systems, a company that provides talent management software, content and services. That’s why it’s important for top executives to lead the transformation through example and communication.

    “When the message is delivered at the highest level of the organization, it resonates more,” Heiden says. The key concept to get across is “letting employees know what their stake is in it.”

    Their role has to be more fulfilling than just increasing bottom-line numbers, says Maxine Kamin, president of Touch Consulting Inc. They have to feel as if they’re truly delivering more value to the customer.

    “The challenge for the company is to show that it’s not the company’s intent to sell more products without reason,” she says. “It’s the company’s intent to provide better service. The paradigm shift has to be: `I really want to find out what this customer needs.’ “

    This kind of approach has become common in the telecommunications industry. With the advent of portable cell phone numbers, competition spiked for retaining customers through service.

    “People realized margins are better when you have a lifetime of usage,” says Marti Smye, market leader in coaching and change management at Korn/Ferry. “In the more equipment-oriented companies, this is a new trend.”

    Trane turned to Smye to help it become part of the movement. She worked with 36 Trane district managers over three years to retool the company’s culture.

    That meant changing their mind-set from transactional to strategic and from short term to long term. It required their “thinking from the customer’s point of view,” Smye says.

    Getting district managers to make the adjustment is a key to the transition. Of course, some people who have been used to doing sales the traditional way might resist the change, and decide to leave the company.

    There was some turnover as Trane started to make its transformation in 2002—the year Conover’s predecessor retired, as did many senior district managers. “Some people decided they didn’t want to make the transition,” Conover says.

    Although the company didn’t provide statistics, it said that turnover has been minimal. “Trane has been very committed to the people in place,” Smye says.

    Part of the reason the change didn’t cause a bloodletting is that the customer culture that has been ingrained over the past century.

    “When you convey it in those terms—`This is what the customer wants’—they’re quick to sign up,” Conover says.

    In fact, employee commitment increases because of the collaboration with customers and colleagues that the new approach requires. “They’ve been engaged by being part of a team,” he says.

    Cooperation is also emphasized in the Trane Leadership Development Program. Established in 2003, it involves 12 to 15 people at a time who are in class together for three days every six weeks over an 18-month period.

    The program is designed not just to teach talent management, solutions-selling and ethics, but also to help each class become a team.

    “It develops a network of people—15 peers,” Halley says. “It really ties us together. We’re all thinking the same way.”

    Trane hopes the end result is improved performance in the field. “You are building skill sets to run a district office or a business unit,” says Gigi Bruno, Trane’s global learning and development leader.

    And, as with all training at Trane, the client is the focus. “The idea is getting people together to talk about the customer,” Bruno says.

    The importance of collaboration is reinforced by Trane’s recognition system. “You have to align those rewards with all of this change,” Smye says.

    So Trane acknowledges group accomplishments. For instance, the One Trane Award signifies achievement in providing solutions and value to customers.

    “It’s a plaque; it’s a public acknowledgment,” Bruno says. “It’s got nothing to do with money. That’s something we’re very proud of in this culture.”

Workforce Management, November 5, 2007, p. 33-37Subscribe Now!

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