A Knowledge Growing Tree

By Katie Schroeder

In recent years, multi-plant executive management has been on the rise. The boards of some ethanol plants are consolidating their resources by sharing a CEO between multiple plants— even those not owned by the same company—or hiring a CFO on a temporary basis. Ethanol Producer Magazine recently spoke with industry executives who manage two or more plants to shed light on why multiplant executive management happens, as well as the benefits and challenges of this strategy.

Experience and Qualifications

In order to be a CEO or CFO of an ethanol plant you need to have experi- ence and knowledge that qualifies you for the job, even more so if you are managing multiple facilities. Seth Harder, general manager and CEO of Husker Ag LLC and Lincolnway Energy LLC, says his experience comes from over 20 years of work in the ethanol industry, a journey that began post-college in 2001. He started out working on building a small ethanol plant in Stanton, Nebraska, then joined Husker Ag in 2002, working as production manager when the plant started up in 2003. After a short stint with ICM in 2004, being involved in around seven startups and plant retrofits, Harder returned to

Husker Ag at the end of 2004 as the plant manager and general manager shortly after, eventually taking on the title of CEO. He worked to build a second Husker Ag plant in Plainview, Nebraska, which he currently manages along with the original Husker Ag facility and Lincolnway Energy in Nevada, Iowa.

Nick Bowdish also got his start in the ethanol industry straight out of college in 2007 with an ag business degree. He worked with Fagen Inc.—as he explains, the construction company that built half the etha- nol industry—and led Platinum Ethanol in Arthur, Iowa, from 2008 to 2013. After the plant was sold in 2013, Bowdish decided to pursue his dream of working for himself and created N Bowdish Company, which runs and manages ethanol plants at the executive level. Over the past eight years, Bowdish has been CEO of both

Siouxland Ethanol in Jackson, Nebraska, and, for the past five years, Elite Octane in Atlantic, Iowa. Elite Octane was a newly constructed plant that Bowdish and some partners planned, developed and built, and it has been running since mid-2018. More recently, Bowdish also became CEO of Little Sioux Corn Processors in Marcus, Iowa, following the retirement of LSCP’s longtime CEO, Steve Roe, in July.

The role of CEO is not the only executive management position that may be handled by one person for multiple plants.

Jeff Kistner, owner of Flagleaf Financial Management, works as a CFO-for-hire, helping ethanol producers assess and manage risk as well as set strategic vision, typically working with a producer for two to seven years. Currently, he works primarily with Harder and his team at Husker Ag and Lincolnway Energy. His goal is to ultimately “work himself out of a job” with the producer that hires him, he says, by helping them reach their goals and making an exit.

Synergy and Collective Knowledge

Harder says CEOs in his position have a unique opportunity to grow a “knowledge tree” by connecting with employees and sharing information. It takes a “boots on the ground” approach, he says, when coming into a new plant, finding people who are staying engaged and excited about trying a new approach.

This type of information sharing is key to a plant’s success, according to Bowdish. He explains that multi-plant executive management allows for operational synergies, mistake avoidance through experience and solutions sharing, and the exchange of advice on issues they are experiencing. “One of the common characteristics of the group of plants in our industry that financially struggle, is that many of them, I perceive … go to extremes to keep everything under wraps and in a cocoon; [it’s a] guise of believing that they have so many things they do [that are] especially unique,” Bowdish says. “Quite the contrary, what I see in many of the best financially performing plants are those that are led by people who network the best—and multi-plant executive management is networking.”

A learner mindset and sharing openly are key to developing a trusting relationship with other producers to learn from each other’s struggles and successes. “The plants I’m privileged to lead definitely make each other better,” Bowdish says. “We too are also learning from others in the industry; we’ve grown a mutual trust and benefit from that … [and it] isn’t a one-way street. We openly share our challenges and things that work and don’t work, and we make each other better.”

Harder also discusses the ways that ethanol plants under the same executive management can benefit from sharing R&D, taking turns testing out new technologies and learning from each other’s findings. “We’ll do one thing at one plant that benefits the other plants that we’re in,” he says. “We kind of share the R&D across the platforms, so that one place isn’t always the guinea pig.”

The ‘Why?’ of Multi-Plant Executive Management

“The main ‘why’ [of multi-plant management] is that investors want to maximize their financial return, so they seek out professionals with the experience and track record to achieve their financial goals,” Bowdish says. Ethanol producers all operate in the same volatile market, with similar input costs from natural gas, corn prices and coproduct prices. However, Bowdish explains that the variability of profit from plant to plant at times exceeds 30 percent. “Typically, a portion of that variability, or delta, stems from regional supply and demand; for instance, with the crop year we’re in this year, corn is plentiful in the east and scarce in the west, [and that can cause] some of the difference,” he says. “But also, I would say a good portion of the delta exists purely based on management decisions made.” In today’s complex market, investors seek out someone who they see has “delivered good results” in the past to help manage the company through a transition.

There are also cost benefits that come with hiring a temporary CFO, because it is generally cheaper than hiring another full-

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Approaching a New Environment

When Harder comes to a new plant, he observes the way the plant is run, talks with operators and hears what problems they encounter with the process. Building trust is a key first step in developing these relationships, he explains, and the best way to accomplish that is by working alongside operators and demonstrating a

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• Centrifuges desire for their success and growth. Harder sees sharing knowledge about the ethanol plant’s process as vital to helping increase process efficiency. After building relationships, Harder shows them some of the basic physics of an ethanol facility, stimulating growth of that “knowledge tree.”

This strategy of trust, communication and education helped bring Lincolnway Energy out of the 40s or 50s in benchmark metrics up to the top 10 or 15 percent in net income. Harder credits the shift to the improvement in energy management and amount of electricity that was being used, increasing yields and reducing maintenance costs. These process adjustments mean a lot to the ethanol plants productivity and can mean dollars and cents in a world with tax credits for carbon reduction, he explains. “When I look at the industry average and what we see coming for carbon and lowering our carbon scores and knowing what we’ve been able to achieve [at] … these three facilities, and seeing what the industry averages are and the benchmarks, we know there’s an improvement that’s available out there,” Harder says. “And we know that a chunk of that can come from operators being taught what a British thermal unit is, and how to save Btus, and how to save kilowatts, and tuning valves, and not putting too much water in the process … showing people what saving water on their scrubber or testing [does] if they run a clean plant.”

Bowdish explains that he tries to avoid conference calls and power points and instead takes a team-oriented, hands-on approach. “That type of leadership out in the field that no matter what our title or organizational position is, we’re all in this together to deliver top-end financial results for our shareholders, while doing it in a way that we all take pride in the facility, how it looks and what we’re doing,” Bowdish says.

“That’s what’s worked for me in the past, and I think that has truly become one of the challenges that rises to the top of my mind … just continuing to embrace and lead that type of culture.”

Assessing Investments

Executive management often is a part of making decisions on what technologies or improvements need to be added to an ethanol plant. With so many technologies to consider, Harder explains that networking is vital to learning about a new technology, and conferences provide a great opportunity to hear about other producers’ experiences. “We’re busy as plant management, so we don’t have time to talk to our buddies every single day in the industry, when we get to these conferences that’s where a lot of this knowledge transfers,” he says. Doing the math, understanding the technology, knowing the local markets and what the plant is capable of are tactics that help management make good investments.

Making good capital allocation decisions has become “more of an art than a science” at the executive management level, according to Bowdish, due to the constant innovations and improvements across the ethanol industry.

For Kistner, determining good investments is similar to doing a feasibility study; examining potential payback time on investment, cost and return, amount of capital needed, as well as assessing the markets. “Does it make sense for us to do it? And I use this a lot of times, just because we think it doesn’t mean we need to do it,” Kistner says. “And that’s where companies fail, if they don’t have a strong balance sheet … [or] if they missed some of the risks associated with these projects.”

Challenges of Multi-Plant Management

Bowdish and Harder both agree that there are challenges that come with man- aging multiple biorefineries. For Bowdish, one of the challenges is making sure he remembers the name of every single operator, maintenance technician and staff member at each location. “At the end of the day, people want to work for people who care, and a huge part of our past success was the learned culture of doing more than just grabbing samples or wiring up a motor,” Bowdish says. “For me, as a challenge, I think as the organizations grow that I’ve got the opportunity and privilege to lead, I have to find new ways to stay connected with the people that are day in and day out, delivering all the action items that snowball into the organization’s success.”

The biggest challenge for Harder is time; managing plants that are located a four-hour drive apart can be difficult, even with a small airplane to make travel a bit faster. Harder explains that he prioritizes visiting Lincolnway at least two days a week to make sure that he is present as much as possible. “I feel like if you’re not doing that, are you doing everybody a service then at that point?” Harder says.

Multi-plant executive management provides more opportunities for teamwork and information sharing between plants, two factors that are vital to growth and problem solving.

“It truly is building a great team, watching them grow around you. We all only get so much time on this planet,” Harder says. “It’s really a strong belief of mine that there’s some really great people out there or there’s greatness in everybody, it’s just helping them to realize it.”

Author: Katie Schroeder

Contact: katie.schroeder@bbiinternational.com