*Fast Rising STAR

Aug. 1, 2002
A customer calls Star Rentals' main branch in Seattle and tells them he'd like a rotary hammer and will be coming by to pick it up. As he drives into

A customer calls Star Rentals' main branch in Seattle and tells them he'd like a rotary hammer and will be coming by to pick it up. As he drives into the lot 15 minutes later, the branch manager recognizes his pickup truck by the company logo on the door. He pulls the customers' information up on the computer screen and has the contract printed and ready for signing before he even steps into the building. As the customer signs the contract, Star's warehouseman puts the hammer into the back of the pickup truck. Time inside the Star Rentals' gate: less than two minutes.

Another customer calls the Auburn, Wash., branch and asks if he can pick up a generator at 5:30 the next morning. No problem. The contract is written up the night before and all the customer needs to do is drive through the gate. The counter is by the front window and the counter person sees him drive through the gate towards the showroom. He brings the contract outside and the customer doesn't even have to get out of his car. (Unless of course he needs a cup of coffee. This being the Northwest, there is always a pot of fine brew available.) Time of transaction — one minute.

Another customer drives in unannounced to the Auburn branch during the middle of the day. The branch manager sees the customer coming and pulls up his profile on the screen. The counterman pops out to say hello and asks him what he needs. The counterman tells the branch manager who prints out a contract and has the warehouseman bring an air compressor and rock drill out from the back. The customer never leaves his car. Time of transaction: five minutes.

It may not always work that fast, but that's the way Star Rentals tries to conduct its business.

“If the customer is coming to your yard, he doesn't want to wait for 20 minutes or a half hour,” says Star CEO Bob Kendall. “He wants to get in and get out of there. If he is a runner or an expediter, the boss wants him back as soon as possible. So how the yard is laid out, how the store is laid out, how you rack things, right down to the software system that we're using, to me those are big issues.”

The same goes for deliveries. With about 60 percent of Star's business made up of aerial work platforms and telescopic handlers, Star delivers most of its equipment via a large fleet of rollback trucks and tractor-trailers. Quick, on-time delivery is an essential part of the company's performance and Star delivery personnel are trained to be fast and courteous and not keep customers' waiting.

Outstanding mechanical expertise is an important aspect of the entire customer service performance. Kendall is a strong proponent of training, with all mechanics having been through service schools offered by the manufacturers of machines they work on. And although specific Star mechanics are assigned to perform service calls in the field, every Star mechanic is capable of performing them when the need arises. Star has mechanics that specialize in forklifts, compressors, aerial work platforms, small engine repair and other service areas.

Star also does a large amount of repair of customer-owned equipment as well, bringing in about $1.5 million revenue annually from this including parts sales. Not only does it provide Star with another stream of revenue, it provides an important service for customers and keeps them coming to Star for all of their equipment needs, whether it's to buy used or new equipment, supplies or rental.

Kendall consistently emphasizes proper treatment of the customer right down to the way employees answer the telephone. Kendall calls it smiling on the telephone. The customer can sense when they are dealing with a person who cares about their work and consequently is attentive to the customers' concerns. At Star, that concern is expressed from the moment the customer calls on the phone as well as in every personal contact they have.

“What's more important than a customer?” asks Kendall. “Speaking the right way on the telephone doesn't cost you one penny, it's the easiest thing in the world to do.”

Kendall tries to set the example with his own daily activity. As CEO of a $50 million company — No. 27 on the RER 100, with about 260 employees and 15 branches — you might expect him to be in a suite of offices, removed from the day-to-day interaction with customers that drive in to rent equipment. But visitors to Star's main Seattle headquarters walk in through the front door and find the rental counter immediately to their right and Bob Kendall's office immediately to their left. If they have an issue they want to address, they don't have to wade through layers of managers and assistants before they get to the top. The top man is accessible at the bottom, sitting right by the front door with a glass office right in the showroom with the door open. And Kendall makes it a habit, whenever he sees customers he knows, to get out of his chair and greet them.

But the way Star is structured, customers don't normally have to go that far up the corporate ladder to deal with problems, because one of the keys to the customer-friendly way Star does business is the degree of authority and autonomy that managers and sales staff have far down the chain of command.

Outside sales people have the power to approve rates and if a deal seems a bit out of the usual range, their branch managers are empowered to make those decisions. The same rules apply to service-related issues with customers. If it seems reasonably fair to the customer and the company, the manager has the power to make decisions right on the spot.

“If a guy has a beef, if he lost a couple of hours, and we can see his point, I don't mind giving him a break,” says John Simpson, manager of Star's Auburn, Wash., branch. “If he had it for a week and a day and he was down a few hours, I'll give him an extra day on it. Some customers tell me they're still fighting with other rental companies to get credits over a breakdown that happened months ago. Superintendents have enough paperwork and details to deal with and so do we. They like to get an answer right now and I feel the same way. They call us and get it done within one phone call.”

Similarly, branch managers have authority to alter their inventory mix if they have sound business reasons to do so. As Kendall says, he expects to be informed of these decisions, but he empowers his managers to make them on their own.

While employee empowerment is important for the harmonious operation of any enterprise, it is much easier with a company like Star because of the experience level of its management team. Star's 15 branch managers average more than 23 years of rental industry experience and more than 15 years with Star. Eastern regional vice president Chet Olson just celebrated 40 years with Star Rentals. Walk through Star branches and you'll find that service managers, sales coordinators, outside sales staff, mechanics, drivers, accounting and collections personnel — in short, personnel at all levels of the company — typically have 15 to 25 years with Star.

Kendall is proud to say that he can only recall one time when he lost an employee to a competitor. An atmosphere of trust, of being part of a team, of being part of the decision-making process where one's opinions are desired and appreciated contributes to a sense of unity and common purpose at Star. The trust emanates from the top. Employee participation and empowerment is part of Kendall's philosophy as it was of former CEO Kyle Hesse before him.

To a degree, the atmosphere of trust can be traced to Star Rentals' ownership. The Rabel family, which has owned Star since its founding in 1900, are absentee owners. No family member works for the company and the three brothers — great grandsons of the company's founder Christian Rabel — live outside the Pacific Northwest several months a year. While CEO Kendall meets with them several times a year, keeps them informed of major decisions and, is responsible for fiscal and operational conditions, the owners essentially let the management team of Star chart the course for the rental company, and the atmosphere of trust emanates from the owners to management and from management to the various levels of the company.

The ability to get back to customers quickly with decisions is valued at Star Rentals. If a customer wants a piece of equipment that Star doesn't carry and a manager wants to obtain the item for the customer, the manager or Kendall will make an immediate decision if the purchase makes good business sense and order the item immediately if they determine that it would. Likewise, they take advantage of strong, carefully developed relationships with suppliers to add inventory immediately if utilization is high and a need arises.

“We recently had a situation with a very good customer, a key account, where they needed two new 60-foot booms for a specific application and they caught us at a time when we were 100 percent utilized on 60-footers,” Kendall says. “The branch manager called me and I called Genie Industries and gave them a purchase order for two brand new machines and we had those machines delivered to the job the next day. Not many companies can do that.”

Just as national players reduce vendors to a few key preferred accounts, Star Rentals does the same. “By streamlining it down to a couple of products in all categories, and sometimes it's not even a couple, no matter where our equipment goes, our people have familiarity with it because we're buying specifically that brand. And it gives me a fair amount of leverage with manufacturers for attractive pricing.”


Star Rentals has long-term relationships with many of the suppliers it does business with, but its relationship to its customers goes back even longer in many cases. The company was founded more than a century ago as Star Machinery about a half block from its current downtown Seattle headquarters.

The original Star Machinery catered to the fishing, mining and logging industries, doing business as far north as Alaska. It eventually focused more on construction equipment, becoming dealers for Grove cranes, Ingersoll-Rand and was the area's first Bobcat dealer in the 1950s.

In the late 1950s, Kyle Hesse, who recently had worked for a company called Cox Rental Machinery, approached the Star owners, which had a small, back-room rental operation, about starting Star Rentals. They pondered the idea and reached an agreement where they would own the company and Hesse would run it. Hesse retired in 1997 and turned the company's reigns over to Bob Kendall, who Hesse had hired in 1983. Kendall, whose father had been a construction contractor, had worked for Hertz Equipment Rental Corp. and a local outfit called High Lift Equipment Rental.

Amazingly, many of Star's current biggest customers date back to the early days of Star Machinery, such as aircraft manufacturer Boeing, which is one of Star's biggest accounts, and Hanford, best known for its controversial nuclear waste reservation. While Star Rentals has a number of large industrial accounts — the industrial business makes up about 35 percent of its business, with about 65 percent devoted to construction — such as Boeing, Hanford, Burlington Northern Santa Fe Railway, Bonneville Power Administration and Weyerhauser — the company has more than 10,000 active accounts and is so diversified that no single customer makes up more than 1.5 percent of its revenue base.

Such diversification is extremely important as the Pacific Northwest suffers the brunt of the current recession. Massive layoffs by Boeing and a number of high-tech companies have contributed to unemployment rates of about 9 percent in Oregon and about 8.2 percent in Washington — thus the two states where Star markets have the two highest unemployment rates in the nation. Some recent large-scale construction projects, such as the construction of Safeco Field, the new home of the Seattle Mariners, and the new Seahawks Stadium football stadium, opening this month, are located within a block from Star's Seattle headquarters. Also, the massive 7.6-scale earthquake in February of last year caused much damage in downtown Seattle, which kept utilization high, especially on aerial work platforms, and a lot of seismic retrofitting work has kept the company busy. But Star management knows there won't be such large projects for quite a while to come.

“There are still some good sized projects going on downtown but we won't see anything like [the construction of those two stadiums] for the rest of my career,” says Kendall. “I'm certain of that.” Nonetheless, Star has hope that the significant need for new highway development will provide a lot of opportunity for Star in the coming years, although whenever public funding is involved, the pace of development could be much slower than hoped for. While Star has had to do some belt-tightening, it has avoided the massive layoffs that many larger companies have been forced into, losing a couple of dozen employees because of natural attrition.

Star Rentals will need to hang tough through the next couple of years as the Pacific Northwest passes through a recession that will likely last longer and be slower to recover than the rest of the nation. Star will continue to diversify, as it did recently by winning a large municipal contract with the City of Seattle.

As long as the company continues to concentrate on its fundamentals — the crisp, thorough and prompt customer service for which it has become known — the future of this particular star appears bright, light years from extinction. And in an era when almost every rental company of its size was acquired by consolidators, the survival of Star as an independent appears most probable.

The New Star

Even though Star is strong on customer relationships and history within the community, Bob Kendall and other managers have become aware in recent years of the need to freshen up the company's image.

“The thought process for me was looking at what has happened in our industry,” Kendall says. “United came in here and RSC and Hertz changed its logos here a couple of years ago. Sunbelt came in and bought Ivy Hi-Lift. So all of our competitors had new looks somehow, new names, new decals, new images, and yet we were somehow the same. When I looked at our Yellow Pages advertising, I didn't think it was terrible, but it just wasn't fresh.”

Kendall felt the need for a change and hired a local marketing expert Jeff Busch. Busch took the round Star Rentals logo and moved it to the side so that only a partial image would show, thus forcing viewers to subconsciously complete the image in their minds. Now that the changes its competitors made are several years old, the new look makes Star look like the new kid on the block, even after decades of doing business in the region.

“The temptation for a new marketing firm might be to come in and want to re-design the brand,” says Busch. “I didn't see it that way. I thought it best to capitalize on the equity Star Rentals already had. So we've taken its logo and tried to make the best of it on ads, business cards, invoices and decals.”

The result has drawn a lot of positive attention to a company that has already been doing a lot of things well.