Don Correll, CEO, American Water

Providing a Service We Take for Granted

Don Correll, CEO, American Water

Don Correll, President and CEOFor much of this country’s history, the states and Federal government did not provide water service to communities. Instead, private companies were granted franchises to become water utilities, and back in the early 19th century nine out of 10 water systems were built by private enterprise It was only during the late 1800s that municipal entities began to buy their water systems to manage growth. Today, 85% of Americans get their water from a municipality, not from a company like American Water.

“Like everyone else, I took water for granted as much as anyone else when I was young,” said Don Correll, the company’s CEO, during our meeting at the company’s headquarters in Voorhees, N.J. “We’re to water what a utility would be to electricity. We serve 15 million people in 32 states and Canada.”

Founded in 1886, America Water is the largest investor-owned (NYSE: AWK) water and wastewater utility company in the U.S., with revenues of more than $2.3 billion in 2008 and 7000 employees. Most of its business in the last 50 years has been concentrated in suburban areas, like Cherry Hill, N.J., and the suburbs of Pittsburgh and St. Louis.

Correll grew up in Lehigh Valley, a Phillies fan hoping to make the major leagues, “but neither my height nor my hitting prowess was going to get me into the big leagues.”

Don studied accounting and finance as an undergraduate, and then earned an MBA in finance. He started out in public accounting, worked for a water utility in the finance area, and after 15 years become its president. He served there for 10 years, growing it into the second largest water utility after American Water. He became CEO of American Water in April, 2006.

I asked Don about his path to becoming CEO. Was it a straight line? Had he always aspired to the position?

“I think everybody has to have a five-year plan: where do you want to be in five years? When you’re 26 or 27, you plan isn’t necessarily to become a CEO, especially when the people running your company are in their 40s or 50s. But I set some goals for myself. I knew I needed more management experience and more education. I went back to school at night and got an MBA in finance. Then I made another five year plan and worked toward it.”

Correll looked for opportunities to take on more responsibility.

“My company recognized that I wanted to take on more, and they were willing to work with me and challenge me. I had mentors and I worked with evolving challenges, whether it was building a new water supply, dealing with rate increases or droughts, or positioning the company for growth.”

Correll emphasized how his career was helped by good mentors, “people who served as sounding boards, and who understood that business is not just about capital, but managing people and giving them opportunities. That was critical.”

Correll recalled one mentor who was a big influence when he was in his late 20s and just starting out in the business.

“This man was in 60s, an interim CEO, a very calm, focused, and accomplished person. He had already left his mark on one organization. and was there to see this company through a five or seven-year period. He was a mentor to the entire team. He saw me as someone who could accomplish more, if I had the opportunity and the oversight and the trust. And I learned from him how to build a team and give people opportunity within an organization. You can’t do everything yourself. It’s not going to happen. You have to have the right people working for you. You have to trust them and they have to know that you trust them. And you have to hold them accountable–they have to know they’re in their positions to get something done. I learned all this from that mentor, and I’ve worked in the same way for 30 years.”

Crucial to his daily work as CEO is staying in touch with his senior management team.

“I touch base with the top ten people in the organization at least once every other day, if not every day. I prefer face-to-face, next would be telephone. Last for me is sending an email. I haven’t reached the point where I find it personal enough. It’s just as easy to pick up the phone. I hear their voices and they hear mine. It’s the next closest thing to meeting them face-to-face. I’m also an absolute subscriber to management by walking around (MBWA). When you have face time, you know you’re connecting with someone. I fear the day when the majority of communication is through the internet, because then we’ve lost the personal touch.”

Correll’s vision of the company’s future sees an increased role for the private sector in supplying water.

“The idea for the last century that one answer fits all–that the local entity or town owns it and runs it–isn’t the only answer. We’ve had a lot of successes in the last few years demonstrating that we can work with those public entities that have owned their water systems for 20 or 100 years. They have to build a new plant, but they realize they don’t have to do it the way they’ve always done it. Or they realize they don’t have to provide water service, when they also need to do fire, safety, and education.

“With the country $11 trillion in debt, with another trillion a year as far as the eye can see, and with $2.5 trillion in municipal debt across the country, from basically zero in 1950, there’s going to be an inflection point. I don’t know if that’s going to happen next year or over the next decade, but that’s where I see our company using it’s strength and its history to work with government entities and municipalities to show that there is another way.”

Complementing this monetary and political rationale, American Water has the resources and technology to make water systems more efficient, particularly for those small communities that lack large resources or infrastructure to deal with water issues.

“We bring technology to every aspect of our business, whether treating water, reading meters, or detecting leaks in the system. We work with R&D groups that have new technology that might help with a specific problem in West Virginia because of the terrain there, or with a water quality problem in New Mexico. A small municipal entity of 25,000 people in Pennsylvania or Ohio or Kentucky doesn’t have the same ability to focus on these types of problems. There aren’t a lot of mayors who stay up at night because of a water issue. They’re thinking about teacher contracts, budget issues, or the next election.”

I asked Don how he handled the inevitable stress that comes with being a CEO.

“If I show stress, then everybody else in the organization will. I have good genes from my father, who was a very relaxed and calm individual. I’ve seen a lot and learned a lot. But there are certain things you can’t control, and there’s no point getting stressed about them. I find the job enormously rewarding and enjoy the interaction with all the people I work with.”

Correll doesn’t dispute that there have been corporate excesses in recent years.

“Has it gone over the top? I absolutely agree with that. I wouldn’t want to take anything away from entrepreneurship and rewards for performance, but there were some outsized executive bonuses in years past that boggle the mind.”

Summing up, Correll emphasized the service his company supplies, one often taken for granted by the public.

“The bottled water industry did an effective job of selling the convenience, while creating a taint about tap water. As an industry, we were outraged 20 years ago when they started doing it. Some bottled water is more expensive than a gallon of gas, but the cost is less than a penny. A terrific markup, if you can do it, from the marketing and delivery and putting it on the shelves, but that’s not our business. We’re not marketers–we’re service providers. We take the water, clean it, and deliver it to your house.”

I glanced at the bottle of water that Don had offered me when I first walked in, which the company gives out at community events (American Water doesn’t sell water retail).

“Don’t worry,” Correll reassured me, laughing. “That’s our water. We’d forbid anything else.”