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The consummate Oregonian

Native son Tom Kelly wields his unassuming style and quiet drive to build his business and his state.

 

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Tom Kelly in the Neil Kelly showroom in North Portland, where the company has been headquartered since 1966.
// Photo by Christopher Barth

Tom Kelly is sitting in his North Portland office, waxing enthusiastic about his latest cause: juniper, an indigenous Eastern Oregon tree that is apparently running amok. Decades of fire suppression have left the state with a juniper surplus, and Kelly, president of the Neil Kelly Company, a design-build-remodeling firm, is incorporating the weed-like wood into a sustainable cabinet line, part of a larger effort to commercialize juniper as an industry.

“What’s exciting is this could be a real job creator,” says Kelly, describing a logger in Harney County who harvested 9,000 acres last year. “He brings his equipment out to the site and cuts it down and mills it right there.”

The 60-year-old Kelly gets excited about a lot of things, most of all triple-bottom-line projects that use business to catalyze social and environmental change.

The head of the largest residential remodeling firm in the Pacific Northwest, he boasts a lengthy civic resume that includes chairing the board of Loaves & Fishes, a nonprofit that provides meals to homebound seniors, co-chairing a statewide Oregon Solutions effort to build a new state-of the art green school for flood-ravaged Vernonia, and serving on a Habitat for Humanity capital campaign committee.

Notable positions and accomplishments notwithstanding, Kelly, whose rumpled hair and low-key speaking style make him seem more handyman than executive, has remained mostly out of the spotlight in the 33 years he has run Neil Kelly. Gov. John Kitzhaber, who tapped Kelly as co-chair for the Vernonia project, calls him “an unsung community leader.”

But therein lies Kelly’s secret.

Gregarious yet unassuming, Kelly is one of the state’s most respected businessmen, not because of charisma, cutthroat business practices or wildly innovative designs, but on account of decidedly less sexy qualities: hard work, respect for others, and enthusiasm for the task.

A second-generation business owner — his father was company founder and industry pioneer Neil Kelly — Kelly is also part of an iconic Oregon company and family. For all those reasons, his story unfolds as a story of the Oregon everyman: a tale of a native son whose values, accomplishments, and, perhaps, weaknesses, parallel those of the state he loves.

Today, Kelly seems at the peak of his game. He received this year’s Hope and Liberty Award from the Oregon League of Minority Voters, and in 2011 the Fred Case Entrepreneur of the Year Award, a national industry honor. The company received the 2010 Dean’s Award for Family Business Leadership from Oregon State University’s Austin Family Business Program.

Building on that momentum, Kelly is pushing ahead with ambitious new initiatives aimed at steering his company out of the recession and keeping it at the forefront of green construction trends. But if history is any judge, his core business philosophy is not going to change.

“Tom again and again reaches beyond his own immediate interests to take a broader interest in how we make business work ethically and environmentally,” says Dennis Wilde, chief sustainability officer at Gerding Edlen Development Company who has worked with Kelly for more than 30 years. “He has a passion for the future of the state and the economy and how we can continue to improve it.”


 

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Tom Kelly, an avid sailor, and his crew aboard the Anam Cara during the 2011 Van Isle race around Vancouver Island.
// Photo courtesy of Sean Trew

On a slushy January morning in the Pearl District’s Bridgeport Pub, Kelly is participating in a panel on family business, sponsored by OSU’s Austin Family Business program.

“There’s a word — entropy; if you don’t grow, you fall in on yourself,” Kelly told the audience. “If you don’t have vitality, you don’t have opportunity for your employees.” Growth, he concluded, “is one of our core values.”

Even in good years, 30% of all contractors go out of business. In bad times, such as the Great Recession, the industry “gets slammed,” says Kelly, whose own low point came in 2010 when Neil Kelly had 118 employees, down from 170 in 2008.  Fueled by the condo boom, the company’s downtown cabinet business, which drove the $4 million division, “almost totally went away.”

As bad as things got, the Great Recession was not the worst downturn Kelly had experienced. That honor goes to the severe economic malaise that gripped the country in the early ’80s, a few years after Kelly took over the company at age 29.

The succession coincided with what John Kelly, Tom’s fraternal twin and a Portland urban planner, describes as a “double whammy” on the company: the withdrawal of a line of credit from U.S. Bank and the elimination of a veterans home loan program that had also been a major source of financing. Kelly managed to pull the company through, and along the way learned about more than the harsh realities of the business cycle.

In a highly personalized sector like remodeling, most contractors are small, one-office operations, with a geographical reach that is often limited to the neighborhoods in which they are located. An anomaly in the industry, Neil Kelly has five locations, more than any other residential remodeler in the country. It’s an expansion- and acquisition-based business model that Kelly, who has a tendency to hedge when referring to his accomplishments, describes as “kind of pioneering, kind of groundbreaking.”

His first buyout, of Portland’s Kitchen Kitchens, occurred in 1988 as the country was climbing out of that first recession, followed by acquisitions in Eugene (2005), Bend (2008), and most recently Seattle (2011).

“There’s no better time to expand than in an economic contraction,” says Kelly, citing as a key reason the availability of good employees. The company’s team-based management model, in which the same group of employees work together on projects, allows Neil Kelly to retain the feel of a small firm while enabling it to grow, Kelly adds.

Kelly’s management style has played a critical role in the company’s growth, says Tony Leineweber, a Neil Kelly board member and executive director of the Portland State University Foundation.

“He has a very participatory approach that builds the confidence of his employees. So when he embarks on new initiatives, there’s a spirit of camaraderie that this is something we are all in together. In my view, Tom is one of the best performing managers around.”


 

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Kelly with his father, Neil, in 1983. The photo on the wall is of Tom and his twin brother John, which long served as the advertising logo for the company.
// Photo courtesy of The Oregonian

Kelly’s cooperative ethos springs in part from his father, a larger-than-life figure whose story, as relayed by Kelly, sounds like founding myth. A Minnesota farm boy, Neil Kelly in the Great Depression “rode the rails” to the Pacific Northwest to work in the Kaiser shipyards, then in 1947 purchased a weatherization company for $100.

He and his wife, Arlene, a Quaker converted to Catholic peace activist, worked out of their basement while raising eight children. At once entrepreneurial and socially conscious, Kelly was the first president of the National Association of Remodelers, and the first member of the Portland Development Commission to hail from a neighborhood outside downtown.

The senior Kelly’s business and social responsibility ethic trickled down to their children, six of whom stayed in Portland and collectively form a kind of Kelly dynasty.

Kelly’s sister Anne was the former director of Loaves & Fishes; sister Susan was a staffer to Charlie Hales; brother Jim was the founder of Rejuvenation, the lighting fixtures manufacturer now owned by Williams & Sonoma. (A nephew-in law, Bryan Steelman, owns the popular Portland Mexican chain, ¿Por Qué No?) As for Kelly, he says he was expected early on to take over the family business.

Of all the siblings, he was “the most enthralled” by the carpenters going in and out of the family home. “I’m not going to tell you that it was all straightforward with no stress,” says Kelly of the succession. “But it was fairly minimal.”

Like many second-generation business owners, Kelly retained something of an Oedipal relationship with his father, who died in 1995. (His mother passed in 2008). “When you are the son of a guy like my dad, everybody who surrounds you wants you to be him, said or unsaid,” Kelly says. “I came to peace with that many years ago, that I wasn’t going to try and be my dad. I think it was one of my better life decisions.”

On a late winter Wednesday evening, Kelly and his wife, Barbara Woodford, are on their houseboat on the Columbia River (remodeled, naturally, in 1994). An avid sailboat racer, Kelly last year won the premier long-distance yacht race on the West Coast, the Swiftsure, which starts and ends in Victoria, B.C. “We kind of took home all the marbles,” he says.

Kelly met Woodford, an attorney at Liberty Mutual Group, while both worked in Washington, D.C., for former Oregon Congressman Les AuCoin. (Kelly was an intern; Woodford, a secretary).

Sharper edged than her husband, Woodford seems a perfect foil for Kelly, a man whose greatest strength and greatest weakness, she says, is that he’s “too trusting.” Woodford provides Kelly with “steadfast support,” says family friend and Hood River commissioner Maui Meyer, adding: “If Tom wasn’t married to Barbara, he couldn’t do half the things he does.”

Back on the houseboat, Woodford doesn’t mince words about the challenges of living up to Neil Kelly. “Tom’s dad was an exciting person:  he put women into high profile managerial spots when that was very unusual,” she says. Kelly’s father was a groundbreaker in other respects, hiring minority contractors when that, too, was uncommon. “Tom’s done all that, too,” Woodford says. “But now it’s not so special.”


 

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Kelly at the 2011 school wall raising in Vernonia with Columbia County commissioner Tony Hyde (left) and school superintendent Ken Cox (center). Kelly and Hyde were co-chairs of the Oregon Solutions Vernonia project.
// Photo by Justin Tunis

Neil Kelly may have been the pioneer, but the son didn’t try to be the father. Instead, Kelly carved out his own niche by being the better businessman. “Tom took the company leaps and bounds beyond what our father built,” says Jim Kelly, who has been a director on Kelly’s advisory board and vice versa. “He professionalized it; managed it.” Kelly “is more strategic, more systems oriented,” agrees Julia Spence, Neil Kelly’s Human Resources vice president who also worked for Neil Kelly when he was in charge.

One example of Kelly’s systematic approach is the series of green building initiatives he introduced in the 1990s, initiatives that parallel the development of Oregon’s green building sector. The firm was among the first cabinet manufacturer in the industry to use Forest Stewardship Council certified wood products and to adopt principles of Natural Step, where Kelly was a board member. Kelly also developed the first LEED-rated commercial building on the West Coast — the company’s Southwest Portland showroom. Then he followed up with his Parkdale vacation home, the first LEED-rated residence on the West Coast.

During the condo boom, the company strayed a bit from its green roots, Kelly says. Today, in an effort to revive flagging business units, Kelly has launched a new Naturally Northwest line of sustainable cabinets — juniper is the flagship — and ramped up the company’s fledgling energy retrofit unit, Home Performance. Fueled by Clean Energy Works, a nonprofit that was seeded by federal stimulus money, Home Performance harkens back to the 1980s, when federal tax credits for insulation generated steady weatherization work for Neil Kelly. “It makes Jimmy Carter look like a brilliant man,” says Kelly, referring to the 38th president’s failed attempt to implement a national energy policy. “Had we done what he wanted we wouldn’t have had to fight a few wars.”

A classic Portland liberal, Kelly has a long record of supporting and spearheading progressive causes. In support of gay rights, he helped lead the Vote No on Nine campaign in 1992. The original Oregonian press plate for the ad, signed by dozens of businesses, adorns his office wall. Four years later he joined Susan Sokol Blosser, Ron Buel, brother Jim, and several others to found the Oregon Business Association, a lobbying group aimed at providing “representation in the Legislature for businesses that have more moderate to progressive views.” Kelly was motivated to take on the Vernonia project, he says, as a way of bridging the state’s urban rural divide. “There’s this resentment carried by Portland about rural communities and vice versa. I think we are all Oregonians and should help each other.”

Such declarations can make Kelly sound a bit disingenuous and at odds with his obvious strategic flair. But that’s Tom Kelly, friends, family and colleagues say. “Tom is instinctively guileless,” says his brother, John. “His idea of a quid pro quo relationship is that he does you a favor and in return he expects you to give him an opportunity to do him another favor.”

That description is almost identical to the one provided by Kitzhaber. “Tom has devoted himself to making Oregon a better place while asking nothing in return,” says Kitzhaber, adding that Kelly’s collaborative leadership style was the reason he appointed Kelly to the Oregon Solutions steering committee, to help train other community leaders to be conveners.

From brothers to governors, interviewing people about Kelly can be a challenge, if only because the collective accolades tend to blur into an endless love fest. (For a guy who flies under the radar, Kelly has a formidable Rolodex). “Tom motivates people by being so soft-spoken and genuine that you can’t help but think it’s the right thing to do,” says Joan Smith, executive director of Loaves & Fishes in yet another testimonial. “Neil Kelly is such an icon in the industry,” says Carolyn Boardman, who sold her company, Seattle Design Build, to Kelly last year. Kelly and his company “are leaders in publicizing the importance of ethics in business, having a heart and giving back to the community.”

Finding someone who will say something critical about Kelly requires going back about 50 years, when a young Kelly and his twin allegedly tormented their younger brother, Jim. “One would hold me and the other beat me,” recalls Jim Kelly cheerfully. Another font of negativity is Portland businessman Sho Dozono, who took Kelly on his post-Hurricane Katrina rebuilding trips to New Orleans. Kelly attended the University of Oregon; Dozono hails from the University of Washington.

“Can I say something bad about Tom?” Dozono asks, and then offers: “For a Duck, he’s OK.”


 

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Tom Kelly delivers meals to homebound seniors in Portland as part of the Loaves & Fishes program.
// Photo by Christopher Barth

Five years after the collapse of the housing market, Neil Kelly is slowly getting back on its feet. Although Kelly declined to reveal total gross revenues, the employee count is now up to 160, with much of that increase dedicated to the new Seattle location and the Home Performance division, which in 2012 is expected to bring in $6 million, double 2009 revenues. In Bend, Kelly’s remodeling business is up 23%, 53% in Eugene.

As sales rebound, Kelly aims to grow the company into a regional remodeling firm, with a Seattle showroom debuting this fall. It’s a legacy project he hopes to pass on to his son, Garret, 21, a student at Portland State University who has expressed interest in third-generation ownership. Kelly sees an employee stock ownership plan as another option.

Remodeling is a tough business. It requires going into people’s homes, never knowing what’s behind the walls, and often competing with people who work out of the back of a pickup truck. In a chaotic industry, Kelly has built a business of national stature that not only reflects Kelly family values but also serves as a mirror of Oregon — solid, dependable, but with ambitions for something better. Whether the state retains those values today is a matter of some debate, but Kelly, who laments the state of higher education funding in particular — “in many ways we’re going backwards” — remains unflagging. In December, when The Oregonian published an article criticizing the high cost of the proposed Oregonian Sustainability Center, he fired off a letter to the editor focusing on the bigger picture. “The OSC is not a real estate project,” he wrote. “It is a proposed state of the living laboratory, a university research center and a showcase for Oregon’s ultra-efficient building sector.”

In true Kelly fashion, not all his civic involvement projects are so grandiose or cutting edge. On a recent morning, Kelly and sales vice president Randy Hudson were stooped over the trunk of the former’s Lexus hybrid, picking out meals to deliver to homebound seniors.

“There are so many causes in this world,” says Kelly, who drives the same meals-on-wheels route his father pioneered 40 years ago. “This one is straightforward: nutrition and social interaction for shut-ins.”

The first part of that assessment applies as much to the man as it does Loaves & Fishes. No matter how big or small the cause, Kelly’s estimation of his life and his role in the community is disarmingly direct.

“How do you develop self-worth in this world?” he asks, simply. “Business is just a huge lever for that.”

Linda Baker is the managing editor of Oregon Business. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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