Decentralization and Empowerment

Toromont is a decentralized company. Our Board of Directors and executive leadership team set the tone through policies, corporate strategies and ongoing stewardship and then grant authority along with accountability for performance to our business unit leaders. Shared areas of authority and accountability include employee safety, environmental compliance, customer satisfaction and loyalty, growth in market share and revenue and returns on investment.

In turn, our business unit leaders delegate responsibility outward so that decision making is dispersed and employee empowerment at all levels can take hold.

This shared system of management has been in place for many years and helps Toromont make decisions that are attuned to the needs of customers in the diversified markets we serve.

Empowerment at all levels creates a more resilient, capable workforce and a workplace that fosters personal growth and achievement as we take on new challenges and seize opportunities to create value for all stakeholders.

Alignment 

Toromont’s businesses trade on different names and pursue unique growth and development opportunities in their markets. However, every business is aligned to the Toromont Business model, Values, corporate management principles and core strategies. Alignment is a precondition to the delegation of authority. Alignment is also fostered through performance-based compensation and by encouraging employees at all levels to own Toromont shares through the Employee Share Purchase Plan.

Business Model

We are in the business of representing specialized equipment and supporting customers as they use it. This approach is designed to create deep, ongoing connections between Toromont and customers, differentiate our businesses in their markets, and give Toromont exposure to customers’ capital spending and operating spending cycles. We are discerning in choosing what equipment to represent and seek to work with world-leading partners such as Caterpillar from whom we gain competitive advantage, strength and discipline.

Values

Toromont lives by its core Values:

• Safe and Respectful Workplace
• Social Responsibility
• Uncompromising Integrity
• Empowerment at All Levels
• Growth of the Individual and the Enterprise
• Returns to All Stakeholders

These Values guide us in the performance of our duties and reflect what is important to us. In addition, we operate with several business principles in mind, namely:

• Continuous improvement
• Business excellence in everything we do
• Capital preservation
• Market leadership
• Respect for the environment

Strategies

Our five strategies are to:

• Expand markets
• Strengthen product support
• Broaden product offerings
• Invest in resources
• Maintain a strong financial position

These strategies are constant but the way they are shaped and employed each year reflects our perception of opportunity, our assessment of risk and an evaluation of our resources – human, capital, and technology. 

Capital Allocation Objectives

Capital allocation decisions are based on disciplined adherence to meaningful financial benchmarks: Return on Equity (ROE) and Return on Capital Employed (ROCE).  The executive leadership team established the ongoing ROE objective, which is 18% after-tax over a business cycle.

We then translated this expectation into ROCE targets for each business unit, taking into consideration conservative leverage levels, capital intensity and other key factors. ROCE targets are constant year to year but vary by business unit from a low of 17% in more capital-intensive operations to a high of 25%. In turn, Toromont branches strive to meet specific Return on Asset objectives. When rolled up, these business unit goals support Toromont’s ROE objective.

Consistent with our decentralized and empowered system of management, specific capital allocation decisions are not made centrally. Each business unit develops rolling three-year business plans and deploys capital in pursuit of strategic targets.

Technology

Digital technology is a key enabler of Toromont’s strategies and an effective way to safely serve customers and connect to opportunity. Toromont’s digital capabilities include:

• Analytics and Insights (“AI”)
• Applications to remotely monitor equipment
• Various management, sales and marketing tools and what we refer to as our digital front door including ecommerce sites

At the business level, our data scientists write algorithms to synthesize a raft of market, customer and machine-level data into actionable intelligence to improve market coverage and inventory management. Business analytics is in its infancy, but our team is gaining experience and advantages with it.

At the machine level, telematics coupled with AI offer the ability to watch for performance patterns across thousands of units that predict the need for a service call, part replacement or rebuild before breakdown. Toromont’s capability in this area is at its formative stage, but the ever-increasing installed base of smart machines in our territories creates a significant opportunity to improve the value of product support for customers.

E-commerce is another important digital capability that has advanced in meaningful ways at Toromont over many years. Most recently, our Equipment Group businesses collaborated to develop a series of online auctions. Hundreds of used attachments and parts were sold on as-is/where-is basis. These auctions were well received and created new connections with customers while complementing other go-to-market strategies.

People

Across our divisions, Toromont employs what we believe are the best people in our industry and supports them with ongoing skills training. By investing in our employees, we create the means to be more competitive in our markets, more capable of responding professionally and quickly to customer needs, and more able to fuel performance for our shareholders.