Succession & Non-Family Leadership

Transcription

1 Succession & Non-Family Leadership Jack Ouellette, American Textile Company Ken Gorman, Power Construction Company Mark Contreras, Calkins Media, Inc. Bryant Seaman, Bessemer Trust Background: American Textile Founded in 1925 Products then Household coverings Mattress covers Ironing board covers Outdoor furniture covers Products now Mattress covers and pads Pillows AllerEase allergy bedding Customers = all major big box retailers in US and Canada

2 Background: American Textile 1,000 employees 4 factories across the US Pittsburgh, PA Tifton, GA Salt Lake City, UT Dallas, TX 2 selling offices New York Bentonville 1 sourcing office in China d Family-owned television broadcaster, newspaper publisher and digital media company with operations in the Northeast and Southeast 1000 FTEs 3 ABC affiliates in Sarasota, Tallahassee and Huntsville 5 daily newspapers in Pennsylvania and New Jersey 3 Weekly newspapers in Pennsylvania and Florida Founded in 1937 by Stanley W. Calkins in Uniontown, PA Shepherded by the three daughters (and their families) of Stanley Calkins for last three decades Owned by three family groups: Ellis, Hardy and Smith Company governed by representatives from each branch

3 Calkins Locations Who is Power Construction Management Wellness Center Management Construction IT Consulting Construction Supply Distribution

4 Firm Overview th Anniversary 3 rd Generation Ownership Commercial Construction Organic Growth $1 Billion Revenues #1 Chicago / #4 Midwest Workplace 6% Firm Overview Hospitality 11% Northwestern University Healthcare 27% Developer 46% Astellas Pharmaceuticals Education 10% Rush University Medical Center

5 Challenge Family Faced Generation Role at company Relationships Age at event Location Leadership Potential G1 President Deceased founder 60 Pittsburgh Buyer Founding brother 75 New York None G2 Vice President Son 39 Pittsburgh Strong Sales Nephew 48 New York None G3 5 grandchildren < 5 years old New York & Pittsburgh Unknown Calkins Media Incorporated Board of Directors Stanley M. Ellis Sandra Hardy Charles C. Smith

6 Context In 2005, company bought two new ABC affiliates: WAAY in Huntsville; WTXL in Tallahassee Took on debt to pay for it 2008 happened Owners fired CEO Lenders bailed and new bank relationships established Extreme cost-cutting across the board like most others in media 2010, owners decide to look for a new CEO after having run the company themselves 2011, Mark hired The Nature of Power Relationships Matter People Driven Finding a Better Way Long Term Counts Driven People

7 Challenge circa 1970s Authoritative G1 founder Entrepreneurial G2 (son in law) High Risk Business Model Family 100% year age gap G2 to G3 Limited Market / Customer Focus Business Scale > Fluctuating Revenues Annual Revenues $0 $50 M Challenge circa 2000s G2 reducing daily involvement Relative experience / engagement of G3 Growth / project complexity / company culture Industry pressure on President s tenure Recruitment of top industry talent Professional service vs contractor paradigm

8 Solution: Hire non-family executive Desired background of non-family executive MBA Retail supply chain experience Textile production experience Leadership experience Remain at company for min of 5 years Actual background of non family executive MBA None None West Point Graduate / Viet Nam veteran / airplane pilot 39 year career at ATC A strong leader is more important than a business insider Decision = hire Jack Process Company ownership is 1/3, 1/3, 1/3 for each family group. Decision for hiring CEO required unanimous vote. Company hired search firm to vet candidates. Interviews were with family members and family office director. Family members ranged in age from late 70s to early 40s. Mark s promise is to develop 3 internal candidates ready to assume CEO role during his tenure. Process to get more formal this year.

9 Solution circa 1980s Institutionalize the family business Identify and reinforce culture Align leadership and ownership President = most capable leader 1 st non-family President/CEO Mgmt 25% Family 75% Annual Revenues $70 $300 M Solution circa 2000s 2 nd non-family President/CEO Expand management s ownership Create deferred comp plan Formalize leadership development Further diversify customer base Mgmt 39% Family 61% Create new business units Annual Revenues $300 $950 M

10 G2 Solution 2015 Fiduciary Board of Directors Family Member Family Member President/CEO SVP Independent Independent Family Assembly G2 G3 G4 G3 G3 Impact Solution Had on Family New President was strong leader We liked, trusted and respected each other over time President gave good reviews on new hire to Family working in the business His wife and children All of his friends in the community Included me in major family events Family began to empower non family executive as his contributions became important Complimentary passion To the family: the business is personal To the non family: the business is a responsibility

11 Lessons Learned: The Family Provide emotional support Hire with the end in mind-career path Connect with all members of the family All generations Working and non working family Entire family supports the non family exec as unified front Empower Promote Treat as if family Provide financial reinforcement Compensation Phantom stock Life insurance Company car Lessons Learned: Non-family executive Dedication to business must be unquestioned Respect unique family dynamics Families in daily life are not easy Families in business can be even more difficult Family dynamics are both Independent of the business Intertwined in the business Non family must: Know how to function in both dynamics Family must allow non family into the inner circle Loyalty to the family is different than loyalty to the business Unique role requiring unique skills Diplomacy Humility Knowing when family trumps non family Major crossroads Death of existing operational family Entry of next generation

12 The formula for successful non family CEO Title must come with Full responsibilities Full authority Watch out for Timing-What can you anticipate? Size of business Personalities Major crossroads-succession events Untimely death of existing family Entry of next generation into the business Plan succession seriously-every YEAR Impact Company decision-making reflects a long-term view reflecting the family s values and entrepreneurship. New management team and consultants represent a national-quality diverse set of media executives motivated by the ability to make a tangible difference in a small but committed company. Some examples: 1. Started a real estate company leveraging our newspaper interests 2. Transformed print newsrooms to print/digital/video now able to produce more video than a television station 3. First local media company to establish presence on OTT platforms (Roku, Amazon Fire) and cable distribution with newspaper video content. 4. Developed new digital services businesses at television and newspapers. 5. Journalism highly recognized by regional and national peers.

13 Lessons Learned CEO selection process was long but support for company s decisions/actions solid. Owners transition from deep operational involvement to board directors was smooth. Operational latitude for management has been complete. Developed lanes early on to maintain owners direct company involvement in areas of their interest. Update entire family group on major industry trends every 2-3 years using outside experts in both television and newspaper industry. In a disrupted industry, commitment and longevity are valuable competitive advantages for mission-driven businesses like ours. Impact Family / management financial alignment Proactive succession planning Long term customer commitments Sheltered family wealth / risk capital pool = opportunity Future leadership bench strength Transparency and trust (family / management)

14 G4 Challenges Long term enterprise diversification Mitigating insular thinking Rising share value for management buy in Decreasing margin / increasingly risky business