Rotary District Conference 2005 Leadership and Succession Planning.
Succession & Non-Family Leadership...Succession & Non-Family Leadership Jack Ouellette, American...
Transcript of Succession & Non-Family Leadership...Succession & Non-Family Leadership Jack Ouellette, American...
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
• 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
Background:
American Textile
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
Calkins Locations
Who is Power
Construction Management
Construction IT Consulting
Wellness Center Management
Construction Supply Distribution
Firm Overview
• 2016 - 90th Anniversary
• 3rd Generation Ownership
• Commercial Construction
• Organic Growth
• $1 Billion Revenues
• #1 Chicago / #4 Midwest
Workplace6%
Developer46%
Education10%
Healthcare27%
Hospitality11%
Northwestern University
Astellas Pharmaceuticals
Rush University Medical Center
Firm Overview
Challenge Family FacedGeneration Role at
companyRelationships Age at
eventLocation Leadership
Potential
G1 President Deceased founder
60 Pittsburgh
Buyer Foundingbrother
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
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 CountsDriven People
Challenge…circa 1970s
• Authoritative G1 founder
• Entrepreneurial G2 (son in law)
• High Risk Business Model
• 28 - 30 year age gap G2 to G3
• Limited Market / Customer Focus
• Business Scale > Fluctuating Revenues
Family100%
1926 - 1980
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
Solution:
Hire non-family executiveDesired background of non-family executive
Actual background of non family executive
MBA MBA
Retail supply chain experience None
Textile production experience None
Leadership experience West Point Graduate / Viet Nam veteran / airplane pilot
Remain at company for min of 5 years 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.
Solution…circa 1980s
• “Institutionalize” the family business
• Identify and reinforce culture
• Align leadership and ownership
• President = most capable leader
• 1st non-family President/CEO
Family75%
Mgmt25%
1980 - 1999
Annual Revenues$70 – $300 M
Solution…circa 2000s
Family61%
Mgmt39%
1999 - 2014
Annual Revenues$300 – $950 M
• 2nd non-family President/CEO
• Expand management’s ownership
• Create deferred comp plan
• Formalize leadership development
• Further diversify customer base
• Create new business units
Fiduciary Board of Directors
Family Member Family Member
President/CEO SVP
Independent Independent
Solution…2015
G2
G3 G3
Family Assembly
G2
G3
G4
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
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
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.
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)
G4 Challenges
• Long term enterprise diversification
• Mitigating insular thinking
• Rising share value for management “buy in”
• Decreasing margin / increasingly risky business