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