Values & Ethics

Ohio Art Company

Ohio Art has reinvented itself several times in the 112 years of the company’s existence.

Henry Winzeler, who founded the Bryan, Ohio, company in 1908, started out making metal picture frames and buying photographs to put in them. The framed images were sold in Woolworth’s, five-and-dime stores and the Sears catalog.

Winzeler sought other ways to use the lithography machines he had bought to decorate the metal and, around 1918-19, began making toy tea sets. “It was just a huge success,” says Elena West, Ohio Art’s CEO. By the mid-1930s, the company had shifted away from picture frames and was primarily a toymaker, although it continued producing a few items outside the category. In 1928, it negotiated a license with Roy and Walt Disney to make toys featuring Mickey Mouse, Donald Duck and other characters, a project that continued for decades.

During World War II, Ohio Art, like many American companies, focused on aiding the war effort. The company stopped making toys in 1942 to produce gunsights, bomb whistles and other parts needed by the military.

After 1945, the company returned to toy production. By this time, parents were shying away from metal toys, fearing danger to their children, and the company began incorporating plastic into its lines. “Once again, Ohio Art decided that they needed to pivot,” West says. “That left a big open opportunity for the business to look at other things they could potentially do with their machinery.”

To complement its toys, the company began making metal products such as TV trays and “butt buckets” (buckets that were filled with sand and used as outdoor ash trays).

Meanwhile, on the toy side, the company introduced the Etch-A-Sketch, a mechanical drawing toy, in 1950. Ohio Art shifted to making plastic tea sets. It also made globes and Chinese checker sets.

In 1977, the Winzeler family sold their stake in Ohio Art to the Killgallon family. W.C. Killgallon had started with the company in the 1950s as a salesperson and rose to president. The company today is 89% owned by the Killgallon family.

By the late 1980s, Walmart had become a retail powerhouse and was demanding low prices from its suppliers. To accommodate the large customer, Ohio Art moved manufacturing to Asia. “That left an open opportunity for the business here in Bryan to diversify even further,” West says. “And, again, that was where the metal lithography came into play.”

Second-generation owner Bill Killgallon — West’s uncle — asked his brother, Larry, to join the company and start a diversified products business. The new division “reinvented the company to focus on what we could do outside of toys to continue to be prosperous and keep everyone employed here in Bryan,” West says.

The diversified product line included metal trays and other products bearing logos licensed from Budweiser, Coca-Cola and other companies; Kodak and Fuji film cartridges; popcorn tins; and jar lids and cans for food companies.

“We still do a lot of food product, and that’s one of the reasons we’re considered an essential business [during the COVID-19 pandemic], because we support the food industry,” West says.

West joined Ohio Art in 2013 and became its CEO, working alongside her cousin Martin L. Killgallon III, the president. By that time, the challenges of the toy business had multiplied. Big-box retailers dictated pricing and packaging.

“Small, mom-and-pop businesses were going out of business all the time, the specialty market was also becoming narrower and the opportunity was just going away,” West says.

When West and Martin Killgallon began working together, “one of the first decisions we made as a team was to focus the future of the business on the lithography side versus the toy side,” she says. That included selling the Etch-A-Sketch brand to a Canadian toy company, Spin Master.

West calls the move “probably the best decision we ever made. Because since that time, so much has happened in the toy business that would have really crippled us even further,” including the bankruptcy of Toys R Us, tariff issues and the coronavirus.

“It was a really big decision, because the toy business was our heritage and our livelihood, and that was really the exciting part of the business. We traveled all the time for toys, and it was really a major part of our identity. And the lithography business was less exciting. But it was solid.”

When West was a college student, 300 to 400 people worked in Ohio Art’s Bryan factory. Today, the company has 85 employees.

Because Ohio Art uses Chinese suppliers to make components for its inks and varnishes, management noticed the coronavirus spreading in China before it came to the United States. That sparked the company’s quick implementation of precautionary measures.

“We were already looking at our supply chain early on, making sure that we had plenty of material to get us through to the next large order that we anticipated for the year,” West says.

“As soon as the first recommendations came out from the governor’s office here in Ohio, we implemented them immediately in our factory.”

West is in the office daily and personally manages the company’s COVID-19 response.

“Having myself out there every day, being in front of [employees], showing them that I’m in it with them — as well as Martin and as well as our management team — I think it has made a big difference. I hope it’s made a big difference.” 

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Kemin Industries

When the Nelson Family Foundation decided to give $50,000 to the Food Bank of Iowa to help address a spike in need because of COVID-19, the plan was put into action quickly.

“I think we initially had the idea on a Friday morning, and by Monday afternoon the check had been cut and we had made contact with the food bank,” says Mary Katherine Nelson, chair of the Nelson Family Council. “It was a much quicker turnaround than what we’re used to. But luckily, with our structure, we were able to make those decisions quickly.”

The Nelson family owns Kemin Industries, a Des Moines, Iowa-based global company that produces ingredients for human and animal food. The company has more than 2,800 employees and operations in 90 countries.

The foundation is run through the family council, which consists of five members, representing each of the second-generation branches. The council works with R.W. and Mary Nelson, who founded Kemin in 1961, to make funding decisions.

Because Kemin serves the food industry, “food security is very important to not only the company but the family, as well,” Nelson says. “So the food bank really fit that goal.”

The Nelson Foundation’s gift was designated to go directly toward meal programs. According to statistics from the Food Bank of Iowa, the donation would provide about 200,000 meals.

“We have members from the first generation through the third generation that are a part of the decision-making process,” says Nelson, a third-generation married-in family member. “It’s really been a good tool to unite the family and get people involved at different age levels, those that work inside the company and those that don’t.” About 60% of the family lives in Iowa, Nelson says; the others are spread from Seattle to Baltimore, plus one family member in Italy.

The Nelson Family Council was established in 2017. “The family council process is still relatively new to us,” Nelson says.

The family has been invited to join daily video updates on the business hosted by Chris Nelson, Kemin’s second-generation CEO. They have also received meeting notes from the steering committee organizing the company’s global response to the pandemic. “It’s more information and more frequent updates than we usually get,” Mary Katherine Nelson says.

While adhering to social distancing, the family has had weekly lunchtime video calls that usually draw eight to 15 people. “R.W. and Mary, the G1 members, really enjoy getting to connect with some of the grandchildren throughout the week,” Nelson says.

“R.W. and Mary have been very involved in the company since they started it,” she says. ‘Their personal values have certainly trickled into the business and continue to be important.

“Their legacy in the community is that they’re very generous people, and give back in lots of ways — time, talents, energy, all of that,” Nelson says. The foundation is “a special project for the family, because it was so important to them.”

The foundation and Kemin are longtime supporters of Habitat for Humanity. Family members and Kemin employees have participated in local and international Habitat home-building projects.

In addition to the foundation’s gift to the Food Bank of Iowa, Kemin donated nearly 10,000 personal protective equipment (PPE) items to the Iowa Department of Public Health.

“Kemin being a laboratory- and a science-based company, they had a lot of that material on hand, and went through and donated any excess that they had — obviously, retaining enough to make sure that our employees are protected,” Nelson says.

Kemin teams in Italy and Belgium have donated PPE to their local hospitals, including homemade masks for healthcare workers. An internal fundraiser collected more than €13,000 for a hospital in Verona, Italy, where Kemin operates. The company matched the donation.

To help its U.S. employees obtain food, Kemin bought its U.S. employees GrubHub gift certificates (or Walmart gift cards for employees outside GrubHub service areas) and arranged for delivery fee waivers for employees who order groceries online through Midwest supermarket chain Hy-Vee.

The company also set aside $1 million to pay bonuses to employees in North America who worked on site during stay-at-home mandates and shelter-in-place orders.

Kemin has implemented other bonus programs to support teams at global locations. 

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J.W. Lopes

Jeff and Elyssa Kotzen’s hot yoga class on Friday, March 13 was not a zen experience.

Jeff, the fourth-generation vice president of J.W. Lopes, a wholesale produce and dairy distributor in Chelsea, Mass., was unable to relax. Although Massachusetts Gov. Charlie Baker would not announce mandatory restaurant closures until the following Monday, orders from restaurants were already drying up as COVID-19 began to spread through the country.

Elyssa turned to her worried husband at the beginning of the 60-minute class and said, “We have got to do home delivery. We can do this. We’ll go home and we’ll figure it out once we’re done here.”

Once they got home, the couple sprang into action. “We both got on our computers, and I started drafting an email to our closest friends and family with our rough-around-the-edges idea of what this would be,” Elyssa says.

Moving into direct-to-household food delivery would meet an important need, Elyssa realized. The company’s new customers “don’t have to rely on a grocery store visit or an Instacart delivery that gets dropped. I’ve been reading all these stories about people refreshing [their computer screens] in the middle of the night to get slots for meal and food deliveries.”

Adapting the company’s wholesale processes and ordering platforms to accommodate retail orders was no small task. “It was definitely trying to fit a square peg into a round hole,” Elyssa says.

“The system offers no bells or whistles. It is all-capital-letter gray text; no pictures. There’s no additional information about ingredients or quantities of certain things. It was really bare-bones.”

The Kotzens named their home-delivery venture New England Country Mart and used social media to get the word out. “I’ll be the first to admit that I’m not a social media guru, by any means, but I quickly became one. My personal background is in public health,” says Elyssa, who works for a foundation and previously worked in the hospital industry.

During the new venture’s first four weeks, Elyssa updated the J.W. Lopes website, created a New England Country Mart site and managed social media for both businesses. “I was trying to get acclimated to all of it,” she says.

The efforts were wildly successful. “We started with maybe 40 people [customers], and that became 80 people, and it became 200 people, and we just kind of grew,” ­Elyssa says. “We realized the power of word of mouth and email forwarding and photos on social media.”

Jeff and his father, Peter, are partners in J.W. Lopes; Jeff’s younger sister, Alison, works there as well. To help the Country Mart get off the ground, Jeff’s mother, brother-in-law and older sister pitched in.

“It was all hands on deck where necessary to get the initial bulk of the work uploaded in the computers and get things going, which was great,” Jeff says. Everyone really stepped up.”

The new business started out offering produce, J.W. Lopes’ main product line. Jeff soon added fish from a friend’s fish distribution company.

“We had such positive feedback on the fish as an addition to our produce that we grew one week at a time by reaching out to local companies: bakeries, butchers, dairy companies,” Jeff says. The partnerships enabled the Kotzens to help other local food businesses that were struggling because of the pandemic.

They formed other partnerships, as well. Jeff contacted a friend who works at a website development company. The friend built an upgraded New England Country Mart website within two weeks.

“It was a huge opportunity for an optimized experience for the customer, and a way easier way to manage everything on the back end, operationally, for Jeff and his warehouse crew,” Elyssa says.

A public relations firm reached out to the Kotzens and offered to help with publicity. “They also have clients in the food industry, and their business essentially dried up with the COVID-19 pandemic as well, so our story really resonated with them,” Elyssa says.

“They’ve helped us develop a social media schedule and create some consistency around our messaging. It’s just nice to have a sounding board, because this is all very new to me.”

The Kotzen family has previous experience with business reinvention. Jeff’s great-grandfather started selling produce at Boston’s Faneuil Hall marketplace. The business originally sold produce to retail grocers.

“Over several generations, the retailers became bigger and more efficient, and they started buying directly from the farms, rather than from a distributor like my family’s business,” Jeff says. “The business had to evolve; they couldn’t rely on Stop and Shop to buy 5,000 cucumbers anymore. So they had to look for other avenues to sell their products.

“My dad was smart enough to see that there was a downward trajectory in that business. He sold the original business with his two brothers and started a distribution business with me in 2006.”

Jeff says his father “really had the vision that [the original] type of business was a dying breed, and being a direct-to-food­service distributor was more of a vibrant business than relying on retail chain markets, which were only really using the services in a fill-in capacity.”

At J.W. Lopes, Jeff says, “We’ve always been flexible. We sell to the state prison system as well as really high-end, white-tablecloth restaurants. And I think that’s a testament to how flexible we are to be able to pivot to any type of business.”

Pivoting to direct-to-consumer delivery involved logistical hurdles. J.W. Lopes’ wholesale business has about 800 customers. The Country Mart venture added upward of 1,200 new customers, and counting.

To manage the booming demand, the direct-to-consumer business imposed a waiting list, adding new customers weekly and monthly as the Kotzens learned how to manage the growth and ensure every customer would receive high-quality service and products.

The success of the venture enabled the Kotzens to invite everyone they had laid off at the start of the pandemic to return to work.

“We’ve hired, too, so the company’s actually larger now than it was,” Jeff says.

Elyssa’s public health background is helping the company ensure a safe working environment. “All of our drivers, all of our packers, everyone, whether they’re in the back office or frontline, is taking all precautions,” she says.

The new venture has public health benefits. “We’re trying to reach the elderly and the immunocompromised” to help them obtain groceries in a safe way, Elyssa says. “We’re really committed to and sensitive to that demographic in this situation.”

What started as a stopgap measure for J.W. Lopes is now being considered a permanent division of the business.

“I don’t think we had initially thought that this would be a long-term business idea,” Jeff says. “But as the Country Mart grew, and our offerings continued to grow, and the feedback we continue to get from customers is so positive, we definitely have our eyes set on larger things as we move forward.” 

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Sessler Environmental Services

When COVID-19 began to spread through the United States, the Sessler family saw an opportunity for one of their businesses.

Sessler Environmental Services (SES) of Rochester, N.Y., provides environmental remediation and demolition services for private- and public-sector clients. The company, which offers mold and asbestos remediation services, now also provides coronavirus remediation, including disinfecting and surface protection.

“It wasn’t even a hard decision to say, ‘Hey, there’s going to be a market and a need for this,’ ” says Brian Sessler, managing family member at SES.

The new line of business caused some logistical problems. Schools were closing because of the pandemic, and SES’s school district customers began asking if asbestos remediation projects they had scheduled for the summer could be started earlier. That meant the company’s crews would be busier than ever.

“All of our jobs have been deemed essential, so our normal work hasn’t necessarily slowed down, and we’re now offering this other service, which is ramping up. We’re doing more and more,” Sessler says.

To adhere to social-distancing protocols and keep workers safe, the number of people on each crew was reduced, requiring plans to be altered. At the same time, the office was in the middle of a renovation. “It was a stressful couple of weeks,” Sessler says. Since the pandemic began, the company has hired about 15 additional people.

Managers were consulted before the company took the leap into coronavirus remediation. “It was vitally important to bring them into the mix,” Sessler says. “We didn’t want to stress operations just because we wanted to do the COVID cleanup.”

Crews have been issued full face masks rather than cheaper masks that cover only the nose and mouth. “We had to implement protocols,” Sessler says. “We’re documenting all of our employees’ temperatures before and after every shift.”

The family enterprise was started by Sessler’s grandparents. SES, owned by the third generation, was formed to complement Sessler Wrecking, a demolition company that is owned by second-generation members. Other family companies include a development company, a marina and campgrounds.

“As long as you have the right people within your company, from your top managers all the way down, it’s very easy for a company to shift direction and morph into something that’s needed at the time,” Sessler says. 

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Values guide business families during COVID-19

The COVID-19 pandemic has forced business families to make decisions with sweeping ramifications. Steps taken to ensure business survival have had to be balanced with precautions to avoid health risks.

“My values haven’t been tested, but my ability to live by them has been shattered,” commented one listener during an April 14 webinar presented by Family Business Magazine and CFAR, a management consulting firm.

Debbie Bing, president and principal of CFAR, tells of a family whose business was deemed essential and thus could stay open despite a state social-distancing mandate. Family members weighed the idea of paying part-time wages to employees who opted to stay home because of concerns about their vulnerability to the disease. “But then they worried in making that decision, which is very much of their values, that they might not have a workforce, and then they couldn’t continue their essential operation.”

“I’ve seen some businesses that went from growing and thriving to just stopping suddenly, and they’re not sure if they’re going to even exist anymore,” says Jeff Savlov of Blum & Savlov, a family business and wealth consulting firm.

Policies that varied from state to state, and diverging opinions about the pandemic from the political left and right, have made complex decisions even murkier.

Thomas Epperson, president of InnerWill Leadership Institute, spoke to a family in Georgia who fielded conflicting risk assessments from urban Atlanta and the rural parts of the state. “They were getting lots of mixed messages about what to pay attention to,” Epperson says. “So as a family business, they had to lean back on, What do their instincts tell them?”

“Liberal or conservative isn’t the issue here,” says Jonathan Moreno, a medical ethics and health policy professor at the University of Pennsylvania. “It’s about the best way to protect the lives of the people who work for you, and their families.”

Even employees who fear a loss of income don’t want to risk their lives or those of loved ones, Moreno points out. “If they feel they picked up the virus [at work] and transmitted it to their mom or dad, that doesn’t help their feeling about the company.”

Consequential decisions
Americans took to social media to criticize businesses, whether for laying off workers, for eschewing safety precautions or, conversely, for requiring face masks.

“What families need to consider is that every decision has its consequences, both positive and potentially negative,” says David Karofsky, a principal with the Family Business Consulting Group. “And the decisions are scrutinized even more so in times like this.”

“I would never put our men and women in the field in a situation that I’m uncomfortable being in,” says Brian Sessler, managing family member at Sessler Environmental Services. The Rochester, N.Y.-based company, which provides decontamination and environmental remediation services, has added COVID-19 remediation services to its offerings.

Sessler visits as many job sites as he can to talk with workers. “There’s communication from our managers and the family members, pretty much on a daily basis, to all the workers that are in the field battling [the virus],” he says.

Other business families debated the ethics of family managers working from home while lower-wage employees were required to work on site. “One guidepost has been thinking about [protecting] vulnerable populations,” such as family members over 60, Bing says.

“I think this is just the first wave of this set of questions,” she says. If the predicted future waves of infection and continuing economic consequences materialize, “The choices aren’t going to get easier anytime soon.”

Adversity reveals character
For business families who have discussed their corporate purpose and the social impact they aspire to have, “this is an opportunity to take action on that purpose,” Epperson says.

“This adversity that we’re all going through is revealing people’s character. For those families and organizations that are committed to making a positive difference, this is a time to invest in that and show that.”

The Nelson Foundation, the philanthropic organization of the family that owns Kemin Industries, a Des Moines, Iowa-based global company that produces ingredients for human and animal food, announced a $50,000 donation to the Food Bank of Iowa on April 1. The gift helped the food bank address the increased need in the area due to the pandemic.

“We felt the need was, obviously, immediate, and we wanted to be responsive,” says Mary Katherine Nelson, chair of the Nelson Family Council.

Typically, the foundation solicits contribution requests through June and makes decisions by September 1; checks are issued by the end of the year. As the pandemic spread, “A member of the family council suggested that we consider moving up our donation process for the year,” Nelson says.

“We obviously knew that the food bank was a need locally, and we wanted to make sure that our dollars were supporting our neighbors in Iowa.”

One of the foundation’s requirements is that its gifts be meaningful, Nelson says. “We wanted to make sure that we were giving an amount that would feed as many of our neighbors as we possibly could.”

In a separate initiative, Kemin Industries donated nearly 10,000 personal protective equipment (PPE) items to the Iowa Department of Public Health, and teams in other global locations donated PPE locally. The company also announced it would allocate $1 million to fund a bonus program to thank employees who were required to work during the pandemic.

Values as decision-making tools
Chief among the challenges of these times has been the ambiguity of the choices.

“There is the financial responsibility that we have to our shareholders and stakeholders, there is the health and safety of our people, there is the long-term result of some of these decisions, and then there is the short-term impact of these decisions. So out of all that, what comes first?” Epperson explains.

“I always encourage alignment around whatever decisions that [families] are making,” Karofsky says. That’s especially important when there’s no single right answer, he says.

Family values can help provide clarity. “Your values should really be practical decision-making tools,” Epperson says.

“The clients we work with have clearly defined values,” says Greg High, president of GH Family Business Consulting. “These values have helped to frame their discussions around how their family and their business will deal not only with COVID-19, but anything else that comes their way. By doing this work early, they have positioned themselves well to be able to calmly manage through challenging situations.

“Some clients read their mission statement and review their values at the beginning of every family meeting to keep these items at the top of their minds as they continue on with their meeting.”

Some families have internalized a set of values even if they haven’t formalized them. Jeff Kotzen, fourth-generation vice president of J.W. Lopes, a food distributor in Chelsea, Mass., and his wife, Elyssa, created a new residential delivery division after COVID-19 wiped out demand from the company’s restaurant-industry customers.

The Kotzen family has not established a written list of values, but in their new venture they’re putting their community at the forefront. Their service offers products from other local businesses in addition to J.W. Lopes’ produce and dairy items.

“We’re trying to lift up other people in the industry who are dealing with the effects of COVID-19 like we are,” Elyssa Kotzen says.

“There are so many companies in our position now that are mostly family-owned businesses who had to pivot during this situation — who are staying open, who are in the front lines — and those are the companies who we really wanted to be partners with,” Jeff Kotzen says.

Families should make decisions based on what they value most, Epperson says. “I think there’s a pretty broad spectrum in what’s right. What I think is most important is that we are authentic to what we’re all about.”

Saying one thing but doing another will get companies in trouble with customers, employees and other stakeholders, Epperson says. “People can smell that.”

When emotions are running high, Karofsky advises clients to “separate the emotion from the logic.”

He recommends assessing the potential impact of decisions on the business and each of its key stakeholders.

“This is where boards can shine. How you use that board is so important right now, and having that board in place is so critical.

“The power of the board in this case is to separate emotion from logic. And we have to live in the world of logic right now. If we’re running around making emotional decisions on what to do with this business, in my opinion it brings in a higher risk to the business.”

Leaders in the spotlight
Leaders are “always on stage,” and a wide variety of stakeholders are in the audience, Epperson says.

“They are paying a lot of attention to what we’re saying and what we’re doing. So being aware of those words and actions right now is incredibly important.

“And if you want them to be fiscally responsible, or you want them to care about other people, or you want them to value health and safety, or you want them to value relationships, then you have to act that way.“

Savlov knows of a family whose construction firm is continuing its essential projects during the pandemic. Some of the work requires employees to travel and stay in hotels.

“They’re trying really hard to be honest with their workers about what they need,” he says. “They’ve always treated their workers exceptionally well, so I think they’re trading on a credit balance of goodwill, on having treated workers like family. They’re not seen as greedy. It’s a mutual generosity — helping each other out and making it through.”

Elena West, CEO of Ohio Art, a lithography and graphic arts company in Bryan, Ohio, that’s 89% owned by her family, implemented pandemic mitigation measures early on. In addition to enforcing social distancing, the company stepped up the efforts of its cleaning crew and “doubled down” on its orders of sanitary products, she says.

West has taken the lead on managing the company’s COVID-19 prevention efforts. “I go out into the factory, and I literally take [workers’] temperatures in the morning,” beginning at 4:30 a.m., when employees start arriving for the shift that starts at 5, she says.

“What we have told them over and over again, and what we have shown them, through taking temperatures and cleaning the spaces so well and so consistently, as well as enforcing the social distancing, is that we do care, and that we are committed to this, and that we do want to stay open.

“The longer we stay open, the likelihood is we’re going to continue staying open into the future, when all of this has passed. If we shut our doors now, who knows what will happen in a month’s, two months’ time?”

Open communication
An elevated level of transparency with all stakeholders is called for under these circumstances, advisers say.

It’s difficult to predict what will happen to the economy in the remainder of the year as states start reopening while the pandemic continues. If business leaders see dramatic cuts on the horizon, it’s best to be honest about the situation, Epperson says. “Begin to prepare people,” he advises.

Epperson advocates asking for employees’ help and support. “You’re building a case for involving people, helping them do their best thinking, empowering them to make decisions to act quickly and support customers and the organization.

“At the same time, you’re trying to be real with people: ‘If we have to make hard calls, we will. And here’s how we’re going to make that decision.’ ”

Open-book management — sharing financial information with employees — can work to the family’s advantage now, Savlov says. “When times are bad, people really see the kind of pain you’re willing to take.

“They can see your losses. They can see you not taking a paycheck when they’re still getting theirs. And that kind of transparency is invaluable in the long run.”

Dennis Snow of Snow & Associates, a consulting firm specializing in customer service, employee development and leadership, cites several practices of companies that implement furloughs or layoffs in a way that’s sensitive to workers’ feelings and concerns.

“They’re very empathetic in the way they’re doing it. They’re providing one-stop shopping for information. Whatever kind of benefits they can continue for X amount of time, they’re doing that. It doesn’t make it easier for their employees, but it says, ‘We care.’ ”

Snow says it’s important to be “extra appreciative” when communicating with customers and to focus on what your company can do, not on what it can’t do. He also recommends doubling down on things customers love about your company, such as a personal touch.

Companies selling scarce products in these days of supply-chain disruption should make sure prices are in line with what others are charging, Snow advises. “The big thing is making sure that you don’t get hit with that price gouging perception, because that will have lasting repercussions.”

Pulling together
Bing has found family interactions improving during the crisis. “So far, we have seen the softening of dynamics.”

She’s observed “a lot more transparency than we usually see” within families, “and more rallying together, even in deeply conflicted families. In a way, you could say, it’s breaking all the norms.”

Videoconferences might be drawing families together in ways not possible with in-person meetings, Epperson says. “It’s helping people to make connections that they otherwise wouldn’t.”

Today’s unprecedented circumstances have strengthened intergenerational ties in many families, Bing says. “There’s this level of vulnerability that has shaken up the traditional leading/rising generation dynamic, where the senior generation would take the stand, typically, of ‘You don’t know what you’re doing yet,’ or, ‘I’ve seen it all; you’ve seen nothing.’

“That’s being turned on its head, because this is the first time nobody can say they’ve seen something like this before, unless they were running their business in 1918,” she says with a laugh. “And so there’s a humbling there. And on the other side, rather than, ‘Get out of my way; I know what to do,’ it’s, ‘We need all hands on deck.’ ”

Bing is working with families who now want to step up efforts to build NextGen engagement and family involvement, “whether that’s the shaping of a governance structure or sorting out roles or accelerating an ownership transition.”

One senior-generation member Bing knows had been adamantly opposed to transferring ownership to the next generation. After the coronavirus struck, he executed the transfer “all of a sudden,” she says.

Yet the new living arrangements brought about by social distancing may be pushing young family members into roles they’re not ready to assume. In one family Bing knows, college students are living with their parents because their schools have closed. Ordinarily, their involvement with the family business would be limited to summer jobs.

“But now they’re home, and they’re calling in with their father to top-level strategy meetings and business discussions.

“On one hand, they’re able to [discuss] at dinnertime, ‘What are we learning about business and leadership in a crisis?’ and they’re learning more in an accelerated way. On the other hand, it’s undermining some of the things that [the parents have] said they’re committed to, like age-appropriate experiences for these kids as they come into the business, or working your way up from the bottom.”

With families being what they are, and with the economy in a downturn, it’s an open question how long the positive developments will last.

“I’ve seen more of the pulling together than pulling apart so far, but what I would predict is that the battles are going to come, because these companies are going to be so economically stressed, and family dynamics get worse when there’s less prosperity,” Bing says.

“People are in survival mode right now, but the recovery is going to, I think, invoke all the old battles.”

The dilemmas are daunting. Bing heard a business owner sum up the situation in a powerful way:

“Eighteen months from now, two years from now, five years from now, when I ask myself the question, ‘Did I do everything I could do in that moment?’ am I going to be proud of this answer? And I need to think about that now, with every decision I make.”

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.    

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Dueling Perspectives: Faith and the family business

The family owners of A. Duda & Sons — a diversified enterprise based in Oviedo, Fla., with operations in farming, ranching and agricultural management, real estate development and commercial properties — share a strong Christian faith.

The Yoh family, owners of Day & Zimmermann — a Philadelphia-based company that offers services to the engineering, construction, maintenance, staffing and defense industries — are diverse in their beliefs. Yoh family members include those who follow several different Christian denominations as well as those who consider themselves more spiritual than religious or simply feel a connection to something larger than themselves.

We posed this question to Stacy Mello, who leads two business divisions at A. Duda & Sons and serves as family council chair, and Bill Yoh, who held a number of leadership roles at Day & Zimmermann and leads the Yoh family’s governance and succession efforts: How do your family and business address the issue of faith?

Stacy Mello, A. Duda & Sons:
“One of our strongest values is our Christian faith. It’s kind of the foundation to everything else. It’s what our legacy is based on.

“We pray at the opening of board meetings and at the opening of family meetings. We feel God is our go-to for guidance and leadership in our personal and professional lives.

“ ‘To grow Christian faith and business integrity’ is the first plank on our mission card. One of our core values is ‘faith in the Lord, who richly blesses us all.’ Employees are aware of that. When we have a companywide meeting, we open with prayer.

“[Christian faith] is maybe not shared by all of our employees, and it’s certainly not a requirement, but it is something that we see from our employees as well.

“It’s always been part of who the family is and who the company is. And I think the reason it’s still so strong for us today is just how strong of an example the founders set. That  formed so much of our culture as a business and influenced so much of what we try to do as a business.

“When you look at things at a micro level, we [the family] may not always agree on things, but when you zoom out and look at the macro, when you have that foundation of Christian faith, it does bring you together.”

Bill Yoh, Day & Zimmermann:
“We’re very proud of the diversity of our family, and we’re very proud of the priority that diversity and inclusion have in our family business. Both within the family and within the family business, diversity and inclusion are central to what we do.

“We want people as engaged as possible. We want to be able to attract, retain and engage employees and retain and engage family members as much as we can. We like to talk about people bringing their whole selves to a conversation, bringing their whole selves to work, bringing their whole selves to the family, and feeling safe to bring their whole selves and to share. So we intentionally keep faith out of those conversations, and we instead focus on core values.

“The values that we focus on and talk about are secular. They’re core values, not core faith. We think they have more of a universal appeal, where people can see how our family and how our company operates. It’s clear that we’re not ascribing to one doctrine, which may be at odds with another.

“A lot of this is around not just diversity and inclusion, but the whole idea of respect, and that applies within our family, as well. Because even though there aren’t a whole lot of us in the family, we represent a whole lot of different political spectrums and ideologies, and beliefs.”

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.    

$10.00

Vermeer comes back strong from tornado damage

On Thursday, July 19, 2018, the family leaders of Vermeer Corporation shifted gears from marking the 70th anniversary of the business to managing a crisis after a tornado struck the company’s Pella, Iowa, headquarters.

Vermeer makes construction, earth-moving and agricultural equipment, known in the industry as “yellow iron.” More than 400 dealers and customers from 13 countries were visiting the Vermeer campus for the company’s customer conference. Activities to commemorate the milestone were among the agenda items for the event.

When the tornado struck, at about 4 p.m., Mary Andringa, a second-generation member of the Vermeer family who serves as chair of the board, was in the company’s Global Pavilion, an event space. She and her niece Allison Van Wyngarden were leading a breakout session for customers about governance and succession in family businesses.

Mary’s son Jason Andringa, Vermeer president and CEO, had been hosting tours in the Vermeer Founders’ House, located across from the campus. The home of company founder Gary Vermeer and his wife, Matilda — where Mary and her siblings were raised — had been acquired by the company and formally dedicated as a museum three days earlier. When the storm warnings began, Jason took shelter in the corporate office space.

Elsewhere on the campus, known as the “Vermeer Mile,” team members were at work — designing, producing and supporting Vermeer’s yellow iron equipment. More than 2,700 Vermeer team members are based in Pella.

The tornado measured EF-3 on the Enhanced Fujita scale (136 to 165 mph). The damage to the Vermeer Mile was significant. Vermeer Plants 5 and 6, as well as the waste management facility, were a total loss. Plants 4 and 7 sustained less severe damage. Vehicles in the company parking lots were tossed about and piled up like unwanted toys.

Safety first
“Upon being notified of severe weather, we worked to quickly activate our emergency response system,” Jason said in an emotional statement to the media later that day. “The emergency alarms in all buildings sounded, and team members, dealers and customers were directed to tornado shelters in all facilities on the Vermeer campus.”

Mary remembers receiving a text alert toward the end of the session she and her niece were presenting. “I said, ‘OK, it looks like we may all have to go to shelters.’ ” Almost immediately after that, a “very annoying” alarm sounded loudly and repeatedly. At that point, “there was no question” that everyone would have to take shelter, Mary says.

“We had plenty of warning & time to make it to the numerous tornado shelters,” a visiting customer commented on the company’s Facebook page. The customer expressed thanks “for the precise direction & attention given to the serious nature of the storm.”

In the shelter, Mary found herself fielding questions about tornadoes from international customers, sometimes with the help of interpreters. “They said, ‘Is it like a hurricane? Is it like a typhoon?’ ” she recalls. At first, Vermeer staff tried to reassure customers that there was a slim chance the campus would be hit. Pastries were brought into the shelter, and coffee was available. “We were socializing,” Mary recalls, “and then the lights went out.

“Shortly after the lights went out, we knew the tornado was really going to be close.” Suddenly they had a sensation of being “pulled out of the room.” People held onto each other for stability.

In the building where Mary was sheltered, some windows and doors were broken, but there was no major damage. “And then we started getting texts from people that the roofs were off on a couple plants, and that a lot of glass was broken,” she says.

They were still in the dark when the alarm stopped, signaling that they could leave the shelter. As the group congregated on the grassy area around the pavilion, they saw that emergency vehicles were already on campus. They also saw the devastation wrought by the tornado.

“A lot of people just stepped up and started organizing,” Mary says. Plans were made to help customers leave campus and to provide transportation for those whose cars had been tossed about and smashed.

Because first responders had cordoned off heavily damaged areas, employees who had been working in those buildings were unable to retrieve their possessions — including cell phones and keys — from their lockers. A nearby church offered to house displaced individuals. “We had some of our leadership people go over there with about 50 people who didn’t have cars, didn’t have keys,” Mary says. “Within a couple hours, they had all found a way home, or someplace.”

A core team, including Jason and key people from HR, operations, communications, and environmental health and safety, assembled to create a plan to contact all employees. “In some cases, we asked police to go to homes to make sure people were OK,” Mary says. Homeland Security dogs searched the campus to ensure no one had been trapped or killed.

During the tornado, 130 children from the Yellow Iron Academy — a child care and early-learning center operated by a third party on the Vermeer campus — headed to a shelter along with their teachers. All the pupils, 60% of whom are the children of Vermeer employees, were safe.

Preparation pays off
Vermeer turned to the media to disseminate safety messages in the immediate aftermath of the tornado and to declare the company’s plans to rebuild and return stronger than ever.

Vermeer management began recovery efforts immediately. Company leaders quickly assumed crisis-management roles. The Vermeer response was in keeping with the philosophy and practices of lean manufacturing (a systematic method for working intelligently and eliminating waste) and continuous improvement, Mary says. “In a lean event, you understand the reality of the situation, and then you designate teams with leaders to go check on things to find out what the issues are, and that’s just what happened,” she explains. Vermeer adopted lean manufacturing under Mary’s leadership in 1998.

Despite the destruction wrought by the tornado on the Vermeer Mile, only “a small handful” of injuries were reported, according to Lt. Shane Cox, public information officer for the Pella Police Department. Seven people were transported to Pella Regional Health Center. All had minor injuries and were soon released. Several other people with minor wounds were treated at the scene by EMS personnel.

The lack of serious injuries was likely attributable to “the quick acting of Vermeer as far as [activating] their emergency response [and quickly] getting team members to shelters within the buildings,” Cox told reporters.

“I’m certainly glad that we have put the effort that we have into being prepared for something like this,” Jason said during his media appearance.

Vermeer had previously conducted tabletop exercises simulating a tornado event and the need to conduct crisis communications. When the actual tornado struck, Mary says, “They just started putting these plans in place.”

Most of the core team worked until 1 a.m. on Friday, July 20, then went home to sleep and returned at 7 a.m.

Vermeer closed for business that Friday, so a team could assess the facilities with the aim of resuming production to the greatest extent possible the following Monday. Vermeer chaplains were placed on call to support team members.

Getting back to work
By Friday afternoon, the team had sketched out a plan for moving operations to alternative locations. People were dispatched to scout out off-campus space.

By Saturday, July 21, recovery plans were well under way. Wrecked vehicles had been separated, moved and identified with a number and location so their owners could find and claim them and begin working with insurance companies.

“I have never been more proud of the Vermeer team than I have been over the past 48 hours,” Jason posted on the company’s Facebook page. “We plan for scenarios and practice drills, but nothing truly prepares us for the unknown. The way our team handled the situation, followed procedures and cared for one another is precisely what Vermeer team members pride themselves in — doing more. The amount of progress we have already made is astounding.”

On Sunday, July 22, local shareholders were invited to visit the campus. “We had a little church service, and then we had a little tour, so they could see everything, in almost its worst state,” Mary said.

Shareholders and members of the board of directors received updates on the recovery, along with videos and a map indicating the “red zone” — the damaged area where entry was restricted to those who had received safety training and were wearing safety equipment. Information was sent daily for two weeks via the Vermeer family’s Trusted Family secure online portal.

The company, which dubbed its rebuilding effort “Vermeer Strong,” resumed operations as promised on July 23. In the first week, 77% of the team was working in permanent or temporary positions. Those whose job functions were out of commission were called in to help with the cleanup after receiving safety training. Mary credits the Vermeer HR team with identifying displaced employees’ skillsets and determining how they could be redeployed in support of the recovery efforts.

Within a week, Plants 1, 2 and 3 were back online, shipping was under way in the Parts Center, and central receiving operations had begun to move from the totaled Plant 7 to the Global Pavilion. The company says its Parts Center delivered more parts in July than it had in June.

By Week 2, 95% of the team was back to work. Plant 4 and some of Plant 7 were back up and running.
“For two weeks, it was what we called a mile-long kaizen,” says Mary, using the Japanese term for continuous improvement or change for the better. Although many leaders and team members were working outside their usual functional areas, they identified what needed to be done and executed the tasks, she says.

At first, the core leadership group met twice a day to assess how their projects were progressing and what additional help was needed. “That helped us to be able to call more people back,” Mary says.

In Week 3, 99% of the Vermeer team was back at work, and construction had begun on the front offices in Plants 6 and 7. In Week 4, more operations resumed in Plant 7.

“Our team has been rapidly shifting and moving production lines in smart, creative ways to deliver yellow iron to our customers and get our team back to work,” Jason said in a video message on Aug. 3.

“There is no quick fix to make the [campus] look like what it used to, but we are optimistic about the opportunities for growth in the rebuilding process. While this year served as a milestone, 70 years in business, it will be remembered for more. This is the year the Vermeer team came together, grew in ways we never imagined, and rose to the challenge to meet our customers’ needs.”

On Monday, Aug. 20, 100% of the Vermeer team was back at work. According to the company, sales volume in August 2018 was higher than it had been in August 2017.

Mary says the company’s “4Ps” philosophy — People, Product, Profit and Principles — was in evidence throughout the tornado recovery. The 4Ps, representing the core values passed down from Gary Vermeer and his brother Harry, were coined as a result of a goal-setting exercise Mary and her brothers conducted in the 1980s. The second-generation members realized they needed a memorable way to communicate the company culture.

When the tornado struck, Mary says, “The absolute first focus for everybody was our people — are our people safe? Then, how do we communicate effectively, so they know what’s going on? It was that strong focus on people, not thinking about, ‘What is this going to mean to our top line or bottom line?’ That was absolute, without anybody saying it. And that came from this 4P philosophy, that we’re going to try to manage by principles, which means we’re going to take care of our people.

“And then on product, within 24 hours we had our key leaders going through every single product line and figuring out, how would we be able to get production up and running? Because we knew, for our customers and our dealers, that was a very, very important thing. And for us it is, too, because it’s part of our culture.”

Rebuilding and expansion plans
The company plans to build new facilities to replace the destroyed Plants 5 and 6. A new engineering facility is also in the planning stages. Vermeer engineers are now working in temporary quarters outside the Vermeer Mile; their former work area is being used for production. Their new site will be called Shop 48 in honor of the year 1948, when Gary Vermeer founded the company. “Shop” is a nod to where Gary tinkered with his first inventions and the Vermeer spirit of innovation got its start.

Also in the planning stages is a documentary on the tornado and the recovery effort.

“It was a privilege to see people helping each other in a time of need after going through a very critical incident,” Marion County Sheriff Jason Sandholt wrote in a Facebook message. “These team members were truly concerned about each other, and I saw the same care and compassion for the employees when I met with Jason, Mary and many others in the Vermeer leadership team.”

“We’ve dealt with lots of challenges in seven decades of doing business. This is a new, major one,” Jason said on the day of the storm. “As we have survived and thrived after every challenge we’ve had thus far, we plan to do so again.”  

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.                                                                     

CSR, TBL and ESG

 

Management literature has developed a slew of three-letter acronyms to refer to considering societal benefits as part of the assessment of business results. There’s CSR (corporate social responsibility), TBL (the “triple bottom line,” referring to social, environmental and financial performance) and the latest label of choice for public companies, ESG (environmental, social and governance concerns).

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Charity and challenges: The pros and cons of family foundations

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A billion-dollar family business goes non-profit

Cascading force for good

These concepts are old hat in the family business world. Business families have been contributing generously to good causes for centuries. Closely held companies, free of the public markets’ pressure to increase profits each quarter, are especially well positioned to pursue non-financial goals in parallel with their revenue-producing activities. Many business families want to honor their ancestors by making an investment that perpetuates the founders’ values.

A survey of representatives from large family firms in 21 countries, conducted in early 2016 by EY and the Center for Family Business at the University of St. Gallen (Switzerland), found that about two-thirds of respondents organize their philanthropy through a family-specific vehicle, such as a family foundation, trust or family office. But half of those surveyed said they also participate in philanthropy through the family business.

In this issue, we offer tips on doing good in a way that both achieves the family’s societal goals and promotes family harmony. In order for a philanthropic program to succeed, the family must approach it intentionally — just as they approach their business ventures. This involves measuring the effectiveness of the charitable contributions. In EY’s global family business study, 60% of respondents (on average) expressed a desire to enhance the evaluation of their philanthropic projects.

In philanthropy, as in business, excellence won’t be achieved if people don’t take their jobs seriously or lack the skills to execute on a strategic plan. A family foundation should not be used as a means to dole out paychecks to unskilled relatives or as an attempt to remedy an entitlement mindset.

Unfortunately, many families find that giving money away can generate as much intrafamily conflict as earning money does. This is especially true in large, far-flung families whose members have differing political or religious beliefs.

It’s natural for long-surviving family foundations’ giving or investment patterns to evolve when a new generation takes the helm. The Annenberg Foundation, for example, moved its headquarters from Radnor, Pa. (a Philadelphia suburb) to Los Angeles after the death of its longtime board chair, Leonore Annenberg. Annenberg’s stepdaughter and grandchildren, living in Los Angeles and Paris, wanted to shift their giving to the L.A. area and away from Philadelphia cultural institutions.

One of the most radical shifts has occurred at the Rockefeller Family Fund. Patriarch John D. Rockefeller founded Standard Oil, a forerunner company to ExxonMobil. In 2016, the fund announced that it would divest from fossil fuel companies. What’s more, David Kaiser, a fifth-generation Rockefeller family member, and Lee Wasserman, director of the Rockefeller Family Fund, wrote an article in the New York Review of Books decrying what they referred to as “morally reprehensible conduct” by ExxonMobil.

Decade after decade, families continue to practice philanthropy as a group, rather than have individual family members pursue favorite causes separately. Good governance will smooth the way to good works.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Tag: Beyond the Bottom Line

A billion-dollar family business goes non-profit

When J. Mark Baiada turned 70 in 2016, he had more to celebrate than just a big birthday. Bayada Home Health Care, the business he had founded in 1975, was generating more than $1 billion in annual revenues. The Moorestown, N.J., company had become the U.S.’s 10th-largest home health agency, with 310 offices in 22 states and 23,000 employees serving 150,000 patients.

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Two months before Mark Baiada’s milestone birthday, he announced a plan to restructure his family-owned company into a non-profit organization. Mark would become chairman of the charitable entity. His son, David, would serve as CEO of the business.

The goal of the change in status is stewardship of the legacy, Mark and David Baiada say.

“This is converting personal wealth for the benefit of home healthcare,” Mark says. He notes as the owner of a billion-dollar company, he’s saved plenty for his retirement. “I don’t need an airplane,” he says.

The goal is that Bayada will still be operating in 100 years, maintaining the company’s high standards via a governance board and ensuring that the company will not be sold if the third or fourth generation lacks the same passion that Mark and his children have for the business.

“I wouldn’t really think of this as philanthropy,” David says. “This is about the conversion of ownership.”

“We want to lock down continuity and the long-term vision,” Mark says. The goals are threefold: “to serve millions worldwide, leave a lasting legacy and be the world’s most passionate and trusted team.”

The original plan was to transfer 80% of the business ownership to the non-profit and distribute the remaining 20% among family and employees. “But then some people might wonder, ‘What’s the angle?’ So we decided to go straight non-profit,” Mark says.

The process started more than 10 years ago when family and company officials sat down with a consultant to write “The Bayada Way,” a document outlining the company’s mission, vision, beliefs and values.

As Mark approached retirement, he thought about the best way to perpetuate “The Bayada Way.”

“I looked to the lasting legacy — the best chance of the company lasting 100 years,” he recalls. “I could give it to the kids; I could sell it. Once you [sell it], you will lose control. If it goes public, then you’re under the scrutiny of Wall Street.”

Mark’s daughters Kelli Marans (chief compliance officer) and Janice Lovequist (headquarters manager) also work at Bayada. Another daughter, Jackie Kirchhoff, previously worked there but has taken time off to raise her family. A fourth daughter, Christin Gregory, works outside the family business. Mark’s wife, Ann, retired from the company but still works on some Bayada initiatives. There are 11 grandchildren.

So while the family has a deep bench of potential successors, and Mark says his children are doing a great job at the company, he is looking farther into the future, focusing on that century mark. He says he’s concerned some future generation might end up in a disagreement, become greedy or perhaps simply be unable to run the business successfully.

“My first thought was, ‘Wow this is a complicated undertaking, and the implications of our decisions carry a lot of weight and are irreversible,’” David says. “At the same time, the challenge and the nobleness of the intent are energizing and inspirational.”

But, David adds, it was natural to consider the implications of the transition on the family’s wealth. Family members talked it through, and now everyone is on the same page. “Candidly, in the beginning, [going non-profit] was an effort that had no predetermined outcome or solution,” David says. “This was a blank slate.”

It was truly a blank slate in that very few private companies have transitioned to become non-profit. Bayada tested the concept in Hawaii, where the company has been operating as a non-profit under section 501(c)(3) of the Internal Revenue Code for two years. The family is now ready to make the change nationwide. The transformation is expected to be finalized in April. The name of the non-profit entity will simply be Bayada.

The process has not been easy, the Baiadas say. Taxes will be owed on company receivables transferred to the non-profit entity, which affects cash flow. Then there’s the paperwork. Then more regulations to meet.

“I thought it would be, ‘You’re giving away your business, isn’t that nice?’ But it’s not. It’s a lot of work,” Mark says with a laugh.

The Baiadas have also been vigilant to ensure that clients and employees are in no way affected by the transition, and they’ve kept the stakeholders up to date every step of the way. They say employee satisfaction has gone up since the announcement.

“I think people are proud to be part of an institution that puts mission over money, doubling down on serving more people in more places at a high standard for a very long time,” David says.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Tag: Beyond the Bottom Line

Cascading force for good

 

In just one generation, Cascade Engineering has achieved considerable business success, while also striving to make a positive impact on society and the environment. Fred P. Keller, who founded the company with six employees in Grand Rapids, Mich., in 1973, says the business now generates about $350 million in annual revenues, up from $250 million in 2011. The enterprise, primarily engaged in designing, engineering and injection molding of large plastic parts, employs some 1,600 people and serves customers worldwide.

The Cascade family of companies encompasses nine business units focused on a diverse array of markets and products: agricultural, material handling, office furniture, automotive, waste and recycling, polymer compounding, truck and bus, and RFID (radio-frequency identification) asset management.

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CSR, TBL and ESG

While Cascade’s growth has been impressive, that’s not the only way the company measures its progress. Cascade has created a culture that focuses on the “triple bottom line” (TBL), an accounting framework that looks at social and environmental results as well as financial results. It refers to its triple bottom line as “People, Planet, Profit.”

Cascade has proclaimed itself an “anti-racism organization.” Its welfare-to-career program helps employees transition off government assistance. The company also has committed to hiring returning citizens (people returning to the workforce after release from prison).

Cascade assesses the “planet” portion of its bottom line in multiple ways, including use of recycled materials, progress toward zero waste-to-landfill in each of its facilities and reduction in greenhouse gas emissions. It recycles water throughout its manufacturing processes and calculates the number of dollars it earns in sales per kilowatt hour of energy consumed. (Cascade reports that in fiscal 2016, it made $3.43 per kWh.)

Cascade is transparent about its progress toward these goals. Graphs depicting yearly progress on a variety of metrics are available on the company’s website, as are downloadable annual TBL reports. Cascade published its first TBL report in 2004.

The company has gone even further in asserting its commitment to social responsibility. Cascade is a certified B Corporation, meaning that it meets high standards in social and environmental performance and transparency, and its governing documents state its commitment to all stakeholders (not just shareholders). A non-profit organization called B Lab grants B Corporation certification. (See below for more information on B Corporations and benefit corporations, a related legal status.) Cascade is one of the largest certified B Corporations and one of the few manufacturing companies to hold the certification, a status it first achieved in 2011.

Companies pay an annual fee for B Corporation certification, which varies according to annual sales. (Cascade’s annual fee is $30,000.) B Corporations must apply for recertification every two years. Cascade estimates that six to eight staffers spent a total of 400 to 600 hours completing the complex, 152-question certification assessment, which also requires supporting data.

In 2014, Fred Keller turned over the CEO title to a non-family member, Mark Miller; Keller, 73, remains Cascade’s chairman. Among numerous other professional and philanthropic activities, Keller has been a visiting lecturer at the Samuel Curtis Johnson Graduate School of Management at Cornell University since 2002. His course, which has had various titles over the years, is now called “Changing the Game: Purpose and Profit.”

Fred’s daughter Christina Keller, 36, is president of the Cascade Engineering Campus Business Team, responsible for four of the company’s businesses located in West Michigan. Previously, she was president of the company’s largest business unit, CK Technologies, in Montpelier, Ohio. Fred’s eldest daughter, Lorissa Keller MacAllister, 45, serves on Cascade’s board.

Fred, a widower, owns Cascade along with his three daughters (Christina Keller, Lorissa Mac­Allister and Susan Whitman, who is otherwise not actively involved in the company).

Fred’s entrepreneurial spirit and family values were inherited from his parents. His father, Fred M. Keller, started out as a laborer and served as a master mechanic in World War II. After buying and then selling a die-casting business, he acquired Paragon Die & Engineering, an indebted manufacturer of aluminum die cast tools, for $1 in 1962. Fred P. Keller began Cascade as a division of his father’s business; the company incorporated as a separate entity in April 1973.

Paragon, also based in Grand Rapids, still exists today. Fred P. Keller serves on Paragon’s board; his nephew Dave Muir is Paragon’s president.

The senior Keller and his wife, Bernedine Johnson Keller, lived frugally, valued people and loved the outdoors, according to their son. Fred M. Keller once was a preacher in Michigan’s Straits of Macinac region. The Kellers donated generously to many Grand Rapids institutions. They started the Keller Foundation, which supports programs and services for children and families.

Family Business Magazine recently spoke to Fred P. and Christina Keller about Cascade’s certified B Corporation status and the company’s commitment to the TBL framework. An edited transcript of the conversation follows.

Family Business: How would you describe Cascade Engineering’s TBL philosophy — “People, Planet Profit”?

Christina Keller: We don’t take a hierarchical approach to people; everybody has value. It’s not good enough to say, “Hey, you’re valued” — we need to go as far as [ensuring] that people feel valued in our organization. We have welfare-to-career, returning citizens and veteran programs, [helping] people who sometimes don’t feel valued and bringing them into the culture.

The planet has always been a part of our upbringing; we always did things outside. And now that translates into the innovation around the planet — recycled materials, zero waste-to-landfill, etc. — in the facility.

And then on the profit side: How can we be the most effective that we can be? How can we figure out how to solve problems?

FB: Cascade has declared itself to be an anti-racism organization — not only a workplace where racist acts and comments are not tolerated, but also an environment where employees feel safe discussing issues related to race. Could you explain what this entails?

Fred Keller: The dedication to anti-racism is something that we’ve been doing for six or seven years. The [Grand Rapids] community started a program called the Institute for Healing Racism, and I was one of the first to go through that. It was aligned so well with my beliefs, and also gave me tools to think about how to deal with [the issue]. My intention at the time was to make sure that we were not a place where racism would be tolerated. We were very clear about that. We had rules about it. We also required our supervisors to go through the Institute for Healing Racism program.

Every person in the organization is required to attend what we call Diversity Theater, where we bring in actors who act out themes that actually happen in our organization and then ask the participants to design what they could do differently. So there’s an awareness building around inappropriate behavior.

We use a dialogue process, where we have small groups of folks talk about very tough issues. Racism is one of the topics. You learn how to trust each other as you go through that process.

We brought in a traveling version of the Jim Crow Museum, artifacts that are being sold or traded in this country that reflect on the Jim Crow era. Virtually everyone went through that display, and we had dialogue sessions afterwards.

The result of all that is that we are seeing a very high sense of trust amongst people of color in the organization. And we measure that through attitude surveys. It’s really a gratifying thing to know that the culture of this organization can feel so inclusive, and that people feel safe here. That’s a very important part for me, that we deal with tough issues — we don’t just try to be off in our own enclave. That we try to be a place, as Christina was saying, where people know they’re valued.

FB: What motivated you to seek B Corporation certification for Cascade?

FK: I have been teaching a course at Cornell since 2002 on sustainable business. [When the course was first launched,] it was kind of radical thinking to be teaching something other than maximizing profit for the shareholders. I was the only antidote to Milton Friedman at the time at Cornell.

When I learned about B Corp, I got to meet the three founders [of B Lab, the certifying organization], Jay [Coen Gilbert], Bart [Houlahan] and Andrew [Kassoy], and they’ve become good friends. I just wanted to support the movement, more than anything else.

CK: When I look at the decision to become a B Corporation, as we were saying, the values have always been there.So the idea of joining a larger-scale group is really more out of trying to push the movement forward, and push it in a new way, and attract or come together with others that have similar values. [It’s not as if] we put the B on and started doing anything differently. This was kind of an additional certification to help us look at how we can get better and connect with a greater community.

FK: The justification was that we’d be able to have a baseline to work from, and use that as a checklist to get even better.

CK: We’re very metric-driven, you might say, and it’s always hard to find a social and environmental metric that you can use. One benefit of the B Corp metrics is that you can see how you rate. Somebody’s put some thought behind metrics, and we can work at improving those metrics over time.

FK: Foundationally, [regarding] the societal and environmental issues that [B Lab] challenges you on, we had many of those things in place already. It was primarily understanding the questions that they were asking, to make sure we received the appropriate credit, because it’s all based on a point-scoring system.

FB: How does the TBL concept differ from corporate social responsibility (CSR) or environmental, social and governance (ESG) criteria in public companies?

FK: The way I describe it in my class is that there are what I call “Rings of Impact.” [Editor’s Note: “Rings of Impact” is a registered trademark.] At the center — mainstream, basically — are “Profit Maximizers.” That would be Ring 1.

Ring 2, “CSR and Giving Back,” are folks who do corporate social responsibility work. Often, and I lament that it’s maybe too often, that is thinly veiled profit maximization. They’re really trying to burnish their image, so that people will buy more of their goods.

Ring 3 is a group that I call “Doing Good and Doing Well.” A lot of private companies, a lot of family-owned businesses, fall in that category.

And then there’s a fourth ring of impact: “Social and Environmental Problem Solvers,” the people who are actually designing their businesses to solve a social or environmental problem. That’s a growing entrepreneurial field, and I think it’s one that’s very encouraging.

What is a certified B Corporation?

•  Certified B Corporation status is not a legal status.

•  B Lab, a non-profit organization, is the B Corporation certifying agency. B Lab was founded in 2006 by Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy. Coen Gilbert and Houlahan were previously co-founder and president, respectively, of AND1, a basketball footwear and apparel company; Kassoy was a private equity investor.

•  There are currently 2,334 certified B Corporations in more than 50 countries, representing 140 industries.

•  Certified B Corporation status is available to every business regardless of corporate structure, state or country.

•  To achieve certification, a company must receive a minimum score on B Lab’s B Impact Assessment. Additional documentation is required to verify the information. B Lab staff will also conduct an assessment-review telephone call, and the company may be subject to a background check.

•  Certification requires directors and officers to consider the impact of their decisions on all stakeholders. Depending on the company’s legal structure and state of incorporation, it may need to amend its governing documents to protect directors and officers.

•  Recertification is required every two years.

•  Certified B Corporations must publish a report of their social and environmental performance, assessed against a third-party standard.

•  Annual certification fees vary according to company revenues and range from $500 to $50,000+.

For more information, see bcorporation.net.

                                                                               

What is a benefit corporation?

•  Benefit corporation status is a legal status.

•  Thirty-three U.S. states and the District of Columbia have passed laws authorizing benefit corporation status, and six additional states are currently considering legislation.

•  Benefit corporation status is currently available for corporations only, although a few states offer benefit LLC options.

•  Directors and officers of a benefit corporation are required to consider the impact of their decisions not only on shareholders but also on society and the environment. In addition to overseeing the company’s financial performance, they must assess the company’s social and environmental performance. Benefit corporation status protects them from legal liability in doing so (even if the business is a public company or pursuing a sale).

•  Transparency provisions of benefit corporation legislation require these companies to create annual reports of their social and environmental performance. Reporting requirements vary from state to state.

•  B Lab certification is not required to obtain benefit corporation status. B Lab plays no role in benefit corporation oversight, although it advocates for legislation passage and offers a reporting tool to meet transparency requirements.

•  State filing fees range from $70 to $200.

For more information, see benefitcorp.net.

My little mantra is: Find something good to do, and then figure out how to make it good business. It’s the motivation that is the key, as opposed to someone who is saying, “I’ll do CSR work, as long as it improves my bottom line.”

With regard to ESG, [adding] in corporate governance, I think, is a little bit of an interesting twist. But environmental and social measurements are key to that. I happen to have a Ph.D. teaching assistant this year who is doing her work in the area of ESG measurement. And it is a confounding field, because there are not many who are able to do it well. They primarily do ESG work in publicly traded companies, so they’re trying to relate it to how well they do from a stock performance standpoint.

CK: We have said that intention does matter, especially because as things get hard, if you think that it’s a tradeoff — that charity or CSR is at the detriment to the bottom line, and that it’s something that you have to be carrying along — you might abandon that.

Whereas if the intention is to be an employer of choice — that sustainability and the environment serve innovation, and it’s a cornerstone of what you’re doing — you do it because it’s the right thing to do. You’re more likely to keep that value and to translate that value across generations, regardless of whether the market is favorable on it or not favorable on it. So intention matters, and it’s not a tradeoff. It’s really a reinforcing concept with the triple bottom line — they all reinforce each other.

FB: Of course, your company must be financially successful in order to make this work.

CK: Of course. It’s not a tradeoff.

FK: “People, Planet, Profit” is the right order to remember those things, though. Profit is not the objective. The objective is to make a positive impact. And of course, we need to have profits in order to make a positive impact.

FB: Cascade operates in an industry that is generally opposed to regulation, and you’re based in an area that’s largely Republican. Yet by undergoing B Corporation certification for Cascade, you chose to subject your company to rigorous environmental and social standards. How do you navigate the contradictions?

FK: I don’t see them as contradictions. It hasn’t been difficult, really. You could call this area a Jerry Ford Republican area. We believe in rationale and reason. I certainly am respected for my views. They [Grand Rapids business leaders] understand the value that this corporation brings to the community. And there is not a conflict with other folks who may be even more conservative than I am. We could have good dialogue around it.

I think that’s part of the problem: People who have different views go to their own echo chamber and don’t want to talk to folks who don’t think the same way that they do. I would say that this region has much more openness to that kind of dialogue.

CK: I think a lot of the people in our situation are middle-of-the-road, and not the extreme of either side. If the regulation is non-value-add, then we shouldn’t just have blanket regulations. And if businesses could step up and be more socially responsible, we wouldn’t need as much regulation. There’s a lot of, I think, shades of gray in a world that’s trying to make things very black and white. 

FB: Why do you think B Corporation certification has been slow to catch on, particularly among family companies?

FK: Well, they’ve designed [the certification process] to be rigorous. And I think it’s the rigor that slows people down more than anything else. It takes a fair amount of dedication to want to be certified.

We are quite fortunate, being just a G1-G2 business. When you get to the third and fourth generation, my guess is that shareholders can have a disparate opinion about whether or not B Corporation status is important.

It may not seem obvious to people, but running a company that has triple-bottom-line thinking, first of all, is a lot more fun to do, you’re much more proud of it. When the culture is really there, you don’t have to worry about things; you know that the business is going to survive long-term. People really come to work wanting to engage in this fascinating business that we’re in. When you trust each other and you’re working together with the right values, things happen in a very positive way. It makes the business much more robust and more resilient.

FB: Interestingly, Michigan, the state where Cascade is incorporated, has not passed benefit corporation legislation.

FK: You can be a certified B Corp, [but] we don’t have the benefit corporation status in Michigan, which is the legal form that we can register under. We’re still a C corp; we are not a benefit corp. But we are a B Corp. [Laughing]

CK: We thought it was more important at this point to be registered in Michigan and support our state [than to incorporate in another state as a benefit corporation].

FB: Do you think Cascade’s growth is attributable to the TBL philosophy and the values that you hold?

FK: I see them as kind of intertwined. I don’t think you can be so Newtonian as to say that the cause of our growth has been because we are a B Corp, or because we have the values we have. We don’t have a growth objective, we have an objective of being a healthy organization, and guess what, a result of that is the growth. The health of the organization is determined by the people in it, by the culture in it, and if you’ve got the right culture and the right folks, they want to make things happen. They want to make things grow.

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Tag: Beyond the Bottom Line