Values & Ethics

Bringing joy, and fresh food, to low-income communities

Even if you don’t live in Greater Philadelphia, you may be familiar with Jeffrey Brown, a fourth-generation grocer who is chairman and CEO of Brown’s Super Stores. About half of the 12 ShopRite and Fresh Grocer stores Jeff operates are located in “food deserts” — urban areas where residents lack access to stores selling fresh food.

You may recall Jeff from President Barack Obama’s 2010 State of the Union address, when the grocer was among Michelle Obama’s guests. Jeff was an adviser to the Healthy Food Financing Initiative, part of the first lady’s “Let’s Move!” campaign aimed at ending childhood obesity.

You might have seen Jeff in 2015 on PBS NewsHour, which praised his work to build “an oasis in a Philadelphia food desert.”

More recently, you might have seen him on CNN, lamenting slow police response to the looting of two of his stores amid the national unrest after the killing of George Floyd, a Black man, by Minneapolis police.

Jeff, his family and store personnel rushed to reopen the two decimated stores within a week to ensure his customers had a source of fresh food and the other services his ShopRites provide.

After the looting, “We must’ve received 15,000 notes from customers,” says Jeff, 56. “A lot of them felt bad that there wasn’t something they could do to prevent this. And they just wanted to express a lot of love and affection for the work we do and our commitment to them.”

The word “love” comes up frequently when Jeff speaks about his relationship with his urban customers. That relationship dates back generations.

Jeff’s great-grandfather opened a small grocery store in an inner-city neighborhood, and the family has been serving low-income shoppers ever since. Jeff recalls accompanying his father to work at age 8, chatting with customers and employees. He grew up viewing ethnic diversity as normal. Today the majority of customers in his urban stores are Black.

Brown's Super Stores’ mission is “to bring joy to the lives of the people we serve.”

“If you’re building a business basically to bring joy to people that have very little joy in their lives and it’s going to be super difficult to do it, you have to be motivated,” Jeff says.

The mission helps unite a multiethnic team around a shared purpose and a roadmap to achieve it. Brown’s Super Stores doesn’t just sell groceries; the company aims to solve problems in the communities where its stores are located.

Food desert economics
When his father sold his stores to a public company in 1987, Jeff, the 23-year-old CFO of the business, decided to open his own stores. He joined Wakefern Food Corp., a buying cooperative whose brands include ShopRite and the newer Fresh Grocer.

He opened his first store in December 1988, taking over a money-losing ShopRite in Philadelphia’s Roxborough neighborhood. The young entrepreneur, who graduated from Babson College and in 2012 was named to the school’s Hall of Fame, earned credibility by orchestrating a turnaround of the store. He opened two more stores in 1995 and 1999.

Jeff’s wife, Sandy, says her husband’s devotion to the business comes from his father, Lenny, who died in 1995.
“A job is a job,” Sandy says. “But if you have an excitement and a passion about something, that’s what makes the difference. I think his father ­really gave him that passion and that love.” Sandy, Jeff’s executive assistant, has managed a variety of projects at the company over 25 years.

In 2000, Jeff opened his first store in an urban neighborhood, in a declining shopping center in Cheltenham, just outside the city limits.

While grocers’ profit margins are low— about 1% to 3% of sales, depending on the item — the challenges are even greater for stores in low-income communities. The average sale is lower, and training, security and insurance costs are higher.

“We had done early work before we opened the first store to calculate that the gap was somewhere around 5% of sales,” Jeff says, comparing margins in poor and higher-income communities. “So instead of making that 1% of sales bottom line, it would be a 4% loss.”

Poor consumers buy lower-cost commodity items rather than value-added products, which yield higher margins. What’s more, the challenges these consumers face — such as violence and dependence on public transit — also affect stores that serve them.

Most grocers bridge the gap in low-income areas by charging higher prices, paying lower wages and reducing quality standards. Jeff found a different solution.

“Our thought was that we could use entrepreneurial creativity to solve about half that gap,” he says. To make up the rest, “We would need some sort of financial engineering solution or a public-private partnership to give us a fighting chance. A lot of our innovations have to do with how we could take advantage of existing economic-development tools.”

Jeff has succeeded with this approach and is bringing it to others through a non-profit organization he founded.

“When they opened up the ShopRite, it made a lot of the grocery decisions much easier and much more convenient,” says Alexandra McFadden, board president of the Centennial Parkside Community Development Corporation, made up of residents and organizations in the West Philadelphia neighborhood where the Browns have had a store since 2008. Before then, many residents had to take a long bus ride or costly taxi to reach a grocery store, she notes.

Serving the community
In 2010, when the Browns launched their company’s mission to bring joy to the lives of the people it serves, they established four brand attributes: authentic products, affordability, community responsibility and an enjoyable shopping experience.

They also set out four core values: seek understanding, be flexible, show respect and act responsibly.
Before opening a store, they meet with community members to seek input on shoppers’ expectations and how the store might meet their needs.

The Browns take note of community members’ heritage and stock their traditional foods: halal meat for Muslims, ackee fruit for Jamaicans, fufu flour for West Africans, sweet potato pie for Black Americans. Competitors who stock specialty items in affluent neighborhood stores neglect this service in poor neighborhoods.

“We’ll have people come into a store and [say], ‘I cannot believe you carry this product. I haven’t seen this anywhere since I left my country.’ That brings them joy,” Sandy says.

Some of the Browns’ stores offer additional services, such as a pharmacy, ecommerce, a health clinic with sliding-scale fees and a credit union (with no minimum balance requirement, no monthly maintenance fee and no ATM fees).
The family’s two Fresh Grocer stores offer prepared meals and high-quality perishables, emulating the Whole Foods experience in neighborhoods where Whole Foods wouldn’t open.

The Brown family is a strong supporter of community organizations.

“I put on a lot of events in the community,” says Tracey L. Fisher, founder and CEO of Gateway to Re-Entry, which provides education and support for returning citizens — people released from prison who are reintegrating into society. “Any time Gateway to Re-Entry called, Jeff automatically donated.

“Not only did he come physically and give his time and volunteer, but he does it as well through [donating] his products.”

Staffing up
Jeff’s stores are unionized, as his father’s were. Sandy says most of the workforce is drawn from the stores’ neighborhoods, although employees are moved around as they rise within the organization.

“If I were to open a store in a suburban area, we would get lots of applications from experienced people in the food business,” Jeff says. In urban areas, there are exponentially more applicants because of high unemployment, but most lack experience. “In many cases, they may never have worked before.”

When Sandy joined the company, she developed its human resources function. At the time, Jeff was in the process of purchasing his second store.

Sandy had worked for Unilever and Revlon and had a strong HR background. “I recognized that I didn’t have a world-class human resource capability,” Jeff says. “And I always marveled at what she did in that area.”

“I had no idea what you needed to be a good deli worker or how to train a deli clerk. So I had to basically learn all of those different positions, and then I proceeded to write the training programs,” Sandy says. “Over time, I gained the knowledge and the background on the interviewing style.”

At a town hall meeting to discuss the opening of the Parkside store in 2008, a community member urged Jeff to hire returning citizens.

“She explained to me that a lot of people in West Philadelphia have a criminal record, and they’re never going to be the type of customers they should because they can’t get work. And maybe I had the capability to solve that problem,” Jeff recalls.

He took the suggestion to heart and hired six returning citizens, originally as an experiment. Today, about 700 of the company’s 2,500 employees are returning citizens. Some hold store manager positions.

Fisher says when he was starting his organization, “Jeff Brown, literally personally, made phone calls to all his stores to hire my returning citizen guys. It made me more credible when I was going to the prisons and telling them, ‘When you come home, I got a job for you.’ ”

The biggest issue with returning citizens, Jeff says, is not theft or violence but the use of street language in the workplace — a problem that can easily be fixed with training. He’s found that turnover among these employees is low and loyalty is high.

Sandy, who has been involved in many aspects of the business, currently works on store design, customer relations, retail technology and social media. “She’s been a tremendous contributor to the business,” Jeff says.

Jeff and Sandy’s eldest son, Joshua, 29, has worked in the business for two years. Josh, who studied business at Cornell University, previously worked for a private equity real estate fund. At Brown’s Super Stores, he’s training to replace the company’s longtime CEO, who plans to retire.

“I thought that his finance skills were just tremendous, and really were enhanced and refined during his work experience on the outside,” Jeff says of his son. “As a kid, he worked in the business and truly valued the human aspect of what we do.”

Josh spent his first year rotating through various departments. “We wanted him to understand at the operating level how everything works,” Jeff says. “And he also wanted to show the team that that he’s willing to work and do what they do.” He has learned every operating manager’s job and every role in finance.

Of course, no one had planned for a pandemic and destructive looting to be part of Josh’s training program. “I knew going in, no matter what happened, this wasn’t going to be easy,” Josh says. “I’m prepared to fight the long fight.”

Destruction and rebuilding
The looting on May 31-June 1 “was not a complete shock to us,” Jeff says. “My family in the ’60s had inner-city stores that went through the same thing, and so we always understood that this was a possibility. History tends to repeat itself.”

The Browns’ ShopRites in the Nicetown neighborhood of North Philadelphia and in the Parkside community were completely destroyed. At press time, Jeff was still awaiting final figures but estimated the damage would total about $2.5 million. He anticipated that most would be covered by insurance.

Community members joined store staff in the cleanup effort. “As soon as they could help, they came out in large numbers,” Jeff says.

“I understand the anger and the pain” over police killings that drove the unrest, McFadden says. “But it was also very frustrating for me. That’s my grocery store.

“I felt like it was so many steps backward for people who are living on the edge of food insecurity as it is.”

Each store had to be thoroughly cleaned. Workers “needed to refill that whole store with thousands and thousands of products, and then also do all the work to put in the flooring and fix the doors and the windows.,” Josh says. “It was such a tremendous effort.”

Sandy worked the phones, trying to replace registers and self-checkout systems that were damaged beyond repair.
Did the Browns consider leaving their inner-city locations after the looting? “Not for one second,” Sandy says. During the unrest, she says, the family’s focus was, “‘How fast we can fix all this, and how are we going to secure it so this doesn’t happen again?”

Both stores reopened within a week.

“Seeing how our team responded, how we all pulled together, drove home for me why it is we do what we do every day,” Josh says. “I think it says a lot about the way we think about the community and the way we want to be involved.”

The Browns held store reopening ceremonies centered on remarks by local clergy.

“We felt that it would be important to have almost a religious-type ceremony with all the different faiths we serve, and just stay away from political speeches because, obviously, the public sector let us down,” Jeff says.

“All we did was communicate it on social media, and we had a very large turnout at both. They were very moving, genuine ceremonies, with a lot of affection and love for our life’s work.”

Fisher, who attended the Parkside ceremony, was moved when Jeff introduced a group of returning citizens who had been promoted to managers. “I was so proud that moment, watching him bring up people that I bought to him years ago that’s managers now.”

Pandemic protections
Jeff and other Wakefern cooperative members prepared early for COVID-19, having been alerted by peers from Asia and Italy.

“Before the CDC came out with advice on masks, we procured masks and started requiring our employees to wear them, and we started temperature checks,” Jeff says.

“Every day there were innovations like plexiglass shields. We kept track of how many people were in the store at one time.” Graphics were placed on the floor to promote 6-foot distancing, and sanitizing stations were installed in the shopping cart area. Shower curtains separated self-checkout stations and, later, were hung behind cashiers.

“We immediately came out with hazard pay for all our workers to give them a reward for coming in,” Jeff says.

COVID-19 hit grocery retailers first. “But then it started to spread to all of our vendors,” Jeff says.

“Industry by industry would start to get shut down. And as it spread through the country and more and more of the food system was impaired, the logistics of getting product became very difficult. So then we had a new wave of figuring out, how do we get products to our stores?

“That was a much more difficult job than [after] the looting. The looting happened, we fixed it, we were open within a week.” Months into the pandemic, “we still have logistics problems getting certain kinds of merchandise.”

The pandemic has also disrupted office operations.

“Since COVID, I’ve had to increase the number of things that I handle,” Sandy says. Among them: adding third-party logistics companies like DoorDash to accommodate the increased demand for deliveries.

Josh notes that along with day-to-day operations, the business is also coping with the challenges of COVID and the aftermath of the looting.

“Various little things in our society that fall apart go unnoticed until they become a problem,” Josh says. One example is a coin shortage in the United States, which arose because nowadays fewer people are using cash.
“So now I’m trying to find coin. Our team is looking for ways to work without it.”

Challenges from right and left
Jeff has faced off with politicians from both sides of the aisle, opposing policies that hurt his customers and his business.

He’s criticized conservatives’ calls for a significant reduction in the Supplemental Nutrition Assistance Program (SNAP). “Of course, in a very impoverished area, the people count on that to get their food, and my business model counts on that,” Jeff says. “So we would often find ourselves in Washington fighting conservatives and explaining to them, you can’t sustain an infrastructure to serve the poor if you take away the revenue of SNAP. Besides, we already know that the sink-or-swim mentality does not result in a lot of people miraculously going to work, because the opportunities just don’t exist where they live.”

More devastating to his business, Jeff says, is the beverage tax imposed by Philadelphia’s Democratic mayor, James Kenney. The tax, 1.5 cents per ounce, is levied  on sweetened caloric (regular) and non-caloric (diet) non-alcoholic beverages.

“Of all the things I’ve dealt with, the beverage tax was the most absolutely damaging, and for absolutely no benefit to society.”

Despite his efforts to improve customers’ health outcomes, Jeff says, Hispanic and Black consumers prefer sweet beverages. “It’s a very hardwired preference.”

After the tax was instituted in the city in 2017, the price of sweetened beverages doubled in Jeff’s Philadelphia stores. His fears came true: Shoppers with the means to do so traveled to suburban stores to buy their beverages and, while there, also bought their other groceries.

“It was devastating to revenues,” Jeff says. “Some of the stores were down 25%.” That blew up his meticulously designed business model for stores in low-income areas.

Jeff sold one of his stores “because, in my way of analysis, there was no way to correct the damage that was done.” He’s still operating three other stores that are struggling because of the tax.

“And of course, after a lot of years and an incredible number of studies, what we feared the most was true: There was virtually no reduction in sugar intake among the poor.”

Public health researchers from Drexel University, for example, polled Philadelphians and those from neighboring areas outside the city a year after the tax went into effect. Of the city residents, 39% reported drinking fewer sugar-sweetened beverages than they did a year earlier, compared with 34% of respondents outside the city — not a statistically significant difference.

Public service initiatives
Jeff was a founder of the Pennsylvania Fresh Food Financing Initiative, a public-private financing program to attract grocery stores to underserved communities. The program began in 2004 and ended six years later when all its funds were deployed.

In 2009, Jeff and Sandy created a non-profit organization called Uplift Solutions, whose original purpose was to assist with grocery store development in low-income communities nationwide. It grew out of a request from Thomas Vilsack, Obama’s Secretary of Agriculture.

Uplift now has an executive director and a team that includes Jeff and Sandy’s youngest son, Scott, 23, a Saint Joseph’s University student who serves as Uplift’s fund development officer. The mission has also expanded.

Besides offering food service consulting nationally, Uplift provides workforce training to returning citizens through a program called Workforce Solutions. Via a program called Philly Food Rescue, it distributes food that would otherwise go to waste to groups serving the needy.

Jeff is also a board member of the Pennsylvania 30 Day Fund, which distributes up to $3,000 in forgivable loans to small businesses shut out of federal Paycheck Protection Program loans.

The program, created in April, has primarily helped urban minority- and woman-owned businesses that have struggled during COVID-19. In addition to providing the loans, fund officials offer advice to the business owners.

Planning for the future
The fifth generation of Browns has been working with a consultant to establish a collaborative business relationship.
Jeff and Sandy suspect that Scott might be interested in joining the company in the future.

“He seems very interested in the business, and he’s very motivated by the mission,” Jeff says.

“Scott’s people skills are off the charts. His emotional intelligence is incredible, and he’s just beloved by everyone who meets him. And we could totally see how [Josh and Scott] would make a good team. But we’ll have to see.”

There are two sons in between Josh and Scott. Alex, 27, works for a consulting business in Washington, D.C. Lenny, 24, aspires to be an app developer.

“Whether my brothers end up being involved in the operation of the business or not, they’re always going to be part of my life and part of our family business in some way,” Josh says.

With the consultant, the four are “working out how we work together, how we think through problems, and how we don’t allow childhood biases or things like that to interfere with success as a group and as a family,” Josh says.

“What does the organization look like 10 years out?” Sandy wonders. “There’s so many logistics about that, and things that really need to be worked out and negotiated.”               

LOOTING AND ITS AFTERMATH: FEAR, FRUSTRATION AND RESOLVE

Two of the Brown family’s ShopRite supermarkets in low-income areas, one in the Parkside neighborhood of West Philadelphia and one in the Nicetown neighborhood of North Philadelphia, were destroyed by looters during protests over the killing of George Floyd by Minneapolis police. Machines were dismembered; glass was smashed; food, alcoholic beverages and medications were stolen; and items were flung from the shelves onto the floor.

Jeffrey Brown, chairman and CEO of Brown’s Super Stores, contends that poor handling of the situation by Philadelphia officials was partly responsible for the extensive damage.

The looting started in Philadelphia’s tony Center City on May 30, and the police department sent most of its resources there.

“It had the unintended consequence — which I think was predictable — of forcing [looters] into the poor neighborhoods,” Jeff says.

Brown’s stores operated May 31 until the violence escalated. The city ordered all retail businesses to shut down that afternoon. The Parkside store fell under siege as soon as it closed.

“The store had a very heavy loss-prevention and security contingency, but they were overwhelmed fairly quickly,” Jeff says. “So we let the outside security go after a while.”

The Parkside store’s loss-prevention staff locked themselves in the security office. Meanwhile, the looters were being captured on camera. “We knew everything they were doing, in the store and outside the store,” Jeff says.

“And we continually called the police, but with no response because the police had other priorities. And at some point, we told our loss-prevention [staff] to go out the emergency exit and leave because we didn’t think it was safe for them.”

The Parkside looters ransacked the store through the night. The destruction lasted 15 hours.

Looting began at Brown’s North Philadelphia store on the evening of May 31. “And again, we called the police and they also didn’t have the resources to help there,” Jeff says. 

The store was boarded up, but at about 12:30 a.m. on June 1, looters penetrated the barrier by driving a truck in reverse through the front doors.

The night crew inside the store heard explosives at about 4:30 a.m. Looters were blowing up ATMs. The employees fled to the roof and had to be rescued by the fire department.

Jeff wanted to rebuild the stores quickly but realized “I couldn’t get anyone in there to work if they’re under attack.
“I started to explain to the elected officials, I’m going to need real robust protection to get these stores rebuilt. I’m not going to want to spend money to rebuild the store if it’s only going to get destroyed again. Until the rioting quiets down, I need to have absolute certainty that the stores will be protected. And I cannot get that from the police.”

Jeff urged the city to call the National Guard, to no avail. “I decided the way I was going to address it was to do an interview with the [Philadelphia] Inquirer — I would make my plea public and hold elected officials accountable that way.” That plan worked.

The National Guard’s armored vehicles and automatic weapons may have upset neighbors, but store employees felt safe. Despite extensive damage to the equipment, the North Philadelphia store reopened June 5 and the Parkside store resumed operations June 7.

The Browns believe the looters were mostly from outside the stores’ neighborhoods. “I never had the feeling that anyone betrayed the spirit of our relationship,” Jeff says. “I didn’t see it as an attack on us other than just acting out over the situation, which, in a sense, is understandable.” — Barbara Spector

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.    

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.” 

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. 

See here for more information on Kemin Industries' social-responsibility initiatives.

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.” 

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. 

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.    

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.    

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

Avoiding family philanthropy pitfalls

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.

Special Report

Read More

Charity and challenges: The pros and cons of family foundations

Avoiding family philanthropy pitfalls

Cascading force for good

CSR, TBL and ESG

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