Family Business Legends: Alan Hassenfeld

By John Resnick

Q&A with Alan Hassenfeld, chairman of the executive committee at Hasbro

John Resnick: Alan, give me a snapshot today, an overview, of Hasbro.

Alan Hassenfeld: Let’s just say that Hasbro is in a wonderful position of constantly evolving. It has gone from really a history of first being in the textile business and then in the toy business … to coming up with its own brands, such as Potato Head and GI Joe. And then [acquiring] a number of other companies….

Under the present leadership it is really dealing with many different platforms. Yes, we have what is called the toy business. Yes, we have an entertainment business where you see movies like GI Joe and Transformers….

[Chairman] Alfred Verrecchia and Brian Goldner, who is the CEO now, really are making it that entertainment company. [Ed. Note: On April 30, Hasbro announced it would partner with Discovery Communications to form a children’s cable TV network.]

JR: If you took a snapshot today, financially, how would you size that up: size, territories, sales?

AH: Well, Hasbro is about a $4 billion company today. But it is a company that is under control. It has very little debt, it has got the opportunity—especially in this difficult economic time, we are in a wonderful place—because if there is something out there … that might not be part of our portfolio, there is the chance that [we] can buy it….

The most important things that Hasbro believes in today in the times that we are in is that ... the way out of this is through innovation. Now, innovation for the sake of innovation is no good. It’s got to be priced right and it’s got to pique the curiosity and imagination of the child.

JR: Give me a list of your most recognizable brands. As a matter of fact, the one differentiator I have seen in Hasbro over the years is, you are like the Monopoly board; you collect great properties. Has that been one of your differentiators, Alan?

AH: Yes, it is. Years ago a number of people asked me, what is it that is different about Hasbro, other than being [a] family company? And I said, the one thing is that we are like a bank ... we have a portfolio. And our portfolio happens to be made up of these wonderful intellectual properties… I literally can alphabetize—you know, Aggravation is the “A,” Battleship, Candy Land or Clue, you know—you go on and on....

JR: You work very closely with George Lucas, one of the most amazing strategic alliances that I have seen. It is not just a business deal; it really is an alliance, isn’t it?

AH: It has been a special alliance for years and years.

JR: Just the strategic alliance with George alone, quantify the revenue that that meant to Hasbro.

AH: In revenue alone we’ve gotten more than, you know, $1 billion plus. I don’t know the exact numbers. And George has done very, very well off of the licensing -revenue....

JR: Let’s go back for a moment. Hasbro came from Hassenfeld. Hassenfeld Brothers. Take me back to the beginning, 1923, with your grandfather, your two uncles, where all this began.

AH: Well, there were three brothers. There was Henry, Herman and Hillel. Henry was my grandfather. I don’t know that much about Herman and Hillel. And they literally were in the rag business. They ended up settling in Rhode Island. Don’t ask me, “why Rhode Island?” I still haven’t figured that one out. But when they went into business Rhode Island was known for its rivers. And the textile industry grew up in the Industrial Revolution, harnessing the power of the rivers for the textile mills.

They took the seconds and the thirds from the mills and made hat liners. And then from hat liners they ended up making pencil boxes, which were like a doctor kit. And so that is how we got into the toy business.

JR: And that was your first toy.

AH: Doctor and nurse kits, yes.

JR: As time went on, Mr. Potato Head was really your first big toy. I mean, that is one that really set you on the map.

AH: Potato Head had a life of its own. It has changed. Potato Head and I argue all the time —

JR: You talk to him?

AH: I talk to Potato Head constantly.

JR: When did it start?

AH: After I took over as chairman and CEO, Potato Head thought that it was his job, you know —

JR: Sure.

AH: Please don’t forget—he’s been in politics, he’s been in movies, he’s been on TV. The president has used him, the League of Women Voters has used him. The smoking people. Everybody has used Potato Head.

JR: You have cleverly marketed that brand.

AH: No, Potato Head has cleverly marketed himself.

JR: Your next big hit was GI Joe?

AH: I would say that, really, in 1964 what really put Hasbro on the map was the coming of age of GI Joe. And GI Joe was an interesting story unto itself because it came from an intermediary, someone that represented other people, named Stan Weston….

My father said—and I must tell you that this is where all wisdom of my coming into the toy business almost got thrown out of the window. Dad once came to me and said, “Well, what do you think?” And I said, “Dad, you know, boys aren’t going to play with dolls. We like to play football, we like to play soccer, we like to be outdoors.” And he said, “Well OK, well you are wrong on this one.”

JR: And then you recoined it and called him an “action figure” instead of a doll? It is clever marketing.

AH: … It was classified as an action figure, which helped greatly so it didn’t have to be called a doll.

JR: When you come out with a new product, how do you gauge the risk of how much you are going to gamble with?

AH: I think that there are two things in the toy business. Yes, there is a cost and you know, what most people don’t realize is that it can take on a new figure or something like that 12 months to 18 months with tooling and design drawings and all of the safety considerations….

There is a sensation when you first see a new concept. And if you really feel good about it ... I think you also have to do some testing as far as play patterns. And that sometimes you have to compare them to other things that are on the marketplace that are on similar pricing points....

Kids are like schools of fish; they spook very easily. They move from place to place to feed and you’ve got to try and put the bait where they are going to be….

You know, people ask me, where do toy ideas come from? A lot comes internally from our own blue-sky groups and the different teams because we want to do things on a global basis today. But also, you know, we have wonderful relations, thank God, with the outside inventing community….

I also tell my people that you cannot only look here. You must look under every stone in every country in the world for the next fad, the next great idea.

I mean, look at what has swept the American boys’ toy market, if you would. Let’s go to Japanese anime. Let’s go to Pokemon. Let’s go to Yugioh. You know, let’s go to Duel Masters….

There are toys that have started in Australia. There are toys that will start in Israel. There could be something in India. The thing is, you have to read, you have to listen, you have to know what is going on.… One of the things that I do credit Hasbro with is, all of my people can cross the world better than anybody in the toy industry and be accepted. They are global in their thinking today…. I lived in Hong Kong, I lived in different places….

JR: On the Hassenfeld family side, your father, Merrill—you lost him in the late ’70s. Was he a good mentor to you?

AH: ...It was 1978 when Dad died, so I was 30. And I had spent the better part of 1970 through the time that Dad died living in Hong Kong. So I wasn’t home that much....

My dad was one of the most beautiful human beings in the world. He was the most caring, loved, honest, bright, sensitive, good father you could have....

My grandfather was a great man with his two brothers in founding the company and having a dream. My father and his brother did a good job of perpetrating that and growing it somewhat. But when Dad died we were a company that was doing about $70 million to $80 million. We had lost about $7 million or $8 million that year. We were mortgaged, you know. We were paying 21% interest rates and we didn’t know, you know, if we could rub two nickels together.

But the relationships my father had created with everybody—everybody loved my father. He was a good man. He was honest, he was hardworking. He had that joie de vivre, he didn’t know how to say no to anybody. But he was beloved.

Dad had a couple of rules. Number one: Sink or swim. And number two: If you make a mistake, that is OK [but] don’t make that same mistake twice. And he wasn’t a tough man, he was a Confucian thinker in the sense that he really taught us and he wasn’t a shouter. He was a child. He belonged in this business.

JR: At a certain age did he expect you to come into the business?

AH: No, my brother always wanted to go into the business…. And me, I didn’t know. I grew up in a time which was a little bit scary—the time of the Vietnam War. A time when big business wasn’t respected very much. A time when you heard about brother against brother, father against son in businesses.

When I came into the business after I had been to the Orient, I fell in love with it. And I was off on my own. It was something that we were learning so it was something that I could, if I was good, would be able to put my stake in the sand....

You know, I really spent a lot of time under my brother because he was becoming, as I came in, really much more of the day-to-day running—the marketing and the sales and the this and that. And I remember when I was in the Far East; in those days, communications was a lot different. At five o’clock at night you pick up the phone to the IDD operator in Hong Kong and you’d book a call for 11 o’clock at night. You know, you had to have a time slot.

And I remember it was a long holiday weekend and I had to make a decision and it only would have saved the company like five cents on maybe 100,000 pieces, but five thousand dollars was a lot to us. And I made the decision because I couldn’t reach anybody and it was a tough weekend….

But I kept on getting more and more responsibility and I kept on becoming more and more crotchety and independent….

We have many different, you know, episodes with different parts of the family in the business. And at the end of the day I think the family today is closer than it was 35, 40 years ago. Because, look, there were a couple of cousins in the business and they ended up—one group went and set up their own business. Another group went into the investment banking business. Because in one sense they were passed over. They weren’t really, but when we were beginning a project on GI Joe globally and I had someone that had been working for me who was a right hand for many years, for about seven or eight years. And then there was my cousin, who is wonderful, but he had only been working with me one year or two. I gave it to the person who had been working with me eight or nine years. So that cousin felt that I hadn’t done the right family thing.

And you weigh these things, because there are ramifications. But at the end of the day, once you become a public company—and we became a public company in 1968, which was about the time that I first dabbled in the business—everything changes. Because it is not the family and the business you are worried about. It now becomes a different world. It is the stakeholders that you worry about….

JR: Going back to when your father passed away, your brother took over, Stephen. But in 1989, tragically, you lost Stephen, as well.

AH: Yes.

JR: So you were 41 years old at this point... Where were you, and how did you handle the death of your brother?

AH: Not easily. It was a very confusing time. First of all, I married in April and my brother was best man at the wedding. And two months later my brother died. It was almost as if my brother had wanted to make sure that I found the proper partner. And originally, if you go back to the late ’80s, this was the time that the EU was coming on board. And I was going to move to London … and run our European operations and take us into the European Common Market, the European Union.

JR: That was the plan before he passed away?

AH: That was the plan. Then when Steve took tragically sick, and remember, this is also the time of Tiananmen, which was a huge issue for us because of all that we were buying at that point from Hong Kong and China. I had always avoided a couple of things. I loved the product side of the business. I also loved manufacturing and the international side of the business. And I wasn’t, ah, let’s say the greatest salesperson in the world, you know….

Steve’s death was a surprise. I mean, he was sick for about two months before he died. But it really was a surprise for me. My world was being blown up. My move to Europe to run certain things—now all of a sudden I was going to have to deal with Wall Street. I was going to have to deal with, you know, the board…. Now all of a sudden I was going to have to deal with the banks, and I was not skilled. I could read a balance sheet, but I didn’t know the ins and outs of how to do ... a lot of the sophisticated things that my brother was so good at. I wasn’t used to speaking before Wall Street. I wasn’t used to everyone bringing me an apple, depending upon who wanted to go to the next level. And you learned very quickly.

JR: At this point, were you getting any resistance from people at the company?

AH: Look, I don’t think there was any resistance in the company about Alan Hassenfeld becoming the CEO. There was resistance about which way Alan Hassenfeld would go, because there were two diametrically opposed forces at Hasbro at the time. There was my brother’s group, which I was a part of in a way, but his was much more the marketing and the sales. And I was much more into the making of the product, the sourcing of the product and the creating of the new world. Where the others were more American, more in the R&D and more in the marketing, more in the sales. Because Stevie loved those areas. And I had to make some choices, and it was not pretty.

JR: Sleepless nights?

AH: Very definitely a lot of sleepless nights and a lot of talking. And I had to make some hard decisions which, to this day, I guess because of where we are, were the right decisions. Even though some of the people that I ended up saying good-bye to … even though some people would have said they were bad people then, from having tried to cut my legs from underneath me, they probably thought they could do it better in a different way.

JR: Then where did you take the business?

AH: When Dad died we were about $70 million to $80 million. When Stevie died we were doing $1.2 billion. And then when Al [Verrecchia] took over from me [in 2003] we were doing about $3.5 billion.

And we have just been very fortunate. We have been lucky with people. We’ve really had a lot of very, very good people. So I would say that my passions that I brought to the business—Stevie was the ultimate marketer and architect of the modern-day toy company. I was much more, I think, trying to make Hasbro realize how important the Far East was for us as a good partner. Number two, to look anywhere and everywhere for product. And number three, to try and learn from the best practices of what Mattel did best and what some of the other companies that were bigger, how they were doing things better than we were doing.

JR: So now Al takes over as CEO. This was a planned transition?

AH: In, I think it was 1998, I had a heart warning, a heart attack. And I realized that one of the things that we anguished over at board meetings was succession planning. But the one person that we didn’t talk much about was me, being the chairman and the CEO. We talked about all of the people underneath me; who was promotable…. And I remember—ah, I want to say 2000 or 2001—sitting with three of our board members and basically saying, I am the blockage. There is not a fourth generation that will take over in this business so we are not holding this business for anyone. Because I did have a nephew in the business, but when the business is a $70 million or $1.2 billion, and now it is $3.5 billion and you’ve got a market cap which is fairly high, it is no longer [a matter of] protecting for the next generation.

And my nephew, Michael, who is sensational, really didn’t want to be in Rhode Island. And that was home base. He was running our Latin American operation. He had run our Asian operation. But there wasn’t that, je ne sais quoi that I felt that he really wanted some day. And my niece, who had the capability, had gone into work with Hollywood and then in New York. And then she got married and all of that.

And so I went to the board and basically said, let’s work the succession plan by moving me to chairman. In the beginning I wanted to be chairman and chief creative officer and move Al to CEO. Because Al was a known quantity. Al is as honest as the day is long, is bright, has so much invested in Hasbro…. And the board liked the idea and over the next year, year and one half, we worked on it. And in 2003 at the annual meeting Al became the CEO and I became the chairman of the board.

Little did I know … the difference between the role of chairman and the role of CEO.... The chairman [must] stay away and let the CEO operate the business.

JR: Now that had to be difficult for you.

AH: It was totally difficult for me. And I made every mistake in the book.

JR: For example?

AH: If I couldn’t get certain sales numbers because someone was away, I would go two and three levels down because I knew everybody. I would be asking questions, you know, the chain of command didn’t exist for me. And finally, Al said to me, “Hey, guy, you are not letting me be the CEO.”

JR: So as an individual, what have you done to compensate for that?

AH: For me, at the end of the day there were a number of things. The Hassenfeld family and Hasbro, specifically, owe an incredible debt of gratitude to the toy industry to children and to families all over the world for our success. For years I’ve traveled the world. I don’t believe in burning bridges, I talk with anyone. I have built up a wonderful relationship. And so as the industry was having trouble with abuse in Chinese factories, human rights issues and then safety issues. These are things that if they are good for the industry they are good for Hasbro. And so I have taken on being a statesman for the industry.

I’ve become senior adviser for the China Toy Association, which is 1,600 members. To work with them on how to perceive America and what is important to us. And by trying to make us perceive and understand and support them…. And so I am in a position where I can do a lot for the industry.

I also have been doing a lot on the philanthropic boards that I am on for kids around the world. And our family initiative, which I run, also deals with women, empowering women in developing worlds because we believe that if you can educate women who are the center of the family then maybe we can break the cycle of violence.

JR: Do you get a little melancholy that you are the last of the Hassenfeld family?

AH: No, I don’t…. When I stepped down as chairman and CEO, you know, as that decision was coming down and I was explaining it to the family, no one thought that I was doing the right thing. And then a little bit later as I was moving from chairman to the new role—but I had my own vision of what I thought was right. And again, I was fortunate in the sense that, like everybody, I have an ego—I want to do the best that I can and do all of those things —but I don’t have an ego of me. I understand that Hasbro is a company that has been successful because of we, it is a royal we….

There were days that I was very down. But at the end of the day I knew what I was trying to do was to protect the future of a company called Hasbro. I wanted to be there, to be able to mentor the next generation. I wanted to be there to be a gatekeeper on values…

If I had the same thing to do all over again I might have done it slightly differently, but I could not have asked for, as we sit here … a better outcome. Because in a relay race, you know, to be the best, to pass the baton twice now and watch it get better and better—Al made it better than when I was there. Brian will make it better than Al, and don’t ask me after Brian!

John Resnick is the creator and host of the radio program “Legends of Success,” which is syndicated on more than 100 affiliates and 58 digital cable television systems (audio channels) nationwide (www.legendsofsuccess.com). He is also a business succession and estate planner with Resnick Associates, a second-generation firm with offices in Harrisburg, Pa., and Overland Park, Kan.

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Issue: 
Summer 2009

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