A fresh start

By Barbara Spector

When three third-generation sisters succeeded their late father as owners of Kwik Lok Corporation, they knew little about the business. Since then, with mentoring from the board, they have encouraged management to make numerous positive changes.

If you’ve ever bought bread from a grocery store, you’ve probably noticed the plastic clip that closes the packaging. You may not realize that a family business — Kwik Lok Corporation, founded in 1954 and based in Yakima, Wash. — originated the closure. According to family legend, founder Floyd Paxton, an engineer, invented the clip during an airplane flight by carving it out of a credit card. He started out selling the clips as a secure way to close bags of apples.

In 1968, Floyd retired and was succeeded by his son Jerre. When Jerre died at age 76 in 2015, ownership of the business passed to his three daughters, Stephanie Paxton Jackson, Kimberly Paxton-Hagner and Melissa Steiner.
Jerre had not prepared his daughters for their responsibilities as owners of a company that today employs more than 330 people, operates six global factories and sells its products in more than 80 countries.

Stephanie, 52, the eldest, joined Kwik Lok’s board about a decade before Jerre passed away. “But I really was there just for, I’d say, checking the boxes of having a family member on [the board], and I did a lot of listening,” she says.
“I didn’t even know what some of our machines were called or exactly how they worked.”

Much has changed since then. Today, all three sisters serve on Kwik Lok’s board, which has evolved from a group of advisers with little say to a fiduciary board. Three independent directors serve along with the three owners and non-family chairman John Rothenbueler.

Under the mentorship of the independent board members, the third-generation women are developing as owners and directors. With the sisters’ support and encouragement, Kwik Lok has launched sustainable and tamper-evident product lines to meet the demand of today’s marketplace and has positioned itself as a values-first business. It released its first Corporate Sustainability Report in September 2018; the report is posted on the company’s website.

“It’s great working with them,” says non-family president and CEO Don Carrell. “They’ve got a long-term vision, which I share with them. Being synchronized in long-term planning is key.”

Carrell joined Kwik Lok as chief operating officer in 2017 and was appointed CEO in April 2019.

Professionalizing the business
Floyd Paxton originally owned a company that made nailing and labeling machines sold to distributors of Washington apples, then packed in wooden boxes. After World War II, apple packaging shifted from boxes to bags. The Kwik Lok clip was a sturdier alternative to the wire and tape that had been used to close apple bags.

Jerre, Floyd’s son and successor, ran the business as an autocrat. “He didn’t share much information with anybody, including the board,” Rothenbueler says.

Rothenbueler had been a partner at the accounting firm of Alegria & Co. in Yakima. Kwik Lok was one of his largest clients.

“While [Jerre] allowed us to help him design a very effective estate plan, he did not want to hear anything about management succession,” Rothenbueler recalls.

Around the time of Jerre’s death, one executive left the company for health reasons and another announced plans to retire. Rothenbueler, the executor of the estate, became chairman and CEO of Kwik Lok.

In 2015, Rothenbueler added Stephen Westby, a retired Boeing manufacturing executive, to the board. Paul Barbeau, an international business attorney from Vancouver, B.C., was named board secretary in March 2015.

Another independent director, retired insurance executive Alan Cottle, joined in 2017. Kimberly was appointed to the board in 2017 and Melissa came on in 2018.

Stephanie remembers her father telling her, “When I die, sell the business.” He had created a file of prospective buyers.

“That was about as much as our father planned for that occasion. My sisters and I hadn’t collectively talked about what all of our feelings were” about keeping or selling the business, she says.

Kimberly, 50, who was a graphic designer in Kwik Lok’s custom label department from 2012 to 2015, is the only sibling who ever worked in the company. Stephanie is a health and wellness coach who previously owned a women’s clothing store. Melissa, 47, was working part-time as an apparel and fashion merchandiser and buyer before she joined the board.

Kwik Lok informed its employees, customers and suppliers that business would operate as usual. But the way business was done needed to change.

When Jerre was at the helm, “there wasn’t even a business plan,” Rothenbueler says. “The first thing we did is start to develop annual business plans, and then use that to manage the business by.” He engaged a consulting firm to develop a strategic plan for the future.

“I give credit to the daughters — they were really pushing to have a strategic plan,” the chairman says.

“Probably about a year in, as we were cleaning up things and making sure that the business was able to do everything it needed to do and starting to evaluate what changes may be needed to make it even stronger, we started to have conversations with John Rothenbueler about what [Kwik Lok] could look like,” Kimberly says. “Where we could have a part in it. How we could manage to keep it and continue on as the third generation. Because that really was where our heart was at.”

The sisters often use the word “heart” when speaking of Kwik Lok.

Rothenbueler advised the women to keep an open mind about all possibilities as the board and management worked to strengthen the business.

“That gave us enough time to have conversations and think about what this meant to our future,” Stephanie says. “[We] came to the conclusion that this is such a unique and special opportunity. We had a lot of loyalty, a lot of employees that loved doing what they do. And that meant something to us.

“It really caught our hearts at another level, because now we were invited in, and we actually could think about it being an option.”

Kimberly and Melissa studied board materials and learned more about the business before they started attending board meetings. The gradual transition enabled them to clear their schedules in order to devote more time to Kwik Lok.

Melissa says she had “no interaction with the company” before Jerre passed.

“I actually had pretty much no idea about the business, as our father kind of put us on the sidelines. And so for me it was extremely overwhelming — but in a good way,” she says. Board meetings were scheduled every other month, which helped expand her comprehension.

The independent directors have been “great at helping us fill in our knowledge gaps” during board meetings, Kimberly says. “Stephanie is the best at saying, ‘Can we bring this down to terms that we can understand to make sure I get the whole concept?’ ”

“They had a lot to learn, but they’re three bright ladies, and very caring,” Rothenbueler says. “They’re striving to grow and learn as much as they can and surround themselves with competent board members and outside advisers.”

Stepping up
In late fall 2017, Rothenbueler took the three sisters to a family business awards dinner presented by Seattle Business magazine, where they interacted with other multigenerational family business owners.

“That was a wonderful night,” Stephanie recalls. “One of the things I remember that really stuck out to me that night, listening to all the different family stories, was the humility that most of these family members had, and just how blessed they felt to be part of the family business — [even] with its challenges.

“And that definitely ignited a spark in me of just how special this opportunity is. And I would say if that was John’s plan for me, it worked.”

“It was probably about that time period, too, where layers of understanding were happening for us,” Kimberly says.
They were beginning to understand they could be owners without being owner-operators — “we could be board members and be involved at that level, and still do right by Kwik Lok, and be able to oversee what’s done, make sure that our family values are expressed and our employees are taken care of,” Kimberly says. “That was something that really didn’t come to my awareness until after my father passed away.”

They also learned they could play an important role in promoting Kwik Lok as a family business. “We just didn’t realize that we would necessarily have a place alongside the CEO and the leadership team to help make connections,” Kimberly says. “That was a bit of a surprise to me, and a fun one, to be able to be useful to the company in that way.”

To further edify themselves, the sisters attend industry trade shows as well as Kwik Lok’s annual corporate retreat, which brings together top management from Kwik Lok’s facilities around the world.

“We’re just getting more and more educated and comfortable,” Stephanie says. “Of course, there’s still a learning curve, which makes it so interesting and fascinating.”

“Maybe by default, because Stephanie’s the oldest, she seems to be the most outspoken,” Rothenbueler says. “She unabashedly tackles any issues she thinks needs to be talked about.

“Kimberly’s a little more reserved and thoughtful. She thinks about things — you can see that she’s processing — and asks very thoughtful questions.

“Melissa is a little more reserved and quiet, but she’s starting to learn. When she does speak, it’s thoughtful and meaningful.”

Most important, Rothenbueler adds, is that “all three get along exceptionally well, and they’re very supportive of one another. You know, the worst thing that can happen is a situation where the owners don’t get along, and I don’t see that. I can’t imagine them getting along any better. And if there’s some issue that’s as much family as it is business, they talk among themselves, and they come to a consensus.”

At the 2018 corporate retreat, the sisters announced that they intended to continue Kwik Lok as a family business and pass it to the fourth generation.

“That, to me, was a real crowning moment,” Rothenbueler says. “And I think the employees and the management are very excited.”

New mission and values
In 2018, Kwik Lok launched an initiative called “Fresh Start,” a name that refers to the new ownership as well as “our promise to continually improve, innovate and support our community,” as the company’s website notes.

The core of the initiative is the company’s pledge to hold itself accountable by issuing a Corporate Sustainability Report. Four sustainability strategies were announced: opportunity, well-being, protection and innovation. (See below for details.)

Kwik Lok’s board created a corporate social responsibility subcommittee, which provides oversight for the sustainability initiative. The human resources director, Shelby Willette, also holds the title of global diversity coordinator.

“We have, right from the get-go, shown where we’re leading from,” Stephanie says. “It’s hugely about lifting up our employees, first and foremost, because they are our family. When you make them feel valuable, heard and seen, they are going to go to bat for you. And we believe that wholeheartedly. We’re about being inclusive.”

Were he around today, Floyd Paxton might be surprised at his company’s emphasis on corporate social responsibility. In the 1960s, Floyd was national president of the John Birch Society, an anti-communist organization that opposed the civil rights movement and economic interventionism. Floyd ran for Congress four times, losing each time.

Jerre and his first wife, Nancy — mother of the G3 owners — divorced when their daughters were 8, 6 and 3.

The sisters lived with their mother after the divorce. Stephanie says it wasn’t until she was around high school age that she learned her grandfather had run for office and heard a reference to the John Birch Society. “It never has been, for Kim and Melissa and I, anything that we have been aligned with,” she says.

“My dad was just a small part of our lives as we were under my mom’s roof,” Stephanie says. “Then, as I got older and got to choose my own relationship with him, I would listen to his views and just go, ‘That’s interesting,’ and then pick my own views.”

She says she and her sisters “have a joint value and standard of doing the right thing by the people in our lives, with Kwik Lok, our customers, our employees, their families, the communities that we’re in. And so that’s where we are, taking this next journey with our company as the third-generation owners. That’s our approach.”

Stephanie says her grandfather and father, with “their engineering minds,” had great success building the company. “Kim, Melissa and I bring another side to being in business. And we have seen that our employees and our leadership and our customers have been waiting for it. It brings some new energy — like we say, a fresh start to our company — and it’s been really wonderfully received. “

Innovative initiatives
In May 2019, Kwik Lok introduced the Eco-Lok, a closure made of renewably sourced, plant-based polymer that will naturally degrade. (Both the Eco-Lok and the plastic Kwik Lok closures are recyclable.)

Before he joined Kwik Lok, Carrell had become familiar with BioLogiQ Inc. of Idaho Falls, Idaho, which makes NuPlastiQ, a renewably sourced, plant-based polymer. When he arrived at the company, he led a collaboration between the two companies to develop the Eco-Lok.

“It took quite a bit of R&D investment to get where we’re at today,” Carrell says. “But we’re doing it for the right reasons, and the leadership team and the owners really saw an opportunity here to differentiate ourselves in the market.”
Kwik Lok had developed an Eco-Lok prototype before consumers started demanding alternatives to plastic, Rothenbueler notes. “The sustainability push has all of a sudden really become in the forefront of consumers’ minds. And we have a solution.”

The company’s Kwik Link technology binds together bunches of produce (such as carrots or asparagus) and then adds a closure and label. The process results in less packaging and a smaller carbon footprint.

Carrell says there was “synchronization of thought” between management and ownership on moving away from plastic. “It lined up well with what [the owners’] true values are, and so it was easy to chart a path going forward.

“What was more difficult was, we were ahead of the curve, so we were taking a little bit of a gamble when we started this process, because there was no guarantee that that’s what the market wanted.”

Another innovation is the development of a machine that produces tamper-evident laser stitching on a bag. The bag doesn’t tear when opened by the end user and can be reclosed with a Kwik Lok closure.

“Our solution was quite different than anybody else’s solution for creating a tamper-evident machine for the bakery industry,” Carrell says. “It’s really exciting to see it taking off, and the acceptance that it’s getting globally.”

The owners understand the need for continual innovation, Carrell says. “And when you’ve got a willing ownership that sees that [R&D] investment as a way to be competitive, it really makes it fun.”

“Innovation has always been one of the key components to our success,” Kimberly says. “And so for innovation to really have an opportunity to grow, we know that we have to create a culture where innovative minds can feel safe to express ideas, and that we [might] make mistakes along the way to that wonderful new idea.

“So we just are excited to always be driving the industry in a way that is valuable, as well as getting all our employees involved in creating new products.”

Looking toward the future
There are two members of the fourth generation, both of whom are nearing their 20s. Their moms, Stephanie and Kimberly, made sure they visited Kwik Lok before they started college. Although they had been to the company headquarters as children, their moms wanted to make sure they had a chance to see the facility as young adults.
“They sat down with our CEO, and could ask him any questions,” Stephanie says. “And we could see a little spark of interest. So the seed’s been planted.”

The sisters are considering inviting the G4s to serve as board observers after they graduate from college. “We’ve said, ‘This could be your future, and it can look a variety of ways,’ ” Stephanie says.

Carrell says the development of a strong board with a committee structure was essential to ensuring the continuity of the business. “I would credit the owners with having the vision to see the importance of a fiduciary board over an advisory board,” he says.

“We wanted to always be aboveboard and run with high governance,” Stephanie says. “Because I think that provides transparency, and very clear values and missions. So you can really get the most out of everybody, because it’s clear how we want to run.”

In late fall 2018, the three Kwik Lok owners, along with the rest of the board, returned to the family business awards dinner presented by Seattle Business magazine. This time, they weren’t there just to listen and learn. Kwik Lok was honored at the event as the recipient of the Business Transformation award.

Kwik Lok’s four sustainability strategies

Kwik Lok’s first Corporate Sustainability Report states, “We recognize that with a global footprint comes extraordinary responsibility and an incredible opportunity to drive change. We fully understand that as a plastics company, we must transform our business to minimize our impact while continuing to be cost competitive. We must and will lend our voice to finding solutions for the plastic waste so prevalent in our environment.

“We believe the most effective way to achieve sustainability is through responsible and accountable stewardship. We have instituted a sustainability planning, governance and reporting system so we can hold ourselves to the highest standards. We are also working to unlock opportunities for our workers, families and communities while protecting their health, safety and well-being.”

The report lays out four corporate sustainability strategies, developed in alignment with the United Nations Sustainability Goals:

1. Unlocking opportunities through education and economic success. Initiatives include providing on-the-job training and employee learning; the company’s longtime collaboration with Perry Technical Institute in Yakima, including scholarships; paying well above minimum wage; offering light-duty assignments to workers injured on the job to reduce the number of days they miss work; and providing family leave.

2. Improving the health, safety and well-being of all people. Initiatives include a commitment to providing affordable and comprehensive health insurance; a worker health and safety committee consisting of 43% management and 57% staff; a wellness program; a sexual harassment training program, implemented in 2017; affirmative action policies and programs; installation of improved lighting, a gym and a larger lunchroom during a 2015 headquarters renovation; and clearly defined ethics and cultural norms.

3. Protecting people, places and the planet. Initiatives include a food safety management system; a three-year-long voluntary groundwater testing and soil sampling effort to clean up contamination uncovered at Kwik Lok’s facility and ensure compliance with state and federal laws; plans to reduce water use and reduce or eliminate waste; and continued innovation to lessen the impact of Kwik Lok products on the environment.

4. Fostering innovation in food safety, access and manufacturing. Initiatives include environmentally sound product management and promoting reuse and recycling of Kwik Lok products.

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

                                                    

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March/April 2020

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