Living Dangerously

By Berkeley Rice

CEO Frank Robinson coolly takes the controls as test pilot for his company's new helicopters. But he hasn't faced the equally daunting task of spelling out a succession plan. Why don't even the most successful entrepreneurs confront their own mortality?

IT IS A WARM DAY in the Southern California city of Torrance, the air is still, and Frank Robinson is about to risk it all for a dream. The 61-year-old engineer and chief executive of Robinson Helicopter Co. stands on the tarmac at the Torrance Municipal Airport and makes a final inspection of his latest creation, the R44 helicopter, a sleek four-seater, propelled by a powerful 260 horsepower engine.

The R44 has been five years in the making and the research and development costs have run into the millions. After months of test firings and limited test flights, the prototype finally is ready to cruise up the coastline. With so much on the line, the CEO mans the controls himself. If the craft handles like it's supposed to, Robinson can win a sweet share of the lucrative commercial and law enforcement markets. If it performs poorly, the delays might be long and costly.

As Frank climbs into the cockpit, his 35-year-old second wife, Barbara, watches intently from a few feet away, pacing in front of the small hangar where the R44 was housed. Leaning against the front of the building is Kurt, Frank's 33-year-old son from his first marriage .

Babara knows her husband has spent his life designing and testing helicopters. She and Kurt are principals in his company, so she also knows firsthand that the R44's key components have repeatedly been tested. But such notions take a back seat as Frank pulls away from the hanger.

"Experimental flying is the part of the job I enjoy the most," he'd told her several times during the preceding weeks.

The whirring of the blades intensifies. The R44 glides upward. Barbara shades her eyes from the sun and cranes her neck to follow the flight. "It's a crazy thing to do," she says, "but Frank is not a foolish man."

If Frank Robinson wants to play top gun, more power to him. Sure, he has a wife and son who are his business partners and two young children at home, but he knows what he's doing. He's not a bungee-jumping: thrill seeker; he's an entrepreneur who believes enough in his work to put his life on the line. Besides, who's in a better position to judge the K44's maneuverability than the man who dreamed it up?

Unfortunately, there's no safety net for Frank's company, because the founder hasn't addressed the most fundamental issue facing a family business: a plan for succession. Barbara and Kurt know, in a general sense, that they will run Robinson Helicopter if Frank is severely injured or dies, a real possibility for a test pilot. But how that will work, in reality, is still up in the air, and may stay that way unless the family sits down and agrees on specifics.

DESIGNING, building, and test-flying state-of-the-art helicopters may seem extraordinary. Indeed, Frank Robinson is not your average businessman. He's a strong-willed individual who started his own company and now sells $50 million worth of aircraft a year,

Yet like a lot of family business owners in far less exotic fields, Frank has put off one hard choice. Does he want his business to go to his wife or to his son? If they share it, how will it be divided? The issue, of course, is always thorny because at its center is the often real conflict between doing what's best for the company — choosing the most talented person to run it — and doing what's best for the family. But when succession involves a wife and son who aren't related, it multiplies the complications.

That being the case, maybe it's not as ironic as it seems that someone who is willing to confront danger finds it difficult to risk offending a loved one.

Much rides on the success of Robinson Helicopter's new R44. It could be a breakthrough product, the kind that opens up new markets for sales and provides for the future of the company.

Fortunately, the first machine off Frank's assembly line was a blockbuster. Thanks to his R22, a compact two-seater introduced in 1979, Robinson owns the market for small helicopters. Strategically priced at about $100,000, not much more than some luxury cars and a lot less than many yachts, the R22 was the country's first inexpensive personal helicopter and became a hot item in the eighties.

After years of financial struggle, the company's sales boomed: $23 million in 1988, $36 million in 1989, $50 million in 1990. Last year Robinson sold nearly 400 R22s, more lowcost helicopters than any other manufacturer, including Bell, McDonnell-Douglas, and Sikorsky.

The sales strategy for the R44 mirrors the one for its predecessor. At a projected price of about $300,000, the piston-powered R44 will cost roughly half that of Bell's popular Jet Ranger. Its pricetag might make it irresistible to the commercial and law-enforcement markets for which the R22 was too small.

The notion of outgunning established aircraft companies is especially appealing, though running a $50 million family business was not one of Frank's boyhood dreams. He grew up in Washington State, where his father worked as a coal miner, a saw mill operator, and a fishing resort owner. Inheriting his father's independent spirit, Frank went to sea at age 16 and paid for his college education by working as a merchant seaman.

He graduated from the University of Washington in 1957 with a degree in mechanical engineering and a fascination with helicopters. Frank spent the next 16 years as a research and design engineer for several major helicopter manufacturers, including Cessna, McCulloch, Kaman, Bell, and Hughes. His job was to help them win big-ticket orders from the Pentagon and large corporations. But his dream was to build a small, inexpensive personal chopper that would require no more maintenance than the family car.

He repeatedly tried to persuade his employers to back his project — either in-house or as an outside venture — but none showed interest. So he sketched his vision on notepads at home.

When his first marriage ended in the early sixties, he took his four young children to Los Angeles, where he worked for Hughes Aircraft and continued to search for backers. But no one wanted to take a chance on a solitary engineer in an industry dominated by major manufacturers.

In 1973, after four frustrating years with Hughes, Frank decided to take the plunge. "I was 43 years old," he says,"and I felt if I didn't start then, I'd never do it. So I gambled my house and savings. I knew the odds were a hundred to one against me, but I just didn't want to spend the rest of my life regretting not having tried."

Securing a $150,000 loan from a partner, Frank quit his job and set up shop in his home in Palos Verdes. He hired a couple of engineers and a secretary and began to work on the R22. It was a typical entrepreneurial venture in almost every respect.

"I'd come home from school, and they'd all be sitting around the living room working at drafting tables," Kurt recalls.'"There were all these parts lying around in the family room, and the garage had been turned into a machine shop."

In 1975 Frank moved the operation out of his garage and into a small rented hangar at Torrance Municipal Airport.later that year he demonstrated the R22 to the public. The trade press liked it, and a few dealers even contacted him. But the most crucial support — hard cash — proved far more elusive. For the following seven years, Robinson Helicopter flirted with bankruptcy. The company was saved by Frank's craftiness: Each time the well was about to go dry, he'd convince a dealer or two to advance him deposits on future orders and used the orders to wheedle modest loans from banks and other investors.

DURING THIS dark period, Frank's family began to work at the company. His daughter Terry worked in accounting for two years before leaving to pursue her own vision, a career in the hotel and restaurant industry. His son Lincoln worked with the sheet metal handlers. Lincoln's tie to the company was brief, Frank explains, because he simply wasn't a good employee. "I told the production manager to treat him the same as the other employees," he says.'"The manager fired him."

The anecdote illustrates Frank's managerial toughness. If you can't cut it in the shop, you're out on the street, and that goes for everyone, including offspring.

The only child who's remained in the business is Kurt. He started as an 18-year-old part-timer. During high school and college, Kurt and a friend named Tim Gilligan pitched in on weekends and during vacations. After graduating from college, Gilligan returned to Robinson Helicopter, where he now works as the company's chief design engineer.

Kurt took a different route. Frank ushered him through every phase of the operation to give him the broadest possible workplace education. Teaming up with his father, however, was not a foregone conclusion.

"I could never pick out a day when I decided to become a permanent part of this company," says Kurt. "Dad had always encouraged me to work with him, but more as a way to make money, not as a career. I majored in economics, and I'd always been interested in small business. One day he said to me, 'Look, if you really want to find out how a small company runs, why not come work with me?' He told me that I'd get much more experience here than I would in a bigger or more established company. So when I graduated in 1980, I joined him. And he was right."

Kurt spent two years lining up suppliers, setting up assembly lines, and creating a production control system. Until then, he recalls, "we didn't even have production control. It was just a bunch of guys running around with parts in their hands."

As the company began to grow in the early eighties, Kurt and Frank both realized that the outfit needed a trained business manager. "When Frank started designing the R22," Kurt says, "he had no idea what running a real company would involve. He had never thought about things like accounting or personnel. He was an engineer, not an administrator. So I saw that as the perfect opportunity for me."

Frank had kept an eye open for an able adminstrator, but no one had impressed him. And as Frank readily admits, he was a hard man to work for in those days. The financial strain was as enormous as his drive to succeed. "You can't be a nice guy in a tough business environment," Frank says."When you have to lay people off, you can't be soft or procrastinate. If a decision becomes obvious in the morning, you have to carry it out by that afternoon. I was very demanding then. Maybe too much so. We lost some good people." Is he still a bear to work for? "It's easier to be a nice guy when you're making money," he replies.

Searching for a business manager he could trust, Frank turned to his son. Unlike some of his former managers, Frank knew that Kurt had the kind of commitment no one from outside the company could have. So with his blessing Kurt went off to business school, knowing a job would be waiting for him. He earned an MBA, and then a law degree, but with one important proviso from Frank: that he continue to work at Robinson Helicopter during summers, vacations, and whenever else possible. Frank had a simple reason for that demand.

"I don't agree with a lot of what they teach at business school," Frank explains. "A lot of teachers have never had to meet real-world problems, and what they teach can be misleading. I wanted Kurt to get the academic education, but to keep getting experience, so he could decide for himself what to accept and not from what they were teaching him. College professors can never bring themselves to discuss how to lay people off, or how to meet a payroll at the last minute. I wanted Kurt to be able to evaluate what he was being taught."

When Kurt returned fulltime, Frank put him in the front office. He didn't give Kurt any financial stake in the company, though, because he wanted to see if Kurt would stay to see the company through what were sure to be more lean years.

While Kurt was working toward his degrees, Frank became romantically involved with his assistant, Barbara Krauss, who was then in her mid-twenties. Bright and ambitious, Barbara apparently fell under the spell of Frank's zeal to make his dream come true. Although she knew nothing about aviation, Barbara recalls that she "could see Frank had the guts to make his idea work."

In 1983, five years after they started working together, Frank and Barbara were married. A few years later, Frank made her head of sales and marketing.

"I never thought of Barbara as a future wife or partner at first," Frank says, "because she was 25 years younger than I was. But it became apparent to us that age didn't matter. And no one could accuse her of marrying for money because back in those days the company was always on the verge of bankruptcy."

Barbara doesn't think employees resented her when she became the boss's wife. "It might have been hard if I had suddenly appeared and took over a major role in the company," she says. "But because we had worked together for years before we were married, that was never a problem."

If the arrangement created no problems with employees, it did create a very real problem in terms of succession and ownership. Frank would have to either choose between his wife and his son or establish some kind of co-management team. The situation also set up the potential for a problem between Kurt and Barbara, both of whom would have valid expectations of being first among equals. The relationship could change from one of being colleagues to one of being competitors for future control of the company.

Office relations between a mother and her biological son present plenty of difficulties. Relations between sons and stepmothers can add an additional layer of emotional complications, especially when they are close in age. Experts on the subject agree that it can be a very slippery landscape of shifting loyalties and mixed allegiances. The only way to defuse the problems that are bound to arise is by discussing them as a family, with the help of counselors if necessary. Frank, a gutsy competitor in business, concedes that he's been reluctant to address the issue. Perhaps that's why he's failed to create a succession plan, which is crucial to the future of Robinson Helicopter. His posture is perfectly understandable since the process could be a delicate one. Yet by avoiding it, he jeopardizes all he's worked for.

"Frank Robinson has a real success story on his hands, but it could be undermined if he can't face the tough issue of who will take over," says W. Gibb Dyer Jr., a family business consultant and associate professor of organizational behavior at Brigham Young University, who was briefed about the Robinsons' situation. "Frank seems to have a good relationship with his wife and son, but the lack of a succession plan suggests he has some anxiety about the outcome."

FOR FRANK, Barbara, and Kurt, the early eighties were filled with distractions. Just as production of the R22 was hitting its stride, the country went into recession and the civilian light-aircraft market crashed. Robinson's sales fell from 250 helicopters in 1981 to just 64 in 1983. As investors pulled out, the company had to limp from one payday to the next.

Along with financial problems, Robinson Helicopter also faced potentially devastating legal difficulties. Some early models of the R22 were involved in accidents, most due to pilot error, but in one case due to a defect in the rotor blade manufactured by a subcontractor. Frank had to spend much of his time haggling with FAA and National Transportation Safety Board investigators and with private lawyers. He fought the lawsuits vigorously and won all but two, which were settled out of court. In response, the company launched a rigorous training course for R22 pilots, which dramatically reduced accidents.

As the economy perked up in the mid-eighties, it became evident that if Robinson Helicopter was to rebound it needed someone to take charge of sales and marketing. That's when Frank named Barbara to the post. "She was bright, aggressive, and wanted the job," Frank says. And having a family member in such a key position made him feel better. As Barbara explains, "Frank doesn't trust people easily. With Kurt and me, he knows that there's a long-term commitment he can count on."

With Frank as her coach, Barbara learned her new job quickly, but establishing her own identity as a top executive wasn't easy. "When I took over sales and marketing, I wasn't always taken seriously. I'm a woman, and the aircraft industry is really a macho world. Outsiders saw me as the boss's wife and didn't realize that I'd been involved with the company for years."

Barbara got her pilot's license so she could speak more knowledgeably with dealers and customers. Even now some still try to bypass her and get to Frank, but they soon learn they must deal with Barbara.

According to Kurt, "Barbara might have gotten the marketing job at least in part because she was the boss's wife. I remember feeling the same thing at first." But he is quick to add, "She was no airhead. She was a natural for the job. She's smart, she works hard, and she gets along well with the dealers."

Barbara fulfilled her sales and marketing role well. In part, she succeeded because she had a good product. The company's little helicopter initially was greeted with skepticism because it seemed to lack adequate power or cargo space for most jobs.The pricetag seemed to be its chief asset. But sales picked up in the mid-eighties, and the helicopter soon created its own market niche with those who appreciated not only its price but its other virtues: reliability, fuel efficiency, maneuverability, and a relatively low noise level. Frank designed all the parts to be as light, strong, and inexpensive as possible. It cruises at 100 miles per hour and has a range of 200 miles (300 with auxiliary fuel tanks). Unlike most helicopters, which are powered by turbines, the R22's 160 horsepower piston engine boasts comparatively low maintenance and operating costs.

The R22 has since become the vehicle of choice among flight instructors, cattle ranchers, pipeline and powerline inspectors, TV news departments, traffic reporters, farmers, rural doctors,tunafleetspotters, and small business owners. Sales and service are now handled by 76 dealers and 90 service centers across the country and abroad.

With more than 1,700 R22s sold, and most of them still flying, sales of spare parts and factory overhauls (which cost about 50,000) have also been growing steadily.

Despite the company's rapid growth, Robinson Helicopter still gets by with only half a dozen executives plus a few department heads. The atmosphere is low-key, a reflection of Frank's own style and his well-developed distaste for corporate bureaucracy. Frank, Barbara, and Kurt occupy adjoining and roughly equal offices. None has a private secretary.

Both Barbara and Kurt seem comfortable by now in their roles in the family business, largely because both know they're pulling their own weight. "If you work harder and longer hours than other people and do a really good job," Barbara says, "it's pretty hard for them to resent you even if you are the boss's wife or son."

For Barbara, life outside the office is more complicated than for Frank or for Kurt, who is still single. Along with her duties, the dark-haired vice-president is also the mother of two small children, both by Frank. She drops them off with a sitter or at school each morning and picks them up on her way home. She spends most of the summer with them at the family's island home in Puget Sound.

Barbara's absence does put a strain on other managers who must cover her work, Frank concedes, but he feels she's eamed the option to be away at times. "A lot more is demanded of family members here," Frank says, "but they do have some prerogatives."

Prosperity has enabled Frank to relax a bit, but the couple's lifestyle is not overly extravagant. There is a Mercedes, and they commute to their island home on weekends thanks to their access to a nifty helicopter. But most of the company's profits have been reinvested in plant expansions and, more recently, in development of the R44.

With the R44, as with everything else at Robinson Helicopter, Frank is still very much in charge. He oversees most design changes and approves major decisions in every department. With the company's day-to-day management now in capable hands, he spends much of his time prowling the production line, teaching part of the pilot training course, and checking the progress of the R44.

And then there's the test flying. "It's crazy," Barbara concedes. "After all, he's the CEO and the brains behind this company, and besides, he's got a wife and two small children. On the other hand, as the most knowledgeable and most experienced pilot here, and as the engineer who designed the thing, he's uniquely qualified to do the test flying. Frank is not doing it for the danger. He loves to fly. It gives him a real kick to get up in the air."

Just the same, there is still no plan, written or spoken, that spells out what would happen should Frank perish during one of his test flights. The couple controls all of the stock in Robinson Helicopter, which would go to Barbara if Frank died. As things stand now, Kurt would have no financial stake in the company.

When asked to consider what would happen to the company if Frank had an accident, Barbara replies, "I don't think there would be a power struggle between me and Kurt because there's no one person here who could take Frank's place. There's no formal succession plan, although I know there ought to be. It would be a team made up of all the members of the executive committee [Barbara, Kurt, the heads of production and purchasing, and Tim Goetz, the company's legal counsel. And while Frank is definitely the top engineer here, he's trained a team of bright young engineers who have been working under him for many years."

Both Barbara and Kurt say they are relatively at ease about the lack of both an ownership and management succession plan. Nonetheless, experts still advise that companies spell out their plans formally, to prevent miscommunication and misunderstandings from brewing.

"When someone in a family business puts the best iiton everything, it often means they are not being realistic," says Dyer, the family business consultant and professor.

Dyer says that the history of stepfamilies suggests that when the father dies, it is not uncommon for friction between stepmother and stepson to arise. There may be underlying tension that doesn't surface because the founder is still around.

Even if Frank wants Kurt to take over, or wants to set up some kind of co-management, there is nothing in writing to assure that his wishes will be carried out. If Barbara wanted to fire Kurt or simply keep him in the wings, Kurt would have no recourse. And Barbara now has two children of her own, and would probably want to give them some stake in the company.

FRANK STILL GETS AN almost childlike pleasure from flying his own invention. "It's the only time you can really fly like a bird, with the freedom to hover or land wherever you want," he says."You just can't get that feeling with a plane."

When asked why he insists on personally testing the R44, he replies, "I'm still trying to get all the design characteristics just right, and the only way to be sure is to test the thing myself. How can you ask anyone else to fly an aircraft unless you're willing to fly it yourself? Besides, test flying is a lot of fun — the most enjoyable part of my job. I've been flying the R22 since 1975, and I've done everything I can do with it. Now I've got a new toy to play with."

And how does Frank answer questions about succession? Still only with good intentions. "I realize I have to do more," he admits. "I have to set up a management structure that will provide for team management. It would include Kurt and Barbara plus three or four other people whom I'd expect to be just as influential. They would have to reach consensus on major decisions. I'm also working on giving Kurt a lifetime stake in the company, since it's now clear to me that he's dedicated his career to it."

In January, Frank completed a test flight of a second R44 prototype. There will be more trials this year. For some of them, Frank will again be at the controls.

Berkeley Rice wrote about the families who cultivate the cranberry bogs of Cape Cod in our December issue. Robinson Helicopter Company

Business: Personal helicopters.

Sales (1990): $50 million.

Founded: 1973, by Frank Robinson.

Top management: Frank, CEO; wife Barbara, director of sales and marketing; son Kurt, director of operations.

Ownership: All held by Frank and Barbara.

Employees: 480.

Challenge: Establishing a joint management succession plan should Frank not be able to lead the company. What could Frank Do?

Barbara Hollander, president of her own family business consulting firm in Pittsburgh and cofounder of the Family Firm Institute, says that Frank Robinson's failure to come up with a succession plan creates urgent probiems.

"Frank needs to put in place both a management and financial plan, yesterday," she says. "lf he is grooming Kurt as his successor, he should settle the management question first, then the financial division can be made in a sensible way. For example, he could give Kurt 51 percent, so he'd have control, and give Barbara 49 percent, which for a $50 million company is not chopped liver. And he should make sure he's got a financial plan that takes care of any property, and the kids he's had with Barbara, who are still dependent."

Hollander explains that since such arrangements might take some time to iron out, Frank should draw up an emergency plan just in case one of the test flights goes awry.

"lf he's going up there again tomorrow," she says, "he should put the company shares in a trust and name an impartial board that would help Kurt and Barbara decide how to divide the company. Then, he can keep flying and take the proper time to talk with Barbara and Kurt about how they see the future, and to work out detailed plans."

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March/April 1991

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