Morris Speaks for Himself
Is there a happy ending to succession at Erving Industries?
In my top drawer, I keep a black-and-white photograph of myself at age 12 standing inside a smokestack before it is to be hoisted into position above Erving Paper Mills. Since that day, I have planned my succession as president and CEO of the company. My high school and college summers were spent in the laboratory, in the warehouse, on the customer service phones, and on the production floor helping to run the huge, steamy machines. I insisted on those jobs so that I would know the business inside and out and so that no one would ever tell me that I didn’t earn my position.
When I graduated from Carnegie Mellon University in 1985, my father and I decided that I might want to learn more about the paper business from the customer’s perspective. I spent the next six months at the elbow of the CEO of a major paper distributor in the Southeast. I listened to every phone call, attended every meeting, and read every memo, plan, and forecast. At this point in time, my father and I corresponded regularly about business. He often sent me articles, internal memos, and reports regarding operations at Erving Industries. In exchange, I reported on every aspect of the distributor’s operations and marketing plans.
After a year and a half, I had grown tired of Southern hospitality and decided to move north. I created a job for myself at our Erving Health Care Division in New Jersey. As a “project specialist,” I found myself completely focused on the operation, spending little or no time on the company reports my father had been sending. I developed a new costing system, cut production costs, and improved the market penetration of one of our product lines. I had lost interest in those reports, and my father and I talked more about personal matters than business. He visited the New Jersey facility infrequently. As a consequence, the employees looked to me for leadership. This feeling of ownership and attachment was a powerful incentive for me and I worked harder than I ever had. My management style began to take shape. Though my dad had always been concerned with sales growth, my priority was profit, then growth. I focused on margin management, inventory management, and machine efficiencies.
At the end of 1989, I graduated from New York University with an MBA in finance. I was determined to completely devote myself to corporate matters. I planned to work diligently in the finance department, ascend to the CFO position, and then move into the CEO spot—a natural progression. I accomplished some of these goals. I revamped the finance department by introducing some of the latest financial tools, developing reporting methods to improve analysis of the business units, and implementing new capital budgeting procedures. But as I worked, I found myself less and less inclined to climb. I found other non-executive opportunities that interested me. I moved to the packaging department, then the customer service department, then into sales. In hindsight, I realize I was caught between the desire to make a real bottom-line impact in order to earn respect from my father, the CEO, and the fear of failing.
In 1991, I returned to Erving Health Care as controller. Here I could make an impact that would be seen on paper. At EHC, I took complete responsibility for the books. I obtained financing for a $500,000 piece of equipment and implemented Electronic Data Interchange for our customers and vendors. During this period, my dad appointed me assistant treasurer of Erving Industries. He felt that it was important for me to be involved with corporate issues such as company benefits, the pension fund, and banking. Although pleased with the appointment, I was not anxious to pursue what I perceived as essentially administrative tasks. I was more eager to manage and improve our operations.
In 1993, we determined that Erving Health Care did not fit our corporate strategy and we decided to sell it. I spent several months finalizing the transaction, after which I returned to Erving Paper Mills with the objective of assuming more corporate responsibilities. As vice president I reported directly to the executive vice president. Although my father and I talked, most of his higher level business discussions were with the EVP. The business was performing quite well under the EVP’s watch. When my father and I discussed the possibility of my assuming the EVP position, I analyzed the business climate and my own feelings, and determined that it made sense to keep the current EVP in place. I also began to feel that with all my years at Erving, I still hadn’t had full bottom-line responsibility at a smaller division. How could I move from a staff position to president of a $100 million business?
As assistant treasurer, I began analyzing our Wisconsin business unit. I identified significant unexploited opportunities in a few market niches we were serving. I recommended that we break out three of these “businesses” and create a new division. This concept had been discussed before, but never implemented. I pursued it. I realized that this would be a great opportunity for me to have bottom-line responsibility for a division and report directly to my father, the CEO. My father agreed with the concept of setting up a new division, but instead of having me run a newly formed Erving Industry division, he decided he wanted to sell it to me. My original intent was lost. This new opportunity presented a new dilemma. I had an opportunity to own and run my own business, but it would take me out of the loop at Erving Industries.
In May, 1996, I incorporated Birch Point Paper Products Inc. I currently own and manage the three profitable businesses under one roof. Sales are $4 million and I intend to double that in three years—profitably. I am 33 years old. My office is about 15 minutes from my home. My daughter is six months old. My wife and I often socialize in Boston, which is 45 minutes from my office. Three weeks ago my father indicated that he wanted to pursue more extracurricular activities and asked me if I wanted to run Erving Industries. Not own it, but run it. Erving Industries is located an hour from my home, and it is a capital intensive, high risk collection of factories. Profit in the paper industry fluctuates as frequently as the point at which the supply and demand curves cross. My uncle and grandfather bought the mill many years ago. It has been a part of our family and has provided for us for as many years.
In the past three weeks, I have crunched numbers trying to forecast the sales and costs of Erving Industries for the next five years. I have spent time wandering through the warehouse full of rolls of tissue paper, asking myself if I will ever be able to fill my father’s shoes. I have made decisions regarding my personal, professional, and financial goals.
Well, here’s my decision: I have decided to follow in the footsteps of my great uncle, my grandfather, and my father. I, too, will be a paper maker. And perhaps my little daughter, Molly, if she so chooses, will one day follow in my footsteps. When she graduates from college, I will be sure to reread this article to remind myself of how to pass the family business to her.
My experience at Birch Point has made me realize that I will operate Erving Industries differently than my father has. He and I have very different styles. He is an entrepreneur, buying assets because they look exciting. He enjoys the hunt. I take more calculated risks, being sure the fit is right before making a move. I need results. My challenges will be different and my focus will be different. As he says, “The next 30 years will be nothing like the past 30 years.”
My road to succession has been a long, windy one, while my dad’s was short and straight. He was pulled from his law practice to take over the presidency. It is important that the parent let the child find his or her own level, but the child must assume bottom-line responsibility. This alone creates the confidence and experience necessary to run a multimillion dollar organization.
Morris Housen is president of Birch Point Paper Products Inc. in Shirley, MA.