New ideas from a new generation

By Margaret Steen

The third-generation members of the Klassen family were only in their 20s when they realized key questions about their business needed to be addressed. Changes in the decade since then have sparked rapid growth.

Travis Klassen was a 25-year-old high school dropout working for his family’s Canadian trucking company, Valley Carriers, when he started studying business leadership and realized how little he knew about the family business. How was the company structured? What were its financials like? Was the company making enough money to provide jobs for him, his brother and his cousins that would support them as their families grew?

He decided it was a time for a family business meeting. So he called his father, his uncles, his brother and his cousins — the company was not yet using email for communication — and made his case. “Finally we got agreement that we could do it, as long as it was done after work,” Travis says. “It was very important to our uncles that none of us were getting paid to attend this meeting.”

To prepare, Travis and others from his generation compiled a list of questions. He also bought a $400 board table and spent about $500 on chairs. “All of those costs were questioned at that first meeting,” Travis recalls. “I don’t know if anyone anticipated ever holding another meeting.”

And so nine members of three generations of the Klassen family — including Travis’s grandfather, company founder Neil Klassen — gathered in a makeshift meeting room in the basement of the old farmhouse where the company’s offices were housed on the evening of April 17, 2008. Forty-five years after the company’s founding, its first meeting was under way.

Although he was no longer actively running the business, Neil opened the meeting with a prayer, a reading from Psalm 128 (“You shall eat the fruit of the labor of your hands”), and words of encouragement.

“He said he was overwhelmed to see the powerhouse that is this board — he called it a board long before we did,” Travis says. “He encouraged us all, instead of running down the weary among us, to lift them up.”

The meeting lasted until after 10 p.m. and ended with plans for future meetings. The third generation didn’t get their financial questions answered, mostly because no one at the meeting had that information at hand. But they had a good discussion: “There was a lot more focus on the future and where we were going after this,” Travis says.

A family affair
Today, the company that Neil started when he bought a truck from his boss to deliver firewood and sawdust in 1963 is a $23 million family enterprise with 110 employees. Neil, now 89, and his wife, Rita, who ran the company’s office until she was 78 years old, still live on the family farm in Abbotsford, B.C., that serves as the company headquarters. The company has a satellite office in Merritt, B.C., about two hours to the northeast.

Travis, 35, is CEO of the Klassen Business Group, the family holding company. The primary operating company is a trucking company, Valley Carriers, which hauls sawdust, woodchips and logs. The family enterprise also operates Klassen Landscape Supply, and it has a majority stake in Klassen Wood Co., which packages wood shavings to be shipped all over the United States and Canada.

The company currently has 10 active shareholders (in addition to Neil and Rita Klassen, who also own shares). Four are Neil and Rita’s children: Reg, 60, who ran the trucking business and is now a senior partner; Dennis, 61, who handled sales and is now a senior partner; Merv, 63, who was the lead mechanic and is now a senior partner; and Genny Loewen, 55, who still works as the people and office manager.

There are six active third-generation shareholders. Travis (Reg’s son) is CEO of Klassen Business Group and chief operating officer of Valley Carriers; Travis’s brother, Ben, 33, is CEO of Valley Carriers. Dennis’s son Greg, 32, is Valley Carriers’ production manager. Merv’s daughter Erin (Klassen) Parkes, 40, is CFO of both Valley Carriers and Klassen Business Group; his son Russ, 36, is general manager of Klassen Landscape Supply and the safety and compliance officer for the Klassen Business Group; and his younger son, Stuart, 33, is operations manager of production for Valley Carriers.

Other family members also work in the business in various capacities but are not involved in management and are not currently shareholders.

Today, when a new truck rolls into the Valley Carriers yard, Neil watches it from his living room.

“He can see everything that goes on from the big window,” says Reg. “He tells me when he doesn’t think much of a driver we’ve hired, how slowly he walks across the yard.”

The business has involved the whole family from the outset.

“We got very involved right from the beginning,” says Reg, who left high school after 10th grade to go to work. “We would go with our dad in the truck. I remember even at a young age, all four of us boys being in the cab of the truck.”

When Reg and his siblings took over the business from their parents, about 25 years ago, there was no formal succession plan or transfer of ownership.

“We basically just worked and eventually we took it over,” Reg says. “It was a gradual thing. We each had our own departments.”

The third generation also started working for the company early on. Erin started out helping her aunt and grandmother in the office, and Reg quickly realized that Travis had a head for the business as well. As the two cousins started looking more deeply at how the business worked, they realized that it was not on a sustainable path.

“You grow up fairly naïve and assume the company must be doing well and there must be millions of dollars in the bank,” Travis says. “Then you open the bank, and you realize that if this is going to sustain all of us for the rest of our lives, we need to make some big changes very quickly. We had to come up with a plan. We could either grow the company or we would bleed it dry.”

Discovering what they didn’t know
Although he never finished high school, Travis took executive education courses to learn about running a family business. He earned the Family Enterprise Advisor designation from the Institute of Family Enterprise Advisors in Vancouver, B.C. He and Erin took frequent trips from Abbotsford to Vancouver for executive education seminars, having what he describes as “strategy sessions” on the train on the way there and back.

The executive education helped them realize what they didn’t know. This was one of the catalysts for that first meeting — which took place when the third generation members were all in their 20s.

“We were trying to understand what the boundaries were, who made decisions,” Travis says. “We realized that there wasn’t a structure, and we came out of that meeting realizing that it was up to us to build a structure for the next generations.”

They quickly built a team of outside advisers, many of whom continue to help the company.

One of their first steps was to take care of the paperwork to transfer the business from the first generation to the second, then to plan the transfer to their own generation.

The family decided to hire consultants to help with succession planning.

“We realized it had not been done well enough: the partnership, paperwork and legalities,” Reg says. “My sister and Dad ran the books, but it was getting way too big for that. We needed Dad to slow down, and we realized that to keep the kids involved, we wanted to make it a partnership.”

Although the business moved gradually from second-generation leadership to third-generation leadership, the process was not without some tension.

“The fact that we were giving ourselves titles and roles and responsibilities, all of that seemed quite pretentious to them,” Travis says. “But we knew if we were going to grow, we needed to modernize and professionalize the company.”

Travis says the mantra “honoring the foundation and embracing the future” helped bridge the gap between generations.

“They do have a lot of wisdom and years of experience,” Erin says. “We respect the past.”

Still, “there’s tension there, with the old generation staying on,” Travis says. “We’ve embraced that tension, and I think we’re better for it.”

Deena Chochinov, who holds the Family Enterprise Advisor title and has been working with the family since 2014, says the family members were guided both by outside advice and by their values during these conversations.

“They brought in best-practice research and had many conversations with advisers. They did it so respectfully,” Chochinov says. “Of course there have been challenging times and difficult conversations between the generations, but nothing that wasn’t able to be managed and worked through in accordance with their principles and values.”

One result of the process: In 2013, they formally created a 10-member board for Valley Carriers with members of the second and third generations. (A separate board for Klassen Business Group was created later.) Then, in 2014, they formalized the executive team — with Travis as CEO and Ben and Erin as the other two members — and worked on creating the current corporate structure, with a holding company and subsidiaries.

There was “very little contention” at the meetings to determine the new leadership structure, Merv says.

More recently, the board took the next step in the company’s leadership transition by voting unanimously to consolidate the number of family seats on the boards of Klassen Business Group and Valley Carriers from 10 to five. They also put in place a plan to add independent directors to the boards. (The boards are separate, though the same family members serve on both. The family has not yet decided whether the independent directors will be the same for both.)

“They are really open and understand that they need to bring in fresh perspectives from longstanding, successful business owners to help them increase their strategic competence and make informed decisions about their growth,” Chochinov says.

Accelerating growth
Under the leadership of the third generation, the company has grown significantly after seeing revenue decline from 2011 to 2013.

In September 2017, Valley Carriers was ranked No. 398 on the PROFIT 500 list of Canada’s fastest-growing companies. The Klassen Business Group was expected to generate $23 million in revenues for 2017, with about 70% of that coming from Valley Carriers.

The company employed 35 people when the third generation took over; today it has 110 total employees (across all parts of Klassen Business Group), including about two dozen family members (in either full-time or part-time positions).

“They have just taken on our vision and run with it,” Reg says. “It’s gotten so much bigger than we would ever have thought. It’s because the young people have the vision. They want to keep growing, and they’ve got a real heart for it.”

One key has been the company’s expansion to Merritt. Ben led that move, building a presence of 18 trucks and 38 employees (for Valley Carriers and Klassen Wood Co. combined) in Merritt in four years.

“My motto is to say yes and figure it out later, which has gotten me into trouble more than a few times,” Ben says. “But saying yes gives you time to figure out how you can do it.”

That was how he came to buy a set of custom-built trailers for a job in Merritt that a customer asked if he could do. Once he had the trailers, he needed to make money with them even when that customer didn’t need his services. He decided to sell landscaping supplies and started by cold-calling landscaping companies in British Columbia and Alberta.

Then a customer asked him if he could drive a logging truck.

“I had never hauled a load of logs in my life, or thrown a wrapper [to secure a truckload of logs], and it’s fairly challenging,” Ben Klassen says. “We bought a truck and trailers and I spent 10 minutes figuring them out the day before in the yard. Then I headed out and made myself a log hauler. It was a pretty stressful first week.”

That led to other opportunities, including a job nine hours away on some of the steepest terrain in British Columbia. “The way we grew this part of the business was that any time a contractor expressed a need for another truck, I would respond with a yes, then find a truck driver and buy another truck,” Ben says.

A second driver of growth was changing how the company managed its fleet of trucks. Instead of purchasing trucks outright and keeping them as long as possible, the Klassens revamped the structure to run a fleet of trucks that are treated as disposable assets. Replacing the trucks more often means they break down less.

Klassen Wood Co. has also helped the company grow. A married-in member of the third generation, John-Mark Ferguson, came up with the idea as a way to find a new use for old equipment. In 2017, the business generated about $5.5 million in revenue.

Finally, last year Klassen purchased one of its competitors, growing revenue and expanding its reach with customers and suppliers.

Encouraging family bonding
Although the Klassens lacked formal family governance until 2008, they have a longstanding tradition of getting together as an extended family outside the business. For the past 35 years, they have gathered for Victoria Day weekend each May. The gathering includes both those who work with the business and those who don’t. In recent years, they have added an extra day for the annual general meeting of shareholders and a meeting of the Klassen Foundation, the family’s philanthropy vehicle.

“This is a great way to connect to the whole family even if they’re out of the business,” Parkes says.
Working with Chochinov, the family has developed a statement of purpose for the family enterprise, as well as statements of mission, vision and values. They have also revamped the employee handbook. The family council, which consists of Erin, Travis and second-generation member Genny Loewen, is working on a family employment policy.

In 2013, the family created a family charter based on notes family members scribbled on whiteboards at that year’s gathering about what was important about the family.

Chochinov says the family’s values — humility, collaboration, faith, growth and change — “are not just considered but I would say guide all their conversations.”

“They are so humble — it’s one of their values, and they live it fully,” Chochinov says. “They know that there is more to learn about growing their business, that they require that knowledge, and they are always open to learning more. There’s not one scrap of arrogance in this family.”

The family is looking to the future while appreciating the growth and milestones the business has achieved.

“We had lots of crazy, outrageous vision and strategy meetings that actually helped us see the future, and here we are actually living it today,” Erin says.

The oldest members of the fourth generation are still teenagers, and some are starting to work summer jobs at the company. The current leaders are working on a curriculum to teach the next generation what it means to work for the company and to be part of a family that owns a business.

Both the generation that has just taken over and the one that is passing the torch are pleased by the company’s success.

“I’m proud of their new ideas and the way they have structured the company to be a professional business,” Merv says. “We basically just worked all our lives, never really planning for the future. But it was a simpler time, and there weren’t as many mouths to feed.”

“In a conversation in early 2015, Travis stated his goal for company growth was that he wanted have $20 million in revenue by 2020,” Ben says. “To which I responded, ‘No problem.’ We reached that in 2017.”                                        

Margaret Steen is a freelance writer based in Los Altos, Calif.

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.

Article categories: 
Issue: 
March/April 2018

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