When I first visited Hammond Inc. seven years ago, the company had barely managed to fend off a pair of serious, unwanted takeover attempts. The fourth generation fought fiercely to retain family ownership, even in the face of opposition from relatives who preferred to sell. In the end, Caleb Dean Hammond III and his wife, Kathleen D. Hammond, convinced the family to hold on to the map and atlas company that Dean’s great-grandfather founded in 1900.
What they were left holding, though, was a company that needed a lot of attention, including a complete change of production methods, a big investment in technology, a management overhaul, and some fast-growing new markets to help it remain competitive in the future.
It was a critical juncture—one faced by many family businesses. Hammond was an old company with a tired product, run for decades by a generation that was not known for innovation. Hammond needed someone to come in‚ shake it by the roots, and give it a new sense of direction.
Dean and Kathy presented Dean’s father, Caleb Dean (“Bud”) Hammond Jr.—still in control—with a bold vision for the future. It would cost a lot of money. It would require Bud and his younger brother, Stuart, vice-chairman, to step aside. Bud agreed, but it would take six carefully orchestrated years before the company was fully transformed. Last year Dean, now 51, and Kathy, 46, finally became chairman and president, respectively. In November, I returned to Hammond’s offices in Maplewood, New Jersey, to find out how the new generation had done, how they had asserted their control and handled the challenges before them.
Rising to the challenge
The acquisition attempts in the late 1980s, while awkward, gave Dean and Kathy a chance to step in to run the company. They were well suited to the challenge. Dean had a business degree, almost two years of law school, and experience starting a small retail business before joining the family business. He had started in 1974 as Hammond’s New England sales representative and quickly expanded the regions for which he was responsible. His relaxed attitude and intuition for popular products made him a hit with customers. He was being groomed to take over by his father and his uncle, Stuart L. Hammond, who together had run the company since the 1950s. But the seniors were not ready to make a transition yet.
Kathy had gained valuable experience in the business world as an assistant to takeover specialist Carl Icahn. She was a rising star in the advertising department of The New York Times when she married Dean in 1978. It took Dean four years to persuade her to leave her high-paying job to become the new director of corporate development at Hammond. The position allowed her to troubleshoot throughout the company, helping her learn all facets of the business. She proved to be a strong administrator, hard-nosed and focused.
The takeover attempts convinced Dean and Kathy that they had to take over Hammond and reengineer it. But they owned less than 10 percent of the company’s stock. They bought the shares of an inactive cousin and teamed up with Dean’s father, who held 30 percent. By 1990 the trio controlled more than 60 percent of the company. Stuart’s family held about 30 percent. Dean and Kathy, president and executive vice president, respectively, would continue to acquire all of Bud’s stock, to hold a majority by themselves. “For his own estate planning reasons, Bud turned over his stock to us,” says Dean. “He realized this was where our life’s work was and it made sense for him.”
Still, the couple knew that some family members, suppliers, and employees would need time to adjust to what would become a completely new kind of company. They recognized that to implement all the changes successfully they could not rush—a tough challenge for an eager, energetic next generation.
Bud admits his generation had grown complacent. “Everything had been done the same way for so long, we probably would have never tried to do it differently,” he says. “I think the company would have been down the tubes if the kids hadn’t come along.”
Dean and Kathy started turning the company around by embracing new technology and demonstrating to family shareholders that this path would ultimately make Hammond a much better company for everyone. Although one or two of the dozen shareholders had been interested in selling during the takeover attempts, Dean talked to them one on one, and convinced them that Hammond had tremendous growth potential. If they were patient, he agreed, they could realize much greater benefits than the current stock price. The message was that large investments in computers and software development would soon make map production “better, faster, and cheaper,” Dean says, leading to higher profits down the road. “These are smart people,” Dean adds. They viewed their investment as long term.
Change wasn’t a hard sell to employees. New technology would make their jobs easier and their products better. They wanted to be sure they would be trained. Kathy got them help, but also knew the technology would eliminate some jobs. She offered voluntary buyouts to employees. Over four years, the design staff was thinned from 50 to 36, without a single layoff. Bud was firmly behind Kathy’s decisions, but reassured other employees of their futures.
For customers, the potential of Hammond’s new technology was attractive from the start. “I was out listening to what customers wanted,” says Dean, “and what they wanted was flexibility in design and content.” The biggest customers were publishers of educational products and reference materials. They wanted to have new maps fast, given rapidly changing national boundaries. They wanted to change scale, change colors, change overlays, and adapt maps to different media without having to wait—or pay—for an entire new hand-rendering. Customers saw that Hammond’s computerized map-making could fulfill their needs.
The company set an ambitious goal to achieve fully digital production by the late 1990s. Kathy says this goal set the company on a clear course. By leading the charge, “we were really able to solidify control. The directors and the other family members understood the strategy. We enjoyed good support from them.”
Dean likes to prove this point by noting that he put a standing offer on the table to buy stock from any inactive family shareholders. To this date there have been few takers.
Dean’s uncle Stuart was not as charmed by his nephew’s ideas, however. Stuart was Hammond’s president for most of the 1980s. He left the company not long after Dean and Kathy took over operating control in 1989. The writing had probably been on the wall for Stuart’s departure ever since the takeover attempts. He was more interested in selling the company than Bud, and was cooperating with one potential suitor before Dean and Kathy blocked his way. The last years were not always pleasant, though Dean and Kathy worked hard to avoid ruptures.
“There was some agreement and some disagreement,” during this transition period, Dean says. But for him the bottom line is that Stuart and his children still hold their 30 percent share and “don’t want to sell.” Agreements among family members prohibit Dean and Kathy from talking about Stuart’s departure further. When he left, however, Stuart resigned his seat on the board of directors and asked that two seats be given to his daughter and son-in-law. Dean and Kathy agreed, which helped soothe ill feelings.
Experts asked to comment on the new ownership structure at Hammond were generally positive. Bonnie Brown, a family business adviser and president of Transition Dynamics Inc. in Eugene‚ Oregon, says the decision by Stuart’s family to retain its stock is a sign that Dean and Kathy have their confidence. “It’s a good indication that you’re doing well when the inactive stockholders are not selling,” she says.
Still, one has to wonder if strains on the relationship between the seniors may not affect the ability of majority and minority shareholders to cooperate. Even though Dean and Kathy seem to have mediated potential family discontent, Bud reports that he and Stuart haven’t spoken in years. Even relatively successful transitions have their casualties.
Updating an industry
Dean and Kathy knew their biggest challenge was to bring Hammond up to speed technologically. They set out to create a completely digital map company, one that would no longer utilize any of the painstaking hand-production processes that marked cartography for the first 90 years of the century. They even changed the company’s slogan from “Mapmakers and publishers since the turn of the century” to “Mapmakers for the 21st century.”
“When Dean and I first started managing the business, the newest world atlas on the market was 25 years old,” Kathy explains. “It was the Rand McNally International World Atlas and it had taken five years to develop. No one was developing new map collections because it had become too expensive.”
By 1992, however, Hammond published the first computer-generated atlas, the Hammond Atlas of the World. It was an immediate hit, described by The New York Times as an “extraordinary new atlas of a radically altered world.”
“We were able to use the power of computers not just to have more efficient production, but to deliver more accurate maps to the consumer,” says Kathy. “We’ve really raised the bar for how up-to-date atlases need to be.”
The company has spent $15 million on technology so far, with more outlays likely to come. But the money has put Hammond in front of competitors and provided it with a couple of key patents on cartographic software that should help it remain there for a while.
“Because of the investment we made, we aren’t an old dinosaur that got caught behind the curve,” Kathy says. “We are ahead of the curve. As new technologies mature, we’ll be positioned to do well. That’s one of the things that’s unique for us as a family business. We not only look at where we are today, but constantly ask where we need to be four years from now. That’s the way you have to do business if you’re going to survive.”
Last year the company completed the shift of all of its map-making operations to computers. That’s when Dean finally assumed the titles of chairman and chief executive from his father, and Kathy rose to president and chief operating officer. Kathy notes that some competitors who are years away from such a move have since approached Hammond to license its proprietary technology. It’s an enviable position.
Out-thinking the Goliaths
As new technologies took hold at Hammond, the capabilities of the company increased dramatically. The challenge then became finding new markets to justify the capital expense. In the past, Hammond could not serve overseas customers effectively for reasons as simple as the need to provide translations of place names on the maps. A different language meant the creation of a whole new map, by hand. With computers, it takes a few keystrokes to delete all the old names and add new ones in whatever language is needed.
As a result, since the husband-wife team took over, the company’s international business has grown from zero to 25 percent of total revenues. As the company’s lead salesman, Dean is finding that the Hammond name carries a lot of clout in Europe and Asia. Recognition is helped by CNN, the global cable news network, which has used Hammond maps under license for years, with a credit appearing regularly on viewers’ television screens.
Growth in the company’s digital business, a natural fit for a newly computerized company, runs a close second. Hammond maps appear in a number of multimedia programs, such as Microsoft Bookshelf. The company plans to release its own CD-ROM version of its atlas in 1997. Electronic distribution through computerized databases is also in the works.
The growth areas are crucial not only to leverage the expense of new technology, but also to compete with larger global competitors. Companies such as Rand McNally in the United States and Bertelsmann in Germany always pose a threat, even if Dean and Kathy are convinced that Hammond’s technology is superior.
“Where they can hurt us is that they can throw a lot more money into promotion,” Kathy says. “They can be less efficient but still outspend us.” Hammond’s advantage is its ability to make fast strategic decisions. Basically, if Dean and Kathy decide to do something, they can proceed. “We’re constantly being faced by Goliaths and what we need to do is out-think them,” Dean says. “It’s clear now that we have succeeded in out-thinking them technologically.”
But there’s a downside to this freedom to make swift decisions. Dean and Kathy are now middle-aged, and as they have solidified their control of the company, they realize they have made themselves irreplaceable. “We want to be able to die and not have it affect the future of the company,” Dean says. “That’s why we’re building another level of management. We want a professional team of managers who can run the business in our absence,” even if the absence is just a one-week sales trip to Scandinavia.
Last year Hammond hired a new senior vice president and associate publisher to be the number three person on the management team. The pick, Brian O’Leary, has an MBA from Harvard and was production director for Time Worldwide. Two more vice presidents will be in place by early 1997. This structure, together with a financial consulting firm that Hammond has used for years will create the nucleus of an executive management team, Kathy says.
For Bonnie Brown, the consultant with Transition Dynamics, these steps bode well for Hammond’s future. “Getting the company positioned strategically to move into international markets and getting a level of management in place to cover in Dean and Kathy’s absence is a good indication that they are running the company professionally,” Brown says. “That’s the key to getting from generation to generation successfully.”
The fifth generation
Although it may be some years off, there is a fifth generation at Hammond that may take over some day. Dean’s 23-year-old son from a previous marriage, Josh, has worked at the company for four years and is currently in production. He’s beginning to understand that because his name is on the product, he has to “make it look good before it goes out the door,” Dean says. His two children with Kathy are younger but have also expressed interest in the business.
Dean is in no hurry to leave, however. He figures he has 20 years left with the company. He notes that his father, 81, still comes into the office regularly. And he indicates that the good of the company will always come before preference for his children. “We’re not about to throw someone the reins because of genes,” Dean says.
Stephen J. Simurda‚ a business writer in Northampton, MA, is a frequent contributor to Family Business.
Hammond Inc.
Business: Maker of maps and atlases.
Location: Maplewood, NJ.
Founded: 1900.
Employees: 85.
Family managers: Caleb Dean Hammond III, CEO and chairman; Kathleen D. Hammond, president and COO; Caleb Dean Hammond Jr., chairman emeritus.
Claim to fame: While establishing their controls, the fourth generation repositioned the company with new technology and a management restructuring.