Purposeful Growth at Michelman
Some families discuss current events or pop culture over dinner. The Michelman family talked chemistry. That was understandable, since Michelman, their Cincinnati-based family business, used chemistry to make its products.
“My father used to take us through a game called ‘What’s it made of?’ ” says Andrew Michelman, 50, chief business development officer and executive vice president, Asia and fibers & composites, at the company. “We talked about science and the curiosity of chemistry. That was my world, and teaching me those things was important. From a commercial perspective we’d talk not about money, but about how to engage with customers.”
Andrew’s grandfather, Joseph Michelman, began the business in his garage in 1949 and later moved it into a new, 3,000-square-foot facility. The company started out making products such as EZ-Stretch, which softened leather so it would more easily stretch over shoe molds, and Akwa-Pruf, which improved water resistance of the fabric tops of convertibles. In the early years, the firm struggled to find a focus, moving back and forth between making products for the retail and commercial sectors.
Today, under the leadership of third-generation president and CEO Steve Shifman, Michelman is a global developer and manufacturer of advanced materials for industry.
Michelman employs about 450 associates. The company has production facilities in North America, Europe and Asia. It also maintains sales and administrative offices and technology centers around the world.
“When you talk to employees in India or China, you hear the same things that you hear from employees in Cincinnati,” says board member Karen Bogart. “Employees — and customers — are impressed with the company’s focus on understanding their needs and responding to them.”
A family culture
Joseph Michelman’s son-in-law, Phil Cohen, joined the company in 1957 after serving in the Navy and earning an MBA from Xavier University. At the company, Phil focused on sales and revenue generation. Joseph’s son, John Michelman, who had earned a doctorate in chemistry from Harvard University, came on board in 1965 and served as the director of research and development. Phil was named president in 1976, when Joseph assumed the role of chairman.
The brothers-in-law created a family culture within the company.
“John Michelman and Phil Cohen were fabulous business leaders and fabulous business partners, but they were also great friends,” says board chairman Jerry Reichert. “The Michelman and Cohen families interacted with each other; they broke bread with each other. Those two, almost unconsciously, also invested in the health, well-being and governance of the families. That has really manifested itself with the families, and as the family tree keeps growing it’s embedded and instilled within the family.”
“You see the values of the family, and the values of the company every day in operation when you’re part of the firm,” Bogart says.
In 1969, the firm invented X300, a technology that made corrugated paper water-resistant without compromising its ability to be recycled. The coating is used in making boxes as well as products such as paper cups and trays.
As the brothers-in-law took on greater roles, the company grew, fueled by an improved marketing strategy. Over the next few decades, Michelman formed an international sales group. The firm began producing additives to coat plastic, wood, metals and other materials. It created chemistries for use in plastic films, floor polish and beverage cans.
The company’s focus has evolved from making products to creating solutions that have wide uses throughout various industries. Its corporate headquarters in Cincinnati includes the Advanced Materials Collaboration Center, opened in 2014, which features six laboratories and was designed to facilitate sharing of ideas and technology among stakeholder groups.
The third generation
Phil’s son-in-law Steve Shifman, 63, joined the company in 1991, the same year that Phil became chairman and John took over as president. Steve started out in a sales role, quickly rising to chief financial officer. From there, he ran the paper coatings business. In 2003, Steve became president and CEO and John assumed the role of chairman. Non-family member Jerry Reichert succeeded John as chairman in 2015.
Bogart says Steve’s leadership has been a key factor in the company’s success over the past few decades.
“Steve has a fabulous integrated background and approach,” she says. “He’s a high-IQ, high-EQ individual who is good at strategy and operations. He’s caring and practical and very broad-thinking in terms of what’s happening in the world, how it affects Michelman and how Michelman can create a broader impact.”
During Steve’s tenure, the company has quadrupled in size and profitability, achieving this growth both organically and through acquisition.
John's son Andrew Michelman joined in 2015, after a 20-year career as an investment banker in London. Andrew’s brother Rick Michelman, 55, came on board as a research chemist in 1996, after spending several years as a scientist for a manufacturer in California. Rick is now chief technology officer and executive vice president, Americas and printing & packaging.
Working so closely with family has been empowering, Andrew says.
“What’s great about the generation before ours — John and Phil — is that they had a great understanding of each other’s strength and what they brought to the table. We have a similar dynamic. I’m not Steve, and Rick is not me. We all bring different things to the table, and that makes our company stronger.”
The second and third generations of leadership have both included in-laws. Steve says that has been a factor in the company’s success.
“I effectively had one foot in the family and one foot out of the family,” he says. “My experience growing up was different than that of Rick’s and Andrew’s. And my world view was also different.”
Those differing world views may sometimes result in diverse ideas about how to proceed. Treating everyone at the company — family or not — with respect has created a culture of teamwork.
“We are happy to have debates,” says Rick, who worked in various divisions of the company and last year was named chief technology officer and executive vice president for printing and packaging in the Americas. “We may have different opinions, but we always leave with the same direction.”
That spirit of collaboration has helped fuel Michelman’s continued expansion. The company now has locations in Luxembourg, Belgium, India, Singapore, China and Japan.
Michelman originally opened its international facilities to meet customer demand as its clients began their own global expansions.
“We went there originally because our customers wanted us there, but in retrospect opening those outposts was a great decision,” Steve says. “Over the years we have found that a lot of solutions that we created in our overseas locations have had opportunities for implementation all over the world. We’re not a super-large company, but the global footprint also helps us from a diversification standpoint.”
The company has made significant investments in human resources, new technology and sustainability programs. About a quarter of Michelman’s associates focus on product development and new technology.
The importance of diversification
Diversification has been key to the company’s success. Beyond serving different geographic markets, the company has three main business lines: coatings, industrial manufacturing, and printing and packaging.
That’s been helpful over the past year, as the COVID-19 pandemic has had different impacts on the various sectors that Michelman serves. While the automotive and commercial printing markets have been soft, demand has risen for paints and stains, as consumers isolating at home have taken on DIY projects. Label and packaging sales are up as well, thanks to an increase in e-commerce.
The emphasis on diversification enables the associates to gain experience in multiple areas, Rick says. “They’ll have a good career if they do the same thing for 30 years, but if they have different experiences, they’ll come up with new ideas and be able to solve problems more quickly.”
That philosophy also helps the company attract top-tier talent, which, in turn, makes the company better able to serve its customers, Reichert says.
“The Michelman associates are very bright and very customer-oriented,” he adds. “They’re curious and focused on solutions. They’re brilliant problem solvers, and they just continue to gain the trust and confidence of their customers.”
The company’s flexibility to meet changing market demands has helped drive its success over the past seven decades, a trait Steve says will serve it well going forward.
He calls the pandemic “a massive social experiment that no one signed up for,” noting that “COVID is acting as a massive accelerant to change.”
No matter what kind of changes the future brings, the Michelmans, Cohens and Shifmans plan to keep the business in the family for generations to come. Steve cites the advantages of being a privately owned company and operating without pressure from public shareholders or private equity investors.
Preparing for the next generation
The generation currently leading the firm realizes it must make a concerted effort to prepare for the future, when the family will grow larger and more geographically dispersed.
Michelman put an independent board in place more than 20 years ago and instituted a dividend policy with an emphasis on transparency.
“We have a rigorous family employment policy,” Steve says. “We never wanted our kids to feel like they had to join the business. We only want them in the business if they have the desire as well as the skills and experience.”
That requirement has elevated family members’ skills and experience, Bogart says.
“They have not only have gained experience elsewhere, but they’ve been very successful elsewhere,” she says.
While some fourth-generation family members have had internships at the company, none have yet joined the firm full-time. One side effect of requiring external employment first, Steve concedes, is that younger family members may choose not to return to the company.
“But, having said that, I didn’t join the company until I was about 34,” he adds.
Meanwhile, the company is taking steps to prepare the next generation for their responsibilities with the company, whether as employees, shareholders or board members. That means including them in family meetings and sharing information with them. Michelman has quarterly shareholder calls and annual shareholder meetings (held in person except during a pandemic). In addition, young people are a big part of family retreats, which take place every three years and include company education and updates.
The triple bottom line
Addressed as part of the family’s education is Michelman’s “triple bottom line” focus on people, planet and profits. Because its business is centered on chemistry, the company recognizes it has an obligation to contribute to sustainability.
Michelman’s corporate purpose, “Innovating a Sustainable Future,” reflects the company’s commitment to solving societal problems with sustainable technology through innovation. Michelman has developed new ways to improve the recycability of corrugated boxes, lighten the weight of cars and reduce the number of organic compounds in paint. Additionally, the firm offers products that facilitate digital printing and reduce packaging waste.
“There’s a lot of intentionality, in terms of strategy and the mission of the organization, all the way from executives through to the associates, whether they’re a sale rep or they’re in a lab, or on the factory floor” Bogart says. “Tough decisions get made, but they get made with an appropriate business understanding about the long-term impact on the company.”
While a focus on environmental, social and governance issues has become mainstream for companies in the last couple of years, it’s been part of Michelman’s culture since its founding.
“If we go back in time, I’d argue that although they didn’t use that vocabulary, they were always a purpose-driven business with a strong sense of values,” Steve says. “As it’s grown larger and more diverse and global, we have had to put definition to that purpose and those values. We’ve had to institutionalize it.”
Michelman’s six corporate values — Integrity, Respect, Success, Curiosity, Collaboration and Giving — were developed to guide the development of relationships with stakeholders.
The company, which felt the effects of the pandemic early at its Asian facilities, decided that it would not furlough or lay off any employees.
“The firm believes that if you invest in people and planet — particularly in a family business, where you look at it as a generational asset — the profits will follow,” Reichert says. “Given time, having great people, an environmental focus and a customer focus will continue to build value — not only for the associates and families involved in Michelman, but also in the communities where they live and the customers that they serve.” FB
Beth Braverman is a freelance writer and ferequent contributor to Family Business Magazine.