The rocky course of succession at Ping

By Dave Donelson

John Solheim turned around his family’s legendary golf club company. But his biggest challenge was getting his father to loosen his grip.

Ping Golf has revolutionized not just an industry but also a sport played by nearly 29 million Americans. The innovative product designs of company founder Karsten Solheim made a difficult game easier—and a lot more fun—for golfers at all levels. His sons, especially CEO John Solheim, now 61, honed a business model that set standards for the industry. Today, the third generation is getting ready to assume the mantle of leadership. They are inheriting a $300 million operation with 1,000 employees, about 850 of whom work at the main campus in Phoenix, Ariz.

It all started with Karsten Solheim’s obsession with the game, which he didn’t take up until age 42 while still an engineer at General Electric. He began experimenting with clubs and patented his first product —a putter that on contact with a ball made the distinctive sound that gave the company its name—in 1959. Production took place in the garage and was literally a family affair. John Solheim was 13 at the time. “When we started, I drilled the holes in the putters where the shaft went,” John recalls. “My brother Allan was putting the grips on. It was fun.”

That first putter’s heel and toe weighting helped the player keep it on line. It evolved into the Anser model, which featured several other advancements. “If you look at nearly every putter on the market today, they’re all descended from the Ping Anser,” says John Buczek, head golf professional at the fabled Winged Foot Golf Club in Mamaroneck, N.Y., and PGA National Merchandiser of the Year for 2006. “It’s amazing what they’ve done in the golfing world since Karsten developed the original Ping putter in his garage,” Buczek says. “They’ve been leaders in putters, in irons and even in golf bags.”

The first major tournament win for the company came in 1969, when George Archer used an Anser Putter to win the Masters. Every time a tour player wins an event using a Ping putter, a gold one is inscribed and given to the player and a duplicate is placed in the company vault to commemorate the occasion; more than 2,300 of them are there today. Angel Cabrera, the 2007 U.S. Open winner, uses Ping clubs, as does the world’s leading female player, Lorena Ochoa, and Daniel Chopra, the winner of 2008’s first PGA Tour event, the Mercedes Championship. The company sponsors the Solheim Cup, the premier international event for women pro golfers.

Karsten’s way

As with any family business, Ping’s path hasn’t always been smooth. Karsten, who suffered from Parkinson’s disease and died at age 88 in 2000, was a brilliant engineer, but his management style evokes mixed reviews from family members and longtime employees. “Karsten’s Way,” the name of a street on the company campus, also describes the man’s strong grip on the corporation’s direction. “Growing up, I was told there was the right way, the wrong way and Karsten’s way,” says John’s youngest son, David, 28, who works in corporate communications. “Whenever you start up your own company, you can tell people the way you want things done. It’s been a while since he was here, but that idea has not left the place.”

“Part of the Karsten way is doing things right because it’s the right thing to do, not necessarily the right business thing to do,” says Stacey Solheim Pawels, Karsten’s granddaughter and John’s niece, who is vice president and corporate secretary.

Karsten’s way brooked no opposition, whether from within the company, the family or the powers-that-be in the golf world. In 1961, he created another revolutionary product, the cavity-back iron. The initial primitive version became the Ping Eye2, a forgiving, game-enhancing club that, along with an innovative custom-fitting system, gave Ping a commanding 40% of the market for irons in the 1980s.

The clubs also caused immense trouble for the company and the family. In 1988, the United States Golf Association ruled that the clubs didn’t conform to the rules of the game. The next year, the PGA Tour announced it would ban the clubs, too. A long legal battle ensued.

That battle was a source of friction between John and his father. “The USGA thing really strained our relationship,” John says. “I wanted to get it over with because it was draining him so much.” Karsten also refused to introduce any new irons until the suit was settled. In 1990, the USGA settled by approving the old clubs while Ping agreed to design changes for new ones. The PGA Tour suit wasn’t resolved until four years later, with acceptance of the design. While Ping litigated, the rest of the industry moved forward technologically, beating Ping to market with lucrative metal and titanium woods.

The relationship between Karsten and John had always been somewhat problematic. Even when he was making clubs as a teenager, John writhed under his father’s management. One early issue was money: “There was a shopping center that came into the area and I went there and applied for a job. It was only after that that I got paid [for working in the family business],” he recalls. “I got $2.50 a putter, but if I needed help to get the job done, I had to pay the employees out of my own pocket. I had some of my high school friends helping.”

The real internal battles came when it was time for Karsten to step aside. “My dad didn’t want to let go,” John says. “He would never talk about not being there. That made the planning pretty difficult.”

It was even more difficult when Karsten became ill. “When the Parkinson’s started to get to him, I realized I needed to step in,” John explains. “I discussed it with him, but he didn’t want to [step aside]. Finally, before a board meeting, I told him I wanted to nominate him for chairman, which we’d never had before, and he would nominate me for president. He had a few words in private with my mother, and that’s the way it happened.” John later learned that his father had made the decision to turn over voting control of the company stock to him some time earlier but kept it secret as he held on till the bitter end. His two older brothers were co-executive vice presidents until they retired.

Generational shifts

When John took over in 1995, the change supercharged the company. He expanded the product line into metal woods, set up a rapid-delivery system to hold on to the company’s position in the custom-fitting market and hired Ping’s first advertising agency. He also divested several other operations that weren’t directly related to the company’s roots as a club maker.

Not long after, his own sons moved into management positions in the company. “At our age, the third generation has a lot more influence than the second generation did at the same age,” David observes. “That’s a credit to the second generation for allowing us to get our hands dirty.”

Andy, 31, is director of customer relations. Domestic and international customer service, credit and club fitting and repair all fall under his aegis. Like his brothers (and his father, for that matter), he’s never worked anywhere else. He says he learned what it means to be a Solheim early in his career. “One time, I had just finished my master’s degree and had helped do a video for a national sales meeting,” Andy recalls. “I was just going to show up, watch the video, then go back to the office, so I was wearing shorts and a casual shirt. My father gave me ‘the look.’ Fifteen minutes later, I had a suit on.”

John’s oldest son, known as John K., is 33 years old and the one who inherited his grandfather’s engineering talent. He holds an MBA as well as a degree in mechanical engineering. As vice president of engineering, he says, he has tried to expand the design function beyond the one-man-one-idea operation it was under Karsten. He’s hired several design engineers with backgrounds in the sport and has concentrated on speeding the time to market for new products. One of the company’s biggest changes came with the purchase—at John K.’s urging—of a supercomputer, which shortened the wait time for design analysis from 15 hours to 15 minutes.

“The Cray Supercomputer was one of those times when my dad and I were on the same page,” John K. says. There were plenty of other times when they weren’t, including several disagreements over product design. In fact, their relationship bears some resemblance to the one between Karsten and John, according to John K.: “We may have to name another road ‘John’s Way.’ He has his own way of doing things.”

That may not bode well for the looming management transition from the second generation to the third, although John says he’s working to ensure a smooth handover of operations. “My dad was well into his 80s when he finally turned it over, and I don’t intend for that to happen,” John says. “I’m not in any hurry to leave, but, at the same time, we have to have the best person for the job. The family members have to compete with everybody else.” The family is working with consultants to help them address succession issues.

John K. is often considered the heir apparent. Yet, he says, “Talking to my dad, I don’t get a lot of that. He hasn’t anointed me. Both of my father’s brothers retired at 65, but I’m not sure what the plan is for him.” Andy says he’d like the CEO job, too. “I don’t know what my dad’s plans are,” Andy says. “I look at the third generation, and most of us are pretty young.”

Leslie Dashew, a family business adviser in Scottsdale, says it makes sense for a business leader to take a cautious approach to succession decisions. “When families are [carefully] thinking through this process, it provides a great deal of security to employees,” she says. “If you want to run the business well, you run it like a business. You find the best talent. That may or may not be a family member.”

Doug Hawken, 58, Ping’s non-family president and COO, says he’s not privy to the succession planning but feels good about the prospects. “We have a good balance of family members and non-family members at leadership levels,” he says. Hawken might be considered a prospect to succeed John, but the two men aren’t that far apart in age. Hawken says he wants only one thing: “Whoever takes on that leadership role at this company has to have the same passion as Karsten had and John has. You don’t just assign somebody that passion—they either have it or they don’t.”

John turned the company around, streamlined it and worked through many of the rough spots, but there is still plenty of work to be done, the family acknowledges. Golf in the U.S. isn’t a growing sport, according to John and many industry sources, but the international market is just waiting to be tapped. As John K. points out, “In Japan, we don’t even have 1% of the marketplace. And that’s the second largest golf market in the world!”

In recent years, Ping opened new assembly facilities in both Japan and Europe as part of its strategy to take its rapid delivery system to the international market.

There is also some low-hanging fruit domestically, according to John K. “We’ve been a little slow to adjust to the market’s move from green-grass [golf course pro shop] outlets to retail stores,” he says. “They’ve really taken over the hard goods side of the business. We have great relationships with the golf course owners and operators, but, at the end of the day, the consumer isn’t buying product there.”

Doug Hawken, who watched the generational transition from the vantage point of a non-family insider, has a positive outlook for the future. “Since John has taken control, we’ve returned to a good position within the marketplace,” Hawken says. “We’ve had four years of growth now, but he’s willing to listen to the fact that we need to get our group together to go forward.” FB

Dave Donelson writes and lives in West Harrison, N.Y.

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Summer 2008

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