When you've worked so long for yourself, it's hard to begin working for someone else. When you've sold the family business, but choose to stay on to help the new owner grow the company, it's harder still. You no longer control the firm. You have to adapt your management style, your vision for the company, and your personal needs to fit the buyer's game plan. Some succeed in making the transition. Most don't. Maurice (Mike) Grossman, of Grossman's Inc. in Braintree, Massachusetts, is one who stayed the course.
Mike's family, which had run the company since his Russian immigrant grandfather started it in the 1890s, sold Grossman's in 1969 to Evans Products Co. For 19 years Mike played a vital role as Grossman's CEO. He retired in 1988.
What did Mike do to build a satisfying career in a company he no longer owned? What did Evans do to make Mike feel motivated and at home? I was more than curious, because I had sold my own family's company, Hermann Loewenstein Inc., in 1979. I, too, tried to stay on, but resigned after only four years, discouraged in my role.
Grossman's today is an $890 million public company. The chain of retail stores supplies building materials to professional contractors, remodelers, and serious do-it-yourselfers. Mike Grossman today is a fit and active 72-year-old. Now chairman emeritus, Mike still frequents his old office, where he maintains a cordial connection with management. It was there that I tried to uncover his secret for working for the buyer.
Rod Correll: Mike, could you describe what Grossman's meant to your family?
Mike Grossman: The family had been in business for a long time. My grandfather began by selling scrap and rags. He soon brought his four sons over to work with him. My father was the oldest son. It was a major strategic move when they went from a horse and wagon to a truck.
My father and his brothers started the modern-day business. They had six sons between them. At one point, there were 10 of us active in the business. Besides our building materials business, we controlled a couple of small banks and owned a few small shopping centers and some residential real estate.
Correll: So what was the family's thinking that led to the decision to sell Grossman's?
Grossman: Around 1965 or1966, we started to think about becoming more sophisticated and doing long-range planning. We hired a consultant, Abraham Zaleznick. I was in my early 40s. He was slightly younger. I still know him well; he is currently a professor emeritus from the Harvard Business School.
Correll: Why did you choose Abe?
Grossman: The senior Grossmans—my father and his brothers—were good orthodox Jewish people. We ran the business like more of a kibbutz. Family interests, family feelings, family attitudes frequently came before squeezing the last penny out of the business. Knowing that, we felt it would be critical for a consultant to also understand the roots behind our family. Because of his background and personal style, we thought Abe Zaleznick would work with us better.
Abe agreed that for one year he would do no other consulting except for us, so that we could get our long-range plan rolling. After a few months, he reported that what we were saying to each other was not what we were saying to him in private. We had goals for our own lives, and our families, that were different from the ones we talked about at family meetings.
Correll: Was he right?
Grossman: Yes. But it took some time to accept these facts. Our compensation and perks had always been the same. As a matter of fact, our offices were the same size, to the square foot. Equality, equality, equality was the way this business ran and no Grossman ever reported to another Grossman. Even so, there were some family members who wanted to get their assets out of the business, and it was Abe's feeling that unless we were ready to give up our kibbutz fashion and professionalize management, we ought to think about selling.
Correll: It would be hard to continue to grow the business with 10 equal people.
Grossman: It took a couple of years for all of us to reach that point of view. In 1969 we concluded that we should sell. We closed a deal, selling our building materials business to the Evans Products Co.
My brother Nissie and my cousin Everett stayed with Grossman's. Cousin David stayed for a few years, then left to go into law practice for himself. The others went to work for the family real-estate business. In the buyout, all 10 of us received 25 percent of our stake in cash and 75 percent in Evans stock.
Correll: How did you end up being the one to run the Grossman's division of the Evans Products Co.?
Grossman: A couple years prior to the sale I had started some "cash-and-carry" lumber yards. These became successful. Monford Orloff, the man who ran Evans, and other key managers decided that cash-and-carry was the future of the business. Since this was the part of Grossman's I was running, they decided I should run the company. Besides my managerial duties, I was given a seat on the Evans board. So was Abe Zaleznick.
Correll: How did the relationship between you and Orloff develop?
Grossman: Monford Orloff was a man I respected tremendously. He was a man of big vision. He prodded and pushed me to grow all the time. The early days with Mon were a period of great fun and excitement for me. Evans invested a lot of money in the retail business. We had a formula that worked. Our results were as good as anybody's in the industry. We became the jewel in the crown of the Evans Products Co.
Correll: So far, so good. Did this golden age come to an end and, if so, why?
Grossman: Mon continued to leave us alone. We had our own fiefdom to do with what we wanted, as long as the return-on-investment was right and the sales and profits were right. Evans would take our money, and they gave us money. But then, lots of things began to change. Beginning in 1978, Evans got into trouble in other corners of its empire. The problems had nothing to do with Grossman's, but we had to cut back on our openings. You know that in a retail business, if you don't fix up and relocate your stores, you're falling behind every minute of every day.
In 1980 more troubles hit the company. Evans had a division that made packaged homes. The business was based on selling merchandise and taking back mortgages. During part of that period, Evans had given people mortgages at 12 to 14 percent, while Evans was paying 22 percent for the money. Trouble!
Soon after, Victor Posner from Miami gained control of Evans. Mr. Posner and I didn't always agree. I took a leave of absence in 1982. Soon after, the Evans Products Co., of which Mr. Posner was now chairman, went into Chapter 11. Again, the reason for this was not Grossman's; we never had a losing year. Evans had tough times for a couple years as it worked its way through Chapter 11.
Correll: So things were going great and all of a sudden, due to no fault of yours, you and your company were in the soup. Did you ever blame Mon for Evans's trouble? Were you ever angry with him at pulling resources away from you?
Grossman: I was not happy, but the word angry doesn't describe my emotions at all. I had become part of the Evans team and, certainly, my role was to try hard to do the best job possible to save both Evans and Grossman's. To the best of my ability that is how I conducted myself.
Philosophically, I had made peace with myself many years prior. The Grossman family had sold the business. It was not ours any more. The problem that we found ourselves in was a byproduct of that decision to sell. The family— no one else—decided to sell. Those who stayed made their own decisions, too. So why would I be angry at Monford Orloff?
Correll: It appears that you and Mon remained good friends throughout this ordeal. I gather that was not the case with Mr. Posner. Did you have a difference in management styles? Did he invade the fiefdom? Were his values different?
Grossman: I don't want to discuss the conditions of my leaving Evans Products, or anything about Victor Posner.
[Mike Grossman later told Family Business his leave of absence was "mutually agreed upon" by himself and Posner. In the late 1980s and early 1990s, Posner, a corporate raider, pleaded guilty to tax evasion, was sued for plundering another of his firms, and was banned from any involvement in public companies by a federal judge.]
Correll: Okay, you left the company in 1982 and returned in 1984. How did that happen?
Grossman: The creditors committee, which was made up of the principal creditors (banks and vendors), had kept in contact with me all during the bankruptcy proceedings. They said that if they could get the Evans Products Co. from Mr. Posner, they would like me to run Grossman's. They did and asked me to return. Grossman's was all that was left of Evans. Everything else was liquidated. But Grossman's had fallen way behind. I was in my 60s. I agreed to run the business for three years. I told the board at the end of those three years that I would stay for one more year and find my successor. And that's what happened.
Correll: Looking at your career, before and after the sale, what were you most proud of?
Grossman: I was very proud of our family heritage, and I still am. It was an important part of my life to be a member of that kibbutz, that clan, that I feel was very respected in our community.
Correll: After the sale, was there any shift?
Grossman: The sale was 25 years ago, yet the Grossmans still give charitable gifts together. We are still a family—there's a Grossman Family Foundation. We don't see each other as much. Everyone's older now. I keep quite active. I happen to love to ski. I have a farm in Vermont where I spend as much time as I can. I also do charity work, I'm on a couple of boards, and I've even done some consulting. Life is just as busy as it was when I was CEO.
Correll: Let's examine the sale of Grossman's a little more, and your reasoning when you agreed to work for Evans.
Grossman: Don't forget the word "I" is totally wrong. There was a whole group of people. My father was quite ill at the time. He had one brother who had already passed on. But my brother and I and our cousins would have meeting after meeting trying to decide whether to sell the company or not. I guess it comes back to that one sentence I said originally—the different Grossman members each had different interests. Some family members wanted to pursue their own lives rather than have so much of their assets tied up in this one kibbutz.
Correll: And what did you want to do?
Grossman: I wanted to stay with the business. Monford Orloff did not push anyone out. Mon said to me, "You do what you want." I was able to say to the family, "Anyone who wants to work, works." However, some preferred to leave and run our other business interests.
Correll: So you and three other Grossmans went to work for Evans. Give me one anecdote regarding the support you got from Mon after the sale.
Grossman: Well, I became part of a corporate culture. Evans had five or six divisions, all strong, vying for capital. In order to get capital for expansion, you had to prove you had a good company, that the corporation was going to get a good return from its investment. I always tried very hard to beat our financial plan. I think out of the 15-plus years I worked for Evans, we probably beat our plan 95 percent of the time. Mon always kidded me that we were figuring our projections too low so that we would beat them.
I found Evans a very supportive environment up until the time the company got into trouble. When it did, it had to do what every other company does—cut back and slow down on paying the bills. It was a difficult environment then. I think in a family business, when people's egos drive too hard, when greed takes over, troubles start. Thank God that didn't happen in our family.
Correll: You were used to running your own show. Did it affect you, in any way, that you were not running the show?
Grossman: Rod, I never really "ran the show" before, either. Remember, I was working with a large family and we were all equals. People were amazed at how little back-biting there was. The seniors at Grossman's set quite a tone. It was more important to go along than it was to make the last penny.
Correll: So you had practice in coming to consensus on decisions before you sold?
Grossman: Long before. Nobody would sulk away if they didn't get their own way. We still had to work together the next day. It was good training. I also think that I must have had a flexible personality that permitted me to exist in the family environment and the corporate environment. Since I am sitting here 25 years later, it must prove that I am able to get along with a lot of different people.
Correll: Think back on those early years with Monford. There must have been some problems, even though you were very much in tune with each other.
Grossman: One of the things a public company attempts to achieve is to increase the stock price. There was a feeling in Portland, Oregon, where Evans was headquartered, that if they could give more exposure to the Evans name, it would be a wonderful thing for the sale of Evans stock. Therefore, why wouldn't it be a good idea to call all of the Grossman's stores Evans-Grossman?
I didn't agree with this. I felt that the way to make the stock price rise was to have better results. Still, the PR people felt that if Evans was better known, the stock would have better acceptance. I conducted a campaign to educate people about what happens in retailing. I sent a man from our advertising department and a photographer to create a scrapbook showing what other companies did. Filene's doesn't say Federated-Filene's. Jordan Marsh doesn't market itself as Allied-Jordan Marsh. I found example after example to prove that just having your name over the door doesn't make the stock price go up. The issue went away. It was necessary to take the time to persuade people to my point of view.
Correll: What were the responsibilities you worked out with Mon and what were the boundaries of your authority? How was it similar or not to your role at Grossman's before the sale?
Grossman: There was a vacuum after the sale that lasted about one day. Do you know what the vacuum was? No one told me what to do. No one told me anything! It dawned on me that I had to run this business. Remember, I had not been the head of this company before. Many shares of stock were set aside for my family; they would become ours if we achieved certain results at the end of the first year. I quickly set up an incentive program for the key people in Grossman's to try to make sure that we won those shares of stock. We went away to a hotel. We had a meeting and kicked off our program. I guess the launching of that program made me boss in a hurry. Everyone wanted to win.
Correll: What responsibilities did other family members have, and what sorts of authority were they given?
Grossman: There was a change in the corporate personality for them, too. They started to report to me in a real sense, something that had never happened in the past. My cousin Everett became in charge of our real estate. That was a very important function because at that time we were opening 10, 15, 20 stores a year. If cousin Everett blessed a location I felt secure. As we grew, so did he and his department, in skill and size, moving from seat-of-the-pants smarts to better research on potential locations. Everett stayed with us right until three or four years ago. He was very important to me.
Some nonfamily employees who had been with us a long time also stayed on. I felt very secure with these people. Apparently, they felt very secure with me. My being present reduced some of the normal anxiety that can surround the sale of a company.
Correll: You were a buffer in a sense?
Grossman: Sure, 100 percent buffer. I was the one who went to corporate. I went to the meetings. I was "the senator from Grossman's." I had to go out there and try to get the capital, bring it back, and tell the people what took place.
Correll: Okay. I understand what you and some of the other Grossmans did after the sale. Tell me how you felt. Did you feel as motivated and committed to the company as you did when you owned it?
Grossman: It didn't make one ounce of difference. I was even more dedicated than before. The family had never really committed the kind of resources that were now available to me. We did very little borrowing as a family. There was no big drive to grow as a family business. Everybody was very happy, secure. Now, I was in an arena where growth was so important, and that seemed to fit my personality. It was fun and, don't forget, I was doing it with other peoples' money.
Correll: I have occasional regrets about selling my family company. Did you have people in your family who felt that way?
Grossman: Of course.
Correll: And today, with their assets out of the business, is there still a lingering feeling of regret for some of them?
Grossman: You know, you are covering an awful lot of people. Some very interesting things have taken place. My cousin's son, who went to Harvard and practiced law for a couple of years...well, in school he had been a coxswain of a crew and always loved crew, and today he's head coach of the crew at Dartmouth. Here he is, a Harvard lawyer, and what has he ended up doing? He's living in Norwich, Vermont, coaching crew! I believe that he is doing that because of the options we gained by selling the company.
Correll: You worked for the buyer of your business for a long time. That's not the case for many people. The time period they work for the buyer is one or two years on average. What do you think are the most common reasons that cause the seller of the family business to be not able to work for the buyer?
Grossman: One of the things that I think is naive is that sellers permit themselves to think that they will have a great big future after the sale. Sellers must make up their minds that if they sell a business, they will have enough money to live the rest of their lives. If for some reason the work situation gets desperate, they can always quit. My belief is that when you sell your business, you should hope that it works but not count on it.
Correll: Being your own boss translates into independence. People tell me the loss of independence is one of the most important reasons it doesn't work. But sometimes there are other reasons. One fellow realized he was in over his head. The buyer wanted to grow the business a lot faster than the seller felt he could. And he didn't feel he had enough of a relationship to say, "Look, Joe, I can't run this business the way you want me to." So he sat there, almost catatonic, until they both realized it wasn't going to work.
Grossman: What made mine work for so many years with Mon was that he and I fit. He wanted guys to run the business and left them alone, and I wanted a chance to run the business and be left alone. That's a fit!
Correll: Were there other reasons it worked in your case?
Grossman: The companies fit. Grossman's fit Evans's need for a retail business with a steady cash flow, and it fit Monford's personality to buy the business. It fit my personality to be left alone to run it.
Correll: So what recommendations would you make to a family business owner who is contemplating going to work for the buyer of his business? What clarifications of terms should he seek, whatprotection should he structure, what guarantees should he negotiate?
Grossman: Get a good contract and make sure you have no illusions. In other words, it is somebody else's business. You have sold your baby and don't kid yourself. Look at it strictly as you would any other business deal. If it works out, fantastic. If it doesn't, remind yourself, "I have other options in my life—I'm not dependent on working in this spot anymore," and act accordingly.
Roderick W. Correll leads his own consulting firm, R.W. Correll & Associates in Johnstown, N.Y., which concentrates on family businesses and entrepreneurship. He was the first executive director of the Family Firm Institute.
There are three important lessons that struck me after reflecting on my conversation with Mike Grossman. The first has to do with the importance of a mentor in preparing someone for leadership. Abe Zaleznick played this role at a key point in Mike's career. Certainly, there must have been other people and factors in Mike's life that gave him the self-esteem to lead successfully. But it was clearly Abe who gave Mike the professional polish that allowed him to become an effective hired gun.
The second is the importance of the "fit" between the seller and the buyer. Mike and Monford Orloff of Evans Products (left in picture) dreamed the same dreams, shared the same values, and talked the same language. While Mon was in control, Mike had no problem working for Evans, even during troubled times. From personal experience I know that when there's a fit between you and the buyer, there's no end to the energy you can find to make your deal work.
Finally, there is the importance of detachment. Remember, as Mike put it, "You have sold your baby" and are, if you've been fortunate, "not dependent on working in this spot anymore." A mentor of mine put it similarly: "Pursue, but don't chase, a deal. If it doesn't work, drop it. You will find other deals that will."
—R.W.C.