Succession at Erving Industries

Charles Housen never wanted to force his son, Morris, to take over the family’s diversified paper company. He still doesnÕt think Morris wants his job. But what does Morris think?

By Charles B. Housen

A year ago, I told my son, Morris, that it was time for him to “learn my job.” He replied, “I know you will be disappointed, Dad, but I don’t want your job.”

Instead, Morris, who is 33, indicated that he would like to manage two divisions of Erving Industries for which I was seeking a manager. Erving Industries is the holding company for a $100 million business that started as a paper mill in Erving, Massachusetts, in 1905 and until recently comprised 14 related enterprises, from paper mills and companies making various paper products to a trucking company and an environmental consulting firm.

Morris told me he wanted bottom-line responsibility, but not for the mill which is our core business. The paper industry has been consolidating and independent mills like ours require massive cash infusions in order to survive. He was not certain the paper business would be as good in the next 30 years as it had been in the last 30.

The two Wisconsin-based niche businesses he wanted to manage are small but highly profitable. One is a telemarketing operation selling paper products for advertising promotions. The other is a mail-order business marketing paper decorations to hospitals and nursing homes for holiday and special-occasion celebrations.

My first reaction to his proposal was that commuting five days a week from Massachusetts to Wisconsin was hardly any kind of life for a married man living in a newly purchased home with a wife who was soon to give birth to their first child. He pointed out that I had managers living in Pennsylvania and working in Wisconsin, and others living in New York and working in Massachusetts. Was this a CEO’s decision or a grandfather’s decision? he asked. “It’s a grandfather’s decision,” I replied, and left his office.

Upon reflection, I concluded that both companies were good businesses that he certainly was capable of running. But the only way he could have true bottom-line responsibility was to own the companies, I thought. I asked him if he would be interested in buying them. He spent a few weeks analyzing the financials and talking to bankers, and decided that, yes, he would like to.

A fair price was determined and the transaction was completed. Within three months my son had leased space in Massachusetts, transferred the inventory from Wisconsin, and hired and trained a few new employees. His daughter—my granddaughter—was born in June. In the past year Morris has been putting in 14 to 16 hour days, six days a week, in managing his businesses, which are now completely owned by him and independent of Erving Industries. I am pleased by the job he has done, but I am not certain where this leaves my future and the succession at Erving Industries.

Morris was named after one of my uncles, who had died only four days before he was born in 1963. This uncle had come to work in the original Erving mill in the 1920s, along with my father, and after World War II managed to acquire the company. I went to work there, in sales and finance, after serving in the Army, and at the same time, attended law school at night. When my uncle died, ownership passed to his five brothers and sister, including my father, who became president.

My father, who had been head of personnel, was much loved in the company but could not take the pressures of being CEO. He became ill, and I was asked by the family shareholders to make arrangements to sell the mill. Although I sold some of the company’s assets, my efforts to sell the mill were unsuccessful. I then worked for my uncles and aunts as a professional manager and, since then, have continued to operate the mill. When boom times came to the paper industry in the late 1960s and ’70s, we started to expand and diversify. About 12 years ago, I arranged to purchase the stock from the family stockholders, except for one aunt who expected her shares to continue to appreciate in value.

My wife, Marjorie, and I had two daughters along with our son. I did not start to think about continuity in the business, however, until my 50th birthday, when the children were still in school. At a meeting of the Young Presidents Organization, a fellow member reminded me that I was mortal and should make some provision for the company in case I died or was incapacitated. On the way home, I said to Margie, “You know, I’ve finally reached middle age.” And she replied, “Are you kidding? Do you know anyone who’s 100?” I asked her what she would do with the company if something happened to me. Without blinking, she said, “I would sell it. I don’t want to manage it.”

My daughters never showed any interest in the business. Both are high-achievers who went into other fields and have been very successful. Phyllis is a film editor in Hollywood, and Deborah is a lawyer who teaches law in Jerusalem and serves as an adviser to the Israeli Minister of Communications.

Morris had worked summers in the mill while attending Carnegie Mellon University and studying marketing. After graduating, he came to me and said, “Well, here I am, ready to go to work.” I replied, “So what?” He wanted to work at the mill but we didn’t have a job for him at the time. I advised him to look elsewhere. Morris was a little shocked. He went to his mother and asked, “What does Dad mean?” She told him, “He really wants you to get a job outside the company to gain experience.”

He went to work for a large distributor in Jacksonville, Florida, where he managed a telemarketing division and sold health care products. He developed computer skills and, after the company was sold, did a little consulting. At the same time, he went to New York University’s Stern School of Business at night and earned an MBA. Seven years ago, he came to work for Erving Industries as a controller for our health care division in New Jersey. When we sold that division, he spent some time in corporate finance as an assistant treasurer, then went into quality control at the mill, where, with his computer background, he was able to install a number of effective controls.

After two years he came to me and asked, “Now what do you want me to do?” That’s when I said, “I think you have to start learning my job.”

I had never wanted to force my son to go into the business. Although I think Morris saw Erving Industries as a family company, I tended not to. I had seen the relationship between by uncle and my father over the years; it had not been wonderful. Nor did I ever aspire to build a monument to myself or my descendants. Erving was a fast-track company and, despite the number of family shareholders, there was never much family feeling about it. The aunts and uncles, nieces, nephews, and cousins were only too glad to sell their shares and get their money. Though many of the cousins worked in the company at one time or another, they had all left.

I always thought Morris would make a great teacher. If he decided on a career with the company, that was fine with me. But I wanted to be sure he wasn’t doing it out of obligation, to please me. The experience of managing two small companies would be good for him. Still, I wondered about his real reasons for not wanting to train for my job. Perhaps he wanted to prove something to me first, that he was capable of leading Erving Industries. (His sisters kept telling me that.) I had always told him, however, that he didn’t have to prove anything to me. “The person you have to please,” I said, “is the one in the mirror.”

My son and I are different in many ways. He is very analytical, I am perhaps more intuitive. I’m a “numbers man,” but I was never obsessed by numbers like Morris. Although I am a risk-taker in business, I like sports such as golf and tennis which call for skill and discipline but are not dangerous. My son goes in for daredevil sports such as ice climbing and advanced skiing, but I am not sure he will be a risk-taker in business.

Morris had never worked directly for me. Was he worried that learning my job might set up conflict in our relationship? I have known sons who are always competing with their fathers. I had never really worked for my father. I worked for my uncle. He was a tough boss, and some people may consider me as such. I am sometimes accused in my family of not being a good listener. Maybe my son thinks I’d be hard to get along with in a work situation.

Recently, Morris and his wife taught us a new game in which one player is designated the king or queen, and the other players take turns thinking of gifts to offer that the ruler would want most. The king and queen each get to choose one, after which the player offering it assumes the throne and the game continues.

The choices offered are usually funny and a little outrageous, such as “a half-hour’s conversation with God” or “a lead in a musical comedy.” But they often hit home. In explaining the game, Morris recalled that he was king on a previous occasion and one of his friends had offered: “Your own company, with your father as an employee.” We all laughed, perhaps because the anecdote revealed a competition between us.

Morris’s two ventures are doing quite well. His cash flow is strong. He recently hired one of his cousins who had worked for me and left the company. He is traveling two or three days a week visiting customers around the country. As children, I think he and his sisters saw me as a very hard-working kind of guy. Morris, in fact, once told me, “I never want to work as hard as you do, Dad.” Now, he’s working even harder in developing his own businesses.

In November, I told Morris of my plan to eventually sell Erving Industries. I wanted to be sure he had made his choice and was not secretly hoping to take over the operation of Erving. He told me that he needed two years in his own businesses before he could decide. “Morris,” I said, “I don’t know if I can wait two years for your decision.” He asked for two weeks to think about it, and I agreed.

Morris’s decision not to learn my job had left the ball in my court on succession. With my board, I had put a contingency plan in place at Erving Industries. If anything happens to me, the vice chairman of the board will become president and manage the company along with my wife and her attorney, until they decide the best course of action. My wife is very supportive of Morris in his new businesses and is encouraging me to sell the company.

I am now 64 and fit; I have no plans for retiring any time soon. But I will not want to continue at my current pace forever. A time will come when I will want to spend less time on managing and more on improving my golf score and traveling for pleasure. I will also want to devote more time to some exciting projects outside the business that I engage in. I look forward to a transition a few years down the road that will be good for Margie and me and provide future security for our son and daughters—the best solution for all.

 

Charles B. Housen is chairman and CEO of Erving Industries in Boston.