SEPTEMBER/OCTOBER 2017


Hermann Services Planning a smooth ride for future generations

As G4 takes the wheel at Hermann Services, the Hermanns have made changes to foster better collaboration among business units and family members.

By Hedda T. Schupak

Without trucks, America stops.

Virtually anything Americans touch likely rode on a truck at some point, notes Terri Hermann. And in the Northeast or parts of the Southwest, there's a good chance it rode on a truck owned by Hermann Services Inc., where Terri is the project manager.

The fourth-generation trucking, warehousing and leasing company was founded in 1927 in North Brunswick, N.J. Fred J. Hermann started the business, originally known as Hermann Forwarding Company, with a single truck to haul watermelons for the local A&P supermarket. Over the years, its role grew from trucking to full-service distribution, serving major clients like Union Carbide and Johnson & Johnson. It also helped advance new technologies in the industry, such as two-way radios (which enabled drivers to communicate without having to stop to find a telephone) and, later, RFID tracking software.

Founder Fred J. Hermann and his wife, Myrtle, had three sons: Fred (Jr.), Richard W. (Dick) and Albert (Ab) Hermann, all of whom went into the business.

Under the leadership of the second generation, the company expanded into warehousing and leasing, creating what Hermann calls "Total Distribution Service." Ab ran the leasing business and Dick ran the transportation business. Fred (Jr.) left the family business in the 1960s to form his own company.

Today, Hermann Services Inc. is a holding company with three distinct operations: Hermann Transportation Co., the trucking company, with locations in central New Jersey and Houston, Texas; Hermann Warehouse, with facilities in New Jersey and Delaware; and Hermann Leasing, which leases trucks and trailers and is based in North Brunswick.

Although separate, the divisions share certain functions. Over the years, some of those were decentralized, then later reconsolidated as market conditions demanded. All that reorganizing wasn't always easy, says Jessica Hermann Spearnock, 37, fourth-generation vice president of sales and marketing. Sometimes, the consolidations resulted in jobs being cut or changed.

Now, as the third generation is starting to turn the reins over to the fourth, the company wants to ensure a smooth ride for the eight family members and 294 non-family employees who work for Hermann Services.

"It's important that while running the business, you still want the family unit to remain intact," says Richard (Rich) F. Hermann, 43, the G4 president of Hermann Leasing. "Business is business and family is family, but there's going to be decisions made that some family members might not like. The same thing within the company: Some decisions are tougher than others, but it's for the greater good."

G2 members Dick and Ab had exited the company by the early 1990s; they and their brother Fred are now deceased. Fred's children were never part of Hermann Services.

Dick's G3 sons Richard (Rich) J., 70, and Dennis, 65, along with their cousin William (Billy), who was Ab's son, joined the company in the 1970s.

Billy left in 2000 after acquiring sole ownership of Palmer Distribution, a Texas company Hermann acquired in the 1980s. Palmer's owners had died, and the company was struggling. One of Hermann's key clients, Union Carbide, was also a client of Palmer's and asked Hermann to send a team of managers to run Palmer. After turning around the company, Hermann bought it and Billy ran it under the Hermann umbrella until buying it outright. He has since retired and his son runs Palmer. The two companies have no business connection today.

Dennis, the G3 CEO of Hermann Services, plans to retire in mid-2018. His son, Jeff, 36, is president of Hermann Transportation. Rich J. was president of Hermann Leasing until 2012, when his son, Rich F., was named to that position. Chuck Capra, a non-family executive who has worked for Hermann since 1982, is president of Hermann Warehouse Corp. and sits on the board of directors.

Rich J. retired in late 2016 after a two-year phase-out, but he still serves on the board. His wife, Stelsa, worked as a billing clerk for Hermann Leasing for 30 years and retired shortly before he did. In addition to their son, Rich F., their daughters, Jessica Spearnock and Christine VanHise, work for the business. Spearnock is Hermann Services' vice president of sales and marketing, and VanHise is recruiting and retention manager for Hermann Services. Rich F.'s wife, Tina, stepped in to cover for a sick employee but has since left.

Dennis's wife, Terri, 60, is Hermann Services' project manager. Jeff's wife, Luisa, is vice president of finance and administration for the trucking division. Dennis and Terri's eldest son Bryan, 37, is a firefighter who also works as a recruiter for the company. Their daughter, Nicole Hermann Coovert, doesn't work for the family business.

Consolidation. Multiple reorganizations of various departments sometimes left family members feeling raw. For example, the recent consolidation of the company's payroll and finance operations into one department meant Spearnock had to do something else. "That's how I got into sales and marketing," she says with a laugh.

"Any changes were done strictly for economics, trying to adapt and consolidate functions that at the time made sense to consolidate," says Rich J. Operations such as safety and human resources have been shared since 1970s. Since the 1980s, all marketing brochures include information about all three divisions, and their production costs are shared across the divisions.

While Spearnock likes her new role, she sometimes misses finance. Prior to joining Hermann, Spearnock worked for an accounting firm in Princeton, N.J. She was doing very well there—one of only two to survive a departmental layoff—when her father called to ask if she would join Hermann Leasing to replace the bookkeeper, who was retiring.

At her previous job, Spearnock had learned all her former colleagues' roles, including accounts receivable, cost accounting and payroll. She was quickly promoted to head of Hermann Leasing's financial division.

"I had to supervise clerks who were there when I was a kid," Spearnock says. "My challenge was getting them to respect me on a professional level."

She won over the employees, but when she became VP of sales and marketing at the start of this year, some of the same challenges resurfaced.

"There are some growing pains, just like anywhere when you are changing things," she says. "I am used to accounting, seeing instant gratification for work and daily tasks, and you don't get that in sales and marketing." On the plus side, her new position offers more variety than her old job, she says. "I enjoy the people aspect, and every day is different, so I do like that."

Streamlining ownership. The G2 leaders, Dick and Ab, each had owned 50% of the company. The G3 leaders, Dennis and Rich J., also each owned 50% but gifted shares to family members over the years; their combined holdings decreased to 75%.

In February 2017, Rich F. and Jeff bought all the shares they didn't already own, including the 75% held by Dennis and Rich J. Rich F. says this was a strategic and necessary step to reduce financial burden on the company during the transition of ownership to the fourth generation. The process went smoothly, he says.

The two G4 divisional leaders now each own 50%, as their grandfathers did. There are no plans to re-expand ownership to other family members, though the option hasn't been ruled out. The matter would have to go through the board of directors, says Dennis.

The company's board consists of Rich J., Dennis, Rich F., Jeff, Chuck Capra (the non-family president of the warehouse division) and the business's attorney, Dave Lonski. Rich J. and Dennis take turns serving as chairman of the board in alternating years.

Lonski has worked to boost communication, starting with a family meeting a few years ago. "It's for communications, but also major events in the company, so everyone is hearing the same thing, and non-director family can comment or ask questions," says Rich F. Family meetings are held on an ad hoc basis. One was convened before the change in ownership. Another meting was held last year, when the trucking operations of Hermann Leasing were consolidated into Hermann Transportation's operations and the two sets of dispatch and safety employees were merged.

There is also a family committee, with Christine VanHise as spokesperson. Members include all G4s, even those not working for the company.

"We created the family committee to communicate with all family members the decisions the board is making and direction the company is going," says Rich J. "Even if they're no longer shareholders, the board wanted to get input from family members on any concerns they had."

"With Jeff and I taking ownership of the company," Rich F. says, "it's a means to bridge a gap that could have been created between us and them: to give them a voice as to the goings-on around the company that Jeff and I may not be aware of or keen to."

Jeff gently clarifies, "Not necessarily to give them a voice, because they have a voice, but they can air concerns if they have any concerns."

Spearnock says the business consolidations have helped strengthen relationships both in and out of the office. "We were all used to running separate divisions, so we were never forced to work with each other on a more intimate level within the organization until now," she says. "Coming together reminded us of the importance to carry on a relationship outside of the office. This made family gatherings more important to us now, so we could maintain both personal and professional aspects of the family business."

Leadership transition. Rich F. and Jeff both grew up working summers in the business. Their duties in those early years gave them experience as maintenance and warehouse workers, forklift operators, loaders and unloaders, and drivers' helpers.

"After graduating from our respective colleges, when we came in full-time we let it be known that we wanted to be leaders, and our fathers let us," Rich F. says.

Rich F. began with a special project to digitize the maintenance facility that fixes the trucks. From there he moved up the managerial ranks, as did Jeff.

"We knew we wanted to own the company and knew all the facets," Rich F. says. "We worked hard to prove ourselves to the previous owners."

Both the older and younger Hermanns say the transition went smoothly with only a few generational conflicts.

"We [G3] hadn't learned much about technology, and we butted heads [with G4] over it," says Rich J. "We worked it out. It was the evolution of a business, and it continues. You can't exist as a dinosaur; you have to evolve. The younger generation was very much aware of what had to be done."

Rich F. credits his father's generation for their guidance in prudent risk taking. "At 23 we wanted to buy a lot more shops and expand more, but you learn a lot about tempering that," he says.

Chuck Capra, a director since January 2017, has two brothers working for the company. Capra's father, Charles, had been vice president of operations before retiring. In addition to the Capras, there are multiple other employees with family members who either have worked or currently are working for the company.

Spearnock's mother-in-law, Pat Spearnock, has been with Hermann for 39 years. Jessica met her husband, Brett, in the summer of 1997, when they both worked in the office.

Working with family. A few other family members besides Spearnock worked elsewhere before joining the company, but it's not required and not everyone did. Rich F. notes that the company won't create a position just to give a job to a family member.

Rich F. says that any family member wishing to join the business must add value, go through the same vetting process, and have the right requirements for the position he or she aims to fill.

Terri, Dennis's wife, has had flexible work hours both for child rearing and to deal with medical issues. "I got the privilege to work from home, but I have reports to do, and I have to do them," Terri says. "I can't just say 'I'm not going to worry about it today.' And I need to respect the position of manager, even if [the boss] is my son. He has a business to run, and whatever I'm given the responsibility to do, I need to take it seriously."

Terri's primary role is implementing technology. She says getting the company up to speed digitally was her biggest career challenge.

"You still have to load and unload the trucks by hand, but everything else, from mileage reports to driver loads to the logs required by the government, is all electronic data that has to be managed," Terri says. "I knew it would be hard to explain to Dennis and Rich J. to look at the data differently than how we used to."

Terri's advice for other business families is to "keep the drama out," because "it doesn't do any good in personal or professional life. People may make a mistake, but I don't believe anyone comes in purposely to do a bad job, so mentor and nurture them."

Her son and nephew appreciate the mentoring they receive. "There are a couple of guys here with years of knowledge—our fathers—and we rely heavily on them, meeting every single day and discussing the business at hand and taking notes, and building from that and continuing," Rich F. says.

Hedda T. Schupak is a business writer based in the Philadelphia area.


Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.