BizTimes Media’s annual Family & Closely Held Business Summit was held Wednesday at the Brookfield Conference Center. The event’s keynote presentation featured a moderated Q&A between Richard Bemis, director and past chairman/CEO of Sheboygan Falls-based Bemis Manufacturing Company, and his daughter, Vesla Hoeschen, current chair of the board at Bemis.
Bemis has grown into a global leader in toilet seat manufacturing and one of the top non-automatic contract plastics manufacturers in North America. The company was founded in 1901 and, with Hoeschen, is now in its fourth generation of family leadership.
The keynote presentation was followed by a panel consisting of third-generation, fourth-generation and fifth-generation business owners: Anne Cookson, co-owner of Waukesha-based Baker’s Quality Pizza Crusts and Crustology; Matthew Powell, president of Pewaukee-based Century Fence; and Jeannie Cullen Schultz, co-president of Janesville-based JP Cullen.
Here are key takeaways as to how each of these family businesses have implemented unique strategies to find success.
Governance is pivotal for business continuity
“Having a good, strong board allows for continuity, especially if there’s any sort of discord in a family or any sort of transitional period, which is going to naturally cause discord,” said Hoeschen. “We don’t want to talk about when we’re not here, but we have to in a family business.”
In addition to the company’s strong fiduciary board, Bemis relies on several committees within the company (compensation, audit and finance, investment and governance committees) that are also led by independent directors. Two or three board members serve on each of the committees.
“There’s a lot of work that gets done at the committee level, so all the board members are making meaningful contributions,” said Hoeschen.
As for what a board should be responsible for, she believes shareholders should function at about “30,000 feet” while the board hovers at “10,000 feet” and management should have boots on the ground. Hoeschen said one of her biggest challenges is having independent directors with successful careers move on from discussions on operations and more into strategy.
When it comes to preparing the next generation to take on leadership within the family business, Bemis has been successful because each generation has viewed themselves as a steward of the company, meant to keep it going for just a period of time and then pass it along.
“A company is not something that can build itself. Being the third generation, I said I had the baton for a portion of this relay. It was my job to pick up the baton and pass it to the next generation, ahead of the competition,” said Bemis.
He added it’s rare that a family company celebrates 122 years in business and attributed part of Bemis’ success to reducing the number of owners in the company over time – what he called “pruning the tree.” Bemis believes this is a key strategy for companies looking to survive into the fourth and fifth generations. It’s important to make sure a company’s ownership group remains highly concentrated, he said.
Mentorship important to incoming generations
For Powell, who is the fourth generation of family leadership at Century Fence, his journey within the business initially lacked clarity and any sort of end goal. He relocated from the East Coast to join the company and found himself without a sense direction.
“I remember my first day I was sitting in my office and just twiddling my thumbs,” said Powell. “It was like, ‘What am I going to do today?’ No one was directing me so I had to find my own path.”
It wasn’t until he found a “game changing” mentor at BizTimes’ Family Business Summit in 2015 that he found more direction.
“Being in the second chair can be exhausting and maybe even sometimes demoralizing,” said Powell. “For me, I was able to find my escape with my mentors and coaches, and with reading as well. I think it’s so important to appreciate those in that second chair and if you’re in that first chair, make sure to lead and guide and give up yourself to help them.”
Consider different buyout option
Cookson and her brother are in the process of buying the family business from their parents.
The buyout agreement for Baker’s Quality Pizza Crusts involves Cookson and her brother buying 20% of the business from their parents every two years. The agreement is funded by dividends, which in the long run may have helped save the company. Cookson and her brother should have been entering their final purchase in the next few years, but the COVID-19 pandemic set them back. Baker’s Quality found itself with no customers or orders after the pandemic shut down the entire hospitality industry.
“Because we’re financing it internally and we didn’t go for outside financing, it allowed us during the pandemic to stop all dividend payments, which means we didn’t get our dividends and we stopped paying our parents for the buyout,” said Cookson.
The siblings have missed two buyouts at this point, but Cookson said the ability to stop dividend payments was the company’s “saving grace.”
“If we had been bank-financed on our buyout, we never would have made it,” she said.
Moving forward, the company continues to work on diversifying and is even considering new bread products like breadsticks.
Keep a conservative growth mindset
Family businesses, like any business, want to grow. Cullen Schultz believes that a family business must be more cautious in how it pursues growth for the sake of its employees.
“I remember my dad and grandpa saying don’t just chase growth. The last thing we want to do as a family business is have layoffs because we grew too fast and went and hired a bunch of people, but we aren’t able to sustain that,” said Cullen Schultz. “We really pride ourselves on having a conservative growth rate.”
That doesn’t mean JP Cullen leadership isn’t constantly looking for different growth opportunities. If someone does have an idea, they’re asked to put together a business case to present to the Cullen family.
