Family Focus: The Mennel Milling Company

Family Focus:

The Mennel Milling Company

AFamily Focus: The Mennel Milling Company   n interview with the current president of Mennel Milling, Donald L. Mennel and his father the Retired Board Chairman addressing small family business issues such as, succession, competition and family roles.

Since its establishment by bankers in 1886 and through its development, The Mennel Milling Company has overcome typical family business challenges. Succession, competition, and family roles have all played a part in the company’s growth and success.Problems between banking families provided the opportunity for the Mennel family to gain control.Also typical in family businesses, the first job in the company for Donald M. Mennel (D.M.), retired Board Chairman, was emptying coal cars.As his education progressed, he was able to carry feed bags and use the broom in the mill,Due to other family business issues, D.M.’s reign as head of the company really began in 1958.

The Mennel Milling Company is currently the tenth largest flour milling company in the country with nearly $100 million in sales.There are four mills within the operation, located in Fostoria, Ohio; Dowagiac, Michigan; Roanoke, Virginia; and Mt. Olive, Illinois.The business and the Mennel family continue to tackle typical family business challenges. Donald L. Mennel (D.L.), the eldest of Don’s three sons, took over as president of the company when his father retired at age 65 to enter law school–graduating three years later from Ohio Northern University.Another son, John W. Mennel, Executive Vice President, is in the sales end of the business.

I had the distinct pleasure of spending a half day in Fostoria with D.M. We toured the offices and nearly every part of the fully automated mill.It was an enjoyable learning experience.During lunch, D.L. joined us for some additional conversation on the family business.The following are excerpts from the day’s discussions with both gentlemen.

You have tremendous recall and a detailed and extensive sense of history of both your family and your business.How did you get started?

D.M.:When the company was founded in 1886, they picked Fostoria because it was a hub of railways and also, of course, it was a very good wheat area.And the other thing it had was gas.The company had a contract with the City of Fostoria to give it free gas forever.It was a beautiful situation, but forever in our company is defined as three years.The City ran out of gas at the end of three years and had to convert to coal.

What circumstances first involved your family in the business?

D.M.:My grandfather was the first farm-implement distributor in the United States.Rather than go from farm to farm selling farm machinery, he conceived the idea of setting up a showroom of farm machinery and bring farmers to him.His first store was in Columbus, and he then established a branch in Mansfield.When the Harters invested in building the mill in Fostoria, they hired my grandfather to be the “Superintendent,” which meant, in those days, that he ran the company.

Is this history recorded somewhere or do you remember much of what has been told to you?

D.M.:Both.We have directors’ minutes going back to year one!Some of them are really interesting.In 1893, at a stockholders’ meeting, it was reported that they had put in a fire pond, sprinklers and hoses.Therefore, it was virtually impossible to ever have a serious fire.A year later, on Christmas Eve in 1897, it burned to the ground.

Have you always had a Board of Directors?

D.M.:Typically, when my father was alive, the Board of Directors was my father, uncle, aunt, and mother.We had a man who was a very close friend of the family who had been in the grain business for years in Toledo.His business did not survive the depression so he joined the company as grain manager. In the sixties he was elected director, and he was the only outside director we had.When I took over in 1958, we went to an outside Board of Directors and it’s been that way ever since.It has worked very effectively for us.

What prompted you to retire when you did?

D.M.: My philosophy is that, if the old man hangs around long enough, he’ll screw up the business, and so I promised my kids that, at age 65, I would get out and find something else to do, which was one of the reasons that I was able to induce them to come back to the company. I’ve seen it happen too often–the old man hung around too long and the company went down the tube.

The founder of our Roanoke, Virginia mill stayed in the business until he was 87.His son was 65 by the time he made his first decision. It took his son a year to kill the business.We bought it from the bankers.When I was taking the Case Management Development Course, the theory of one of my professors was that youhave to make plans for succession quite early and that’s what I was doing.I hunted for a business to buy and play with upon my retirement, but I couldn’t find anything that interested me.

Did you retire with something specific in mind?

D.M.:I matriculated from law school Labor Day of 1986.Same day I retired.Law school was an interesting challenge at 65.It was 43 years between final exams. Basically, I wanted to be very busy doing whatever I was going to do.It worked.In fact, I think I overdid it.I was too busy.

While you were growing up, did you feel that there was separation of family and business?

D.L.:I think there was a definite separation of family and business and I think it was intentional. Business problems were not brought home.We basically–I have two brothers and we are very close in age–were schooled in the public school system through eighth grade and then went to prep schools.So we went to three different prep schools followed by three different colleges. This was done intentionally so that we would each grown up as individuals.We were really separated from the business and there was absolutely no pressure or any discussion about whether or not our destiny was to be in the business.

When did you begin working for the company?

D.L.: I worked in the office one summer and then I worked in the mill for a couple of summers–I think primarily to show me why I ought to stay in college more than anything else.There was absolutely no favoritism; I got the worst job on every assignment.When I graduated from college, I did my own thing and we did not even talk about my coming back into the business until the company actually expanded and bought additional mills.

Is your generation doing the same thing with the next?

D.L.: Well, my children are in the local parochial school system and basically, yes, we’re doing the same thing.We’re not talking about business and we’re not talking about succession or plans for them. We want them to develop as individuals and do what they want to do in the long run.

How does that affect succession planning in the business?

D.L.: It makes it somewhat difficult; it’s always a challenge in a family business because the question is:Do you bring in somebody to be the middle person between the father and the son or do you set up a succession plan for somebody who’s in good health in their forties?

We basically set it up so that my brother is executive vice president and I’m president.If I get hit by a Greyhound bus, he and the directors have the problem of sorting it out, which is part of the reason for having an outside board of directors.But I think the other part of our succession plan has been that we’ve put in place key-man insurance to ensure that neither the families nor their destiny be tied to the business.I just hope that our children become good, strong individuals as adults.

How important is keeping the business in the family?

D.L.:I think that, while it’s probably not been said, there has been that driving sense, and we have as a part of our mission statement that we want to remain a privately held company.And that’s probably driven from two different sources.One is from the family itself and the other is that a lot of our key people have been in larger companies, public companies, have even been put through the rigors of being let go or being sold out, taken over, and the reason we were able to attract them is because we were a family company.They did not feel that threat.They don’t want that threat.

Aside from attracting good personnel, any other reasons?

D.L.: Publicly held companies in the commodities business are subject to the markets to a large degree and it becomes very difficult to perform on the quarter-to-quarter basis.I’m not sure I’ve ever seen us profitable after the first quarter because of the nature of our inventory, accounting, contractual commitments, both for purchasing and selling.We hope to obtain profitability by the end of the year.

You can do more as a private company?

D.L.: Absolutely.And that’s really one of the major advantages.You can plan long term and you have the comfort of necessarily not having somebody driving for dividends tomorrow or for liquidity of stock.

How are family conflicts handled?

D.L.: It’s the resolutions you have to deal with.I think that, on those occasions when we’ve attempted to use consultants, we’ve been disappointed because I guess my feeling is that the consultants tend to look to whoever hires them and feed back what they think you want to hear as opposed to really giving an objective point of view.Our best discussions occur after we’ve gone beyond sibling rivalry or whatever is created when you’re nine and ten years old and get down to what really is the problem.

What are the advantages of maintaining an outside Board of Directors?

D.L.: Having an outside board helps keep us aware of the fact that we’re all working for a company and our jobs are not ensured just because we’re family members.I think it helps in that perspective.But we try not to get them involved in family matters and we try to deal with those as family. Some family businesses go to great lengths to have family meetings; we tend not to do that and we tend to pretty much separate the business from the family.Conflicts that occur in the business we try to resolve within the business.One of the things you don’t want your children to see is too many problems within the business so that they think the family business is a ball and chain.

What would you say you have learned most within the business from your father?

D.L.:In many ways, my father and I are too much alike, so when he approached me about coming back into the business, he approached me with the prospect that first, I not work in Fostoria where he was working and second, I not report to him but report to somebody else, which I think was very beneficial.

Gradually, as I progressed through the company we became closer and closer friends.I mean, in addition to working partners, he became a confidant.Even today there are very few people whom you can bounce problems off, especially depending upon the type of problem that the CEO is dealing with.I find it beneficial to have somebody whom I can take a problem to and know they’ll sit and listen to it and give me a rational response.

What would you say was the biggest asset of having your son come into the business?

D.M.: I was very comfortable in the job my sons were doing, so I felt it was time to get out of the saddle and let them run with the company.I remained on the Board for ten years, but basically only showed at the office upon request for business discussion.I have not retired from the Board, but D.L. has been gracious enough to invite me to meetings.While I do not have a vote, I have retained meddling privileges which I exercise very sparingly.

D.L.: Actually, the period in which he meddled the least was when he was in law school, because he had no time.

D.M.: I might say there’s a corollary there; those were some of the most successful years of the company for whatever it’s worth.Of course, I claim I set it up that way.

Is it important to work elsewhere before joining the family business?

D.L.: Boy, I tell you, that’s one of the most important things I think can be done becauseyou have a win/win situation; everybody comes out ahead.If you don’t work elsewhere first, your success or failure in the family business could be judged as: “What do you expect; he’s his father’s son or his father’s daughter.” If you make it:”What do you expect?”And if you fail:”What do you expect?”And it does something for your self confidence as well, which is very important.

Of course, the other side of that is that it’s a real challenge in our industry.It’s so small and I imagine that’s true with an awful lot of others–that the competition’s not going to hire me because they know I’m there for a short time and I’m just going to take their trade secrets and run.Sometimes it’s necessary to get your experience in a totally different industry.But regardless, I think it’s very important.