Succession Planning at Erving Industries

The Changing of the GuardNortheastern University

Family Business Quarterly

Northeastern University Center for Family Business

Charley Housen succeeded his father as head of Erving Industries and created one of the nations largest privately owned paper-processing companies. His son, Morris, is very bright, passionate and energetic. But Morris and Charley have very different styles. And those styles arent always compatible. Charley would like to see Morris at the office by 8:00 AM in a shirt and tie. Morris says his father doesnt see him at 1:00 AM working in his shorts in his home office. As a follow up to two previous presentations to the Center, Charley and Morris share the latest chapter in their work together.

Ego conflicts, loyalty issues and differences in strategy and vision. These are just some of the succession issues that Charley and Morris Housen have struggled through, yet they still managed to avoid family conflict. They accomplish this by effectively separating their business and personal feelings.

The attendees at the November Executive Breakfast meeting were treated to the third part in a series of presentations on the succession planning at Erving Industries. Charley Housen and his son, Morris, discussed their working relationship with Center members in an entertaining and candid manner.

Charley Housen, Chairman, began with a brief recap of the timeline of events over the past several years. He mentioned how his son, Morris, had left and returned to the company twice before. The first time, Morris served as COO. But Charley and Morris were unable to agree on a single vision for the corporation.  They were both trying to be CEO at the same time.

Charley also felt Morris needed more time to learn the job. Charley saw Morris as a “non-executive son” with a work style that differed from his own. Morris prefers to balance work hours with family commitments, not working the traditional hours, but putting in additional time late in the evening as needed. Charley expected Morris to work “standard” hours and dress formally.  Morris was more concerned about results and less about process.

The father-son team struggled with several issues:

1. Communication-their personal relationship was fine, but their business relationship was poor.

2. Strategy/Vision-not the same. Charley said they were “watching different movies of the same company.”

3. Profit vs. growth-their objectives were different, but they agreed to disagree.  Morris wanted results; Charley wanted process.

4. Ego conflicts-they disagreed on selling existing businesses that Charley grew. The double CEO format simply did not work. As Morris said, “We weren’t on an equal footing.”

5. Managers and loyalty issues- younger managers looked to Morris; older managers continued to go to Charley. Managers were most loyal to the one who hired them.

Charley’s and Morris’ work styles and personalities clashed. Morris struggled with deference to his father, but was always respectful.  So Morris soon left to pursue a different career path. He started up Birch Point, a specialty paper products company.

In the meantime, the paper industry was changing. There was consolidation and the larger competitors were buying market share. Erving Industries’ growth had slowed and Charley lost the passion. He lacked “the energy and enthusiasm.” Charley had always claimed “I am a builder, a grower, an acquirer and Morris is bottom line”. Morris’ Birch Point business was going along well, but he was also becoming increasingly interested in his father’s business.

Charley was now ready to relinquish CEO responsibility. The two came together and discussed a second tenure at Erving Paper for Morris.

This time Morris approached Charley with a set of “conditions.” “It was a strongly worded statement, but not an ultimatum,” Charley said. The most important issue was for his father to relinquish direct management of the company. Charley agreed. He felt that Morris was ready. “As a parent you know when your son or daughter is ready.” Charley had been disappointed when Morris initially didn’t want to succeed him In leading the business. “I had originally felt Morris lacked the competitiveness,” he said, “But now he has acquired it.”

Now, with father as Chairman and son as President and CEO, there are still some day-to-day challenges:  . Charley still answers emails directly with VP’s. (Morris prefers that he

doesn’t do that, but at a minimum asks that he copy Morris with the responses.)  . Charley still finds it difficult selling off businesses in which he has had a long- term interest. He says that Morris has an MBA, a “making money kind of thing.”

Older managers whom Charley hired still second-guess Morris’ decisions,  asking, “What would your father say?” Morris is now more assertive. Many of the younger managers whom Morris hired during his first tenure are still with the company. Charley had always hired more seasoned managers and kept a clear command, while Morris has the patience to develop and train them and let them operate more autonomously.

Since retiring, Charley finds his mail is not as interesting. He gets fewer phone calls and has a lack of urgency in his life. One of the things they both realize is that management and ownership do not need to be the same thing. Professional managers and family owners can coexist.

They both realize that there had to be a formal passage of power and recognition of Morris as the new President. The closest Charley and Morris came to a passing of the baton was at a recent Quarter Century Club meeting of many current and former employees.  Charley indicated that he would be passing control of the business to Morris and then Morris addressed the crowd as their new leader.  When Charley and his father went through a similar transition it was also formalized at a Quarter Century celebration. At that event, Charley’s father presented his son with his 50-years service lapel pin. The accompanying speech and presentation of the pin was their turning point.

Charley has asked to not have a retirement party. In lieu of such a celebration, Charley surprised everyone at the conclusion of the breakfast meeting by presenting Morris with that same 50-year pin. The changing of the guard occurred. The leader for the next

generation had been anointed.