On Business | The hard work of letting go of power
As a Bucks County family firm has learned, allowing the younger generation to take the reins can be painful.
By Peter Binzen
Inquirer Columnist
The toughest challenge facing founders of family businesses may not involve technological change or profitable operations. It may simply involve letting go.
Letting go is not always simple. Phil Lanctot Sr., 62, who founded NRI Data & Business Products Inc. in Morrisville in 1975, has discovered just how painful the process can be.
Four years ago, he stepped down after 25 years as NRI's chief executive officer. Begun as a recycler of high-speed computer ribbon, the company is now a distributor of computer equipment and data storage systems.
As his successor, the founder named Phil Lanctot Jr., the oldest of his three sons, all of whom work for NRI.
It turned out, however, that although the son was eager to take the post, the father wasn't really prepared to take a backseat.
"Giving up control is hard," he said. "It's a scary thing. I started this business from scratch. It's my whole life."
He said that, while he has accepted his reduced role as NRI's board chairman, it hasn't been easy. "I might have been a little too... ," he broke off the sentence but then added: "You meddle too much. You've got to trust these guys. I did ruffle a few feathers. I'm just a maniac for detail."
Phil Lanctot Jr., 38, put it this way: "We're still struggling with the succession plan. What do you do when one guy is ready to take over and the other guy still has a lot of gas in the tank?
"It's a roller-coaster. You have two people who care about the same thing passionately, and once a year there's a blowup."
Francis G. Warburton, a corporate financial adviser who meets regularly with the Lanctots, said their styles are very different.
Phil Lanctot Sr. is "more an A-type personality, assertive," Warburton said. "He speaks his mind and takes charge."
Phil Lanctot Jr., Warburton said, is "tough as nails, but he's a lot quieter and more introspective. While the father is relatively sales-oriented, the son has marketing strengths, good instincts, and a good grasp of finance."
What's happening at NRI is a frequent occurrence in American business, said Tim Habbershon, director of the Institute for Family Enterprising at Babson College in Wellesley, Mass.
"Transitioning the founder out of an entrepreneurial business is a typical problem," Habbershon said. "It's more complex when you add a family component and the clash of life cycles with two cooks in the kitchen."
Habbershon, who formerly headed the Wharton School's Enterprising Families Initiative, said NRI appeared to be at a critical stage.
"It has probably outgrown the intuitive management style of the founder, and needs to develop the skills and competencies to move to the next level," he said.
Under Phil Lanctot Jr., such a change appears to be well under way. NRI, formerly a basic distributor, has added services and improved the technical competence of its sales force. Its 51 employees work at two Pennsylvania offices and one each in New Jersey and Massachusetts. It operates a fleet of 15 trucks to serve its commercial clients.
NRI's revenue jumped from $18.7 million in 1999 to $27 million in 2000 and $37 million in 2001. In the national economic slump and recovery since then, its sales have been flat. In the year ended March 31, they totaled $35.8 million.
Although Phil Lanctot Sr. never planned NRI as a family business, that is what it has become. He holds controlling interest, but other shares are held by Phil Lanctot Jr. and his brother, Gregory Lanctot, 36, NRI's business development manager. The youngest son, Michael Lanctot, 33, a graphics designer, is scheduled to become a stockholder at a later date.
The elder Lanctot, a Vermont native of French-Canadian descent, has been driving hard since childhood. A star running back at Bishop Egan High School in Levittown, he later coached football at Egan and at Northeast Catholic High School for Boys in Philadelphia.
He supplemented his school income - about $4,500 a year at Egan and possibly $8,000 at North Catholic - by working as a real estate salesman, bartender, camp counselor, and as a track worker for Conrail.
He was also busy at home. Phil Lanctot Jr. recalled that his father was a stern taskmaster: "He taught the three of us a pretty good work ethic. There was never any idle time. He didn't like teenagers lazing around the house. I remember him waking us up with a snare drum. By the age of 13, I was cutting five lawns."
Phil Lanctot Sr. began selling life insurance on the side in 1970, and he left North Catholic one year later to join an insurance company that named him its state sales director. In 1975, the company asked him to build its territory in Ohio or Georgia.
Neither he nor his wife, Barbara, wanted to relocate with their sons. So Lanctot left insurance and embarked on the venture that would change his life.
He learned that a tiny firm in Tullytown, Bucks County, was making good money by recycling high-speed computer ribbon for the data centers of Wall Street investment houses.
The nylon ribbon, which could be 20 or 30 yards long and more than 15 inches wide, cost close to $20 per spool. Lanctot figured that a big company using 200 ribbons a month might be spending almost $50,000 a year - just on computer ribbon.
After raising $36,000, he purchased equipment, including two table-top machines that reprocessed computer ribbon.
He got a list of companies with large data centers, and phoned for appointments. Give me half an hour, he said, and I'll cut your ribbon costs in half.
In this way, he persuaded many data centers to sell him their used ribbons for $2 each instead of discarding them.
After cleaning the nylon fabric and inspecting it for tears or other defects, he would carefully run it through his inking machine. Presto! The reprocessed ribbon was soon ready for packaging and resale back to the company for $10.
"The whole key was that a lot of data centers changed ribbons frequently," Lanctot said. "They didn't punch holes in the nylon."
Lanctot was a good salesman, and soon he was reprocessing used high-speed ribbons collected from companies as distant as Newark, N.J.; Wilmington; Harrisburg; and Bethlehem.
In 1981, he purchased Eastern International, the Tullytown company that had whetted his interest in reprocessing ribbons. The price was $1.5 million, and the deal got Lanctot into the Manhattan financial market.
But high-speed computer ribbons were on their way out. By the mid-'80s, virtually all large data centers had converted to laser technology. Lanctot had foreseen the transformation, and his company was ready.
Changing its name from just NRI (for National Ribbon Inc.) to NRI Data & Business Products, he began broadening its business. Now it offers laser-jet printers, data cartridges, tape libraries, network appliances, workstations, consoles - hundreds of technologically advanced products.
When Phil Lanctot Jr. started working for his father's company after graduating from LaSalle University in 1985, NRI had two offices and annual sales of about $6 million. In subsequent years, he helped to negotiate the purchase of five smaller companies that led to NRI's growth.
Of the "head-butting" between his father and himself, Phil Lanctot Jr. believes no serious damage was done. "I've heard horror stories," he said. "Our situation was bad, but not compared to family problems at other companies."
Earlier, he had "tried to build a wall" around his father, but now relations are improving. "It's a maturing process," Phil Lanctot Jr. said. "You just kind of know which issues to avoid."
Peter Binzen's e-mail address is BusinessNews@phillynews.com. |
