Through the doors of a very exclusive organization pass a group of individuals with a special understanding of each other's business problems.
It is, by contemporary standards, a secret society. Founded 32 years ago, it has about 4,000 affluent, powerful members, many of them the heads of some of the nation's most dynamic and successful companies. Current members include Leonard Lauder (Estee Lauder), W.R. "Tim" Timken Jr. (Timken Co.), Peter Farley (Cetus), Chuck Schwab (Charles Schwab & Co.), Tom Johnson (Los Angeles Times), Ray Hunt (Hunt Oil), Robert Low (Savin), and Rod Belden (Sykes Datatronics). But the organization has rarely been written about. Even when former Presidents Carter and Ford spoke at a recent meeting an Hawaii the press was skillfully excluded.
"We're just not interested in publicity," says Christopher Lehman, the former executive director of Young Presidents' Organization Inc.What the organization is interested in, according to Lehman and its own motto, is: "better presidents through education and idea exchange."
"It tailors itself to deal with the young, high-energy, successful entrepreneur," notes one member, Charles B. Housen, president of Erving Paper Mills, a family-owned business based in Erving, Mass. "That's who they're trying to nurture, and they really do a good job of it."
YPO, organized in 1950 by Ray Hickok, then president of Hickok Manufacturing Co., was created for people exactly like Housen: individuals who had inherited a family business, needed someone to talk to about the problems they were encountering, but found that no one -- employees, consultants, spouses, or priests -- understood what they were going through. No one, that is, except the president of another company. Following the death of his father, Hickok, at age 27, took over the largest manufacturer of men's belts and jewelry in the world. He found that his education and experience just weren't enough. "I felt that I needed broader management roots," he recalls. "And I felt that untold benefits would accrue by getting together with other younger presidents."
Hickok had a list of 600 prospective members compiled, contacted them in person, and found them receiptive. The first official YPO meeting in New York City included General Robert Johnson, then the head of Johnson & Johnson, and Douglas Fairbanks Jr., who ran a production company.
Housen's reasons for joining YPO reflected Hickok's concern. "At my own company, we have some very bright, energetic managers," he explains, "but I'm the boss. I say 'popcorn,' and they say, 'Terrific!' And I know popcorn's not terrific. I go to a YPOer and say 'popcorn,' and he says, 'Bull! What'dya mean, popcorn?"
Family-owned businesses still account for 40% of YPO's membership, but now about 30% of the members are entrepreneurs who head companies they founded, and the rest are "professionals" -- people who purchased a company or were hired to run one. About one-third of the companies are publicly traded, and some are among the biggest in the country. "Coal, construction, meat products, men's and boys' clothing, sawmills -- you name it, we've probably got it," observes Lehman. "We've got someone for every SIC code going."
To qualify for membership, a person must have become, before age 40, the president or chairman and chief executive officer of a $4 million corporation employing at least 50 people. The financial criteria differ for service companies and banks. The candidate must be recommended by two members of a local chapter and approved by a committee of the board of directors. Prospective members may approach the organization directly, but most are scouted by current members. There is an initiation fee of $600 and an annual membership fee of $600 plus the cost of individual YPO events. On their 50th birthdays, members are awarded a rocking chair and drummed out.
A number wind up in one of two alumni organizations, the World Business Council or the Chief Executives' Forum. Hickok, now 63, is the only lifetime member. Although he sold Hickok Manufacturing in 1971, he remains active with Ray Hickok Associates, a mergers and acquisitions concern, and the Ray Hickok Collection, which puts out a series of wildlife photographs, both based in Rochester, N.Y.
Many members, like Housen, regard the YPO affiliation as the most valuable of their business career. "I think I'd still be running a relatively small company if it weren't for YPO," Housen notes. "My growth was certainly enhanced because I found out that what used to be a mystique, wasn't. I mean, there were ways to do things, such as, how do you put together a financing program without putting everything on the line? How do you set up a communications system between your plant here and your plant in Indiana?"
When Housen joined YPO 10 years ago, Erving Paper Mills was a $12 million-to-$14 million-a-year, 485-employee papermaking concern; today, it is a $125 million, 1,500-employee corporation of 11 companies in eight states. "I don't think that I'd have had the confidence, as early, to do the things I've done," says Housen, who, at 50, is now preparing to depart from YPO.
Housen notes that as his colleagues leave YPO many of them sell their businesses, get divorced, or crack up. "YPO is a support system that tends to hold things together." He adds with a smile that he doesn't intend to pursue those options. Instead, in typical YPO fashion, he held a local YPO chapter meeting entitled "Me and My World" to deal with the rite of passage.
A tall, beefy man with thick features who occasionally refers to himself as "a boy from the small town of Erving," Housen has smoothed away the rough edges with education and impeccable tailoring. He seems the complete cosmopolitan. But it wasn't so in 1968, when he emerged as the general manager of Erving Paper Mills after his uncle died and his father retired.
Housen had a degree in economics, attended law school, and worked in the company. "I began as a kid," he explains. "I'd sold on the road, done the books on weekends." But he was unprepared for the rigors of running a sizable business.
"I was running al over the country, taking every course I could get, including ones offered by the American Management Associations." Finally, a more experienced hand intervened. One night at a party, the host took Housen and his wife, Marjorie, aside and said, "Now I want to talk to you young people about a great organization."
Housen attended a few meetings of the New England chapter and was impressed by both the organization and its members. Although an inveterate nonjoiner, he joined and soon began to appreciate the "very heavy learning and very heavy social experience" that YPO can offer. "I was thrilled that this was available to me -- that I could talk to people who had experiences that I was just growing toward."
YPO has its headquarters in New York City and an annual budget of more than $6 million. It has 86 local chapters and members in 47 countries, although most -- 3,200 -- live in the United States or Canada. The national organization each year has sponsored two "Universities for Presidents" -- intense, one-week programs offering a wide range of activities and covering a vast number of business and extracurricular topics, from R&D planning to holistic medicine.
The universities -- this year, for the first time, there will be three -- are generally held in exotic locales. "You might have dinner at the bottom of a volcano in Hawaii or a formal ball at a palace in Paris," explains Housen. The social events have given YPOers something of a rich-playboy reputation, but despite the pleasant distractions, learning better business management remains the principal concern. Housen recalls his first university -- about five course choices for every hour and a half of the day. "We arrived on a Sunday and got so absorbed in everything that, by Thursday, Marjorie was saying, 'Do you realize that we're in Athens?"
Only about 20 YPO members are women, but wives, and sometimes children, figure prominently in YPO activities. Believing that a happy and productive home life is essential to long-term business success, YPO devotes an increasing amount of time to the family. Housen, for instance, has enjoyed white-water rafting trips and a family weekend (replete with a family psychologist) with his children, and he organized YPO's first family university, at Disney World.
The universities draw on luminaries from the worlds of art, education, business, and government, "resources" who not only speak to gatherings but may also chat informally with members. "You might wind up sitting by the pool, talking with James Michener over a cup of coffee," notes Housen. "I'd never have met people like that in Erving."
Speakers at YPO events have included ex-Presidents, Henry Kissinger, Gloria Steinem, Moshe Dayan, astronaut Alan Bean, Playboy 's Christie Hefner, social activist Jesse Jackson, former FCC chairman Newton Minow, and Coca-Cola director Donald Keough. After he was ousted as Richard Nixon's chief of staff in 1973, H. R. Haldeman spoke on crisis management.
Says Richard K. Oresman, president of Ortex Industries Inc. of Trenton, N.J., an outdoor-furniture manufacturer, a White House meeting with then-President Ford was very rewarding. "He talked to us about the pending energy crunch," explains Oresman," and I went back and took a long hard look at our petroleum-based products."
The universities are overtly beneficial in a number of respects. "I'd been pretty well educated," says Housen, "but when I joined YPO... I learned how to organize a company... how to motivate people, how to set up compensation programs. It added a dimension to the company that, otherwise, it might never have had."
The national organization also conducts some 25 seminars each year; publishes a magazine, Enterprise, for its members; and produces audio and video cassettes on business subjects.
"The organization grew very, very rapidly," says Hickok. "I don't think I ever envisioned having hundreds of people attending one meeting, or the vast array of educational programs that would be available. It's been something of a problem to have YPO grow to the size it is and still retain the original, one-to-one-type benefits that were intended."
Local chapters -- 58 in the United States and Canada -- meet about 10 times each year, generally devoting most of a day to one topic or business. "We might get together with leading economists at MIT or Harvard," says Housen of the 105-member New England chapter, "or, as we did this year, do an economic preview of '82 at the State Street Bank. We've done programs on the role of religion in business, the management of this country's major ports, and one at Beth Israel Hospital on new medical technologies and their implications for industry.
"When you go to a hospital," he points out, "you may see the most recent medical developments, but you also wind up talking with the administrative people. And you come away with insights that may help you run your own company."
The local chapter programs, and the personal involvement with other presidents, remain the bottom line of YPO. "Most people feel that the interchange between members is the most valuable part of YPO," says Lehman. "Being able to deal with one's peers on an informal, confidential basis is invaluable to a CEO." He notes that members establish close ties and may call upon one another outside of YPO formats. Requests might range from asking for help in setting up a banking relationship in a new area to asking a YPOer to look in occasionally on a son or daughter at a college nearby.
"It's very easy to become myopic when you run your own business," notes C. Thomas Cutter, president of Cutter Fire Brick Co., a $6 million company in Waltham, Mass. "And it's great to be able to rap with people who have similar responsibilities. It's like talking to your lawyer or accountant," he says, "except that your lawyer or account is charging $100 an hour; they're good, but they've also got tunnel vision. They know what you want to hear, and they'll often play it back to you. Most of us in YPO are worth at least as much as our lawyers, and we're a helluva lot nicer to talk to."
The most vital aspect of the chapter, according to Housen, is the Presidents' Forum, 10 to 12 members who act as an informal board of directors or critique group, addressing mutual or individual problems at their monthly meetings. "One of the guys is currently facing the threat of organization by a labor union," says Housen. "Well, I've got 11 unions, so I'll try to share my experiences with him. How do I keep the nonunion companies nonunion? How do I deal with the companies that are union? That's very valuable information to this guy."
Forum meetings, he cautions, are not for the faint-of-heart. "You can't be thin-skinned. You might bring in your financials, lay them out, and we'd tear them apart." Direct competitors are not enrolled in the same forum groups.
But relying on other presidents is an experience impossible to obtain elsewhere, and one worth half a dozen consultants' fees. It is also the essence of YPO -- so much so that new chapter members are required to take part in the forums. "Three years ago, I was considering a significant acquisition," Housen explains, "and I asked my forum group to review it for me. We spent an entire day on my problem. They went through the whole thing and said, 'We don't think you should buy this company. It doesn't fit.It's not good for you. It's an ego acquisition rather than a real acquisition.' I dropped it. They pointed out enough weaknesses -- things that I was missing -- so that I couldn't justify it."
Cutter, of Cutter Fire Brick, notes that, "Every businessman out there today is facing the same difficult challenges. One of the advantages of the forum groups is that you develop a very close personal bond with these guys. You can sit down and say, 'Hey, look, I've got a bankruptcy looming,' and throw your financials on the table -- we've had that happen." Some members who didn't make use of YPO have regretted it, he says. "Our chapter has seen several bankruptcies this year."
As with many things he has learned and resources he has met at YPO, Housen has brought the forum format back to Erving. "I pull together all of the 'decision makers' from the 11 companies and may use a resource I've heard at that year's university. Last year we did a day-long program on productivity, and this year we're doing one on physical and mental 'wellness." Other YPOers, he notes, are running similar programs at their own companies.
Housen has also made his contributions to YPO. He served as education chairman, chapter chairman, and, two years ago, ran a university. But, as far as he is concerned, he owes YPO. The "boy from the small town of Erving," who is formulating a new corporate strategy for his company and grows excited when he talks about the possibility of a "major acquisition," observes, "Once I decided that I really wanted to grow my business, I realized somewhere along the line that I wasn't going to be able to do it myself -- I needed other people.
"YPO taught me how to organize, how to structure, how to delegate, how to build a motivated organization that would permit me to do what I wanted to do. That's what YPO has done," he concludes. "It's made it possible for me to do what I wanted to do."