Nearly a hundred years ago, Lorenzo Vaughn planted a time bomb in his company. Finally, it went off
AFTER 141 YEARS, L. VAUGHN CO. had finally made it. At last, the woodworking company was going to contribute to one of the most prestigious new buildings in the country. Rising 37 stories above Manhattan's Madison Avenue, AT&T's corporate headquarters was sure to hold its own beside such handsome neighbors as the Empire State Building. Only four woodworking firms in the country were even invited to bid on the job.
The Warwick, R.I., company turned its $4-million contract into work of breathtaking quality. Company craftsmen paneled AT&T's executive floors in a rich honey-colored teak, hand-rubbed with a natural finish. They wrapped the 30 columns in the employee lounge in teak panels, giving it the ambience of an English library. For the boardroom walls, they created panels of leather, teak, and studded brass nails. This was old-world craftsmanship that people would surely admire a century hence.
"Only a couple of jobs of that size and caliber come along every year," says John Mielach, owner of Mielach/Woodwork, an L. Vaughn competitor. "If you do one, you're very visible. You can go out the next time and say to the architect, 'Look what I did for AT&T."
For L. Vaughn, though, the reality was something quite different. The company was struggling to survive its good fortune, its fast growth suddenly igniting problems that had simmered for decades. Five relatives in this fifth-generation family business held all the company's stock, but none of them had control.
While L. Vaughn's employees were gently hand-rubbing and hand-sanding their wood, it seemed as if the cousins were bludgeoning each other with two-by-fours.
Not many family companies survive intact to the fifth generation. A variety of maladies can kill them, but perhaps none is more lethal than the problem of succession.
The survival of any family business depends in large part on how wisely one generation passes ownership to the next. When several children emerge as potential heirs, the owner faces a terrible dilemma. Anointing a single heir with a controlling interest -- or turning over management to an outsider when no family member appears to be a chip off the old block -- is often the best thing for the company's future. But it can cause tremendous personal animosity within the family. "The more heirs you have, the more complex, geometrically, it becomes," says Richard TenEyck, a Denver family-business consultant. "The possibility of trauma increases. Little factions develop. And that can turn into open warfare."
From the point of view of the company, though, the alternative is clearly worse. Dividing the stock among all suitors may keep everyone happy, but the company is destined to become paralyzed. Such was L. Vaughn's fate.
For generations, the family had been splitting the stock among any offspring who showed interest in the company. L. Vaughn was theirs to have, to reap its benefits and enjoy them equally. But equal distribution became, ultimately, a license to fight. And there was no mechanism -- say, an outside board -- to mediate the conflicts. "I don't think there was ever consensus on any subject," says D. Michael Carroll, the only non-Vaughn board member for many years. "They carried the sins of their forefathers on their shoulders."
Blame forefather Lorenzo Vaughn. Back in 1847, he set out to build a company that could participate in the development of Rhode Island. By horse and wagon he delivered the sashes, doors, and blinds he made in his shop. None of Lorenzo's children lived to adulthood. When he died in 1904, his will surely pleased his two nephews and his great-nephew. Each got one-third of the company. After 57 years spent building his business, old Lorenzo inadvertently doomed it by failing to choose a single successor.
The three nephews, in turn, passed their shares to one child each. Fortunately, a strong leader emerged in both generations to run the company. In the fourth generation, three of the owners were male Vaughns; they split two-thirds of the stock between them. The remaining stock (one-third) went to the first female Vaughn heir, Louise Vaughn Gaddes. Her husband, George Gaddes, became president of the company.
Gaddes's 16-year reign, which ended in 1969, now stands out as a golden age. "The last time L. Vaughn was successful was when George Gaddes was alive," says one longtime competitor. "He was just a good businessman" A charmer, Gaddes was known for inviting customers and competitors alike to his home. There, by a salt pond, they talked over business.
There was plenty to discuss. After World War II, the industry prospered as it followed the baby boomers, helping to build high schools and then college dorms. Under Gaddes, L. Vaughn also began building such laboratory furniture as benches and tables.
Over the years, L. Vaughn's craftsmen gained a reputation for their mastery of matching grains, the art of arranging bundles of veneer sheets, or flitches, to create patterns. They even came up with inventive forms by creatively using such defects as dark mineral streaks or the blotchy "cat faces" that dot various woods. Mostly, they developed sharp eyes and steady hands for mastering such delicate "Michelangelo jobs" as the finely detailed balustrades that line the stairways of Rhode Island School of Design.
The fact that Gaddes owned no stock himself, and that his wife owned only a one-third interest did not stop him from gaining effective control of the company. He was a natural leader; when he ordered a task done, his own sense of personal authority brooked no interference from the other relatives. Perhaps Gaddes's main advantage was that he was not, strictly speaking, a Vaughn. "He was free of the encumbrances that the other cousins had," says Carroll. "They could relinquish all their power to him, and it wasn't as if one of them was getting ahead of the other."
Never again would the Vaughns so willingly surrender authority. "Gaddes was able to make sure the owners were not cutting each other's throats," admits Charles T. Vaughn Jr., an owner who has held every company office except treasurer.
Unfortunately, George Gaddes didn't live forever.
