When it came time to pick a successor to Gaddes in 1969, his son and two grandsons inherited his wife's one-third. But none of the family members -- Vaughns or Gaddeses -- really wanted to be chief executive officer. Somebody had to take the job, though; they did own the business, after all. So the honor fell upon Charlie Vaughn.
Though Charlie had been raised in the mill, his management style went against the grain. Loud, gruff, and high-strung, he rarely kept his opinions to himself.
That aside, Charlie hadn't wanted to be president. Who could blame him? Four major stockholders worked in the company, and they disagreed sharply on every operating decision. Should the bookkeeper get a 10% raise? Do we really need that new machine? Long-range issues such as budgets, acquisitions, and strategy fell by the wayside. "You can't get four people to agree on too many things," says Charlie, sighing.
After about five years of infighting, Charlie couldn't take much more. Neither could the company. Under Gaddes, L. Vaughn had been modestly profitable; now, in 1975, it was barely breaking even. "I felt an inability to cope with the management problems," Charlie says. "I thought somebody better educated should take over."
But who? Charlie recommended his older brother, Norman, a chemical engineer who owned one-sixth of the company. Norman didn't want the job. Neither did Dick Gaddes, George Gaddes's son. So Dick Vaughn, who owned one-third of the stock, became the family's choice -- the only choice left, in fact. Then 48, he'd worked at the company since age 12, when he swept the factory on Saturdays. "Dick became president by default," says an insider.
Had they admitted that they had no strong leader among them, the owners could have looked for a talented manager for the company. But that option wasn't even discussed. "When you've got an old company, some people think that the locomotive will stay running no matter whether anybody is feeding it or not," says Charlie Vaughn. "But you have to ask: how long can a company find talented people among its own relatives?"
The Vaughns never answered that question honestly.
Sadly, Dick Vaughn was not a leader who could unite the family factions. The five manager-owners called one another "partner," and they all earned roughly the same pay, even Dick. And none was about to take orders from any of the others. Mostly, they bickered. The subject didn't much matter. Should this job be subcontracted? Each one weighed in with an opinion, often tinged with digs at one of the others. "Everybody wanted a certain amount of input into everything," Dick recalls. "It made for a consensus type of leadership. It was not easy."
You could see that just by sitting in on one of their frequent meetings. I'd like to see estimates broken out so that we can compare them to final costs, Dick announced. Good idea, they all agreed. I'll do that, said the cousin who handled milling. I beg your pardon, the cousin who handled estimating interrupted, but I believe that comes under my domain. They were off and running, arguing over who should take responsibility. Of course, the project wasn't done at all.
Next, they'd try to prioritize jobs. Let's concentrate on the hotel first, Dick began. Fine, Charlie said. Later, it would become apparent that Charlie -- who, after stepping down as president, had gone back to running the mill -- had focused on a different job. And if Dick asked for a report, he knew better than to think he'd ever see it. "They had such a bad reaction to being told what to do that they would forget what the hell it even was," he says. Why should one cousin report to another? That was the antithesis of their partnership.
As the company's performance deteriorated, the loan officers at its bank became concerned. The bank held about $1.5 million in outstanding loans to the company, which was barely breaking even. In October 1979, it dispatched D. Michael Carroll, a CPA, to diagnose L. Vaughn's problems and help solve them.
The family grudgingly accepted Carroll, only because he was the bank's emissary. Carroll came in a couple of days a week, with carte blanche to wander around, talk to employees, and examine the books. Everywhere he looked, he saw the same thing: a gaping power void. He needed only to examine the company's financial statements. A million-dollar billing dispute, for instance, had languished in arbitration for years because no one had taken responsibility for resolving it. Gross margins were sinking because none of the family knew -- or wanted to know -- anything about marketing. "Inside the company, the family could never decide who was leading the parade," says Carroll. "Major decisions were held up because of all the second-guessing. There was a serious authority problem."
Not surprisingly, L. Vaughn was too paralyzed by family squabbling to develop any coherent business strategy. The company was floating like driftwood -- away from the rest of the industry.
Smart woodworking companies had positioned themselves to tap a new and growing market, corporate interiors. They could see it coming in the 1960s, when big companies began building more and more elaborate offices and lobbies. They used premium architectural woodwork. Custommade desks, cabinets, and credenzas offered a personalized touch. For the woodworkers, the ornate interiors offered huge profit margins, sometimes up to 300% larger than standardized items.
But it was difficult to manage such complex work. The company couldn't be certain of its costs on custom jobs. Careful estimating is crucial and requires an understanding of three diverse areas: manufacturing, installation, and raw materials. The family simply couldn't wing it.
The owners were too busy bickering to see the opportunity to pursue corporate interiors. "The Vaughn company did not know about that market, nor was it interested in it," says Gideon Loewenstein, later head of L. Vaughn's marketing division.
With few exceptions, the company stuck to jobs that called for working with general contractors who weren't seeking skilled advisers; they simply hired the woodworker with the cheapest bid. As a result, L. Vaughn wasn't making great profits from its woodworkers' skills -- even on the few intricate jobs it sought. For the most part, the company fell back on its reputation as a mill house, capably producing such standard, thin-margin items as windows, doors, and moldings.
