Each brother owned 50% of Diemolding Corp., a second-generation custom automotive and medical products molding company founded in 1920, and each had a son working in the business. The questions: was either son qualified to take over the business? And if they both were, how would the two share ownership?
"We needed a nonfamily ear, a relief valve to turn to in this impasse," Don explains. Diemolding already had an outside board of advisers, but the brothers wanted it to have more of a voice, so they invited some of the advisers to sit on the board of directors and disbanded the advisory board altogether.
The newly formed board was composed mostly of local manufacturing company presidents, "no second- or third-string guys," Don says. Three members run privately held companies; one also heads a 40-year-old family business. The only nonmanufacturer is Richard Oliker, the former dean of the School of Management at Syracuse University, who was a consultant to Diemolding before joining the board and adds a theoretical, more academic point of view.
What the Board Does
In early 1986, after considering at least one non-family candidate, it was apparent to the board that Don's son, Donald H., now 38, had the makings of the next CEO. He joined the company in 1974 and had worked in all the major divisions, moving from foreman to manager. He was eager and ready to take over.
Unfortunately, this didn't please his uncle Jarvis. What about Jarvis's son Bruce? "Dad was very concerned," recalls Bruce, who turns 28 this month. "He saw the controlling interest shifting to the other side." One board member remembers Jarvis voicing his displeasure: "Family matters were clouding the waters."
After discussing the deadlock, the outsiders agreed on a compromise. "We in effect promised Jarvis that should anything happen to him we would protect his son's interests," explains board member Chet Amond, president of Syracuse China, a $70-million commercial chinaware manufacturer. "If his son proved he had what it took, we'd make sure he got the opportunity to take a leadership role in the company." Jarvis was satisfied.
Next the board set in motion a full-scale plan to get both sons in shape to run Diemolding. The training stressed lessons internal as well as external. Even though the younger Don Dew had a valuable cross section of experience, the board designed assignments for him "to make sure he wasn't a one-dimensional manager," explains Oliker. For the next year, task after task was thrown at him, from negotiating credit lines to working with key customers to developing capital equipment budgets. The outsiders next got the elder Don Dew to abdicate his CEO position -- a few years shy of retirement -- to his son. Not only did this allow the board to measure the younger man's ability to oversee profit and loss for the entire company, but should anything go awry, his father, as chairman, would be there to help out. And the board encouraged the new CEO to attend executive management programs. "Anyone who grows up in a company ends up with that company's point of view," Amond warns. "Sometimes it's accurate and sometimes it's not."
While the younger Don Dew conquers the operations side, the board is grooming his cousin Bruce for the financial side. Bruce attends all the banking meetings and works closely with the treasurer. To hone his managerial skills, he is general manager of the die-tooling division, a small, autonomous unit of 25 employees.
"It's a crack at managing all the major elements of a business, like manufacturing, marketing, and sales, just on a smaller scale," explains Bill Savage, president of a $5-million textile-machinery manufacturer and an outside board member. This spring Bruce begins an M.B.A. program that will emphasize financial skills, and, as an independent study course, will fit his work schedule.
But as much as the board cares about results, it also wants to know how the younger Dews think. To that end, one of the board members sits on the operational committee and another sits on the finance committee, both of which meet monthly. This allows them to see how the younger men interact with employees and wrestle with the company's day-to-day problems. As Amond stresses, "It's just as important how the decision is made as what decision is made."
What's in It for the Board
"As much as we protect the business, we're also sensitive to family concerns," explains board member Samuel Lanzafame, whose company makes filters for the electronics and pharmaceutical industries. As tricky as this can get, these board members think it's worth the trouble: "It's gratifying to help a family take their business to the third generation."
One member says he speaks more freely on this board than in his own business, where office politics force him to hew to the company line. All the board members enjoy seeing their advice put into practice.
"Diemolding's is by far the most exciting board I'm on," says Oliker, who sits on five others. "Rather than hearing about events after they happen, we're in there getting our hands dirty." And there is the comfort of knowing the advice is well taken. "Here I get to help someone else avoid all the mistakes I made," says Amond, who at 63 sums up his work as a board member simply: "It's a second chance."
Meetings: Six times a year for half a day; two of the board members sit on committees that meet monthly.
How recruited: Don F. Dew met the board members during his tenure as president of the local manufacturers association.
Compensation: Each outsider is paid a confidential annual fee and $400 per meeting.
Chairman's average preparation time: Don F. Dew spends 8 to 10 hours pulling together the agenda, monthly financial reports, operations numbers, and a cover letteranalyzing the results. This packet usually is sent out 10 days before the meeting.
