The story of one company founder who tried to leave her company in her children's hands.
Take one company, three children of the owner who work there, and a founder who is almost ready to let go. Then see if even the most carefully planned of successions -- a couple of false starts notwithstanding -- will fly
It is March 1990, and two women meet for dinner at Eulipia, a trendy downtown San Jose restaurant. The older of the two is the owner and chief executive of Capsco Sales Inc., a $10.7-million electronic-components company just beginning to recover from four years of sheer hell. There has been a computer-system failure, a messy divorce, a banking catastrophe, and a major industry shake-up. But Capsco's luck has taken a turn. The CEO's dinner companion, a promising young manager who left the company in 1987, has indicated that, under the right circumstances, she would consider coming back. The CEO offers the woman her old job as operations manager. No deal, the younger woman replies. She goes on to negotiate a more impressive title -- director of new-business development -- more responsibility, and a better salary. The CEO is impressed with this tenacity, and as she raises her glass to toast the renewed business relationship, the young woman confesses that, in fact, she has already quit her previous job. The CEO breathes a sigh of relief. Not only has she rehired a top manager, she has regained her successor.
"She wasn't just my daughter," says Billye Ericksen, the CEO, as she looks back on that evening in 1990. "I respected her. She was ready." It was Billye's second chance, probably her last chance, to make succession work.
Today 36-year-old Kathy Ericksen sits behind what was her mother's desk, running a company whose continued existence is nothing short of extraordinary. As the newly appointed president and chief operating officer of Capsco, based in Sunnyvale, Calif., Kathy counts among those who report to her her two brothers, Ken (vice-president of sales and marketing) and Kirk (head of the Pacific Northwest division, in Redmond, Wash.), and her mother (chairman of the board and de facto administrative assistant to the president). Like her mother, Kathy exudes confidence and self-control. But comfortable as she may seem, Kathy doesn't kid herself that the transition will be smooth going. Why should it be? The road to the president's office was fraught with potholes and detours. Indeed, it was a journey that began eight years ago.
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Billye Ericksen's strong suit has always been the speed with which she makes decisions and translates them into action. "I'm the 'learn it by 9, apply it by noon' lady," she jokes. That was the case with her first succession plan, conceived in 1985 on a flight home from Hawaii. Ken, Kathy, and Kirk -- then 29, 27, and 25 respectively -- had been working with Billye at Capsco for several years, and while she always assumed they would one day take over the business, she had done very little to prepare them for the responsibility. A carefully chosen outside board of directors, Billye reckoned, could help give her children the management and industry experience they lacked.
Over the next year and a half, she signed on three respected Silicon Valley executives -- John DeSantis, director of manufacturing at Capetronic Inc.; Jan Blakslee, director of human resources at Spectra
Physics; and Bill Flanagan, operations vice-president at Amdahl Corp. In 1988 they would be joined by Gwen Peterson, vice-president of marketing at Clarity Software. The board members' primary mission would be to mentor Ken, Kathy, and Kirk (see "The Family Plan," April 1986) by bringing them into their respective companies for a bit of accelerated hands-on management training. Then, Billye declared, by 1988 she would name her successor, retire, and sell the company to her children through a leveraged buyout.
The plan, a perfect reflection of Billye's proclivity for immediate action (some might call it impatience), "was more of a dream than a vision," says board member Blakslee, now president of his own executive-search firm. "Ken, Kathy, and Kirk did not have the breadth of exposure, living in their mother's shadow, to assume the roles that needed to be played. At that point, they were carrying out orders. That's what happens sometimes with strong founders."
By the summer of 1986 Billye was forced to come to the same conclusion. Capsco's computer system broke down, leaving the company with $600,000 worth of excess inventory and on the brink of disaster. Billye single-handedly cajoled factory reps into letting her return some of the inventory; she salvaged Capsco's relationships with customers, whose orders were shipped either twice or not at all; and time and again, she assuaged the fears of Capsco's panicked bankers. In the process Billye came to a startling realization: she was out there on her own. Her children -- and Capsco's 41 other employees -- were following her directives as they always had: they were not experienced or skilled enough to ease her load significantly. "I don't think they realized what trouble we were in," Billye says. "They had so much confidence in me. I told myself that I was the savior, and it felt kind of good."
"She just wasn't ready to let go," says Flanagan. "We, as a group, came to the conclusion that we had to mentor Billye first." Succession would not be the tidy package she had laid before her children a year earlier.
* * *
The computer failure was just the beginning of Capsco's "dark days." Over the next three years, Billye went through a lengthy and costly divorce that not only drained her emotionally but poisoned her banking relationship. (Her bank was an investor in her husband's company.) Kirk, who was "thrown into operations," grew disenchanted with his long hours, a two-and-a-half-hour commute, and too little time spent with his young family. The industry was going through turbulent changes as well. Prices of electronic components had plunged, squeezing the distributor's already narrow margins and forcing Capsco to reposition itself as a provider of services.
But perhaps most wrenching to Billye was Kathy's decision to leave the company. In 1987 Kathy went back to school to finish her bachelor's degree and then, upon graduation, took a job at another company. "I needed to know more, and I also needed to get out," she says. Billye the mother could not fault her daughter's decision, but Billye the CEO was angry and disappointed to be losing a key manager and her best prospect for a successor.
