So Billye came face-to-face with her demons. "In the psychological evaluation, it turned out that I was such a controlling personality that it's hard for me not to run the show. I wasn't allowing people to grow. John told me if I didn't acknowledge that and do something about it, then I wouldn't have a succession plan."
Taken aback by her domineering presence in a videotape of a staff meeting, Billye stopped attending those meetings and also began to distance herself from factory negotiations, a function she had delegated at least nominally to Kathy. "I would walk by the conference room, and a factory rep would be in there having a meeting with Kathy, and I hadn't been invited," says Billye. "That was very hard at first." Renner also warned her that until her succession plans were on paper, they'd have little credibility.
During Renner's nine-month tenure, Billye had begun talking about "shared governance" -- an equal distribution of power among her children. While she knew that such a plan would be a disaster, she hoped the prospect of a democratically controlled Capsco would raise enough hackles to provoke a discussion of some alternatives. It did. "I thought that would be hell," says Kathy of shared governance. "We'd never get anything done." Ken, Kathy, and Kirk met privately and agreed that Kathy was the best candidate to succeed their mother. Ken, who was happy to remain focused on sales, and Kirk, who wanted to "be the one waving the flag for Capsco to enter new markets," went to their mother on separate occasions and gave Kathy the thumbs-up. With her sons' solid support, Billye set about laying the groundwork for Kathy to succeed her.
* * *
On a shelf behind Billye's desk sits a row of three-ring binders, one of which is labeled "Succession" -- her response to Renner's insistence that she "get it all down on paper." Shortly after their talk in early 1992, Billye read an article detailing the number of succession plans that are made on the way home from the founder's funeral. "I didn't want to be one of those statistics," she says. In her typical "learn it by 9, apply it by noon" fashion, Billye got right to work. She had her certified public accountant do a business valuation, she restructured her life-insurance policy, and she drafted a buy-sell agreement.
With help from the board, she defined the functions of the president and came up with a plan for passing them along to Kathy over a three-year period. (See "Transition Plan," page 5.) Initially, Kathy would be given total responsibility for the functions with which she was most familiar -- information systems, materials management, personnel, and day-to-day accounting tasks. As she became more experienced she'd be given more responsibility and more senior titles.
The transition has not been without glitches. The most dramatic happened shortly after Kathy began managing some of the accounting. Reluctantly, she went to her mother with this message: "We have an inventory build, and we're out of cash." (Capsco had lost a major customer and had not adjusted its orders from factories to account for the loss.) "This time," Kathy says, "I had to go to the bank without Billye and explain." And it was not a minor problem to explain. The excess inventory, in Kathy's words, "had shot all of our ratios," and Capsco was in danger of losing its line of credit. It was up to Kathy to outline a plan of action that would mollify the bankers. She also had to negotiate with factories to take back some of the inventory. It was several months before the company was back on track. In the process, Kathy and her team developed an inventory-control system to prevent recurrences.
"That's one step further than I had gone," Billye says. With her own strong finance background and years of experience running the company by the seat of her pants, she would have known instinctively when she was in danger of an inventory buildup. But her dual goals -- to pass the company on to her children completely by 1995 and to grow Capsco to $20 million by June 1996 -- demanded much more formal guidelines and procedures.
Billye also acknowledged the need for more experienced managers. In August 1992 she and Kathy hired Cliff Videll as manager of information systems and assigned him the task of revamping the company's computer system. Videll says that at first Capsco's employees took everything he said as a suggestion only, "because it wasn't coming from Billye." But Billye promoted Videll's new system as one that was deliberately intended to close her out of the decision-making loop. It demanded, she said, "adherence to procedure rather than the word of the CEO."
Next came Mary Pim, a top-notch manager whom Kathy hired away from a competitor to "be the glue" as she continued to prepare herself for the presidency. Pim didn't take the job offer lightly. "I was told right up front that Billye had announced her retirement," she says. "I was concerned about what would happen when she was gone -- were their bankers still going to support them? What about their customers?" Pim grilled Capsco's customers, factories, and reps. She also talked to employees to be sure they had bought into the succession plan. "Everyone seemed to have tremendous confidence in Kathy," Pim says, "and that was key." She signed on as director of business development in January 1993, with the understanding that she, like Videll, would report directly to Kathy. "The suppliers were surprised," she says. "Some of the reps asked to see my adoption papers!" Billye was in fact stepping out of the limelight.
* * *
It was hardly earth-shattering news when Billye announced last January that Kathy had been promoted to president and chief operating officer. While Kathy was on vacation in Cancun, Billye had systematically removed her own belongings from her office, taking her pictures and mementos down and replacing them with Kathy's. "I was excited," says Kathy. "But I also felt protective of her. It meant she was getting a little closer to the back door."
