This article originally appeared in the January 2017 issue of Family Business Magazine, and was written by Dave Donelson. Dave is a business writer in West Harrison, N.Y. and is the author of the Dynamic Manager Guides and Handbooks.
A Slow But Sure TransitionThe Gordon Flesch Company began its transition to third-generation management last year. After an abrupt change from the first to the second generation, the family is taking a deliberate approach this time.
Tom Flesch, CEO of Gordon Flesch Company in Madison, Wis., chuckles as he describes his ascent to the
presidency of the office equipment dealer in 1986. “My dad pretty much just did it one day,” Tom says. “He
told my brother John and a few others in the company a week before he announced it at a board meeting. It was very oldschool. Back then, you made a decision and moved forward.”
Contrast that style with the first steps taken to move Tom’s two sons, Patrick and Mark Flesch, onto the path to top management last year. After some ten years in the sales ranks, the two were named regional sales VPs in a restructuring that divided between them responsibility for the sales territories the company serves. There’s no firm date for the next moves in the company’s management transition plan.
“This was the first year for them at the vice president level,” Tom explains. “They’ll be there for a while, and we’ll figure out the next step up the ladder. As they move up, we’ll move over a little bit to let them occupy that rung. The transition will take care of itself that way.”
Currently, Tom, 64, and his two brothers, John, 65, and Bill, 59, operate the company, which generates annual revenues of $150 million, with the help of a team of long-tenured senior managers. While they recognize the necessity of an orderly transition, they see no real need to rush into it. The second generation wants to give the third generation time to acquire deeper knowledge of company operations and develop a wider set of management skills, according to Tom. “We have plenty of time, and they’re still young,” Tom says. “It will work out.”
The company was founded in 1956, after typewriter salesman Gordon Flesch saw a demonstration of 3M’s new Thermofax technology. He was so impressed that he borrowed $10,000 from his father-in-law to buy a warehouse and become a 3M dealer. Today, the company that bears his name sells and services document systems that range from copiers and printers to IT management and cloud-based storage. Gordon Flesch Company is the largest Canon dealer in the United States and represents other companies like Sharp, Lexmark, IBM and Amazon as well. Its 20,000-customer base spreads across markets including schools, government, small businesses and Fortune 500 companies. About 600 employees work in 16 locations in Wisconsin, Illinois, Ohio and Indiana.
During the company’s first 20 years, Gordon Flesch ran the business with a trusted management team. “He was a very good delegator,” recalls Tom. “Very early on, he gave the sales department to one person, the parts and service to another man, administration to someone else, and dealt with the banks and leasing himself. He gave them authority to hire and fire, and I think it helped our company grow.”
The second generationThe first small step in management transition to the second generation occurred in 1976, when John Flesch, Gordon’s oldest son, joined the company as a salesperson. Before that, John had worked as a camp counselor and ran a program that placed emotionally disturbed kids in treatment facilities. He knew those jobs wouldn’t provide the income he would need with a baby on the way. A few months later, his brother Tom came to the firm.
“My father basically took Tom and I into a conference room in the office and laid out the finances of the company,” John recalls. “Tom was selling insurance at the time. He looked at us and said, ‘I want you both involved in the company.’ We looked at the financials and saw a great opportunity. That’s how it began.” The youngest brother, Bill, joined the firm in 1982. Gordon and his wife, Rozanne, had two daughters as well, but neither had any interest in working for the company.
“We were all encouraged to get experience outside the family company,” Bill says. “My father was following that practice long before it became good family business practice.”
As the company grew, the three brothers moved into new territories, Tom says. “The thing that made us the size we are today was our willingness to take a risk and expand and invest in other markets. First we went to Chicago, then to Columbus and finally Milwaukee. We had a great business in Madison, but the expansions all worked out and gave us financial strength.”
The expansion accomplished something else as well. “Our dad was smart,” Tom says. “He put us in three different states. Whether it was by plan or happenstance, that’s what happened.”
Tom opened the Columbus, Ohio, office the year after hejoined the company. Bill was sent to the existing office in Chicago, while John stayed in Madison and gravitated to a more administrative role. “I became a full-time recruiter because our need for salespeople was so great,” John says. “Dad decided I could best serve the company in the administrative, HR and service role.”
The first transition
When Gordon Flesch developed some health problems in 1986, he made the decision to promote Tom to president while retaining the CEO title himself. “Maybe no one else on the board knew the appointment was coming, but I did,” John says. “It all worked out.”
Today, Tom serves as president and CEO, John is vice chairman of the board of directors and Bill is senior executive vice president for corporate development. The three brothers also stayed in their respective cities, although Madison remains company headquarters.
Bill believes his father’s willingness to fully trust his managers was a key factor in the success of the transition. “I’ve never seen an entrepreneurial executive so prepared to allow other people to thrive and blossom inside his company,” Bill says. “He hired well and exposed his kids to those people and taught us the value of raising great employees to be great partners in the company. He was very ahead of his time in allowing the business to run and grow without overriding and being controlling.” Gordon Flesch passed away in 1995.
Tom says the family’s willingness to delegate responsibility continues today. “Companies where the owner has to have his hands in every little detail have a hard time getting senior people to grow and expand in [the] company; they fear getting their hands chopped off if they make a wrong decision,” Tom says. A willingness to delegate “works for us,” Tom says. “Some people might think we’re too loose, but it works.”
Ann Kinkade, principal of Lucid Legacy, an independent family business consulting firm in Madison, and former director at the University of Wisconsin-Madison Family Business Center, knows the Flesch family, who were founding members of the center (although she doesn’t have a professional relationship with them now). She sees a direct correlation with their attitude toward non-family management and the company’s success in retaining key non-family executives. “Strong leaders aren’t going to stay with any company where they’re not given autonomy and the ability to make decisions that have an impact,” Kinkade says. “That’s probably one reason I know several people who work for the company who have been there for 40 years.”
“It’s not that they’re not paying attention—they know exactly what’s going on. They just trust us to do the work,” says Kelly Moran, senior vice president of sales and marketing, of the Flesch family leaders. The non-family executives, in turn, readily delegate authority to their direct reports, says Moran, a 32-year company veteran. “We’re not micromanagers,” Moran says. “We trust our people to do the work necessary, and it creates a really relaxing but accountable atmosphere.”
In addition to managing sales and marketing, Moran is responsible for professional services, training and some other areas. To further align senior managers’ interests with the company’s interests, a small percentage of Gordon Flesch Company’s stock is granted to non-family executives; like the family members who own the remainder, they receive distributions. When non-family executives leave, their stock is returned to the company and is reissued to their successors, according to John.
The family is focused on growing the company, Tom says. “You could just sit back and milk the company for a long time, like many second generations do,” he says, “but that’s often the beginning of the end.”
The second transitionAn important part of Moran’s job right now is to help prepare Tom Flesch’s two sons, Patrick and Mark, for larger roles in the company. The pair were promoted to regional sales VPs in 2015. Patrick, 36, oversees the company’s territories in Madison and Appleton, Wis., and in Chicago. Mark, 34, is responsible for the Columbus, Milwaukee and Indianapolis territories. Patrick and Mark assumed some of Moran’s
duties when they were promoted.
Tom’s sons are the only third-generation members currently in the business. Their older cousins (John’s children) have other careers, and the younger ones (Bill’s) opted for other paths as well. All are shareholders through their parents, however.
Unlike the first generational transition, this move was planned carefully and purposefully. “Tom and I talked about it for months and months in advance,” Moran says. Patrick and Mark, he explains, “needed to be in positions to learn more about the operational side of the business. They were very familiar with the sales process and how to take really good care of customers, but in order for them to lead the company someday and have an appreciation of what their people have to go through, they have to go through it themselves.”
“Moving Mark and I into VP positions was a big change,” Patrick says. “There’s not far for us to go to reach the top, but I’m not sure we’re ready for that yet.”
Mark adds, “The promotion was a way to get us more involved working on the business instead of just working in the trenches doing deals and training sales reps,” Mark says. “That was good experience for us, but now we have more strategic conversations about the business.”
The two G3s have been in their positions for more than a year, and everyone seems satisfied with the progress. “It is refreshing to see them work,” Moran says. “They’re further along than I expected when Tom and I first started talking about the position.”
The two sons are also now company directors, joining their father, two uncles and four senior managers on the board. The group meets monthly as a management team, either in person or via video conference, and twice annually in formal board meetings. “It’s not just flying family members in once a year and reviewing results,” John says. “Each department presents its challenges and solutions and progress on various
Bill Flesch is pleased with the way his nephews are developing as future leaders. “They’re working underneath an awesome guy,” Bill says. “He’s really doing a nice job of mentoring them and rounding them off.” Bill is not in favor of pushing the process; he recognizes that it will move along apace. “John, Tom and I are winding down over the next few years,” Bill says. “The path is pretty clear, but there’s nothing written down.”
“It’s great that they have a multi-year lens on the transition process,” says Ann Kinkade. “At some point, though, there needs to be a plan. People in the next generation need to know how and when.”
Given their relatively young ages and the good health of the company, the three elder Flesch brothers aren’t so sure a date-specific plan is needed at this time, although the subject comes up in discussion frequently. “The most difficult part of transitions is knowing when it’s time,” Bill says. “It’s knowing when to give other people more responsibility. You have to prepare the next generation to run the business. You have to be objective about it.”
He adds, “It takes a lot of planning and careful nurturing to make them the executives they need to be.”