Outside Perspectives Create Lasting Success
Despite initial doubts, Field Fastener created a fiduciary board. The company quickly reaped the benefits.
The history of our board began on a summer day in 2013 while I was in my home office in northern Wisconsin thinking about the future of our company and my movement toward retirement. I realized that, as I moved away from the business, a few years later my brother and business partner would also be making the same move. We would need additional skills, knowledge and experience as we grew the business and we transitioned to the next generation of Field leadership. I realized we would need to change how we managed the business, made decisions and shared control.
I pondered the idea and discussed it with my wife. That process helped clarify the advantages and disadvantages. I felt I was ready to discuss it with my business partner. The initial reaction was something like, “Why would we want to invite others into the business who don’t know anything about it?” The response was interesting, since it was the first reaction of myself, my wife and now my partner. It must have been a valid concern. However, further discussions caused us to think more about the benefits we would realize with a board. After much deliberation, we made the decision to develop a fiduciary board of directors.
Field launched its fiduciary board in 2015. We were very fortunate to find three outside directors using our contacts. The three shareholders (all family members) and our CFO made up the balance of the board. The first year was filled with lots of learning in both directions. The external directors were learning our business and we were learning how to effectively use the skills of the new board. More importantly, we spent a lot of time developing a high level of trust and respect for each other. Over time, the board developed its culture. Unsurprisingly, it is a culture very similar to Field’s. We care about the business and each other. We are candid and professional, valuing results and humor.
The board has contributed a great deal to the success we have enjoyed. A few key areas:
Acquisition strategy and execution. We had very little experience in this area, but the external directors brought experience and skills in M&A, bank financing and acquisition structures. They asked questions we had not considered and urged us to move beyond our comfort zone, which was also just what we needed. The board stressed the value of post-close integration and the importance of post-closing evaluations. Management/ownership now has a refined rubric that it uses when evaluating all acquisition candidates to make us more efficient and targeted in our approach.
President and EVP selection. The internal and external directors agreed that we had two strong internal candidates to succeed the founders and did not need to search outside the company. The external directors provided additional input to the development plans for both candidates, participated in quarterly reviews of their progress and made the final selection of the president and EVP. It has been over a year since they have successfully moved into their new respective roles. The board has been a great source of input and assessment as our new president and EVP have taken over management of the company.
Challenging the founders/owners. When we created the board, I had been in the fastener industry for about 40 years and my partner over 20 years. We had our way of doing things, which needed to be challenged. The board did a great job of effectively challenging us to consider alternative approaches and helping us look at information and data differently than we had always done. They also respected the things that have worked well and did not try to make us change for change’s sake.
Contributing to industry leading performance. We have had growth in sales and profits that multiplies that of those in our industry. The board provided just what we were looking for in these areas: input to help us get better. We worked as a team to challenge our sales, profits and EBITDA results, and strive to improve. Since the formation of our board in 2015, revenues and EBITDA have almost tripled.
As I reflect on the evolution of our board, I consider a few things we did to be best practices.
Work hard, play hard. Just like at Field, the board was willing to do what was required to get the job done, have uncomfortable discussions and hold each other accountable. We also enjoyed time having fun. Laughter during a board meeting was very common. Fun conversations over dinner were the rule, not the exception.
Work as a team. While this may sound obvious, we put effort into creating a team feeling on our board. We spend the first 30 minutes of each meeting talking about how our directors are doing: no work-related discussions. You can’t be an effective team if you don’t know each other. We respected our different views, but when a decision was made, it was supported by all of us as a team. There were no sides or “us vs. them”; just one team.
Respect and embrace the culture. Field’s culture is a competitive advantage and an important factor in our success. The external directors recognized that they needed to learn about it before they could provide input to the improvement process, and they did just that. Interaction with the team in board meetings, team lunches and even a trip to Cancun all helped the external directors understand, embrace and assist in improvements to our culture.
It has been an interesting, productive learning experience to be a part of the evolution of our board. The board complemented the capabilities of management and ownership. Company leadership must have a vision and plan. It must live up to its responsibilities to the team, customers and suppliers. It should be a good corporate citizen. The board should help take these capabilities and make them even better. The board should complement this capability, not provide it.
The Field board continues to evolve and get better and better. Earlier this year, we said goodbye to an original external director and refreshed the board with three new, dynamic business professionals, all with multigenerational family business experience. We increased the size of the board from seven members to nine. Field now has five external directors and four internal directors, further validating management/ownership’s belief in the merits of a fiduciary board.
A group of seven, now nine, that evolved into a great board is a blessing!
Bill Derry is chairman of Field Fastener.