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Passing the Baton
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Families—McKees,
Elliotts and Kortes—plan succession.
By Kevin Kipp
Any business profits from the owners’ blood, sweat and tears. How
much more do those elements play a part when the company is family-owned?
We explored the experiences of three St. Louis families. We started
each story of these successful businesses by interviewing the founder.
Here’s what we learned…
McKee Klan
Above:
Family first. Father and sons agree, "business follows
family." (Left to right) Joe McKee, president of Paric, Paul McKee,
Jr., founder and chairman of Paric, McEagle Development and Environmental
Management Corporation and Chris McKee, vice president of EMC.
Three companies, four heirs, no guarantees.
The kids grew up knowing the house rules. Dad’s tripartite edict
was, “One, you couldn’t come to work here right out of school. Second,
you would never be invited into the company by me. If you had a
desire to come back, you had to find your own way in. Third, you
don’t work directly for me.” Paul J. McKee, Jr., is founder and
chairman of general contractor Paric Corp., real estate development
firm McEagle Development and the heartland’s largest independent
operator of water, wastewater and utility systems, Environmental
Management Corp.
Three out of four McKees decided to come in.
P. Joseph McKee, III, 34, is president of Paric. Chris McKee, 32,
is vice president at EMC. Meg McKee, 24, is an environmental engineer
at EMC. Kate Mitchell, nee McKee, is currently in the medical field
as a nurse practitioner at the Washington University Medical Center.
Paul McKee, 56, retains controlling interest in all three companies,
but has renounced the naming of successors.
"Rick Jordan and I founded and own EMC and Paric together," he says.
"Rick was COO at Paric and it was his job to manage the succession
plan. It's been over four years in the works. He chose two candidates.
One was Joe."
Joe McKee became president on January 1, 2001. "Joe's partner is
Greg Frick, the new COO," says Paul McKee. Jordan is now co-chair.
Without detailing ownership percentages, Paul McKee agrees that
"partner" implies shared equity. "We have an entrepreneurial culture
at all three companies," he says. "Unless you have something at
risk, you're really not an entrepreneur."
Paric has four operating groups, Paul McKee explains, "each run
by an entrepreneurial leader-partner. There's a real difference
between managers and leaders. We're looking for leaders."
Joe McKee earned his B.S. in engineering from Vanderbilt in 1989
and an MBA from Washington University in 1991. Jordan hired him
full time in 1993.
The process that brought him to the presidency included broader
involvement in civic and charitable organizations, running an operating
group, then a couple and finally running all of the groups. Plus,
Joe McKee adds, "We worked a ton with Joe Hoffman from Collarelli
Meyer management consultants."
Hoffman has also helped the McKees segregate family issues from
the family business.
Paul McKee says that a lot of what Hoffman has introduced "is based
on the idea that if the family was successful, the business would
follow. A lot of people get it confused. Business follows family.
If someone isn't in the business, they're still family. Kate and
her husband Glen are as much a part of the family as Joe and Brenda."
Paul McKee: “We spend a great deal of time as a family making sure
the family stays family. Business follows family. We have our own
mission statement, and meetings that have nothing to do with business.”
Joe McKee: “We don’t work for the sake of work, we don’t think you
have to sacrifice family for business. Business follows family.
We have a standing commitment to our companies that we don’t run
our business from our kitchen table. The details are discussed here
and kept here. It’s only fair.”
Chris McKee: “There are times when business difficulties could be
discussed at a family event. You have to remember not to, because
that person sitting next to you, with whom you might have a work
issue, is your brother or your dad or uncle. Otherwise it could
eat you up.”
Joe McKee adds, “Mom and our wives hold our feet to the fire to
keep family gatherings about family.”
Paul McKee’s administrative arm’s length applies equally at EMC.
There his brother Mike McKee, 51, is president, COO and one of six
owners. “Mike’s in charge of everything,” he says, “including the
succession plan.”
Mike McKee taught biology for 11 years and joined EMC in 1984. “Paul
[his dad] asked me to join the company in its initial stages,” he
says. “My brother gave me the wonderful opportunity to learn the
business from the bottom up, starting in the [water treatment] plants.”
EMC now has annual sales of $35 million.
Mike McKee hired his nephew Chris McKee in 1993. “Chris came out
of Vanderbilt with a degree in civil and environmental engineering,
and went to work for a company that does a lot of R&D. He had a
lot of experience and capabilities we needed, so we enthusiastically
pursued him.”
Chris McKee earned an undergraduate and a graduate degree in engineering
from Vanderbilt, ’91 and ’92, as well as a Wash. U. MBA in 1999.
As far as training his own replacement, Mike McKee says, “We’ll
be working with Joe Hoffman to develop the plan we [Mike and Chris]
both agree on.”
“We’re not that far along,” says Chris McKee. “It’s in the early
stages, and there may be others in consideration. In general, a
family business gives you opportunities, but taking advantage of
the opportunity is up to the individual.”
Mike McKee remains enthusiastic about his nephew: “He’s done a terrific
job. He’s highly effective in sales and operations. He’s detail
oriented, and has developed real loyalty in his people. He’s been
a whole lot of fun to watch.”
The admiration is mutual. “Relative or not, he’s been a fantastic
mentor, giving me enough freedom to be an immature idiot sometimes.
But he’s also coached me enough that I always learn from the mistakes
and moved forward. That’s a gift.”
Chris McKee went on to explain that, “McKees seem to demand a higher
level of performance from people named McKee.” But they also appreciate
each other.
For instance, talking about his little sister, Chris McKee says,
“Meg joined us after a couple of years at Deloitte & Touche consulting.
She’s a sharp cookie.”
Elliott and Daughter
Above:
Building a strong management team. Susan Elliott, chairman and
CEO at SSE, (left), is grooming her daughter Elizabeth Niedringhaus,
vice president of business development, to one day take over the
business.
Evidence and testimony suggest that Susan Elliott, chairman and
CEO at SSE, is a smart as well as tough cookie.
How smart? After graduating from Smith College in Northhampton,
Mass., Susan Elliott was smart enough to bring herself and her bachelor’s
degree in American Studies back to St. Louis.
Smart enough also to establish Systems Service Enterprises, Inc.
in 1966, relying on the technical and programming expertise she
had gained as an IBM advisory systems engineer.
Smart enough to adapt to the emergence of the PC and the ubiquity
of information technology in the workplace. Since the late ’80s,
SSE has expanded its services to include applications development,
network design and deployment, blended learning and technical staffing.
As for tough, Elizabeth Niedringhaus vice president of business
development says, “She’s a tough cookie. She wants this company
to be successful. Had I been the wrong choice for my job, I would
have been out the door by now.”
That’s Elizabeth Niedringhaus, nee Elliott, assessing the boss.
(Truth is, Elliott’s demeanor conveys gentle confidence more than
toughness, and not a trace of mean.)
Niedringhaus, 32, joined the company in 1995 as an account executive,
after rising to sales supervisor at Esprit de Corp in San Francisco.
She had earned her bachelor’s in Psychology at the University of
Vermont. The daughter, smart like the mother, returned to St. Louis.
Niedringhaus went to live by the bay partly “because out of college
I was determined I wouldn’t work here.” And besides, my sister Kathryn,
a Princeton grad, was studying in San Francisco at University of
California, Hastings College of Law.
After five years there, Niedringhaus says, “I was ready to make
a change.”
Kathryn Love, nee Elliott, now partner at Bryan Cave, says, “Elizabeth
gained a lot of real world experience moving up through the ranks
at Esprit. She also saw retail wasn’t where she wanted to be the
rest of her life. On the other hand, Esprit did give her confidence
that she could contribute to the growth of SSE.”
“I still wasn’t sure I wanted to work at SSE,” says Niedringhaus,
“but in ’95 I interviewed for an open sales job, and got it. We
agreed that we needed to be honest with one another, and if there
was an issue we would discuss it.”
“They’ve always had an open and honest relationship,” Love says.
“Elizabeth was fully prepared to leave if it didn’t work out.”
Elliott was less concerned with the fit than Niedringhaus. “It was
clear to me that Elizabeth had keen business sense, decision-making
ability, excellent judgment and great people skills.”
Elliott preferred to keep SSE in the family: “I always had a fond
dream that one of my daughters would take the business and run with
it...in the Maritz or Enterprise Rent-a-Car model. But I didn’t
want the pressure to be on either of them.”
Elliott thought it better if one or both daughters said, this is
exactly what I want to do with the rest of my life.
“In the meantime, one of my highest responsibilities to my company
is to build a strong management team. About three-and-a-half years
ago, I had the opportunity to bring Mark Kuhlmann on as president
and COO. He was senior vice president and general counsel at McDonnell
Douglas, and negotiated the Boeing merger.”
Kuhlmann wanted to stay in St. Louis. “With 23 years at McDonnell,
four running the information systems group, he had the background
to bring value to SSE,” Elliott says. “He has helped build a strong
management team of which Elizabeth is a key member.”
Kuhlmann’s presence also builds flexibility into SSE’s future.
“The world changes,” Elliott says. “If something changed in Elizabeth’s
family life, if she wanted to raise children full time, she can
keep that option open. Mark will bridge the gap until Elizabeth
is ready.”
Getting ready has included coaching, mentoring and “a variety of
experiences in the company,” Elliott says. As an account executive,
Niedringhaus worked with management teams in each SSE division.
As vice president of solutions she was responsible for the delivery
of infrastructure and applications software, an operations function.
As vice president of business development she is responsible for
sales and marketing of all services.
Niedringhaus and a half-dozen colleagues also recently completed
a strategic plan for SSE. “The essence of the plan is conveyed through
our tagline—applying technology, creating value,” she says. “The
key is creating value. The means by which we achieve value is the
application of information technology to solve business challenges.
“We have many ways to create value for our clients, by delivering
each service separately or blending them for a complete solution,”
she says. “That starts with listening to clients.”
Elliott, 64, says she “plans to stay around as long as I can make
a meaningful contribution. Five years is reasonable.”
Then she chuckles, “I don’t want people saying, ‘Oh dear, here she
comes.’ Meantime I have such an outstanding team I don’t worry a
minute if I’m not here.”
Korte Kin
Above:
Korte Credo: Those who own stock should work for the company.
Family members who aren't working in the business by age 40 must
sell their stock back to the company. (Left to right): Todd Korte,
president & CEO, and Ralph Korte, chairman.
When Ralph Korte is in his office, he only spends about half his
day on Korte Company matters, in part because he’s efficient. After
43 years in the business, he’s boiled down the benefits of his company’s
design-build approach to a formula as straightforward as 1-2-3:
“It’s faster, better and less expensive. I never met a customer
who didn’t want more quality and more building for less money.”
The rest of his time Korte, company board chairman, uses to raise
money for outfits like the Jackie Joyner-Kersee Foundation, the
Girl Scouts River Bluff Council, and the SIU-Edwardsville School
of Business.
Korte Company is now the full-time concern of Todd Korte, 34. He
became president & CEO in January 2001. His rise to the top started
in the warehouse 17 years ago, while he was in high school.
After earning his bachelor’s in construction science at Kansas State
in 1989 (an MBA at Washington University followed in 1997), he went
to work for the Weitz Company, in Des Moines.
He was being a good son. “I’ve encouraged all my children to get
a college education,” says Ralph Korte, SIU-E grad. “And to go work
somewhere else first...to get the confidence and self-esteem that
they could hold a job without being in the family business.”
Meanwhile back at the ranch, Korte veteran Vernon Eardley became
president and CEO in the early ’90s.
Other Korte kids were, like Todd, pursuing other interests with
pop-pleasing results. Ralph Korte says, “Todd’s older brother Greg
works for a contractor in Las Vegas, and now has controlling ownership
after 14 years. Both daughters are CPAs.”
Daughter Vicki Solheim is a full-time mom in New Milford, Conn.,
to which precincts she’s followed her electrical-engineer-husband’s
career with Kimberly Clark. Another Korte, Susan Bowman, returned
to The Korte Company as comptroller when maternal duties permitted.
But who knows? Absent the fates, Todd Korte might still be marooned
in some flat, square-ish state north of here.
“In November of ’93, I was home for Thanksgiving,” he says, “and
I was thinking I’d stay with Weitz. But in spring of ’94, they were
looking for a foothold in Omaha, and they were looking for me to
handle that. Omaha’s a nice enough town, but it didn’t appeal to
me.”
Then the extraordinary. Eardley won the Illinois Lottery. Forty-two
million bucks.
“My dad told me that now was a good time to come home and train
under Vernon,” Todd Korte says. “Vernon didn’t quit,
but he might not be inclined to endure the headaches of a $150 million
company for ever and ever.
“We all had the same shot,” Todd Korte says. “Susan
didn’t feel that she had the expertise in construction to run
the company. She likes raising her family.”
And the out-of-town kids decided to stay with what they were doing.
These are big decisions in the Korte clan. “If you’re
not working in the business by age 40,” intones Ralph Korte,
“you must sell your stock back to the company. I feel those
who own stock should work for the company. They deserve the fruits
of the labor.”
All four heirs remain in his personal estate.
Back to business. Eardley retired at age 55, after 31 years with
the company.
“The training has been good,” Todd Korte says. “Ralph
has been a great dad, and he’s good at walking the fine line
between that and being the boss. Vern brings out the professionalism
in the organization. Without that, some family businesses might
limit their upside.”
Besides the mentoring and brawn-building warehouse work, his on-job
training has included serving as project engineer, project manager,
estimator, vice president and now top dog.
Ralph Korte is pleased. “All of my children worked in the warehouse.
Todd just showed a love of the business and good common sense. I’ve
never seen him panic and in this business there’s plenty of
opportunity to panic.”
According to Todd Korte the most valuable lesson he’s learned
is, “Humility is good. Guys I work with have 30 years experience.
I have 17. They know a lot more than me. Guys on the job sites—Korte
regulars—have valuable insights that the superintendents may
not run across. I’ve learned to listen to them.”
He estimates that advice from “Korte regulars” saves the
company upwards of $1 million a year.
Meanwhile the Korte’s 2001 annual volume is likely to grow
to $250 million, up from $153 million in 2000, and $120 million
the year before.
“Swings happen,” Todd Korte says. “Eighty percent
of our business is with repeat clients. Their backlog increased
that much in one year.”
Especially at Walgreens, for whom Korte is building three distribution
centers at $50 million each. “They’ve been a client for
12 years, but they’ve never done this many projects of this
size all at once. Plus, their prototype has changed from 300,000
to 650,000 square feet.
That and other evidence offer promise for the future: “He’s
doing a better job than I did,” Ralph Korte says.
Kevin Kipp
runs Bubble Communications, a creative services and community
relations firm in St. Charles.
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