Building a better future

Joachim Schwass is Professor of Family Business, IMD and Director, the IMD – Lombard Odier Darier Hentsch & Cie Family Business Center.

Samuel C Johnson Family Enterprises were the recipients of the 2002 IMD Distinguished Family Business Award. Over the past decade, the company and the family behind it have seen phenomenal growth – in both the business and the family dimensions

"We should worry not about whether we have lived up to the expectations of our fathers…but whether we, as fathers, live up to the expectations of our children."
- Sam Johnson

The founder of what is today the Samuel C Johnson Family Enterprises was Samuel Curtis Johnson (1833-1919). In his early working years, Samuel was employed at the Racine Hardware Company, where he sold parquet floors. In 1886 he acquired the parquet flooring business that, in its first year, generated a profit of US$268.27.

Recognizing people's need to treat wooden floors, Samuel developed a wax product from beeswax and other components that he mixed in a bathtub. In 1888 he introduced "Johnson Prepared Wax" and bought his first national advertising in The Saturday Evening Post. By the turn of the century, wax sales were larger than the revenues from selling parquet floors, so Samuel discontinued the sales of parquet and concentrated on wax. As the company's wax products gained wide acceptance, Samuel exported them to Britain and even as far as Australia, and the number of employees ballooned to over 100. By 1900, Johnson Wax was not only at the forefront of wax production, but also at the forefront in human resources policies, offering paid vacations to the employees. In 1917 it introduced a profit-sharing plan that gave employees 25% of the company's earnings – something unheard of back then.

The HF impact
In 1919  Samuel died and his son, Herbert Fisk Johnson (1868-1928) took over. Herbert, who had joined the business at the age of 20, working closely with his father, became an equal partner in 1906, at which time the company became SC Johnson & Son. On Samuel's death in 1919, Herbert, then 51, became President. More technical than his father, Herbert's research-orientation led to a number of new cleaning and treating products, which earned him a reputation as the "real business builder" through diversification. In 1926, Herbert, who shared his father's strong sense of social responsibility and favourable human resources policies, established a 40-hour work week, calling his approach "enlightened selfishness." His outlook was further evidenced by a widely respected speech given by Herbert in 1927 that still serves as a philosophical guide for current generations: "The goodwill of the people is the only enduring thing in any business. It is the sole substance…the rest is shadow!"

In 1928 Herbert unexpectedly died at age 59 and left the family business devoid of any will or succession plan. His son, Herbert Fisk (HF) Johnson Jr (1899-1978), assumed management control – at the tender age of 28. It took a decade to clarify ownership with Henrietta, HF's younger sister, who eventually received one-third of the company shares. This protracted legal battle caused HF to state that he was "never going to let that happen to [his] son," and in his will he subsequently designated his son Sam as his successor.

Despite taking control at a young age, HF seemed to have a knack for running the business. He led the 500-strong company through the Great Depression with no layoffs – an amazing feat at that time. He also is widely seen as the creator of international growth and the progenitor of new manufacturing technologies and was, in fact, the company's first chemist.

Even though the company successfully survived the Depression years, HF soon began to worry about the supply of the key ingredient in the company's wax products, which comes from the carnauba palm in the Brazilian rain forest. HF's background as a chemist raised his awareness of the importance not only of the manufacturing technology, but also about the nature of the raw materials used in production.

So, in 1935 HF bought an amphibious plane and led a 22,000 mile expedition from Milwaukee to the Brazilian rain forest to study the carnauba palm. The trip, which received broad press coverage, was described by Time magazine as "Johnson's search for the 'tree of life'."  The expedition had a strong, favorable impact on the 36-year old HF and he returned invigorated and full of new visions for the business, so much so that he wrote a book about his Brazilian sojourn and what it meant to him. On the inside of his son's copy he expressed succinctly the impact of the trip: "Sammy, I hope you take this trip someday. It changed my life.  Love, Dad."

HF's son Sam later describes his father as "a scientist, and indisputably proud of it, the 'father' of technology at Johnson Wax," an "internationalist" who created an "organization he could trust" so he could travel, enjoy himself and "still take care of the business details on an overseas journey." According to Sam, HF was "a creative leader" who "insisted on the best," drew superior performance from his people, and "believed in the benefits of retaining wise consultants and counsel," a man with a vision who thought in terms of entire generations, a "humanist" who believed in the good of individual creativity and in the dignity of man and woman." Sam quotes his father as frequently saying, "Every community where we operate should become a better place because we are there."

New products, new roles
Sam (1928 - ) joined the business as his father's assistant in 1954, with a master's degree in business from Harvard Business School in his pocket and two years of US Air Force service. On the advice of a consulting firm (Booz, Allen and Hamilton), HF developed a career plan for Sam. Later, Sam recalled that he had been upset about having to follow a carefully laid-out development plan – after all, wasn't he the son of the owner and entitled to go straight to the top? But in time, he came to appreciate the wisdom of the incremental approach thought out by Jim Allen of Booz, Allen and Hamilton. This plan initially had him directing a newly-created department responsible for developing new products – but the company didn't want to just introduce any new thing. Believing strongly in product quality, HF launched the 'Product Plus' concept: every new Johnson product had to have a distinct advantage over everything else on the market, or it had to be new and unique enough to outstrip the competition. The Johnson Wax Company had grown internationally, but it was still primarily limited to wax products for various applications. "I had just become the company's New Products Director," remembers Sam, "and our section had decided that the insecticide field was a good and growing business, one in which we wanted to play a part."

So, Sam set to work developing new products. His first foray into the field wasn't exactly met with wild applause from his father. "I had a mock label created, stuck it on a can, brought the sample of 'Johnson's Aerosol Insecticide' to my father, and announced that this was a business we surely ought to enter," recalls Sam. "He looked at me and then at the can. 'Don't you realize we don't make any products without wax in them?' he said. Although he was the boss, he was also my father, so I was able to risk a little impertinence and I answered, 'Well, we could put a little wax in it, but I don't think it would do the product any good.' My shot at humour didn't throw him off track. He told me we didn't know anything about bugs. I replied that we were learning. He said: 'OK, then let's get down to fundamentals. Tell me what is better about that product than what is already on the market.' I offered: 'It will have a nice label and be an aerosol.' He said, 'Does it work better than the other ones?' I admitted finally: 'No. It's just a darn good aerosol insecticide.' My father replied, 'Then take it back to the lab and when you have something that is better, come back and we'll talk about the insecticide business.' His instincts were right and we did come back with a better insect killer: Raid®. When we came out with an aqueous formula, we indeed had a Product Plus. It smelled better and killed insects without harming plants."

The following years saw a number of new products developed by a new product development process created by Sam in the effort to move the company away from its traditional wax-related products: OFF!® (mosquito repellent), Pledge® (furniture duster and polisher), and Glade® (air freshener). Within a year of market introduction they represented 35% of total domestic sales.  Sam's new product development process was so innovative that it became the subject of a Harvard Business School Case study, and stands today as a model for new product development organisations.

Over the next few years Sam climbed the company ladder, taking on three new roles in the span of four years. In 1959 Sam moved into international operations and traveled to Europe. In 1960 he was named European Regional Director and in 1962 he was promoted to International Vice President. Despite a successful track record, Sam did experience some problems. Sam's first major setback occurred in 1965 when he oversaw the consolidation of European regional manufacturing in a large new plant in the Netherlands, an effort that was designed to reduce cost and improve efficiency.  Faced with overcapacity, start-up problems and major losses, Sam was called back to the US. His father was furious about the bad results. Several weeks later, at the age of 65, Sam's father suffered a stroke that left him severely handicapped: he could neither read nor write well and became very irritable. Sam recalls, "I always wondered whether I had given him the stroke because of the mess-up I'd made in Europe."

Still, Sam laboured on and in 1966, when he was just 38, Sam became President of the company, which now boasted annual sales of US$171 million. His father, now honorary Chairman, wintered in Florida and Sam flew down every two weeks to report to him about the company. These visits often turned very unpleasant. His increasingly irritable father often railed, "I don't like these numbers. And I don't like you either. And you're fired." Understandably, Sam recalls this as a most difficult and depressing time – a time when he questioned himself and his abilities. When his father died in 1978, Sam received a letter his father had written in 1953 for posthumous delivery, stating: "Some people may try to challenge you by saying you are not doing as well as your grandfather or father did. This is something you should not give any worry to because what your great grandfather, grandfather and I did was to build on a foundation of honesty and integrity in business. Just go ahead in the way you think best. I'm confident in your future." Finally, Sam felt he could be himself and not just a clone of his father.

Values-based approach
Sam put his imprint as a strong leader on the company, building it from a company with revenues in the millions to those in the billions. This was based on a strong, international expansion through diversification and acquisitions (he had decided on this approach during a one-year sabbatical he took in 1968 after his father's stroke).

In 1976, in a statement of corporate philosophy entitled "This We Believe," Sam codified the basic principles that he believed drove the family business. It built on his grandfather's famous 1927 Christmas Profit Sharing speech:

- Employees: We believe that the fundamental vitality and strength of our worldwide company lies in our people.
- Consumers and Users: We believe in earning the enduring goodwill of
consumers and users of our products and services.
- General Public: We believe in being a responsible leader within the free market economy.
- Neighbors and Hosts: We believe in contributing to the well-being of the countries and communities where we conduct business.
- World Community: We believe in improving international understanding.

Further to these principles, Sam added: "The way of safeguarding these beliefs is to remain a privately held company. Our way of reinforcing them is to make profits through growth and development, profits which allow us to do more for all the people on whom we depend." Dick Hansen, current CEO of Johnson Financial Group, feels these beliefs make a difference for employees in a family owned business: "I see Sam's integrity through his respect for the community. Sam challenges us to make our communities better because we are there. He doesn't talk values, he lives them."

One strong example for this values-based management approach occurred in 1975, when Sam voluntarily and unilaterally banned the worldwide use of chlorofluorocarbons (CFC) from all Johnson aerosol products. At the time, unproven research suggested that CFCs might harm the ozone layer. Both internally and externally, Sam's decision was widely criticized until, three years later, it was validated when the US and Canada officially banned the use of CFCs in aerosols. It also turned out to be a smart business decision as company scientists had discovered – much earlier than the competition – that propane was a cheaper substitute for CFC, a strong advantage over competitors.

The business also continued to grow in the consumer products field. In 1970 Johnson Diversified, now known as Johnson Outdoors Inc, was created, making leisure products like boats and camping equipment.  The Johnson Bank was also started in Wisconsin. These steps were made both out of fear and logic: fear of being cornered by larger, publicly-held consumer products companies, like
Procter & Gamble; logic by providing entrepreneurial opportunities in new businesses to the next generation of family business leaders.

Readying for the future
Sam married Imogene Powers, whom he met in university in 1954 and together they have four children: Curt (b. 1955), Helen, (b. 1956), Fisk (b. 1958) and Winnie (b. 1959).  All four were educated at Cornell University (where the business school is called the Johnson School). All of the children presently work in the company and each decided to join the family business without pressure from their father. In 1985 Helen was the first member of the fifth generation to join the company as an associate product manager. In 1986 Winnie joined as a public affairs manager. One year later Fisk joined the company as a marketing associate. And in 1990, Curt joined the company when Windpoint Ventures, a venture capital fund he started, was folded into the family business. Although they recognized the expectations and pressures put on next generation members of the owning family, they felt the company was a special place. Like their father, they believed family leadership was necessary to ensure that the core values -– which led to its success – continued to guide the operations.

Knowing full well the fragile structures of family businesses, Sam devoted much attention to preparing next generation family members for working in the family business and creating a large degree of transparency. As a result, the family created a council with regular meetings of all family members to deal with both family and business matters. The council also became the forum for succession planning. In the council discussions, it became increasingly apparent that the children had different interests and leadership aspirations. Sam, who had seen many family businesses suffer from sibling rivalry, wanted to avoid siblings reporting to each other. Without conflicts, the family arrived at a suitable arrangement in 1999.

Fisk, who has a PhD in physics, became chairman of SC Johnson, the core consumer products business. Helen became Chairman and CEO of Johnson Outdoors, the recreational products business. Curt became chairman of JohnsonDiversey, now the second largest institutional and industrial products and services business in the world. And Winnie, who had expressed a lesser interest in the business, became president of the Johnson Family Foundation. Helen described the functional separation as something that came about naturally: "We each found our spot. Curt was the wheeler-dealer entrepreneur, Fisk was the technician, and I was the one interested in marketing."

Confronting the past
Despite the success of the company, late in his career, Sam began to suffer from the same addiction to alcohol his mother had. With strong support from his wife and children, he decided to confront this dependence. After a one-month treatment in 1993 in the Mayo Clinic, of which he was the Chairman, he returned home cured. Readying himself for retirement from day-to-day responsibilities, he began to think about his father's journey to Brazil and what it had meant in his life. Recalling the note his father had left in his book expressing the hope that Sam would make the same journey one day, Sam decided to follow in his father's footsteps.

After some initial investigation, Sam learned that the original aircraft his father flew to Brazil had been sold and ultimately crashed in Asia; it could not be salvaged. So, in the effort to duplicate his father's life-changing voyage, Sam decided to have an exact replica of the plane built, a project that took over three years. On 22 October 1998, Sam and his two sons Curt and Fisk, all qualified pilots, took off from Racine, Wisconsin for a month-long trip to the Brazilian rainforest, following the route of Sam's father well over 60 years earlier. There the rest of the family joined them. The trip proved to be an invigorating and cathartic experience – much as it had been for his father.

But Sam also wanted the voyage filmed as a legacy for his family and companies. The film, "Carnauba: A Son's Memoir," turned out much more personal than intended. In it, Sam speaks very openly about his father, himself and the difficult periods in their lives. Even his children had not understood the extent of Sam's difficulties with his father. Fisk said, "My brother and sisters and I have been huge beneficiaries of the relationship that my father had with his father. I think my father said to himself, 'I'm never going to put my children through this'." His brother Curt stated in an Internet posting to the company employees: "The trip has provided us with an opportunity to talk about some of the issues and opportunities facing the family businesses. I feel connected to the visioning process my grandfather experienced when he made this trip." Sixty years later the family was learning new things about itself and its businesses. It seems HF's original trip to Brazil left an impact on more people than he may have intended.

Sam's four children feel that the relationship between themselves and their father is unique: "Under Dad's leadership, within just a few brief decades, the Johnson business went from a small wax company (US$171 million in sales) to four major global enterprises (combined US$8 billion in sales) that include household goods, innovative commercial products and services, environmentally-responsible polymers, diverse financial services and some of the most recognized brands in the recreational industry. And he didn't just champion the business. He took seriously the challenge of making our world a better place to live. Whether funding the restoration of Martin Luther King Junior's birthplace, contributing time and money to the World Business Council for Sustainable Development, or helping protect a unique ecosystem in Brazil, Dad has dedicated himself personally and positioned the family businesses to shape our communities and protect our planet. But even more important to us, his children, is the support Dad provides right here at home.  From the family dining room to the corporate boardroom, he has been a coach, protector and friend to each of us. He has guided us with wise counsel, but also encouraged us to follow our hearts." The fifth generation continues the legacy – building a better future for the world, the business and themselves.