Sean Lang & Jeff Watters - Appointing a Non-Family CEO & Selling a 5th Generation Business
19 September 2021
1 hr 9 mins 15 secs
About this Episode
The Lang family recruited Jeff Watters as the first outside CEO to lead Ainsworth Pet Nutrition in it's 5 generations. Sean Lang and Jeff Watters worked together, partnering with a private equity firm to scale the $100m per year business into a $2 billion dollar exit over the space of a decade.
This story covers not only leadership succession within a family business but also ownership succession and how the family have stayed together and united around a family office in the absence of an operating company.
- "What's gotten us here, isn't going to necessarily get us there" - [Sean]
- "As a family, we realized that we would have to make a pretty major change in the journey... And we made the choice to start that journey from family-owned and family-run, to family-owned and professionally-run" - [Sean]
- "I think in any family business, there's a certain level of distraction or disruption that comes from the family, and if you can move that into the family council and outside of the board room, it seems to be better for everybody" - [Jeff]
- "The family office is being driven by a stewardship theme; Leave it better than you found it" - [Sean]
- Sean Lang and the Lang family represent a 5th generation business family who owned Ainsworth Pet Nutrition, while Jeff Watters is the first outside professional CEO recruited by the family to lead the business till it was finally sold.
- The business started small, with deliveries made to "mom and pop" stores, expanded over the years, and all interested family members worked in the factory. After school, Sean started as a sales manager and worked his way up to be president.
- The family realized that there was a need to make a major change to move with the competition and this would require great talent, moving from family-owned and family-run, to family-owned and professionally-run
- Although Jeff was in a place where he wanted more in his life personally and professionally, his relationship with Sean was initially not a professional one. Following further interaction, Jeff realized the family was committed to the business, and they were authentic and intentional about their growth.
- The average tenure of a Public Company CEO is about 4 years, and a Family Business CEO is about 6years, even if you think you're going to be there longer than that, you have to plan according to the statistics.
- The introduction of professional leadership after 5 generations took some time, however, this had been tried previously and even though it failed, the family had started to get used to the idea. The goal had become to keep the family culture but adopt the benefit of big company thinking and growth capabilities.
- The notion of an organic, natural but very transparent onboarding process is extremely helpful for professionals outside looking to join a family business.
- Jeff also encourages professionals considering entry into a family business. You just have to bet on yourself to a certain extent. Once you're satisfied that the other party has high integrity and will deliver on their promises, have the conviction that you're going to deliver on yours, and if it doesn't work out, it doesn't work out. There will be other opportunities.
- While Jeff's transition into the business had its hiccups, there was a lot of intentional effort from all sides to communicate effectively and create ways to tackle arising issues. This was made easier by the family culture of transitioning where the older generation completely let go of the business which allowed Sean to give Jeff the space needed.
- Working with a Private Equity Company was pivotal in driving the rapid growth of the company moving from a 200 million-dollar company to a 2 billion-dollar company in 4 years.
- Jeff describes that the main factor that drove growth while working with the PE Company, was a deep cultural alignment
- Between the family and the company. It was all about a long strategic view of the business.
- The family council was started by Sean's father, and one of the policies laid down was that incoming family members needed to work somewhere else for 2 years or until their first promotion whichever came later, before joining the business.
- In the absence of an operating company, Jeff wanted to still have a family enterprise that could act as glue for the family, and help be a driver for education for the rising generation. This would also foster the creation of mechanisms to share the family history and culture with coming generations.
- It's not always easy to leave it better than you found it, given the mathematical fact that families almost grow faster than businesses and assets, that means each family member needs to be self-sustaining and look at any help from the family later in life as icing on the cake, not the cake itself.
- Sean shares he now has more time for family and personal relaxation, while also finding businesses to invest in. Jeff also tries to have fun, works with his wife on philanthropic projects, and serves on a number of boards.
- Jeff's letter to his kids: Jeff tells them to be bold in the pursuit of what they love, hopefully, it will be something that allows them to leave this place a better place. He encourages them to take a leap of faith, the financial fortune is an opportunity for them to invest in their future in a way that can be fulfilling for them and differentiating for their community.
- Sean's letter to his kids: The family business cocktail of money, love, and power is trouble. It can rip families apart easily and needs to be proactively managed within the family with the help of professionals.
- [00:52] Introducing today's guests, Sean Lang and Jeff Watters.
- [02:30] Sean shares the history of the family business.
- [08:00] What was the reason for bringing in outside leadership?
- [10:00] How Jeff got involved with the business.
- [15:18] Were there any surprises while bringing in the idea of getting professional leadership after 5 generations?
- [20:21] Jeff describes his transition into the role of CEO.
- [29:30] Discussing the growth of the business, involvement of a Private Equity, and the decision to exit rather than transition to a 6th generation.
- [42:02] When did the Family Council begin?
- [52:25] What was the transition like after the final decision to sell the company?
- [01:00:22] Before the company was sold, there were plans to continue the Family Council?
- [01:03:51] What Next?
- [01:06:00] In a letter to your children, what is one lesson or idea you don't think many parents would mention but you consider important to understand?
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