Laird Norton Company LLC, headquartered in Seattle, is run by a family with almost 400 living members—one of the largest family ownership groups in the world. Its challenge is to keep those family members engaged while making sure the business has a single vision, not hundreds of individual ones.
In the past several years, Laird Norton has changed significantly. Founded in 1855 by two brothers and a cousin (James and Matthew Norton and William Laird) in Winona, Minn., the company started out logging white pine, milling it and sending logs down the Mississippi River. Today it has cut its 150-year-old ties to the timber industry. Laird Norton now encompasses three types of business: financial services, real estate and next-generation investments.
In 2001, Laird Norton installed a non-family member as CEO for the first time in the company’s history. Yet it works to keep its family ties strong: About 140 family members actively participate in this family enterprise each year, and even more attend an annual family summit.
“It’s not so much that there is a specific business that happens in one place, or that it’s focused in one area,” says fifth-generation member Chalan Colby, 67, who holds the title of family president. “It’s more like, we’re a family and we have this long-term business partnership.”
“Laird Norton is what I refer to as an enterprising family,” says John Ward, professor of family enterprises at Northwestern University’s Kellogg School of Management and a member of Laird Norton’s board of directors. The family, Ward explains, offers something for everyone: a portfolio of interests that includes several businesses, philanthropic initiatives and family activities.
In 2000, the family decided that to serve its growing number of unit holders, the company needed to focus more on creating wealth and less on simply preserving it. This made the role of the CEO more complicated. The family decided to split the duties into two jobs: a CEO, to lead the business, and a family president, to run programs for family members.
The CEO search led to Jeff Vincent, who at the beginning of 2001 became the first non-family member to lead the company. Vincent had years of experience with privately held family companies and had worked as a CEO, a CFO, a corporate development officer and a strategy consultant.
Ward says bringing an outsider into a very cohesive family must be done with care. “There’s a period of time where trust needs to be built,” he says. “If it’s the right people and the right steps are taken, trust comes.”
Laird Norton also added outsiders to its board that year. Today, the board consists of eight family members, Vincent, Ward and one other independent director (another is being added). “To get the kind of financial expertise that’s require on audit committees, you sometimes need to have capabilities that might now reside outside the family,” Vincent says. Family members vote to approve the entire slate of board members each year.
The family’s inclusiveness is one reason it needs such a sophisticated leadership structure. Ward says he doesn’t know of another U.S. family business with so many family members involved, and there are only a handful of its size in the world. Children in the Laird Norton family are often given units of the company, as are in-laws. Young adults can serve as associate directors of the company, sitting in on board meetings.
“Being in a boardroom as people wrestle with business decisions, that’s very helpful when you’re 25 years old,” says Patrick de Freitas, 57, a fifth-generation family member who served as an associate director in the early 1980s.
Today, with hundreds of unit holders, the company must be careful not to exceed 500 members or it could be treated as a public company. “It makes things more complicated, but it’s also one of the company’s strengths,” says Vincent.
Another of those strengths, says Vincent, is that the family can have a long-term focus. One question he is working on answering, he notes, is “How do I set this company up so that they can reach their 175th anniversary in 2030?”
Sticking together while changing course
Family president Colby, the granddaughter of the CEO who led the company in the 1940s, has a background in psychology and social work. She manages the company’s programs for family members, including one that contributes up to $3,000 per year to family members’ education and another that subsidizes internships. She also makes sure that family members are kept up to date on key developments with a website, a quarterly newsletter and the annual family meeting. She chairs the family council committee, which oversees these family activities.
Few family businesses have established a formal family president position, Ward notes. “But the role is not unusual,” he adds. As families grow, they often form a family council to provide leadership, and the council’s leader often fills a role similar to Colby’s. “Families, large or small, need to identify and need to benefit from family leadership,” Ward says.
One of Colby’s first challenges when she took the position in 2005 was communicating with the family about a major step the company was contemplating: selling a building supply company called Lanoga Corp.
Lanoga had grown significantly since 2001, when Vincent and Lanoga CEO Paul Hylbert both started in their positions—from $1.2 billion in revenue at the end of 2000 to $3.1 billion in 2005. However, Vincent says, in 2005 it became clear that the building materials distribution business was about to change. To remain competitive, the company would have to expand so it could work with national homebuilders. Laird Norton’s leaders were also concerned about the possibility of a downturn in the housing industry.
Selling Lanoga was a big decision—one of the biggest the company has made, according to Colby. Lanoga was the family’s largest asset, and the company’s history was deeply entwined with the lumber business.
“We really did take it out to the family from the beginning,” Colby says. The issue was discussed at family meetings, where family members offered lots of input, she notes. The family received an offer from Fidelity Capital, which is also family-controlled and made a case that it was “committed to investing, to doing what needed to be done to build the business for the long term,” according to Vincent.
At the end of a ten-month process, 98% of Laird Norton shareholders approved the sale. After the deal was closed, Fidelity Capital changed Lanoga’s name to Pro-Build. The real estate Lanoga owned stayed with Laird Norton; today its subsidiary TimberRiver Properties leases lumberyards primarily to Pro-Build.
Bruce Reed, 35, a sixth-generation family member, says he thought the decision made sense from a business standpoint. As a younger family member, he says, he was used to seeing the business invest in other areas. “People don’t identify as much with just the lumber heritage,” Reed says of his generation. Still, he acknowledges, “that is where the roots lie. To move on was definitely a big step.”
Ward agrees that the current family members’ distance from the company’s founders probably made the decision easier. “If it’s a business that was founded and birthed by a generation that everybody knows, then the emotional attachment is intense,” Ward comments.
How important was the timber industry in keeping the family—and the family business—together? In some families, Ward notes, the core business is “what holds the family together.” But in the case of Laird Norton, he observes, “The core business wasn’t what held the family together. It’s the family that holds the family together.”
A history of change
The sale of Lanoga was significant, but it was not the first time Laird Norton had changed direction.
The family business faced its first big transition at the beginning of the 20th century. After 50 years of providing lumber throughout the Midwest, all the white pines in the area had been harvested.
The company sold many of its Midwestern properties, redeploying its capital in other areas. It was a partner in the purchase of Weyerhaeuser’s first million acres of timberland in the Northwest. Laird Norton also invested in Boise Cascade, helping that company survive the Depression. Laird Norton thus spent its second 50 years as a major investor in timber companies but not as a majority owner of one.
In the late 1950s, the Laird Norton family decided to start operating businesses again. It moved its headquarters from Winona, Minn., to Seattle, where it remains today. The company invested in many ventures—some successful, some not—over the next several decades. “Fortunately, the successes outweighed the failures,” Vincent says.
One of the most successful investments was Lanoga and the lumberyards it operated. When Laird Norton sold the company in 2006, it operated in 24 states and employed more than 10,000 people.
It’s not easy for a family to remain unified around the business when that family has 385 members, is seven generations removed from the company’s founding and is dispersed throughout the U.S., Germany, England and South America. “With every generation, you probably double your family population and halve your wealth,” Reed notes.
The family business doesn’t provide a livelihood for the majority of family members, and only a handful are employed by the business. The next generation is prepared for involvement in the enterprise through family programs, which help family members develop both intellectually and personally.
What’s their secret?
Family members cite several reasons for the company’s longevity, some unique to the company and some not.
• The Internet is making it easier for far-flung family members to stay connected. A private family website features a family tree and photos, news about the company and even a matching service that helps family members buy and sell units of the company among themselves. They can also buy family-themed tote bags, baseball caps and vests online.
• The family doesn’t just communicate electronically. The annual family summit, held each June at locations that have included Albuquerque, N.M., Hawaii and Boston, is “the glue that holds us together,” Colby says.
Everyone’s way is paid by the company. In addition to business meetings, there are special programs for children and for 14- to 21-year-olds to learn about the business. The most recent family summit attracted 260 family members.
• Laird Norton was a partnership from the beginning. Because it was founded by two brothers and their cousin, the company never had to make the transition from one person’s project to a shared endeavor. “There wasn’t just one grandpa,” de Freitas says. “You already had different visions on how to go forward, each one of which must be considered equally valid.”
• Another unusual aspect of Laird Norton is that the only two sons in the second generation died in their 20s, so the company was led early on by the daughters and their husbands. This may have contributed to the goal of keeping the family unified. The second-generation daughters “were close-knit, and they placed a lot of emphasis on keeping the family together,” Colby says.
Giving as a family activity
Philanthropy is another way for the family to stay connected. The family formed a charitable fund in 1940 and has focused its giving on forestry-related issues since the 1970s. In the 1990s the family started building an endowment for its foundation.
The sale of Lanoga allowed the family to put more money into philanthropy. In late 2005 the family established a new entity, the Laird Norton Family Foundation, which has a $25 million endowment. The foundation is in the process of merging with its predecessor. When the merger is complete, the foundation will focus on five funding areas: arts in education, climate change, watershed stewardship, global fundamentals and the Taproot Fund, which matches family members’ donations of time and money.
Another foundation, the Winona Foundation, which funds projects focusing on the cultural heritage of Winona, Minn.—the company’s original home—will likely merge with the larger foundation as well, making Winona a sixth area of focus.
The focus areas have committees guiding them, which provide many opportunities for family members to get involved. “It’s a very inclusive model, which is part of what makes the Laird Norton family work,” says de Freitas, who is chairman of the Laird Norton Family Foundation.
Reed says the family’s flexibility about how members can be involved allows family members to increase or decrease their engagement at different stages of their lives. Some people are very engaged through their 20s, he says, but then they get married and have families, and “life takes over.” Once their children are grown, they may become more active again.
The family has “a long, long history and tradition of putting a lot of emphasis on family unity, family education, family shared traditions,” Ward says. Developing the next generation, not just for the business but also as people, has been critically important. “They probably have developed the family leadership concept as much as anybody,” Ward notes.
Even with a 150-year history behind it, the family’s—and the company’s—focus is on the future.
“The businesses we own under Laird Norton Co. have changed,” Vincent says. “They will continue to change. What we’re trying to do is build an enduring family investment company called Laird Norton Co.”
Margaret Steen is a freelance writer based in Los Altos, Calif.
Laird Norton Co. todayLaird Norton Co. encompasses three main lines of business:
• Financial services. Wentworth, Hauser and Violich is an independent investment advisory firm with more than $13 billion under management. Laird Norton Tyee is a wealth management advisory firm that oversees more than $4 billion in assets.
• Real estate. TimberRiver Properties, a private real estate investment trust, owns and leases 250 properties.
• Next-generation investments. Winona Capital Management invests in growing, lower-middle-market consumer companies in an “effort to find new legacy businesses,” according to Laird Norton CEO Jeff Vincent. Unlike many private equity firms, which want to get their money out after three to five years, “we’re really looking to build businesses for the long term while partnering with other family enterprises,” Vincent says.
Researching family businessesLaird Norton Tyee, a privately held wealth management firm in which Laird Norton is the majority shareholder, counts many family business owners among its clients. Many of them are concerned about transferring wealth and business ownership from one generation to the next. In 2007 Laird Norton Tyee surveyed 788 family businesses in the United States to learn more about these issues. The companies polled had revenue of at least $5 million and had been in business for at least five years.
The results? Family business owners are an optimistic bunch, notes Rich Simmonds, managing principal of Laird Norton Tyee. Almost all of them (96%) expect their businesses to do well in the future. But, Simmonds adds, “There’s a pretty significant disconnect between what family businesses want to have happen and what they’re planning to have happen.”
Among the potential pitfalls the survey identified:
• Succession planning. Eighty percent of respondents said they want their business to remain in the family, and three-quarters say the next generation is committed to this as well. But 71% have no formal succession plan in place.
• Preparation of the next generation. Only 35% of respondents said family members must meet certain qualifications to be employed by the family business. And 25% said they think the next generation lacks business competence.
• Financial planning. For 93% of respondents, the family business is their primary source of income. This can make it more difficult for the leader to retire and pass the business on to other family members.
• Strategic planning. Almost half (46%) of the respondents said their business had no written strategic plan.
— M.S.