Please read and understand the Samuel C. Johnson Family Enterprise case and write up your key learning points (1 page).

 

Samuel C. Johnson Family Enterprises

                          by Prof. Joachim Schwass*

“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, Johnson was employed at the Racine Hardware Company, where he sold parquet floors. In 1886 he acquired the parquet flooring business, which in its first year generated a profit of $268.27 Recognizing people’s need to treat wooden floors, Johnson 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 Johnson discontinued the sales of parquet. As the company’s wax products gained wide acceptance, Johnson exported them to Britain and even as far as Australia, and the number of employees ballooned to over 100. By 1900, Johnson Wax was 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. In 1919 Samuel C. Johnson died and his son, Herbert Fisk Johnson (1868-1928) took over. Herbert’s sister, Jessie, neither worked in the business nor inherited ownership. Herbert, who

had joined the business at 20, working closely with his father, became an equal partner in 1906, at which time the company became S.C. Johnson & Son. On Samuel’s death in 1919, Herbert, then 51, became President. More technical than his father, Herbert’s research-orientation lead 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, established a 40-hour workweek, calling his approach “enlightened selfishness.” In 1927, on occasion of the Christmas Profit Sharing, Herbert gave a widely respected speech that still serves as a philosophical guide for 2 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 (H.F.) Johnson Jr. (1899-1978), assumed management control – he was 28. It took a decade to clarify ownership with Henrietta, H.F.’s younger sister, who eventually received 1/3 of the shares. This protracted legal battle caused H.F. 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. H.F. led the 500-strong company through the Great Depression with no layoffs. He is widely seen as the creator of international growth and the progenitor of new manufacturing technologies. H.F. was, in fact, the company’s first chemist. On the personal side, besides the relatively early loss of his father, he also suffered the death of his 4-year old daughter and a subsequent divorce from his first wife, who suffered from alcoholism. The other two children, Karen and Sam, moved between their father in the Midwest and their mother in New York.

After the Depression years, H.F. started 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. His background as a chemist had raised his awareness of the importance not only of the manufacturing technology, but also about the nature of the raw materials used in production. Believing strongly in product quality he 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. In 1935 H.F. bought an amphibious plane and led a 22,000 mile expedition from Milwaukee

to the Brazilian rain forest to study the carnauba palm tree. 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 H.F.. He returned invigorated and full of new visions for the business. In 1936 he invited Frank Lloyd Wright

to design the new company headquarters in Racine, Wisconsin. He also wrote a book about his Brazilian sojourn. On the inside of his son’s copy he wrote: “Sammy, I hope you take this trip someday. It changed my life. Love, Dad.” Sam later described 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, H.F. 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.” Sam remembered his father as “a family man who […] took his son hunting and fishing.”

In 1953 H.F. wrote Sam a letter that was to be opened upon his death. Twenty-five years later Sam opened it: 3

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.

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), H.F. 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 that initially had him directing a newly created

department responsible for developing new products. 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, and our section had decided that the insecticide field was a good and growing business, one in which we wanted to play a part.”

Sam recalls his first product idea. “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. 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 humor 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 move the company away from the wax-related products: the Garden Bug Killer, Off (a mosquito repellent), Pledge (a furniture duster and polisher), and Glade air freshener. Within a year of market introduction they represented

35% of total domestic sales.

The new product development process created by Sam 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 organizations.

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. Sam’s first important 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 4 recalls, “I always wondered whether I had given him the stroke because of the mess-up I’d made in Europe.”

In 1966, at 38, Sam became President of the company, which now boasted annual sales of US$ 171 million. His father, now honorary Chairman, wintered in Florida, so Sam had to fly down every two weeks to report. 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.” Later, Sam recalled that this was a most difficult and depressing time. When his father died in 1978, Sam received the letter his father had written in 1953 for posthumous delivery. The twenty-five year old letter “released [him] to be

[himself]

and not just a clone of [his] father.”

By then, Sam had put his imprint as a strong leader on a company with revenues reaching US$ 1 billion in 1978. 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. He also planned for the ownership transition from himself to his four children by setting up trusts for them and the

grandchildren. 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, talks about how 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 Johnson 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 5 discovered that propane was a cheaper substitute for CFC, a strong advantage over

competitors. The business 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 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. Sam had married Imogene Powers, whom he had met in college, in 1954. Together they have four children: Curt (b. 1955), Helen, (b. 1956), Fisk (b. 1958), and Winnie (b. 1959). All four were educated at Cornell, where the business school is called the Johnson School. Each of the children decided to join the family business without pressure from their father. 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 a generation before, they believed family leadership was necessary to ensure the core values – which led to its success – continued to guide the operations. 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. Late in his career, Sam began to suffer from the same addiction to alcohol his mother had once 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, and readying himself for retirement from day-to-day responsibilities. He started 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. The original aircraft had been sold and crashed in Asia and could not be salvaged. Sam decided to have an exact replicate built, a project that took over three years. On October 22, 1998, Sam and his two sons, Curt and Fisk, 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 experience – much as it had been for his father. But Sam also wanted it 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.” 6 By this time, the family had created a council with regular meetings of all family members to deal with both family and business matters. Sam had a strong interest in the history of family business; he knew well their fragile structures, and he devoted much

to preparing next generation family members and creating a large degree of transparency. The council became the forum for succession planning. 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 Ph.D. in applied physics, became chairman of SC Johnson, the core consumer products business. Helen became chairman of Johnson Outdoors Inc., 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 follows: “We each found our spot. Curt was the wheeler-dealer entrepreneur, Fisk was the technician, and I was the one interested in marketing.”

In a joint statement, the four children talk about the relationship between the two generations:

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.

*Joachim Schwass, Professor of Family Business, IMD, and Director,

The IMD–Lombard Odier Darier Hentsch & Cie Family Business Center, wrote this article.

References:

– The Essence of a Family Enterprise, by Samuel C. Johnson, 1988

– S.C. Johnson Commemorative Journal, 2000

– Father Divides a Business to Keep the Children united, by D. Barboza, New York

Times, August 22, 1999

– Waxing Personal, by J. Tannenbaum, Wall Street Journal, May 7, 2001

– Various company publications

  • Award ceremony with Sam and Curt Johnson, Helsinki, September 2002
 
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