My guest on this podcast episode is Jim Derry, the CEO of Field Fastener, a $180 million fastener business based in the Midwest with a unique vendor-managed inventory system. We discuss two main topics: culture and maintaining a multi-generational family business.
Jim shares insights on creating a measurable, data-driven culture where talented people thrive and the importance of values in defining company culture. We also discuss preparing Field Fastener for future generations, covering the essential questions and strategies. My favorite quote from Jim on culture is, ‘Culture is the lowest level of behavior you’ll tolerate.’
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(00:00:00) – Intro
(00:03:33) – The family history of Field Fastener
(00:15:47) – How does your culture separate you from competitors?
(00:18:37) – New Hire key characteristics
(00:23:25) – Getting teams to buy in
(00:26:01) – Firing customers for cultural reasons
(00:31:24) – Unique data uses
(00:39:16) – Designing a multi-generational family business
Alex Bridgeman: Jim, thank you for coming on the podcast. It’s good to see you. And I’m glad we got to meet up at MDM recently, and I would love to chat all about Field Fastener. The one area that we talked about a lot was the owned by a family, family owned business and keeping it through multiple generations. But before all that, can you talk about how Field Fastener started and evolved through different family generations?
Jim Derry: Yeah, Alex, I’m excited to be in the podcast. Yeah, so Dick Field, the founder of this business, started a fastener distribution company in 1976 in Rockford, Illinois. He was a fastener guy. He worked for a large fastener manufacturing company called Camcar, retired from that business, and started a distribution company. One of my older brothers worked at Camcar and actually worked with Dick for several years. And in 1989, Dick said, hey, I think it’s time to sell the business and retire. And long story short, Bill got ahold of me. He said, hey, why don’t we buy this little company? So November 1st of 1990, the two of us, two brothers, bought this business. So I moved back from Minneapolis to Rockford, which was my hometown. And the field was 12 people and $800,000 a year in revenue. And I was running the business and Bill was an investor. And we started selling fasteners. So we tried to sell more of them and grow the business. And that’s how it all started in 1990, we’re coming up actually on our 35th anniversary. So, sorry, 34th. So, yeah, it’s been a great run, an absolutely wonderful run. And as the business has grown and our families have grown, we are committed to keeping the business in the family.
Alex Bridgeman: What were some key moments of growth after buying the business that stand out to you? So, from 800,000 in revenue and through today, there must have been a couple key moments or years that stand out to you.
Jim Derry: There’s been a bunch of them, but I think early on we’ve got real clarity on our value proposition, like what do we do? That boils down to really, we provide our customers a way to save money. We help them save money. We do that by implementing a robust inventory management system. Generally speaking, our customers, they’re not buying orders and they’re not placing orders, buying parts, receiving parts, moving them around. They just literally hire us, and we manage the inventory in their facilities. So we’re putting parts into bins on a manufacturing assembly line. So, our customers reach into a part, grab a bolt or a screw or a nut and put it into whatever they’re building, and we make sure that bin never runs out. So this management system is what we do. And we have a team of engineers that kind of help our customers use the right fastener. So, it’s the right fastener. It’s got the right torque in it. It’s got the right finish. So, it does the job as efficiently as possible. So, we look at how our customers build stuff and find a way to optimize that. So, we take costs out of the manufacturing process. So, that’s what we do. We help our customers save money by doing these vendor-managed inventory systems and providing proactive technical support. We started doing that in the early 90s, and that’s what we do today. We’re really good at it. We know the market, and we create value that our customers see. Our team has gotten really good at growing the business organically, and we’ve had very important acquisitions. So our blend of growth that takes us from 800,000 a year to it will be 180 million this year, 200 next year. It boils down to like, hey, we know what we do. Our customers appreciate the value we bring. They see value in it, and they keep us as a customer. And our sales team is good at finding people that want to do business with us.
Alex Bridgeman: When did that click? So, going from 800,000 in revenue even just to a couple million in revenue, was there an ICP you identified or some specific type of manufacturer that you got a lot of traction with to kick-start a lot, who believed in vendor-managed inventory and all that?
Jim Derry: No. I think one of the seminal moments in our career, in our history was 20 years in. We took the entire company to Las Vegas to celebrate 20 years in business. The company was 22 million a year, and that was about 20% growth a year from 1990 to 2010. It got us to 22 million a year. In the celebration, we had the whole company there, and my brother and business partners, he made this proclamation that said, we’ve grown at 20% a year for the last 20 years. And when we do that for the next nine years, we’ll be a hundred million dollar company in nine years from now. And I’m like, dude, what… We’ve been in Vegas for a little while, I don’t know. I don’t know what you’re doing, man. But so, I came up to the microphone and said, well, if we hit a hundred million, I know I said if not when because I wasn’t really buying into that, we’ll have a real party on a beach or an island someplace. Well, so that kind of set the tone. So the point of this is we established a big hairy audacious goal, a BHAG, to go from 20 million to a hundred million in revenue. But then we just said, all right, that’s what we’re going to do. So we started looking at systems and processes and we started looking at everything we did and we just said, all right, let’s go. We’re going to- we built a plan. And then for nine years, we executed that plan. And then in 2019, we hit 100 million in revenue. And the only reason that happened is that Bill challenged the organization, and then we all bought into this, especially the leaders bought into this, like, okay, not sure exactly how we’re going to do this, but we’re going to do it. And so, in that process, we got better, we scaled, we ended up, bought a decent sized company in Texas and Mexico, so it increased our footprint, we got into some new markets. So yeah, and now we’ll go from a hundred million to 200 million in probably six years. And we’re pretty confident we can hit 300 million by the end of the decade. So it’s just kind of a philosophy that you have about growth and a commitment to doing things right and taking care of customers. And one of the things, we’ve been able to kind of grow because we don’t generally lose customers. We get them and we keep them. And our customers, they tend to be, they’re building stuff. They’re building, whether it’s a football helmet or an elevator or a school bus, they’re building these things all day long, every day. So, we get a customer, we tend to have them for a very long time, we want to keep them for life. So, we look for customers that we think we can grow with, that are going to expand, and they’re going to be leaders in their market, so we grow our businesses, they grow theirs, and then get really good at finding new customers. And so the other piece of this, this kind of very clear value proposition, the other thing that’s happened in the last 30 some years, so probably maybe for the first 15, 20 years, we never uttered the word culture, never said it, never thought about it. But somewhere along the line in the last 15 years, we kind of realized there was something unique. There is something unique about the culture of our company. So we started to kind of dig into that and to figure out what it was. And then now our culture is really intentional. So having a really strong culture does several things. One, it helps us get and keep the best people. So there’s a whole lot of value to that. But the thing that I didn’t realize is when we started really focusing on culture is that that’s how we try to get new customers as well. We talk about culture with our potential customers. Not everybody gets the value of that, but the ones that do, they see significant value. They recognize that doing business with a company that has a very strong culture, and many times it’s companies that have a strong culture, and in many cases, privately owned family businesses, they tend to have a more intentional, kind of a more in this for a bigger thing than making money culture. So the companies that have cultures that are kind of more people centric versus the big fortune 500 companies where they just want to make money for their shareholders, the companies that have cultures that are kind of similar to ours, we find that they tend to- they’d be really good customers and they tend to gravitate to and recognize the value of a supplier that has an intentional and a positive culture. So, the culture has also been an important part of, I would say, our growth over the last 37 years.
Alex Bridgeman: Yeah, and especially for something like vendor managed inventory, where you’re a part of their factory now, they’re kind of making a bet on you, on you and your company for the next couple of years and hopefully longer. And I know like working with certain vendors or when I know that whoever this vendor is going to be, I’m going to work with them for hopefully a long time. Like I’m trying to bet on a company that I know is going to keep improving and isn’t going to deteriorate and get worse over time. And I could imagine similar calculus being done by a lot of your customers and betting on like the horse to bet on, I want to bet on a horse that’s going to be around for a long time and have that customer obsessed focus.
Jim Derry: Yeah, you’re spot on Alex. I mean, there’s really kind of, I would say there’s two different distinct elements. One is there’s a… I mean, we’re pretty integrated. So they’re not placing orders. They’re not checking our parts. They’re just basically, we send them an invoice and they pay it. So, they have to- I mean, they have to believe that when we say we ship them a hundred parts, we put a hundred parts in the bin. Because they’re not placing an order. They’re not having somebody receive it. We’re just telling them, here’s what we did. So, there’s a trust component. And behind that, they ought to be confident that these systems that we have are all… we can’t kind of not do it the right way, like just because the system doesn’t allow it. The other thing that we’re hearing more recently, and it’s becoming, we think, I hope it’s a trend, but we’re finding that some companies, when looking for strategic partners, they are pretty committed to doing business with family-owned companies or publicly traded companies. They’re all concerned about strategic relationships with companies that are owned by private equity. And I love private equity. As an investor, it’s fantastic. But if your vendor is owned by private equity, you know at some point in the next five years, there’s going to be a new owner. And sometimes those new owners have very different opinions about business models and value propositions, and things can change. So we think that as a family business that’s committed to keeping our business in our family, that there are people that resonate with that, too. They know the security and stability. Like, there’s going to be somebody in our family that’s going to own this company and we’ve instilled the values in our family and we’ve defined what we’re going to do and how we’re going to do it. So, some people see comfort in that.
Alex Bridgeman: Yeah, there’s a lot of consolidation in distributors at the moment. I have to imagine that that’s a compelling pitch to other distribution owners that you might be trying to buy their business from and being able to say like this is a compelling pitch and a more long-term focused company that’s not going to have the same short-term swings a lot of peer companies might have under private equity.
Jim Derry: Yeah, every company that we bought in the last several years, our competition, that is someone in private equity. It’s just, that’s always the case. And again, great companies. I’m not knocking private equity, they’re wonderful. But when we’re talking to an owner and say, look, our family’s going to own this, your family business is now going to be part of our family business, and we’re not going to sell it. And some people see value in that. Some people say, hey, I want the biggest wheelbarrow full of money. Hey, that’s great. That’s probably not us. But our commitment to culture and family and growth, it creates opportunities. And the people that we have bought their companies from, the biggest reason is that it is going to stay a family business. So that’s important.
Alex Bridgeman: And how does that stand out in some similar competitors as yours? What does that dynamic feel like and look like on a day-to-day basis? I’m thinking of companies like Fastenal, and I don’t know if you consider them a direct competitor, but other similar fastener businesses, like where does that show up to you, that kind of cultural difference?
Jim Derry: Well, our sales team, one of the things, we go through this process, but one of the things that we look for is fit. Is our customer going to be a fit for us? And really, do they value what we do? Because not everybody does. So, you can tell by companies’ behaviors where they get a new supplier every three years. They’re always changing suppliers, and they’re just looking for the lowest price possible or whatever, or they’re just hard to do business with. So our culture has become so important that we will not do business with a company, a potential customer, if we don’t think they’re a good fit. Because it just ends up being, candidly, too hard. There’s so much work and so much effort to service and support. I mean, they’re never happy. They’re always changing. They’re just hard to do business with. We find that we don’t want that business. And I know a lot of our competitors, they don’t have that filter that they look at by saying, is this customer going to be a good fit for us? And for us, we just try to make it clear to our potential customers and current customers that our culture is a competitive advantage, and we’re going to provide great service and support because of our culture and just everything about it. It pushes decision-making down to the lowest possible level. I mean, people who are closest to the action, they can make decisions. There’s countless examples of how our people have made the right decision to make sure we’re doing whatever we can to take care of our customer. And again, I think you could spend hours talking about how that culture manifests itself, like actually while you’re interacting with other customers, but it really boils down to giving people the right tools and training and skills and empowering them to do the right things and make the right decisions. And when they, our customers, know that our people can make the decisions to do whatever they need to do to take care of our customer, they see value in that versus, geez, I got to go talk to this manager and that manager, and this decision has to go up three levers in the organization. We don’t have that.
Alex Bridgeman: Yeah, that doesn’t sound like a lot of fun. So, I like that approach.
Jim Derry: It’s not for everybody. I mean, there’s some people, this culture sounds great, but it also says, all right, you’ve got to make a decision. Do the right thing, make a decision, don’t- So, it takes the right people to kind of want to thrive in this organizational culture, but it isn’t for everyone. Like, our customers aren’t all for us, and not everybody wants to work in this kind of environment, but the ones that do tend to thrive in it.
Alex Bridgeman: What characteristics are you looking for in new hires, new employees?
Jim Derry: Well, they have to align with our core values, and we have to see them as being a fit into our culture. Now, we don’t want everybody to be the same, but we have to have the confidence that they can fit our culture. And quite frankly, when my brother and I, we talk about this, we sucked at that. For the longest time, we hired people that were just not, they were not culture fits. They had a great background, they had a great resume, but our human resources team, they can look into the souls of people and say, they’re going to fit into our organization. And that’s the first thing that has to happen. It doesn’t matter where they work, doesn’t matter what their last name is. If they’re not, if we don’t think they’re going to be a fit in our culture, people just don’t get a chance to work here. And I honestly don’t know how they do that. And I’m so glad we have a very robust human resources team because they are really good at that. And we have very great success finding people that, again, they enhance our culture. Again, we’re not looking for everybody to be clones, to be the same, but they have to embrace our core values. And there’s a point around passion. To work here, you’ve got to be passionate about something. You’ve got to be willing to work as a part of a team. You’ve got to be committed to make decisions. And there’s just some things that you have to be able to do to be successful in our organization.
Alex Bridgeman: What kind of behaviors would or have gotten, have pushed people out of the organization? Like you’ve seen certain things happen and, okay, great, not a good fit. Like there’s stuff that’s like obvious, like if you’re stealing, obviously, you’re probably not going to be a fit here. But is there a middle ground where this isn’t necessarily a bad behavior, but it’s just not exactly what we’re looking for, and that kind of middle ground is where things get a little…?
Jim Derry: I’ll give you a great example, Alex. One of our core values is teamwork. So, in our great room in Rockford, there’s the core values in these big six inch letters and teamwork is on it. And this goes back several years, but we had a guy working at our distribution center, never missed a day work, never made a mistake. He processed the orders for our largest customer, but he was not a team player. He did his own stuff. He focused on his thing. When he was done with this stuff, he went home. He would never- he was just not a part of a team. So we tried to get him to work together, and being part of a team says, geez, if somebody else needs help, you help them out. As a team, we try to, let’s figure out a better way to do this. We’re always trying to get better. But this guy came in and just did his thing and never- but never made a mistake. So, we got to a point where we’re like, all right, either we have to get rid of this guy, his name is Matt, or we got to take teamwork off the wall because everybody in the place knows Matt is not a team player. And we have these big, bold six inch letters of teamwork. So something’s got to change. Well, so eventually, we had to go through this process. We tried to coach him up, but eventually we said, Matt, you’re not a part- You’re not a team player. So you got to go. So that’s what we did. And everybody, there was a sigh of like, oh, of the people that worked with him, like he just wasn’t a team player. And that’s when culture starts to get real, when you start- Because culture is the lowest level of behavior that you tolerate. That’s what your culture is. So, when we made this decision that this person is going to get- has to go, then the organization is like, these guys are serious about this culture stuff. And a lot of people talk about it, but you have to make decisions. Some people just don’t make it. Recently, I got a gentleman who had been around for a long time in a team leader role, and the organization just outgrew him. I mean, because every year, we’re trying to get better, and moving faster, and we’re doing more stuff. And we’ve had people that were very effective for several years at a period of time in a role, and then the organization just passed them up. That’s just a byproduct at some point. So part of this culture is continuous improvement, driving innovation, getting better, thinking outside the box, doing new things. And if people, especially leaders, can’t do that, they can’t take their game to the next level or the organization to the next level, then it just doesn’t work.
Alex Bridgeman: What’s interesting about that story too is that the other folks in your team knew that he wasn’t a team player, and they knew for a while.
Jim Derry: A long time. And if leaders know about it, the people that work, they know about it times ten. They feel the pain of that.
Alex Bridgeman: So how do you get your teams to share that sooner? Like if they knew already, they will probably know before anyone else in the leadership team knows, how do you get them to share that or at least get that information sooner?
Jim Derry: Well, it’s hard. It’s hard to get that. But you just try to encourage candor. You try to. We try to have like our leaders moving throughout the organization, like interacting with people, maybe at the leadership team level, interacting with people a couple of levers differently from them. The senior leaders are trying to get together with small groups with people in the organization and these kind of focus groups just to kind of, hey, what’s going on? So we try to be available and listen, and we really try to encourage candor. But sometimes what happens is the leadership team is well aware, and the leaders are well aware of somebody that’s having an issue. But we work really hard to try to help somebody work through that stuff. And nobody knows that. They may be on a performance improvement plan, but we don’t post that. So a lot of times, we’re working with somebody to try to help them get through this stuff. And many times, they can, and many times, when they don’t, sometimes it looks like we didn’t deal with the situation maybe soon enough, but the reality is we spent six months trying to help this person work through this challenge, and they didn’t do that. But so eventually we had to make a change. So people would say, geez, we didn’t react soon enough. But the reality was, but we’re behind the scenes, we’re trying to help them, we’re trying to help someone work through those things. Does that make sense?
Alex Bridgeman: Yeah. What types of challenges have you found like training to be effective in resolving getting someone back, and others, maybe not, all the training in the world won’t help this particular challenge or problem that this person has?
Jim Derry: Oh, there’s lots of them. But I think kind of being outgrown with the organization, I think that’s really leadership effectiveness. That’s as the organization grows, we’re adding more people, and again, we do have an ongoing expectation that we get better, more efficient. And there’s some people that just aren’t really capable of kind of taking the organization to the next level and helping people become more effective and looking for tools and technology to help us get better in this particular function. So, it’s typically the leaders that maybe can’t keep up with the pace of change that we need to, candidly, keep up with our customers’ expectations. I mean, this is all driven by what our customers need and want. And so, we’re trying to increase our capabilities so that we can continue to grow, provide opportunities for our team members and keep up with our expectations of our customers.
Alex Bridgeman: Have you fired customers for cultural reasons too?
Jim Derry: Absolutely. Not a lot, but we have. Or we just said, hey, the rules of engagement are different. So, we are no longer- this is not a profitable relationship. So, we have to change service models. We have to change pricing. We’ve got to do something around this to make sure that this is a mutually beneficial relationship. But we have in limited cases exited some customers because it just wasn’t a good fit. The other thing that we did a couple of years ago in this customer profitability thing, we had a lot of debate about really like how did we determine kind of the profitability of a customer. There wasn’t a method. We had different approaches. We started this journey of what we call decision support metrics. Power BI was the tool, but then we built out all the stuff that we felt was most important, that we were going to put it into this database, this system that was controlled and managed. One of the first things we did is we agreed on how we would measure our customers’ profitability. So, the finance team got together, the sales team, and they arm wrestled about, there’s a million ways you can track this. Obviously, sales volume and profit margin, but there’s cost to serve and inventory terms and hassle factor and returns and ARR. We put all that into a system. And so now it’s like unmistakably clear, no debate anymore, this is how profitable our customers are. And we rank them just top to bottom. So that provided this amazing clarity around profitability. So we created a team that looked at this stuff, that looked at this data, and then they just started working it. And the profitability is driven by a lot of things – sales volume, margin, product margin, cost. So we kind of figured out, well, what knobs do we have to turn to improve the profitability? But in two years, this team of people improved the bottom line profitability of the company by 300 basis points. I mean, it’s an amazing change. And we did all kinds of things, and it was a team effort. It changed our whole orientation to this. And candidly, when you started looking at the data, you said, hey, we have to go raise prices with some of our customers. And this gave us kind of the, I would say, the confidence, because we’ve done all the work. We know these costs, our costs are competitive, and just the prices are too low. So, we had some tough conversations with some customers and said, hey, we’ve got to raise the price. And there’s some market changes going on, stuff like that. So they were valid. We knew it was the right thing to do, but since then we had this clear way, this is how we’re measuring profitability, it gave us the ability to walk into customers and say, we got to raise the prices. And they’re not going to be happy about it, but as long as the service and support was there to back it up, and [inaudible], we got every customer profitable. The data is the key that drove that, that drove the decisions, and it allowed us to make sure that each relationship is profitable.
Alex Bridgeman: What went into that final calculation of profitability? What factors ultimately came into that kind of final golden number?
Jim Derry: Well, the biggest one is the product margin. So in the distribution space, the margin on the product is a big part of that. And then the next kind of real big one is the cost to serve. So, this is the VMI, this is the VMI program, are we going there every day, once a month? Basically we could calculate how many hours, man hours, does it take to manage this customer? Things like freight, are we paying the freight or are they paying the freight? The inventory turns, like how much inventory do we have to carry to support this customer? That’s a factor. How quickly do they pay their bills? What’s the DSO? Do they pay their bills in 10 days, or do they pay them in 90 days? Because those things add factor. We looked at order size, like how big is the average order? Because there’s a cost to process those orders. And then there’s some miscellaneous ones like kind of, are there a lot of returns? And there’s kind of a hassle factor that’s somewhat subjective. So those were the primary drivers, and then we scored each of these characteristics. So you could look at a customer from a profitability perspective and really kind of hone in on, here’s where we really think we need to improve some of this kind of stuff. I mean, a lot of things we had to do differently. So, this wasn’t all just let’s go raise prices. We had to find better sources. But when we did all those things that we could control and the profit wasn’t there, then it’s time to say, all right, now we need to raise prices and stuff. But if we had done everything else, then we felt comfortable that we could go in and say that it’s time. We need to- the market would suggest that there’s a price increase needed here.
Alex Bridgeman: So, you talked about data quite a bit in Denver and it sounds like this is certainly a part of it. Can you talk more about some of the data capabilities you’ve been working on internally and how you use data in a really unique way?
Jim Derry: Yeah, I’d say, it really is, it started with this decision support metric system that I alluded to, but really anything that we think is important as an organization is measured in this one spot. So, there’s a whole bunch of reasons for that, because before that, it was in Excel spreadsheets and stuff, and there was just always some question about the data. Because if somebody’s doing this in an Excel file, it’s like, well, is the source data exactly what we want? Did it include…? There’s just so much volatility that could happen. But since it’s in this DSM Power BI system, we’re confident that the data is accurate. That’s the first and foremost. But then we really challenged the leaders in all the functional areas, like what are the one or two things in your function that really would be indicative of your function kind of getting better? What are the things that you have to measure that would show your function getting better? Some of the things I alluded to, but like the average order size. So that’s something that we literally tracked over the last several years, and it’s gotten bigger and part of it because there’s a whole bunch of things in really how we kind of establish the reorder points and reorder quantities for our customers in these bins. I mean, we want them to never run out, but we don’t want to be putting two dollars’ worth of fasteners into these bins 10 times a week. So we’re trying to optimize that. So the data kind of helps you do that kind of stuff. So, again, we try to look at every function of the business and say, what are you tracking to establish kind of your are you getting better? Are you making progress as a functional area? And it’s been great to see how people then use this data to drive actions. I mean, it’s super helpful. It’s pervasive. I mean, we talk about all of these reorder points and quantities for all, I mean, there’s tens of thousands of these bins. So how do we manage the inventory in our customer? Well, it’s all this data that we use to do that. Then we got to go buy all these parts from our suppliers to have in our inventory. So, the data is used for all those kinds of things to try to optimize that kind of stuff.
Alex Bridgeman: How do you actually measure how many fasteners are in a bin at a customer’s location? Is it a scale or a small camera? What goes into that, like getting what that number is?
Jim Derry: You can do it a couple of different ways. So, there are some scales, but generally speaking, our people that establish a reorder point, reorder quantity, and they do this for a living, they can look at a bin and go, yeah, I can tell it’s either above or below this, the pre-determined reorder point. And then they generally scan a bin. But there are more sophisticated ways when you need to know to exactly how many, but our people can generally tell when it’s time to order some more parts. I mean, because they’re there either every day, every week, they know the rhythm and the flow of the customer. So there’s a lot of technology that’s pretty cool that we deploy occasionally. But we’ve put real value in the fact that our people are going to interact with our customer. And they’re not just scanning bins, where they’re talking to the people about what’s coming up, what’s changing. How can we optimize? How do we make sure you don’t have too much and don’t run out? So we’re making adjustments constantly because of the insight and information our people are getting from our customers. Our vendor management inventory people, they’re like really on-site customer service people. We deploy technology when it makes sense and we can eliminate the need for some of the folks like that. But if they’re doing that, if they’re really good at their job, then we get a lot of value out of that personal interaction. We find that, hey, there’s more, we need some of this, we need some of that. And by having people in our customers, we get some insight that helps kind of optimize that relationship. So we’re kind of fans of having people in these roles as opposed to replacing them with technology.
Alex Bridgeman: Yeah, I’m definitely a big fan of that personal relationship, especially in distributors, where, like you said, that conversation, that relationship with the customer could easily lead to other orders and growing wallet share over time as you learn about more products that they need that you can supply, and that becomes really interesting. On the scale front, I was thinking of this company Bottomless. They’re a coffee company. They send you a scale that connects to your Wi-Fi, and then you put your coffee bag on top of the scale, and when your coffee bag gets low enough it, automatically reorders coffee for you. You’re in there every day or every couple days, so maybe less relevant, but like the scale technology, something like that seems pretty cool. But then you’d have to maintain I don’t know how many dozens of scales per customer location and that could get hectic.
Jim Derry: We have that tech capability where every bin is literally sitting on a small scale, and they’re all connected together. So you can see real-time exactly how many parts are there. When everything works perfect, they’re great. But somebody puts the wrong part on the wrong scale, somebody doesn’t put the bin back on the scale, somebody dumps a, sticks a hammer in there. So, if you get- there’s a lot of things that can get in the way of those things working. But in the right organizations, those things work wonderfully. The RFID stuff is like, that’s a cool technology that absolutely has a place in certain kinds of customers. Our goal into these things is we have this whole suite of things we can do, but we’re going to build a system that works for you. What do you need? What do you want? What’s the best optimal system for you? Then we take this tool set we have, and then we customize a system specific around what a particular customer needs and wants.
Alex Bridgeman: Is there some piece of technology or data set that you’re trying to get your hands on today that you’re really excited about?
Jim Derry: Well, AI for sure. I mean, so we were challenged and tried to get every- again, this is one of those where there are so many different AI tools. I’m of the belief that it isn’t like one tool that’s going to do everything we need for AI. It’s like, okay, in marketing, let’s find something. We’re looking at some cool stuff for marketing. And then the quality organization, there’s some stuff that they’re looking at. And HR has got some things, and the sales team’s got some. So, we’re challenging all the functional areas in our business to find one or two tools and just start using the darn things and see what works and see what filters up to the top as being a good idea. And just try stuff. And we’ve had some success. I think, candidly, we need to do more of that. I think we need to have a bigger effort, emphasis on that. And so we’re pushing hard to find the best ways to utilize AI. I don’t think it’s going to go away. I think there may be some overhype around it; it’s not going to replace everybody. But I think it certainly can make us more efficient. And I think it can help us make better decisions, but I guess we’ll get better data. And I think that to me, a lot of companies, and we’re part of that, is to really maximize the use of AI, you’ve got to be really confident that the data that you’re looking at is really clean and accurate, and there’s a fair amount of data kind of cleansing and alignment that has to go to really take advantage of what AI can do. And I think, because if AI is looking at a set of data that isn’t maybe perfectly aligned and cleaned up and validated, you’re going to get wonky kind of results. So, I think we’ve got some work around that too to kind of make sure that the basis of data is accurate. So, there’s some work to be done around that.
Alex Bridgeman: Yeah, certainly. Switching gears a little bit, you mentioned having done a lot of work to make sure that Field can stay a family business going forward. Can you talk about some of the things you did? Because there’s a couple of organizations that stand out to me, like the Tugboat Institute, that has a group of companies that are all focused on being multi-generational families. And Mike Boyd has a good Business of Family podcast. He’s interviewed a handful of CEOs in that same position. And it’s just interesting to hear how each company approaches ensuring that their company can sustain multiple new generations in their family. So, I’m curious kind of what your approach and style was to making that happen and maybe who you studied, too.
Jim Derry: Yeah, I’m super excited about that. There are several things that we have been working on and trying to do to ensure that this business can be successful and our family can be successful at the same time. But the first thing really is I think you need to run the business like it’s a publicly traded company. And we do that. I mean, so if you’re a member of our family, you don’t get any free passes, and it’s harder. It’s harder to get a job if your last name is Derry, the expectations are higher. I mean, there’s no free lunches for anybody and especially not members of our family. So the first is you can’t treat family like they’re special like, oh, well, you don’t have to do that because they’re part of the family. Period, you can’t do that. And 10 years ago, we established a board of directors, so we want external people bringing new, fresh perspectives and really challenging the leadership. We created a board of directors specifically so that we felt like we could complete each other’s sentences. We’ve been doing this for a long time together, but having people from the outside bringing in new fresh perspectives kept us on our toes and challenged us. We think that’s really important. Then there’s a fair amount of work around succession planning. And there’s really a lot of succession. The first that we kind of really worked on is leadership succession. So Bill and I is the first generation. We had to make sure that there are leaders, people in our family, that were capable of running the business. And a couple of years ago, my brother Bill’s son Adam took over as president. So we were able to transition the leadership of the business to the second generation. And for four years before that, there was a pretty in-depth training program and development program that we worked on with Adam so that he was fully capable and fully ready to take over the business. And that was a competitive position. There was another person that was vying for that job, and Adam was selected by the board to get it, and Chris Walls, who’s our EVP, was in that running. And so those two guys are running the business today kind of the way that Bill and I did. So the leadership succession is super critical because we see some families where the family is kind of anointed. The next generation is kind of the anointed leader, and quite frankly, they’re not necessarily capable. And so succession planning and leadership is important. The other thing that’s important is ownership succession. We are in the beginning stages of that. There are more members of our family that have shares of stock, and we’re trying to go through a development program to have them be more aware of what do you need to be an effective owner of this business. Those succession plans. The other thing that I think is important and we’re now implementing is called a family council. So, it’ll be everybody in the family will have a voice in this family council, and just talking about how the business is doing, and there are other elements. Field is a part of that, but we have a foundation that provides financial support to different kinds of folks. And the family council will try to help kind of keep the family aware of what’s going on and provide some kind of opportunities to get together and maybe have some fun. So kind of this family enterprise will be the business, the foundation, and the family council. And collectively, we hope that most of the family is involved in one of these kind of three elements of the business. So, people are more connected to the business. People, the family members, I should say, are more connected to the business. So, some are involved with kind of helping generate some of the revenue and some involved in the foundation to kind of help be philanthropic. And the family council is there to kind of help everybody stay aligned and connected and provide some social opportunities to get together. So I think the key is there’s a lot of stuff you have to do. Then you’ve got to, the other part is that you’ve got to set up all these, the trusts and the estates and the shareholders agreements so that there’s a way, a method for the ownership to go from one generation to the next and to the next. And if you don’t do that right, there are massive tax consequences and there can be ill will to family members. And there’s all kinds of stuff that if you don’t do do that right, you can have some challenges. So for us, we created some voting shares and non-voting shares. So, it’s very clear, the role of people that own shares and the people that have the voting shares, they’re different responsibilities. So we try to make that clear. So, the non-voting shares would be like owning shares of any publicly traded company. You have some shares of IBM or Coke. Well, you get some financial benefit out of that, but you don’t get to tell those guys how to run those businesses. So, we try to make it clear that the people in our family that have non-voting shares, there’s some value to that, but you don’t get to run the business. So we try to do those things the best we can so that when we’re gone, the business and the family can survive. And it’s hard to kind of think about everything that could happen, but that’s what we’ve tried to do. And so, all this stuff was set up with the hopes that the business can evolve and the family can evolve, but there’s still going to be harmony. That’s our whole goal in this is family harmony, that the business can thrive, be successful, and the family can have harmony and love owning the business. So there’s a lot that goes to that, but it can be done. We’ve seen it.
Alex Bridgeman: Yeah, absolutely. And one kind of interesting theme with a couple family businesses and multi-family, multi-generational businesses is the family usually outgrows or grows faster than the business. And so, it could be very quickly, like the ownership of the business can very quickly get diluted across a pretty large family, like large extended family. And so, you have to kind of be selective on how do shares transfer to the next generation and who gets them and who doesn’t. Have you thought through what that might look like?
Jim Derry: Yeah, and I think we’ve put together the structure that can allow that to happen. And I think you’re right, the families grow faster than the businesses. We think an important part of this is creating a clear and straightforward mechanism for people to say, I want to monetize my share. I want to sell my share. Very clear on how they’re valued and who can buy them and the timing of those kinds of things so that for the people that they want to kind of get out, there’s an easy, simple, straightforward way that can happen. And then there’s an agreement on where those shares need to go and who can own them and those kinds of things. So we’ve tried to incorporate some of those kinds of things in there. The other thing I think that is really important and that kind of underpins a lot of this stuff is there’s a pretty substantial commitment to kind of being a good corporate citizen. So wherever we operate, we’re going to be, we really want to be actively involved in the community, whether with financial support and human resources support. So that’s the business and the family. So, I think having the family be committed to giving back and really… so I think that’s important because part of the reason that Bill and I decided to keep our business in the family is that we felt we can do more good in the community if we own this business for generations versus selling it for a pile of money and then making a one-time gift. We’ve instilled the importance of giving back, we’ve referred to it as improving lives, at Field and within our family. The family is committed to channeling a meaningful portion of the profits to giving back to our communities, and to the people that work in our organization, and serving the communities, and trying to make an impact. That’s an important part of this so that the family really sees our legacy as what good can we do in the communities that we operate in, not just how much money we can make for ourselves. I think that, we hope that over time helps people see the value in keeping the business in the family and not just trying to monetize it.
Alex Bridgeman: What other big questions did you have to think about when designing this plan to make sure it stays in the family? What other kind of big topics and debates or questions did you have through that process?
Jim Derry: Well, one of the biggest ones was kind of voting shares, like how does that work and how many and who has them. There was some work around that. That was a tricky one and we feel really comfortable. How many do you have? So that was a big issue. Then the shareholders agreement. So anybody that has shares and agrees to this one document that kind of defines what it is to be a shareholder. So there’s a lot of work that went into that. So it’s kind of like I alluded to some of it before, but how you value the shares and what happens. And you’ve got to think about all the what ifs that could happen in this stuff. And the other big one is these shares go from a personal estate into a trust. So, part of this is we want to get all these shares into trusts so that they’re protected. But then you still, we still want to get the value of owning these shares of stock. So they go into trusts, and there’s all kinds of ways, issues around how do you structure the trust and who’s the trustee and all the stuff around that. But then so we still have, we get them out of our estate from a tax perspective, but you still have the ability to kind of monetize the value of the shares of stock. So there’s a ton that goes into that stuff.
Alex Bridgeman: When you say monetize, you mean you’re passing your shares to the next generation, there’s a monetary exchange, you’re selling them effectively to the next generation, or it’s just the ongoing like annual dividends that you receive?
Jim Derry: We’re thinking more of those dividends. Like how do we put these shares of stock into a trust? But I’m still a young guy. I mean, I still need to get paid. So yeah, I still get a chance to keep the dividends, but when I die and my wife dies, then the shares move to the next generation. So you put them in a trust where you can continue to get paid the dividends as an owner, but they’re protected. So, the valuation. So every year, the value of the stock gets greater. Well, you’re gifting these shares. We have chosen to gift them to our families. Well, once they’re out of our estate and into a trust, they’ve been gifted. So as the stock increases in value, that’s not- they never have to be gifted again because they’re already in these trusts that are in these generation skipping trusts. So you want to get them out of your estate when the value is low, so you don’t have to pay estate tax on it, but then you still want to be able to get the dividends. So there’s some finessing of that. This is hard stuff. This is what I kind of alluded earlier. People don’t do it because it’s hard. I mean, we have all kinds of different experts in each one of these areas and kind of help with how to do this kind of stuff.
Alex Bridgeman: Yeah, there’s a lot of complexity.
Jim Derry: It gives you a headache. And at the end, you’re kind of saying, gosh, I hope we’re doing this right. Because we’re trying to do this so when we’re dead and gone, the next generation is all, this family harmony all still happens. So you do the best you can, trying to figure out everything that could happen and try to build all those what-ifs into this process.
Alex Bridgeman: Yeah, it’s a lot to manage and a lot to think about. Definitely good to have some experts on your team. As a fun closing question, how did the Riddell football helmet deal come about?
Jim Derry: Oh, we’ve been doing business with them forever. Actually, in 2001, we bought a company in Chicago, B&B Faster, and they were a customer of B&B. So we bought that. When we bought a company, Riddell became a customer, and they have been a customer, I think, of the organization as whole company for 25, 30 years, long time. But it’s fun to see, every time you see a Riddell football, our parts are in those things. It’s kind of fun. They’re in drinking fountains and school buses. I mean, you run into our stuff all over the place. It’s just kind of fun to know this little company and kind of the scope and breadth of where our stuff ends up. It is just kind of fun to see. And in our great room here in Rockford, we’ve got pictures of our largest customers on the wall. And it’s fun to kind of share with people what we do. And they see that, oh, my gosh, they didn’t realize where all this stuff goes. And our people get a kick out of that, too. They like to know this box of parts, like what’s it ultimately doing. So, they get kind of personal value knowing that we’re doing some things, working for people that are making an impact on our communities and doing good stuff. So you feel good about that.
Alex Bridgeman: What’s the most random product that a Field fastener is in? What’s the most surprising one? Like you tell someone they’re blown away that they had no idea that something like that would be a product that your products are in.
Jim Derry: Probably the thing that everybody’s using, it’s like a Sloan flush valve. In a public bathroom, like when you hit that valve, there’s a couple of parts in there. They’re not a fastener, they’re a precision machine component, but those things don’t flush without our parts. And they’re literally everywhere. I mean, you can’t go anywhere without seeing a Sloan flush valve. Or like the bottle fillers at airports, and where you put your- our parts are in those things as well. So school buses, garbage trucks, it’s all over the place.
Alex Bridgeman: That’s so fun. That’s so cool. Jim, thank you for coming on the podcast. This has been a ton of fun. And I’ve really enjoyed getting to chat with you more and we’ll definitely see a bunch of your products on the field this Saturday for Oregon v. Illinois. So that’ll be a ton of fun. I did love the uniforms this past week, the leather throwback, leatherhead helmets. Those were awesome.
Jim Derry: Well, maybe the way they played, maybe they got to keep wearing those helmets. They played pretty well, brought their A game against Michigan. They’re going to have their hands full against Oregon. They’re a great team, and yeah, I just hope they keep it close and be respectable.
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