Melanie Stern is section editor of Families in Business.
Four months into retirement, Alan Hassenfeld hasn't played a single round of golf – he's busier than ever, championing Hasbro's interests and cementing his family's legacy. Hasbro's last founding family member talks exclusively to Melanie Stern
Holding steady as the world's second biggest toy company, Hasbro's numbers withstand quarter after quarter of exacting scrutiny. With the exception of the first three months of 2006, when traditionally most toy companies lose money due to the post-christmas slowdown and Hasbro posted a $4.9 million loss despite revenues of $468 million, the company has outperformed the S&P500 index and the toy industry for the last five straight years.
But never mind that. This May the company hit a zenith when it announced the launch of 'Eau de Play-Doh', a $19 perfume capturing the unmistakable scent of the ubiquitous invention. The Play-Doh smell is so highly prized that the recipe has remained top secret for 50 years. But now, grown-up kids of the 1980s only need rub their wrists together and sniff to go to their safe place. It's a simple concept – but a sure fire way to keep the product in people's minds. That's what makes sales; however consistent the cash-flow, however resilient the dividends, there are few companies on this planet who have a lifetime membership in the collective psyche of whole generations the way Hasbro does. It's this particular achievement Hasbro's last founding family member and non-executive chairman, Alan Hassenfeld, counts as the most important in his tenure. "You're talking to someone who absolutely loves the business of entertaining children. Hasbro has been incredibly successful over the years and as the chairman, my job was always to do the right thing by our institutional shareholders. But our greatest achievement and my passion is the entertainment of children," Alan tells Families in Business. "Just don't ask me to choose my favourite Hasbro toy – we have the most wonderful 'evergreens', but if I had to choose between My Little Pony or Play-Doh, the rest might get jealous."
Indeed, Hasbro's portfolio is a veritable beauty parade of famous brands, and arguably the finest in the toy industry. Name a famous toy and it's probably theirs: Monopoly, G.I. Joe, the Rubik's cube, Connect 4, Transformers, Twister – Hasbro owns as many 'Little Black Dresses' (classics, such as Monopoly) as it does Juicy Couture tracksuits (crazes, like the Furby or Toy Story hero Buzz Lightyear). This mix has ensured the company's survival in the most cut-throat of businesses and helped fend off the 1996 hostile takeover attempt from arch-rival Mattel, maker of Barbie and the world's number one toymaker.
The licensing game isn't as easy as it was – Hasbro has merged its Games segment with its Toys business in North America following falling sales of its electronic, board and card games due to shrinking sales from licensing deals. But masterful cross-media deals with other industry heavyweights has made Hasbro a lot of money. Its $600 million contract with LucasFilm to make Star Wars toys and five-year deal with Marvel to make toys on the back of forthcoming films on comic book heroes like Spider-Man and The Incredible Hulk are still sure fire money-spinners. "Looking back over the last several years, the company consistently generates free cash flow far in excess of its reported net income," says Motley Fool commentator Rich Smith. "And judging from its performance last year, the company has no intention of changing this, because the quality of its earnings is simply superb."
The third and final family generation of Hasbro certainly comes over a little Leslie Zevo, Robin William's character in family toy firm flick, Toys; disarmingly plain and friendly in conversation, and genuinely passionate about business, the sound of new ideas and concepts ricochet audibly inside his head like multi-coloured Slinkys bouncing down a flight of stairs. In almost every article written about him, journalists make much of Alan's seemingly 'unique' image: from wearing rubber bands for good luck; having an aversion to socks; to burning candles in shareholder meetings. Frankly, one might think the guy's a loon. Alan is cordial on accepting the charge, but wearily so. It turns out the rubber bands are those charity wristbands so in vogue – one for the Lance Armstrong Livestrong cancer charity, one for the social-philanthropic Jerusalem Foundation, and one for the Hasbro Children's Hospital, which Alan and his family built on their home turf in Rhode Island. "Everyone has their idiosyncrasies and if any of mine hurt the company... I am proud of what our company and my family has done, pleased with what I contributed to our success and, at this stage, I don't intend to change". And the socks? "I wear them when I have to… if I'm meeting a banker or investor."
As he speaks to Families in Business, Alan is four months into his retirement, the culmination of a carefully planned, six-year succession transfer from the last family manager to their most trusted lieutenant, chief executive Al Verrecchia. Alan still controls a 10% stake in Hasbro, and nephew Michael Block runs its South American business, so the Hassenfeld family remains involved in the company's direction. But Alan's time is now invested in ensuring the Hassenfeld family legacy continues – not least by mentoring Hasbro's most promising executive talent for the time when CEO Verrecchia needs a successor.
In giving up the chief executive role, Alan says, the idea was to focus on his philanthropic and civic commitments, acting as ambassador for the Hasbro company brand as he did so. Day-to-day running of Hasbro wasn't part of the plan – but it's never that simple for family businesses. Alan found himself, either by habit or need, engaged just as heavily in management as ever until giving up his role as a day-to-day employee this January, remaining as the unsalaried non-executive chairman of the board. Alan is candid about this perennial family business problem.
"One thing everyone has to understand is that you have a CEO and you have an executive chairman, and they have separate roles. The job of the former is to run the day-to-day operations, while the job of the latter is to work on behalf of the shareholders, ensure a succession plan is in place, and at the same time ensure the company's corporate culture and ethics are operating as they should be. A chairman should act more as a diplomat and try to avoid the operating side. To be a non-executive chairman you're required to be independent, which means you can't also be an employee of the company."
Verrecchia, 63, now in his 41st year with Hasbro, started his career as an accounts junior, and is the only other senior person who has been with Hasbro as long as Alan. He was there when the company was handed from the second to the last family generation.
With Alan's retirement, Hasbro loses its last family leader. He has left his mark on the firm, though as is the case for many family businesses, Alan didn't have plans to join initially. He had planned to do a PhD and was mulling over teaching or government jobs, when his brother Steve, then CEO, proposed that he travel to the Far East. "In my junior year in college, Steve asked me if I wanted to go to the Far East to see what the business was like. What fool at 19 years old wouldn't want to go to the Far East? So I went out there, worked in the factories, and totally fell in love with the business," says Alan. "When I came back I sat down with Steve and my dad to talk about joining the company formally."
No one could have foreseen how fortunate a turn of events this was to ensure the Hassenfeld family remained in management. Steve passed away unexpectedly from the AIDS virus in 1989, and Alan was by that time in a position to take over the running of the company, which the board voted unanimously he should do one week later. All things considered, it was the tallest of orders. Time to deal with his grief wasn't afforded by the need for new leadership at the company. Plans were already in motion for Alan and his wife, who had not long married, to move to London. Practicalities aside, Alan had operational experience running the business out in the Far East, and had set up a number of valuable contacts outside the US, but he had little experience at the top, and knew he wasn't exactly a suit's suit. "With Steve's death, everything changed so quickly. Steve was the most talented of brothers, and he was also my best friend and confidante; it was sort of an ideal family business situation because we were good at different things in the company, and we trusted each other completely," Alan recalls. "But it wasn't as natural as it sounds that I took over his role. My experience was as the globalist, setting up subsidiaries in Europe and the East, and I had always been heavily involved in the products. But I was not as talented with the accounting and financial side, or the investor relations side of our business," Alan admits. "I had to have a long, hard talk with the board when it came to considering the CEO job. To be honest, I was wary because I knew the level of responsibility involved." As well as taking over from a man widely regarded as the prodigal son, eyebrows were raised when Alan got the job while Verrecchia, at the time the CFO with 24 years' experience, wasn't even short-listed. As it turned out, Hassenfeld and Verrecchia become somewhat of a good team. "There's only one person outside of a Hassenfeld who should be running the company, and that's Al," Alan has said of his cohort. Al's role as the number-crunching strategist combined with Alan's creative verve make a powerful pairing, like the original founders, brothers Henry and Helal Hassenfeld.
Succession plan complete, retiring from Hasbro hasn't exactly meant slowing down. Instead, Alan has returned to his roots as somewhat of a travelling salesman, flying between the US, Europe and the East as an ambassador for his industry, heading up lobbying and fund-raising efforts for the International Council of Toy Industries' Care Process (a bill to ensure the ethical manufacture of toys) and chairing the Jerusalem Foundation's efforts to raise cash for a national children's museum in Washington. "I'm doing what has always been important, I think, for me, the company and the industry, and especially the international side because I was the one who started that side of our business," Alan recalls.
Asia is a growth market for Hasbro, as it is for most companies these days, and one of Alan's legacies is the firm's existing foothold in markets like India and China. But it is the legacy back home that is central to his new raison d'etre. "Being the third and final family generation to run Hasbro, it's my job to protect what we built, the way we treat our employees and our ethics, and to pass this on to our employees," Alan says. "We have traditions because of our family history, and because of this we still attract excellent staff – and they are the ones to take this company forward. I just want to make sure that I teach them: these traditions aren't for changing."