Dennis Jaffe is Professor at Saybrook Graduate School in San Francisco, author of Working With The Ones You Love and a founding member of the Aspen Family Business Group.
Tim Habbershon is the Founding Director of the Institute for Family Enterprising at Babson College. He is a Professor of Entrepreneurship holding the President's Term Chair.
A virtual icon at American breakfast tables, Smucker's jams have taken their rightful place as one of the family. To this day, family values remain a key ingredient of the company's success
In 100 years The JM Smucker Company has established an unequalled reputation for honesty, fairness, quality and respect for people – all while growing and being profitable.
Their values are part of the internal operations and are sustained by family stewardship and governance. This was most recently demonstrated in the company's smooth merger with the Jif and Crisco brands of Procter & Gamble in 2002, which resulted in their values becoming the centrepiece of the process of successful integration. Family involvement and clear governance can set up and sustain a powerful corporate culture based on a set of values first defined by the founding family – a rare achievement in today's corporate climate.
The company and its values
Smucker was founded by Jerome Monroe Smucker in 1897 in the mid-western farming community of Orrville, Ohio. Initially, the company pressed locally grown apples into cider and butter. Over more than a century, while still headquartered there, the company has grown into a leading global brand of high quality fruit products.
Today Smucker is a manufacturer and market leader of fruit spreads (strawberry jam being one of their most famous products), peanut butter, shortening and oils, ice cream toppings and health and natural foods beverages in North America under such icon brands as Smucker's, Jif and Crisco. It has over 2,700 employees worldwide and distributes products in more than 45 countries. Smucker, which has been public since 1959, is growth-oriented, with a long record of profitability and shareholder return. In 2002, they completed a merger of the Procter & Gamble brands of Jif peanut butter, the top peanut butter brand, and Crisco, the top shortening and oil brand, which roughly doubled their revenues to $1.3 billion. They have cash for further acquisition of key products that have synergy with the company's core brands.
Even though it is a public company, Smucker remains at its core a family enterprise, operating by the guiding principles developed and sustained over four generations of leadership by the Smucker family. Their five 'basic beliefs' – quality, people, ethics, growth and independence – are a major source of their strength, durability and longevity. These values are visible in everything they do, and known and practiced by every employee. From their first day of work, employees learn that they are to be taken seriously and adhered to. They receive support in how to apply them explicitly in decisions, and they see them reflected in promotions, leadership and the products.
"We see quality as a broad perspective – it is a requisite in everything we do," says Tim Smucker, Chairman and co-CEO. "In accounting it relates to how we pay attention to the numbers, how accurate they are, how timely. Each label is accurate and legible, and we are always close to the consumer. It means we not only choose the right ingredients, but also how people approach their individual job. It's about the culture, not the strawberries."
Promotion and retention
Indeed, these values are reflected in the Smucker workforce. They hire people with a good background and experience and then promote from within to top positions; most top management and current officers have been promoted internally.
As a result of this and other factors, their employees are loyal. This is partly because they have been selected to value that, and partly because people feel good about working there. The emphasis on values and ethical decision-making leads each employee to feel that he or she can do the right thing, and that their action will be supported, even praised by the company. This creates a great sense of personal responsibility for quality and performance in each individual. "People know it's a family business and that they probably won't become CEO," says Tim's younger brother Richard, who is President, co-CEO and Chief Financial Officer. "People here get excited when they see their co-workers doing well. It is not a dog-eat-dog world, people work hard because it is the right thing to do. We get performance by working with people, and nurturing these relationships."
Bob Ellis, vice president of human resources, adds: "Our most important hiring criteria is not how well an applicant can perform the job skill-wise, but do the individual's basic values fit with ours? If so, they'll be happy and do a good job. Throughout the job interview our focus is on getting to know the person – does their approach fit our basic beliefs. We talk about the beliefs with them and ask the applicants to evaluate themselves on each one. Once hired, our people say that everyone they talked to mentioned the basic beliefs, and related them to the job. Our New Employee Orientation and all of our training reinforce them."
Richard reflects, "We don't hire talent alone – we look for an individual's values as well. We spend a lot of time making sure we are hiring the right person, so we have the right people to start with – people who share our basic values."
He goes on to say, "Our beliefs are so basic that you can't train people to have them, you have to find the people who already have these beliefs. When they join us it reinforces and builds upon this structure, because they bring their values with them. People need the latitude and encouragement to build on these values. A lot of intentional time is focused on the beliefs in all contexts; it is part of everything we do."
And how do the employees know what these values are? Through training. Smucker believes that training starts at the top and works down, so all the officers will go through every new training programme first. The way they design training is not as an indoctrination but as a process of dialogue, where important insights and values are put into action. By reinforcing that employees are responsible for ethical and value-based choices, the programme and the culture also says that employees are empowered to do the right thing. This has a general effect of leaving all employees feeling that they can do what is right for the customer, the product and the company. This produces an environment where people are able to ask questions, make suggestions, and feel comfortable challenging the prevailing wisdom and leadership. They do this in a respectful and thoughtful way, but the atmosphere values participation and making the right decision. This leads to what has been characterised as an open and learning-oriented culture.
Growth through acquisition
One of the tests for a culture like Smucker, which thrives on continuity and tradition, occurs when it grows by acquisition and merger. Historically, most mergers are not successful in bringing about the expected value because of issues that arise in integrating different cultures, and creating a unified whole out of disparate parts. For Smucker, the test occurred in 2002 when the company merged with two successful brands of Procter & Gamble. How could they successfully integrate people from P&G, another successful culture with a different but equally strong set of values? In fact, they carried out the merger process in line with their core values and it has been largely successful in reaching the business goals for the combined entities.
By adding the Jif and Crisco brands, they doubled the size of the company and brought about a strategic fit with their products. What could be more strategic than adding a leading peanut butter to their core brands of jelly? The new product possibilities are clear.
"Before the merger we grew our market share for 20 years. We felt these brands are leaders, and we would have the opportunity to do the same thing with them," says Richard. "Our strategy is that we will own or market 'number one' food brands, emphasise North America, and increase market share of current categories where we are leader in niches. We will grow through new products and acquisitions. One-third of our growth will come from each of these three avenues."
One of their values is independence. "We had someone make a run at the company in the early 1980s, which tested our ability to stay independent. How far would we go? We all felt we cannot be part of a bigger company and live by other beliefs, so we remained independent," Richard recalls. This meant that they had to grow by developing new products or acquiring them.
"In deciding on the merger," Richard says, "Our biggest concern was voting control. Our [the family's] voting control was 55% even with only 30% ownership. Our biggest discussion was about ownership dilution and what it would mean. We talked to the family about this. It would be a great merger, but we had to respect the wishes of all the stakeholders – not just shareholders but family, employees, communities we work in and suppliers. We looked at public companies and how much ownership families needed to have for effective control. We read an article in Fortune about families that owned only a small slice but were still controlling companies. While control was a big factor, ultimately long term we feel you have to perform, and this acquisition was a great one. The market has liked what we have done; our stock has doubled in the last two years."
Mergers and acquisitions often fail because of the difficulties integrating the old and new cultures. They had to make sure not only that they were getting the right brands, but that the new employees and production facilities would share their values. They have taken immediate steps to make sure that the vision and culture take root in the new enlarged company. The day after the merger was announced, Tim, Richard and several other key executives went to Lexington, Kentucky, and Cincinnati (Ohio), and met all the new employees. They talked about their culture, history and heritage to the former P&G employees. "Since our sales went from US$650 million to $1.3 billion, we can't be everywhere. We visit our plants every year for an employee meeting. We also have great managers that instil our beliefs whether or not we are there," says Richard.
It was not just a fly-in fly-out visit. They each held meetings with each executive to talk and get to know them. It was similar to their hiring interview, en masse, demonstrating in behaviour the importance of what they are about. Bob Ellis, Vice-President of Human Resources, recalls, "After these initial meetings, we initiated several other steps in the transition to becoming a Smucker employee. They held meetings with our best and brightest employees. They were very impressed with seeing how they were treated. After they formally joined there was another 'welcome to Smucker's and goodbye to Procter & Gamble' dinner. Through the transition period all of the new employees go through all the relevant training programmes. In this way they get exposed to the thinking behind our values and beliefs.
"So far our voluntary turnover rate is very low in today's terms, 5-6%. The top-level – our officer group – have very little turnover. Our top ranks are entirely grown by promotion from within. The merger provided a unique situation for us. In both of the new plants we promoted plant managers from within the Procter & Gamble group using our value criteria. The people we picked were somewhat less analytical than was typical at P&G, but both have been happy with our style. They've said, 'we're like P&G was 20 years ago,'" Ellis says. "With the merger, in the plant or with key staff members in the first year there has been no turnover."
They were very sensitive to how they brought in new managers from P&G. Even before the merger they brought all of them in to several meetings. Even though the deal didn't close until June, they brought top managers to their yearly four-day management meeting. Several managers came from P&G to meet Smuckers' 180 top managers and to hear the Smucker story. Such thoughtfulness and care is not usual behaviour by acquiring companies. Maybe for this reason, the merger has gone extremely well, explains Richard. "We told [the P&G managers from Jif and Crisco] that it was a win-win choice. We would love to have them with us, but they could also choose to stay at P&G. These are two great companies and they had to choose."
Values can often be nothing more than a buzzword. It is rare to find a successful company that so openly and honestly embraces their values in everything they do. More rare is finding employees who espouse those values. "We are honest, what we say we will do. We live our basic beliefs and we hire very well. Our employees are incredibly loyal, and they are our greatest asset. We never think for a moment that we have a corner on those values. What we remember about people is the kind of values they have," says Tim. Wiser words were never spoken.