Online Extra: How the Smuckers Stick Together

A shared set of values keeps the family-owned business running smoothly, say brothers Richard and Tim Smucker

Richard and Tim Smucker, who run the 107-year-old J.M. Smucker Co. (SJM ), defy conventional wisdom. They share leadership of their family-controlled but publicly traded company as co-CEOs, an arrangement that rarely works elsewhere in Corporate America. Their family, with five fifth-generation Smuckers now rising in the management ranks, avoids the squabbles that mark most business dynasties. And they seem likely to pass on an outfit that will be bigger and better-run than the already top-performing outfit they inherited from their father, the late longtime CEO Paul Smucker.

But the Smuckers face some challenges. They've tripled sales in the last three years by buying up such iconic, but underdeveloped, brands as Crisco, Jif, and Pillsbury baking mixes, and they now need to integrate them into Smuckers. Their stock, at about $44, is off some $9 from its high of earlier this year. And they plan to expand the $2 billion-a-year company even more aggressively, promising some 8% growth yearly, half through purchases of big-name brands. All that spells big change at the nation's leading maker of jelly, peanut butter, and cooking oil.

Chairman Tim, 60, and President and CFO Richard, 56, say their family -- and perhaps surprisingly, their faith -- will carry them through. They recently sat down with BusinessWeek Chicago Bureau Manager Joseph Weber. Edited excerpts from their conversation follow:

Q: You break a lot of rules: No. 1, it's rare that co-CEO arrangements work. No. 2, when a family business gets into the fourth generation and beyond, oftentimes the family interests diverge and the business goes away. How is it you're able to keep things together?


A family business consultant and friend of ours, Leon Danco, said to be successful in going from one generation to the next he has found three things that families seem to have. No. 1 is that they have a strong independent board of directors, second is they have a shared religious belief -- whatever that happens to be, whatever religion they practice -- and third is they have a strong matriarch in the family. And I would say we've had all three of those basically in each generation.

Q: Explain those.


If you have an independent board, it shows that you're willing to listen, and you're taking in a broader view of the world, rather than what you might see if it were just family involved. Second, it's the shared values. Shared religious belief really gives you shared values. And you have something besides the business to fall back on. And then the strong matriarch in the family, she'll probably salve disputes within the family and keep the family together.

Q: And that would be your mom?


Well, my mom has passed away, but certainly in that generation it was our mother. [Now,] we have several.

Q: Tell me about the religious belief. Now you're not Mennonites, right, like your great-grandfather? You're Christian Scientists. So tell me a bit about that.


[Great grandfather Jerome Smucker] actually founded the company based upon a religious passage, which was in Galatians 6:7.

Tim: "Whatsoever man soweth, that shall he also reap.... Be not deceived, God is not mocked: for whatsoever a man soweth, that shall he also reap." Whatever you do determines your success -- how you act, how you treat people, the actions you have speak louder than words. Whether it's good or bad.

Richard: Plus he was a farmer, and sowing and reaping certainly made a lot of sense to him.

Q: But you were rebels?


He was a Mennonite. My grandfather was Presbyterian. And then our father came into Christian Science through our mother during World War II.

Tim: Our grandfather had two children -- our dad and our Aunt Marcy Clark. And she's Presbyterian.

Q: So, whatever the particular denomination, there's a real feeling that religion is an important binding force?


Exactly. It wasn't the same one though each generation. Each generation changed, but it was still the values that religion provides.

Q: Values in what sense? How do those values play out and keep the business in the family?


They play out very directly because the values that are taught in the Bible, regardless of what [variety of religion] you practice. Going back to "Whatsoever you soweth, that also you shall reap," is pretty direct. It's how you treat people. It's how you treat your customers. It's demanding responsibility, personal responsibility, which translates into business responsibility, ethics -- your personal ethics determine your business ethics. And ethics has a very key role. It's one of our basic beliefs.

If you were to talk to somebody within our company, I don't think you would say this is a religious-based company at all. We don't have prayer sessions, there's nothing like that. But I think it's just quietly going about your day-to-day business and living those values that you would find in the Bible. That's very important to us.

Q: How does it affect your getting along as co-CEOs? Obviously, it's not a Cain and Abel situation.


It's probably understanding that there's a higher power here -- that helps you make decisions, on a daily basis. Certainly, as Richard said, we don't have prayer sessions, but certainly know that we both, as well as other people in the company, look to a higher power to help [us] make decisions.

Richard: It takes ego out of the equation. And I think is ego is a large reason why CEOs either are or are not successful. Certainly co-CEOs want to get ego out of the question.

Q: That's not the normal course of events. Normally in a family business the father will choose. Why did that not happen? Did he see that you got along?


He did see that we got along. I think he also felt we each had unique strengths that blended well together. Therefore, he didn't see a need to do that.

Tim: Richard was talking about how we manage by consensus. It sets the tone. We have, long before it became fashionable, worked in task forces, multi-organizational, multifunctional task forces. It sets that tone that we're all in this together, we're together in a team.

Q: Have you had situations where you've disagreed and, if so, how have you resolved them?


We really haven't [disagreed]. If there was a major acquisition, like the Jif and Crisco acquisition or the Multifoods acquisition, if we truly disagreed upon it, we wouldn't have gone forward.

We never let a disagreement become big. If we have an issue, even when it's small, we discuss it really quickly. That's one of the key things. If you let something fester, it becomes a much bigger issue than it really is.

Q: Things have been going pretty well for the company, so there hasn't been a whole lot to argue over, I suppose. I guess you did have one problem with the Mrs. Smith's Pies some years ago. How did that play out? What went wrong there?


The good thing is we both agreed to buy, and we both agreed to sell it. So we could both take the blame for buying it, and we can both take the credit -- if we want to call it credit -- for selling it. Dad was around. He was the only one who was dragging his feet.

Q: So he was the one who got to say, "I told you so"?


Right. But that's good because he was willing to let us do something that may have been a little outside his comfort level.

Q: What did you learn from that?


I think we just learned that you have to try to things. You have to try new ideas, whether it's an acquisition, a new product, a new piece of equipment. You have to stretch the bounds. Unless you're stretching them, going outside the envelope, you're not going to develop new ideas.

Richard: We also recognize our mistakes quickly and take action. We owned [Mrs. Smith's Pies] for two years, recognized that it wasn't going to be a long-term fit, and we took a slight loss on the sale. It was a slight loss. If we'd have held it for another three years, we might have taken a large loss.

Q: You're taking Smucker's to a whole new level. I believe the sales have approximately doubled in the last couple years?


We've actually gone from $670 million to -- this year it will be $2.1 billion, so it has more than doubled.

Q: That's pretty ambitious, perhaps more ambitious than your forebears were. What explains that ambition, what do you have in mind for the future?


I don't think we thought about it as size. It's really driven more by brands and opportunities that we can capitalize on at the time. It's more a matter of timing. The Jif-Crisco acquisition was something that we had pursued for years -- obviously [it was a good fit] with jams and jellies. We've also been very connected to the consumer.

Q: What's your ambition for the business?


Well, our strategy is to own icon brands in North America, and there are some really neat brands that we currently own. Look at that cadre of brands -- Smucker's, Jif, Crisco, Hungry Jack, Pillsbury, Martha White -- I mean these are all great, well-known family brands. So we want to be known as a company that manages brands well.

Tim: And [one that's] important in the center of the store. There's a lot of similarities between managing the jam business, the peanut-butter business, the baking aisles. There's a lot of similarities we can capitalize on.

Q: What is it that drives you? Is it to be the best? Is to preserve your independence, to be of a size that you can face off against retailers correctly?


If you look at our mission, it hasn't been financially based. It has been based upon being a company that represents [certain] values. If we represent these values well, both sales and earnings will follow. Because we think if we have those things, if we have the right people and the right values and represent that well, the sales and earnings will follow.

Q: Where do you see yourself in the pantheon of food companies? Do you want to be as big as a Kraft (KFT )? Or do you think you'll have a comfortable midsize niche over time?


We don't think of it that way. We think that if we put the other things first, those things will take care of themselves. So size, growth, and profit return, although important, aren't the key drivers. I think it's important to understand how we think and that concept. Although we have grown significantly over the last three to four years, we've always had a steady growth, year in and year out, since the founding of the company.

Richard: Some people believe that the constituent that they need to serve is the shareholder. And we believe that we actually have basically six constituents, five of which we serve very well, [and that will] take care of the shareholder. The first constituent is the consumer. We have to know what the consumer wants and take care of that need. We have to take care of our customers -- the retailers. The third constituent is our employees. The fourth constituent we believe is our suppliers: We have to have good, healthy suppliers. And the fifth constituent would be communities, where we have plants. Basically, if we take care of those five constituents, the sixth constituent, which is the shareholder, will automatically be taken care of.

Q: It's the backwards point of view from that of Wall Street.


It's a backwards point of view -- it truly is a backwards point of view. And that's one of the reasons why Wall Street takes a very short-term view, a six-month or three-month view. We take a much longer-term perspective. And I think you can do that more in a family business. You've studied family businesses. Your article showed the returns of family businesses are generally better (see BW, 11/10/03, "Family, Inc."). And I think that's because they take a long-term view and they're committed to the business.

Q: How do you keep all the family members in line?


We haven't always. We're a public company, and so they have the opportunity to sell stock, which is the advantage of being a family business and public because there's a market for their stock. I'm sure some family members have decided that they were going to sell some stock and make other investments in other places. In four generations, they've had the opportunity to do that.

Q: Obviously, it's many years off, but have you thought about how you're going to pass things on?


We're fortunate that we have five in the next generation working in the business, and also a great team of officers.

Q: But five, that makes it tough. And cousins, some are siblings. How will you broker that deal?


We don't think about it certainly on a day-to-day business. Our belief is we just go about doing our business, doing what's right on a day-to-day business, and we really believe that it will take care of itself when the time comes. There's no preconceived idea that the company is going to be run by a family member, although that would be nice. But we've got good employees.

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