Still hot at 50: there are plenty of challenges to meet for Allied Metal Co., Chicago, a third-generation nonferrous smelting business - Cover Story - Company Profile

Recycling Today, July, 2002 by Bob Stein

In a recycling sector that has witnessed dozens of business closures during the last decade alone, Allied Metal Co., (Chicago), is celebrating its 50th anniversary in 2002. While the secondary aluminum smelter and zinc alloyer prospers entering its second half-century, the current executive team is also addressing the daunting odds any family business confronts: succeeding into, and through, the third generation of leadership.

According to a Web page posted by the Family Business Forum of Rutgers University, "more than 80 percent of first generation family firms do not survive to the second generation and only 13 percent evolve to the third generation." Underscoring the importance of family businesses to the American economy, the Rutgers site further points out that "family businesses generate about half the gross national product and half of the total wages paid" and "represent about 90 percent of all U.S. businesses and over one third of Fortune 500 companies."

WELL-TIMED TRANSITIONS

The roots of Allied Metal Co. trace back to Irving Dubofsky, who arrived in the U.S. from Russia in 1921. Dubofsky applied the scrap collecting savvy he learned from his father's business while a youth overseas, and for years gathered old iron and rags from Chicago's neighborhoods.

In 1952 Dubofsky was instrumental in forming the organization, which would ultimately become one of America's oldest and largest independently-owned secondary aluminum and zinc smelters.

Marvin Fink, the late Dubofsky's son-in-law, began with the firm in 1957 and presided over it through the end of the 1990s. He is presently retired and serves as chairman of the board.

Day-to-day stewardship now rests in the hands of Fink's older son David, president; younger son Joel, vice president of trading; and son-in-law Mike Gilford, vice president of sales.

To ensure a smooth transition, the firm has also engaged the services of Kenneth Kaye of Evanston, Ill., a consulting specialist who helps companies identify and resolve succession issues. Joel Fink recounts, "Even before we started conferring with Kaye, we contacted a number of similar businesses we admired. Eventually, we understood what we had to do, took on the challenge, and the tough part is behind us now."

THIRD-GENERATION STRATEGIES

Joel Fink emphasizes the obligation for the third generation to uphold what he calls the time-honored Allied character and way of doing business. "We put our family reputation on the line with every transaction at Allied," says Joel. "That's something you won't find in a big new conglomerate. Many people still remember my grandfather, and at Allied we still operate according to his principles of doing what we say we will."

Mike Gilford sees as another third-generation tactic the need to navigate around the steady demise of personalized business relationships at all industry levels. He recalls the not-too-distant past when Allied representatives, all well-versed in die casting operations, could drop in on business owners and recommend ways to boost plant productivity on the spot. Now, multiple middle managers and purchasing agents typify the other side of the relationship--people who wear many hats and do not have the time to benefit from Allied experience.

"We hear a lot of `just fax us your price,'" Gilford contends. "On top of that, while everyone gets greater knowledge from the Internet, e-commerce doesn't create loyal, lasting relationships." He also attributes the industry's person-to-person disconnect to declining involvement in trade organizations, due both to the recent economic downturn and the modern need to balance work and home responsibilities.

THE VIEW FROM OUTSIDE THE FAMILY

When asked if the thought of keeping up with a younger generation felt threatening, key non-family managers firmly rejected the common notion of automatic resistance to change. Instead, they expressed excitement and high hopes about seeing the company evolve.

Barry Cohen, vice president of purchasing and a 20-year Allied veteran, feels reassured by the firm's steady stream of technical and marketing advancements. "This new generation understands that surviving means going beyond traditional quality-based competition. Quality simply gets you in the game," he says. Instead, Cohen believes that unique innovations and strategies will determine tomorrow's market winners, and that the company's third generation is well qualified to meet those challenges.

He recalls his own initial feelings about entering a family business, saying, "I purposely wanted to join one because I was at a large conglomerate and knew I could make a bigger impact in a smaller situation." Like many long-time employees, Cohen has worked with every Allied generation. "We emerge with new family executives yet always keep our original ethics," he affirms.

Vice president of operations Hal Jernigan attributes the company's low turnover to the trust the executive family creates. He joined Allied 22 years ago. "The family creates a comfort level that makes it great to work here, whether you're in Chicago or at our Chattanooga, Tenn., plant that Jerry Hass heads up. People don't leave us for lateral jobs, only for moving up, school or retirement."