All in the Family

In an era when the number of investment banking options available to business owners is growing exponentially, the idea of operating a family-owned business might be regarded as quaint and outdated by some observers.

Business history shows, however, that Wall Street backing provides no guarantee of success. At the same time, the “outdated” family business model quietly proves effective year-in and year-out for thousands of North American business owners.

Members of the Gordon family of Statesville, N.C., are among those running their company without the restraints and requirements imposed by operating in an environment where every decision must be made with an eye on maximizing shareholder value. Gordon Industries Inc. and its L. Gordon Iron & Metal Co. division have earned distinction not only in the scrap industry, but have also been recognized nationally as model family businesses.

A LEGACY THAT LASTS

There are many different “truisms” that are repeated in regard to family businesses, but many of them conflict with each other. Some theorists contend that family businesses are certain to experience difficulty by the third generation. Case studies can be found, however, showing the seeds of destruction being sewn before the third generation even gets its opportunity. Conversely, there are businesses such as L. Gordon Iron & Metal, which is on the cusp of seeing its fifth generation of family members enter the business, and which appears to be as financially healthy as it has been at any time in its history.

Gordon family members cite several different reasons why their business has endured through the generations, but a lack of selfishness and a sense of shared responsibility are unifying themes. “There are very few unilateral decisions of any consequence,” says third-generation family member Saul Gordon, president of L. Gordon Iron & Metal. “We like to check with each other.”

Discussion of any given issue may create disagreements, but the importance of not carrying grudges is kept in mind by all family members. “Don’t think for a minute that we all get along all of the time,” says Saul. “But nobody goes home angry. We get our differences settled and we leave at 5:00 p.m. and we don’t take our work home,” he continues. “Whatever differences we might have had the day before are forgotten the next morning. You can’t hold grudges.”

Such a lack of animosity could explain why the fifth generation of Gordons is beginning to work part-time with the company, and why the firm has not fallen into the decline that many observers of family businesses say is typical by the third or fourth generation. Loyalty is strong among family members, and the workplace environment that has been established helps ensure that loyalty does not involve the sacrifice of working in an unenjoyable situation.

“When a Gordon enters into the family business, it is as if he or she has completed a type of traditional marriage vow—through sickness and health, better or worse, ‘til death do us part,” says Saul. “The older the family business becomes, the more tradition tells us that failure is not an option. It’s the commitment to commitment that is so deeply embedded in our roots.”

That commitment begins from the ground up, as all family members learn about operations from working at the yard. “We’ve always had a hands-on approach,” says Richard Gordon, a fourth-generation family member who is vice president of nonferrous operations. “We’ve always felt that we need to be here and be on the job and lead by example. It’s not like a family business where you go onto Easy Street once you join up,” he notes.

The family philosophy has created not just good family relationships, but also a strong business that is among the national finalists in the mid-sized business category (50-250 employees) of the MassMutual National Family Business of the Year Award for the year 2000. By recycling industry standards, L. Gordon Iron & Metal vice president and fourth-generation family member Louis Gordon estimates that the company’s multi-million dollar revenues would place it within a recently-published waste and recycling industry listing of the 100 largest public and private companies.

PUMPING UP THE VOLUME

If the optimum result of consolidation is to centralize operations and maximize land and equipment use, L. Gordon Iron & Metal is ahead of the curve. The company brings in material from western North Carolina and adjoining states to its single 17-acre site, where it operates an 80/104 Texas Shredder auto shredding plant, as well as a Harris shear and a ferrous baler.

Statesville has proven to be an ideal location, due to the intersection of Interstates 40 and 77 in the small North Carolina city. That has allowed the company to serve a wide geographic area extending in all four directions. “Where we are, at the crossroads, helps us pull a lot of material off the Interstate in every direction,” says Kalman Gordon, a third-generation family member who is executive vice president and general manager of L. Gordon Iron & Metal. “It opened up the north for us, into Virginia, and out into the western portion of North Carolina,” he adds.

“We’re pulling a lot of material from up in the mountains,” says Saul. “Statesville does not have a lot of scrap-producing industries, but there is a lot of farm scrap out there,” he notes, adding that the surrounding countryside is one of the leading poultry farming areas in the U.S.

L. Gordon Iron & Metal has its roots in obsolete farm scrap, according to Gordon Industries chairman Melvin. “We started in the scrap metal business with our father picking up plow points at farms in the area. Our dad would deliver a piece of furniture to a farm house and pick up the old plow points to bring back to sell to a local foundry,” says Melvin, noting that his father Louis was engaging in “back-hauling” before the term was invented.

Saul and Craig Gordon estimates that the greater percentage of what they process is obsolete scrap, greatly outweighing the amount of prompt scrap the company takes in. “We get a lot of automotive bodies and white goods for our shredder,” says Saul. “North Carolina is a state where appliances cannot be buried, and we’re buying appliances from many of the counties. We process a lot of appliances,” Saul notes.

Unlike some shredder operators, L. Gordon Iron & Metal has not yet focused on purchasing the most comprehensive downstream shredder systems to maximize the in-house recovery of shredded nonferrous metals. “Our downstream shredder system makes a commingled shredder scrap product that we ship to heavy media plants, where aluminum, copper, and zinc can be extracted,” Richard remarks.

The company’s 803 Harris shear is used for some forms of industrial and farm scrap that come into the yard, as well as for demolition scrap and larger truck components. “Anything the shredder won’t handle,” according to Kalman, is fed to the shear. The company’s baler is used primarily to bale steel wire.

Equipment currently operated is appreciated by experienced Gordon associates such as Kalman. “We’ve done a lot of upgrading over the decades,” he recalls. “When I came into the business [in the late 1950s], we were running an alligator shear that you had to feed by hand, and it took a long time to get a car load of steel,” he recalls.

Kalman says the company’s purchase of a hydraulic guillotine shear in 1962 was a pioneering move in the region, as was its purchase of a hydraulic material handling crane in 1972. The company has subsequently retired all of its cable crane machines in favor of a fleet of eight hydraulic handlers.

While quality equipment and western North Carolina’s fair weather help keep productivity levels high, Gordon family members say the largest portion of the credit should go to the company’s work force. “We have some really good people,” says Kalman. “We don’t change help often. We run with a minimum amount of people because everyone has their job and they all do their jobs well.”

“Quality people in our workforce attracts quality applicants for the future,” adds Barry Gordon, another fourth-generation family member who is vice president of ferrous operations.

PROVIDING ADDED TOUCHES

After speaking to any member of the Gordon family, it becomes clear that the consideration and well-being of each family member is a priority for all. Further conversation, however, reveals that the philosophy of sharing what is earned is extended as well to other employees and to the Statesville community.

The company has a long-running and consistent profit-sharing plan that dates back to 1965. “It’s one of the reasons we’ve been able to retain good people. They watch the company grow, and their portion of the plan grows. Some employees have six-figure amounts in their retirement accounts,” Kalman notes.

In keeping with the spirit of a time when investors like to more actively manage their own portfolios, the company has introduced ways for employees to make their own choices as to how they invest their money.

“Individuals can choose a risk profile,” notes L. Gordon Iron & Metal vice president of finance and administration Louis Gordon, another fourth-generation family member. “We’ve been fortunate to have those balances growing over the years, and quite frankly we have some 20 and 30-year employees with unbelievable balances.”

Barry Gordon notes that employees are also provided with freedom and flexibility in scheduling off days or vacation time. “If someone wants to take a week off to go hunting but they’ve already used their vacation, we’ll figure out a way to do that. That freedom means a lot to them, that we don’t have an assembly line philosophy,” Craig notes. Similarly, flexible hours have helped some staff members schedule their time so they are home when their children are finished with their school day.

Safety considerations are also a way of making sure employees know they are valued. Craig Gordon, vice president of risk management and transportation, remembers a recently discovered 1963 photo of his grandfather receiving a safety award from an ISIS (Institute of Scrap Iron and Steel) official. “We always have been proactive in making the workplace as safe as possible,” he comments. “Our valuable employees know beyond all doubt how much we care about their health. Our extensive training program speaks for itself.

In the community, family members have been active with civic groups such as the Kiwanis, Rotary and with the local synagogue, which was the second synagogue established in North Carolina, organized in 1883. Family members have also been long-time active Institute of Scrap Recycling Industries Inc. (ISRI) members, Melvin notes.

Their work as recyclers is also regularly acknowledged by community members. “I get compliments constantly from friends and people I barely know, congratulating us on our Family Business Award and thanking us for being an asset to the community,” says Alfred Gordon. “They wonder what the community would look like if the Gordons weren’t here to grind up the old cars and appliances,” he continues. “I do correct them and let them know that there is some profit in it for us,” he adds with a chuckle.

Relationships with customers are also taken seriously. “We try to give them a little extra—some ways of providing good service,” says Barry. “We’re friends with most of our customers and know them all by name and invite them in to sit down and talk,” adds Barry.

In the case of the Gordons, the willingness to contribute time and resources clearly begins within the family. “One of the things that has made us get along so well is that those of each generation draw the same salary,” says Saul. “Members of the same generation who choose to work here earn the same amount, regardless of how long they’ve worked here. We as a family think it’s the right thing to do,” he adds. Referring to the marriage vow comparison, Saul and Craig say that it creates a tendency for family members to reach a cooperative solution.

“When Louis Gordon passed away in 1964, it was just natural that Melvin—the oldest brother—fit the role (as new chairman of Gordon Industries). “My office is open for every employee or customer who wants to come in and talk,” says Melvin. “I love it.”

“Everything isn’t gimme, gimme, gimme or how much can I have,” Saul remarks. “It’s all about pride in what we’re doing. We’re the largest family-owned scrap metal processor in North Carolina under continuous ownership, and possibly the largest and oldest scrap company based in the Carolinas,” says Louis.

A PROMISING FUTURE

The first rapid consolidation era in the scrap industry passed without the Gordon family selling its scrap processing business, and they say they have no regrets. “We were approached,” says Saul. “We chose not to go that route, because we have a family and we have valued employees. Purchasers usually want a three-year contract in place [to offer continual employment under existing conditions], and then at the end of that three years, we’d be afraid that our folks would be out of a job.”

Saul also believes the future of metals recycling is a bright one. “There’s always going to be scrap metal, as long as there is machinery running and automobiles running up and down the highway,” he remarks. “There’s always going to be steel used and there’s always going to be a need for scrap and to recycle it. That’s why I think we’ve got a hell of a future.”

As with every decision, the agreement not to sell the business was almost certainly unanimous among the cooperative family members.

“There is so much pride in what we’ve created,” says Craig. “In a family business you can’t let others down. It puts a lot of pressure on us to perform, but it keeps us together as a family with a lot in common and with the same goals.”