Michael Rosenthal joined Baerlocher in 1976 and served as its CEO from 1980 to 2004, when he became chairman of the board. Founded in Bavaria in 1823, the firm is a leading supplier of plastic additives, with operations in 14 countries and more than 1,150 employees. In this article words, he describes his experiences at its helm, as well as his philosophy on leadership and life.
I joined Baerlocher in 1976 as the director of sales after earning my doctorate in chemistry. Early on, my father – a shareholder in the company and its CEO since 1946 – made a point of getting me involved in the business by including me in important meetings and luncheons. He was in poor health at the time and passed away four years later in 1980. From one day to the next, I went from sales director to shareholder. Collectively, my family was a majority shareholder, taking into account my stake and the shares held by family members.
“From one day to the next, I went from sales director to shareholder…Even though I was young, I felt prepared.”
Even though I was young, I felt prepared. There was an elephant in the room, however: no one was making any move to give me a proper general management contract, so I went ahead and had one drawn up myself! This decision surprised some people and not everyone was happy about it. In 1990, my family and other shareholders were ready to sell their stake in the business. Following the management buy-out, I owned close to a 100% share of the company.
Building a strong management team
In the early days, the task of driving the company’s strategy was definitely a one-man show, which made the banks nervous! They said, “Dr. Rosenthal, what’s going to happen to our money if something happens to you?” This got me thinking, so in 2000, I started taking steps to create a solid management team of non-family executives. My plan was to hand over the reins in a few years to a non-family member since my son was only 18 at the time and completely free to decide his own future.
Family-owned firms have years of tradition and deep-rooted corporate cultures, more so than corporations, so bringing in an outside management team is rarely an easy process. In 2004, I retired as CEO as planned, but it took three attempts and several years until we found our “real CEO”! He was appointed in 2010 after holding different leadership roles in Baerlocher and knew our culture inside and out.
“Family firms have years of tradition and a deep-rooted corporate culture, more so than corporations, so bringing in outside management is rarely an easy process.”
It’s also important to note the vital role of the board in facilitating this transition. Formed in 1990 after the management buyout, the board had an advisory role and two generations of expertise, which they generously shared with new managers to familiarize them with the company.
Expanding our global footprint
When moving into new markets, it’s essential to find the right partner and create win-win situations in which the smaller company doesn’t feel overpowered. We tend to work with companies that are similar in size or smaller than ours, but also work with large corporations like Ciba-Geigy and BASF.
“When moving into new markets, it’s essential to find the right partner and create win-win situations in which the smaller company doesn’t feel overpowered.”
In all of these cases, you have to think about your approach toward these partnerships since dealing with small family businesses is often completely different than with large multinationals. This is also important in life: knowing your strengths and what you bring to the table. If you’re dealing with another family firm with which you have strong relationship, the partnership can be signed with a handshake that lasts for generations. In most cases, however, you’ll need a good contract.
Robust corporate governance
I’m planning to retire from the board of directors at the end of next year and pass the baton to my son, who drives strategic projects for the group and has served on the board for over five years. When I step down, he will become the CEO of the holding company. After I leave, I know the company will continue to succeed for the next five to 10 years because our foundations, brand and market share are all strong. But what about 15 to 20 years down the line?
In this sense, a solid governance structure is crucial. In most family companies – and ours is no exception – medium- and long-term investments outweigh short-term performance. I believe in investing in governance, even at the sacrifice of short-term profitability. In the same vein, I’m more focused on market share over financial performance since, if your market share goes down, this could signal that customers have found other options and you’re not as competitive.
“In most family companies – and ours is no exception – medium- and long-term investments outweigh short-term performance. I believe in investing in governance, even at the sacrifice of short-term profitability.”
I’ve done my best to pass on my know-how to my successor and the board members to ensure Baerlocher’s continuity. I do this in two main ways. First, I’m in close contact with my son. We discuss strategic issues and I explain my criteria behind certain decisions, the prevailing market forces at the time, and what has changed – and not changed – since then. Second, I let the board make strategic decisions, which range from partnership agreements and new innovations to acquisition and exit strategies.
What does the future hold?
In my view, children are the most important thing in life. My son’s mother passed away when he was 16 and after that, my life was solely focused on him and my company. It took a lot of effort but I wanted to teach him as much as possible about the world. We would take walks through the forest and talk about why trees grow the way they do, why the sunlight splits into seven colors, the miracles of nature…
Every year, I would take off at least four to six weeks off so we could go on holiday together. We would talk about life and also the business, yet I always made it clear that his future was his to decide and that I wouldn’t love him any less if he wanted to pursue something else. That said, I also stressed that leading a business isn’t something you can do on the side: if he wanted to join, he had to do it wholeheartedly. In the end, he decided to study chemistry and became an excellent chemist, much better than I ever was!