Pulling the Strings

JD: I’m sure we could sell a part of the business, sell all of it, take it public or do whatever we had to do. But by bringing in partners, whether it was public or private equity, it would change the dynamic of the business. We don’t plan things based upon next quarter or even next year. We’re patient. For example, we know when we’re buying a company that it could take five, seven years, eight years, before we see the return on our investment. We’re in it for the long haul.

Take the Rico reeds company, for example. That division should be as profitable as our string division and it has only one or two competitors in the reed business. However, the people that owned Rico over the past 30 years were coupon-clippers and didn’t reinvest in the business. So we have to make up for 30 years of lack of investment to get the operations where we are with our string business. We’ve put almost $5 million into Rico in the last two years. We put in a whole series of automated machines that reduces head count by about 30 and improves the quality by an immeasurable percent. When you’re a public company or you’re reporting to a private equity investor who wants a return on his investment, it’s hard to do those things. And while I’m alive, I could not be working under those circumstances.

I’m 58 years old and I personally don’t want to be CEO much longer — maybe two years, five at the most. But I do want to stay involved for as long as I’m creative and capable in terms of creating product and machine solutions, manufacturing solutions and marketing solutions.

RL: What’s the future of D’Addario in terms of succession planning?

JD: There are a lot of issues. Well, you know, my family’s been making strings for almost 350 years, going back to the 17th century. It’s been a family business and we want to try to keep it a family business. However, it’s grown into a pretty big company, and we’re realistic about that. We have a very good mix of family and non-family business people here.

In the United States, I’m the third generation, and the fourth generation is pretty actively involved in the business; there are eight of them working here now, but only one is in a high-level management position. Everyone else in the fourth generation is in middle management or below. We have many good non-family business managers, so we realize that we have to find the right person for the job, and it doesn’t necessarily mean that will be a family member.

That said, it would be my dream and my brother’s dream, as it was my father’s dream, to have this business succeed from one generation to the next to the next, and we work hard at that by working with the family business counselors. And we have a yearly retreat with the family. We’re pretty open about communicating problems and issues up front, sometimes to a fault. But I think that everyone’s comfortable talking about issues and facing them early on instead of later.

Daily Accountability

RL: How would you describe the company culture at D’Addario?

JD: I want to try to get the culture back to being more fun. I think that we lost that for a little while because we had people whose tachometers were up too high. They’re only going 65 miles an hour, but their engines were at 5,000 RPM. Lean management is bringing the RPM down. Once we get the lean management through this entire company, I think that we can bring the stress tachometer down and the fun tachometer back up again.

My culture’s always been, “How can we get better every day?” I come to work and I only want to work on things that make us better. I don’t want to work on, you know, fixing the same mistakes over and over and over again. And that’s really what lean’s all about — the continuation of improvement.

RL: I understand you have a morning meeting every day. That’s pretty frequent. Is it just a meeting with your executive team?