How One 90-Year-Old Business Is Preparing To Turn Over The...

Trucking firm A. Duie Pyle has been in business for more than 90 years. Alexander Duie Pyle and his wife, Mary Ellen, started the business in 1924 with one truck. He was the mechanic and driver while she handled dispatch and bill collection. In 1945, they asked their son-in-law, Jim Latta, who had earned a scholarship to Wharton and had just returned from World War II, to join the then-$450,000 (sales) Pennsylvania firm. Latta figured he’d come onboard temporarily, intent on going into insurance, but he stayed for life.

Today Jim’s sons, Peter, Duie and Jimmy Latta, run Pyle, which now has $325 million in sales, mostly in the Northeast, where the company faces a highly competitive industry in a congested part of the country. But what concerns the brothers at the helm of Pyle just as much as external forces is the internal pressure. They are gearing up to hand over the company to the fourth generation but worry about the odds: Just 12% of family businesses make it to the third generation and only 3% make it to the fourth generation and beyond.

"We looked at the statistics and risks, and put in policies that attempt to mitigate those risks,” says Peter Latta, who is Pyle’s chairman and CEO.

To start, the family has an employment policy that ensures there is no lax standard for relatives: Anyone interested in joining the firm from the family must have at least three years of experience outside of the business and be evaluated by an independent board — his or her immediate family members can’t make the hiring decision. Contrary to the way many family-owned companies are run, members of the fourth generation like Hans Latta, now general counsel, weren’t allowed to work at the business at all while growing up.

While Peter, Duie and Jimmy, who are in their late fifties and early sixties, worked at Pyle from a young age, they decided their kids couldn’t, pushing them to learn business skills outside of the company before joining.

The family has also long followed a practice, first implemented by Alexander Duie Pyle and the original Jim Latta, of using generation-skipping trusts to protect the family’s stake in the company. Nearly 80 percent of Pyle is held in these trusts — the third generation, which has run the company for decades, owns less than five percent; even the next generation of owners only holds 18 percent directly.

They also brought on Steve O’Kane as president in 2006, the first non-owner, non-family member to hold the title. The move gave Peter more time to focus on leadership transition and also prepared the company for the future, when day-to-day operations may not be led by a family member.

It was around this time that they began to hold annual family business meetings. They also have quarterly conference calls for fourth generation Pyle owners and their spouses, during which the two fourth generation family owners who work at Pyle, Hans and his cousin Frank Graniere (who is director of process improvement), update the other fourth generation owners on what is going on at the company. They hear from two board observers as well, who are elected by the fourth generation to sit in on board of director meetings and report back. The overarching theme is clear: It’s important to foster communication between the different factions of Pyle leadership and ownership.

"The idea is to have a regular communication process. We don’t want to wait until there’s an inevitable issue and then start communicating,” says Hans. "There’s a graveyard of trucking companies that just didn’t make it.”

In 2012 they began the process of shifting the composition of the board itself. For much of Pyle’s history, its board was composed of seven members: three independent directors, one non-family company executive and the three Latta brothers. In 2012, Peter spent six months with two fourth generation owners to hash out a plan to usher in the new generation of leadership. The ultimate result will be a 12-person board, made up of four independent directors, two non-family company execs, three fourth generation owners who are employed by Pyle and three fourth generation owners who do not work at the company.

So far they have added the extra company exec and one non-Pyle-employed fourth generation owner. When Jimmy retires later this June, the company will elect a fourth generation owner/employee to the board. When Peter or his brother, Duie, retires, the board will elect both a fourth generation owner working at the company and a fourth generation owner not working at the company (and will repeat the process when the final brother retires). The family was careful to ensure equal representation on the board between company owners working for the firm and those who aren’t — a strategy they mirrored when arranging their share classes so that the owner groups each have 50% voting control of the company.

Ultimately the number of owners not working at the company will be larger than the number of owners working there, says Peter, but they determined that a 50-50 balance fits their needs by giving both groups a chance to have their voices heard.

While the Lattas have worked to be inclusive of spouses, allowing them to participate in family business meetings and granting them the ability to serve on the board in place of direct family members, spouses are prohibited from owning any equity in the company.

"Oftentimes in a family business they welcome everyone — including the in-laws and the outlaws — and it creates mediocrity instead of promoting meritocracy,” says Peter.

The family recognizes that domestic disputes can threaten a company’s well-being, so they set up a policy that encourages Pyle shareholders to enter into marital property agreements that prevent company stock from being considered community property jointly owned by spouses. This eliminates the possibility of Pyle shares leaving the family in a divorce. Those who don’t enter into such agreements, or terminate them later on, can have their stock repurchased by the company. This isn’t meant to exclude spouses from the company, Peter says, but to do what’s in the best interest of all of the shareholders.

As the transition occurs, Pyle continues to expand. In 2013 the company launched A. Duie Pyle Custom Dedicated, a service where Pyle takes over trucking responsibilities for businesses with their own fleet of trucks but whose core business is not managing trucking operations. Though the business is in its infancy, Pyle already expects revenues from this segment to be $15 million in 2015. The company also operates more than 2 million square feet of warehouse space across 9 facilities in Pennsylvania, Massachusetts, Delaware and New Jersey, where shippers can store goods closer to their final destinations, leading to faster order processing and transit times.

Expect A. Duie Pyle to remain wholly owned by the Latta family for the foreseeable future ("Why bring in Wall Street?” says Hans when asked about a potential IPO down the road). The Lattas believe that family ownership has been a key component of Pyle’s success over the past 91 years, and that a strong succession plan will protect the family and keep the company focused on what’s really important: continued long-term growth.

"We try to make decisions that impact lifetimes — not financial quarters,” says Peter.

writed by: Chase Peterson-Withron