Success Succession

KC Automotive Parts may not be, strictly speaking, unique in its ownership structure, but it is certainly a rarity in the automotive aftermarket.

The Owen Sound, Ont.-based business, founded by Ken and Cheryl Morrison in 1978 as a mom and pop operation, succeeded and grew due to a lot of hard work and some innovative business thinking. For example, Morrison says, they were the first to offer parts delivery back then.

By 1990, the Modern Sales member had grown to a significant size with a couple of dozen employees, and Morrison had started to think about the future of the business.

“I had three daughters and they didn’t want to take over the business, which is fine,” he says, “but I also didn’t want to just sell to a competitor.”

Morrison says the idea of letting the employees buy in and eventually own the business intrigued him. So, after some detailed investigation, in 1995 the Employee Share Ownership Plan was hatched.

“Ken was phenomenal about it,” says general manager Tim Cox. “When he offered it, he also said that if it didn’t work out after three years, he would buy our shares back at what we paid for them. It was really great for him to give us this opportunity.”

Morrison admits that not everyone was convinced the idea would fly at first, even those who ponied up for shares. And neither were, of course, the many, many jobbers to whom he spoke about the program over the years–he even presented the plan at an Automotive Industries Association of Canada conference a dozen years ago.

However, “I think it has made believers out of them. It’s been good for them, good for me, and good for my family.”

How good? Morrison says that his income from the business since embarking on the plan has easily been twice what it would have been had he sold outright to a competitor.

The now 65-year-old Morrison’s share in the business has decreased over the years (he still owns 25% of the business), but he wonders aloud why more businesses don’t look at this type of program.

“Most entrepreneurs don’t want to share. We’ve always had a profit-sharing program, so even the non-shareholders can benefit.

“Even if you don’t sell it all, why would you not want to have them be owners?”

He says that there have been significant tax benefits, it has provided an income over the years, and it has helped him transition into retirement.

“And KC Automotive is run better today than it was when my wife and I ran it.”

Of course there has been another benefit, one that is difficult for many to face.

If there is one unavoidable fact of any business, it is the mortality of the founder. In too many cases, that realization comes too late; trying to transition ownership at the same time as a family mourns the loss can place a business at significant risk, along with its employees’ livelihoods, as well as risking a marketing group’s access to a market.

Nowhere was the benefit of the KC Automotive structure brought into sharper focus than earlier this year, when general manager Paul Dossman, who led the company through the transition, spearheaded its growth, and whose fingerprint is indisputably on every facet of the business, passed away suddenly in a scuba-diving accident last February while on vacation in Curasol.

For some, the idea of having 22 owners of a business, each with equal say and voting power, conjures up images of confused decision-making, an executive tug-of-war, and a general inability to get things done. But the way they handled Dossman’s tragic death showed that nothing could be further from the truth.

The company has a clear philosophy that reporting structures are respected. Day-to-day decision-making is handled the same as at any company. But when larger issues arise, the broad ownership structure truly reveals itself.

In the wake of the tragedy, everyone pulled together, says Cox, who had been assistant GM under Dossman. Not that people aren’t still smarting from the loss of such a key person, but the overall business was never at risk.

Ken Morrison stepped back in to offer some moral support — “He was my first call,” says Cox–and there were moments of searching for papers and the like, but nothing overwhelming.

“In this incident, everybody had to pull together,” says Pat Moore, veteran counterperson and a lifelong friend of Dossman. “As much as everybody was hurting over the loss, the process has carried on. We haven’t lost that drive to succeed.”

It is no understatement that Dossman’s industry involvement, community work, and commitment to bringing youth into the business are key reasons KC Automotive was selected as Jobber of the Year.

“But Paul did a very good job of ensuring that people knew the business was bigger than one person.

“He bounced every idea off Tim and me and Pat,” says Lynda McFaul, operations manager. “We would all sit down and troubleshoot ideas. He was an idea guy, but we would all sit down and work on it.”

Dossman was the visionary, and his move to put a warehouse into Mount Forest, about an hour’s drive south of Owen Sound, was a fantastic idea, she says. Routing all calls through Owen Sound kept overlap to a minimum, while the location cut delivery times to local businesses to a fraction and opened up new markets. They also have virtually no retail business, which they believe has helped them focus on their core customer base. “It’s a good concept we have, not dealing with the public at all. It’s coming along very well.”

Laurie Morrison, who supervises the Mount Forest warehouse, was hand-picked by Dossman. “Tim, Paul, and I sat down and discussed it. So we decided on the satellite warehouse concept.

“This was Paul’s baby. I wish he could have seen it open. He was so excited.”

Cox says he feels he was about 60% prepared to take over the reins; this realization led them to look at increased cross-training and improved record-keeping, but he says the company remains committed to the fledgling Mount Forest operation, and is poised to add an expanded showroom.

“We’re diversifying into some non-automotive; the Modern Sales warehouse is really thinking outside the box.” Cox says that the addition will be a learning experience, but that it’s important to grow, change, and learn. And work for success, whatever happens.

“Our level of service faltered a bit when we were first hit by the trauma, but it hasn’t faltered since,” says Ken Morrison. “Hopefully KC Automotive will be going in 20 or 30 years. There’s no reason it can’t be.”