Logistics Planning Services moves freight into the next generation

  • Article by: TODD NELSON , Special to the Star Tribune
  • Updated: August 7, 2011 - 9:50 PM

The family-owned shipping company in Mendota Heights is shifting management to second-gen siblings.

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New LPS president Justin Hall, second from left, is joined by fellow execs Jason Johnson, operations manager, left; Eric Heieren , sales manager, second from right; and Bill Kutka, right, vice president of projects and sales.

Photo: David Joles, Star Tribune

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Whether it's a handful of screws or 800,000-pound pieces of equipment, Logistics Planning Services of Mendota Heights can get almost anything shipped almost anywhere.

The company's most important move, however, likely is unfolding within its own headquarters as the husband-and-wife team of founder Larry Hall and CEO Pamela Hall transfer management, and eventually ownership, of LPS to their children: Justin, president; Nathan, vice president of information technology, and Kirsten, chief operating officer.

"The likelihood of failure as you do these successions is really high," said Justin Hall, 32, the former director of sales and marketing at LPS who became president in October 2010 ahead of his parents' retirement at year's end. "We've got about as good a relationship as we could ask for within the business and outside the business. That's a good thing."

Successions can be challenging for family-owned businesses, experts say, especially when next-generation management includes multiple siblings. In this case, Larry and Justin Hall said, years of planning and study into resolving any potential sibling disagreements have gone into making the transition work. The company's recent rapid growth doesn't hurt either, as LPS has rolled out two new offerings to gain business as others faltered in the recession. The company, Justin Hall said, has hired 20 people in the past three years, doubling its staff and tripling revenue from $5 million to nearly $15 million in that span.

LPS is described as a "fourth-party'' logistics (4PL) company: In short, you won't see a fleet of LPS trucks or rail cars hauling transformers or cranes around the world. Instead, the company manages the movement of materials, products and equipment for its customers through proprietary software tools and consulting services. It negotiates discounted rates, passed on to customers as part of its open-book pricing policy, with trucking companies and other carriers that do the actual shipping.

"It's very pleasing to see that they can work side-by-side and actually be excited about it and come to work excited every day," father Larry Hall said.

All of the Hall siblings had at least five years' experience with other companies before joining the family business, he said. "We made it very clear that if they didn't have a good plan for how they were going to resolve differences, we wouldn't subject the family to being torn apart because of the business."

That plan, which the siblings developed themselves, calls for Nathan Hall to cast the deciding vote on issues that the company's larger leadership team cannot resolve in its weekly meetings or that deal with the company's overall direction, Larry Hall said.

LPS also gets input from a board of advisers made up of customers, marketing partners, an attorney and a banker. The board meets twice a year, providing feedback on performance and helping to set three- to five-year goals for the company.

The company formed the board nine years ago, acting on a suggestion from consultants at the Family Business Center at the University of St. Thomas' Opus College of Business, Larry Hall said. Justin Hall's entrepreneurship studies at St. Thomas included taking a family business succession class with his parents. Larry Hall said he has taken a couple of years of classes at the school.

The next-generation planning isn't limited to family members. LPS' hiring push has included a number of recent St. Thomas grads. Larry Hall said the company has hired or contracted with retired executives who have experience in logistics and transportation management to help mentor younger employees.

Larry Hall, who had worked in logistics at 3M, founded LPS in 1987 while his wife, also a former 3Mer, joined a few years later. The company's specialty has been providing integrated logistics, or serving as an outsourced transportation department managing all shipping needs for companies in the electric utility, manufacturing, commercial and consumer goods industries.

With the economy slowing in 2008, the company started two new divisions in response to suggestions from its advisory board.

One is project logistics, which involves shipping huge, heavy objects such as transformers or turbines by specialized rail or heavy-haul trailers or barges. The other new division is express brokers, using proprietary KeyShip Express software to enable small and medium-sized companies to use LPS for part of their shipping needs without fully outsourcing that service.

Justin Hall also has been working to expand LPS' global logistics services to countries in Europe and South America.

"They've been very flexible, very innovative, and the feedback from our individual utility members is that their customer service level is very high," said Steve Willrett, vice president of supply chain for Utilities Service Alliance in Omaha. As a spokesman for 10 of LPS' electric utility customers and an advisory board member, he's kept a close watch on the transition.

"They're on track to do well," he said. "From all indications, it looks like they're in good shape to manage the business now and going forward."

The expert says: Professor Ritch Sorenson, the Opus Endowed Chair in Family Business and the academic director of the Family Business Center at St. Thomas, said the transition to next-generation siblings is one of the toughest challenges that family businesses face.

Ideally, siblings in such situations will have open and direct communication and collaborate to resolve problems, Sorenson said. A mediating influence built into the company's governing structure -- a board of directors with independent, outside advisers or board members -- can make a huge difference.

"They can help mediate the conflict and move the business forward and really add an element of stability to the siblings," Sorenson said. "If they're really experienced in management and in the industry, they can bring a perspective that will be helpful.

"If it were me, I would say get a very good, strong board with people that they trust and have high credibility."

Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com.

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