“There are no issues that affect our company, and it’s business as usual,” read the simple statement of Starkey Hearing Technologies founder and CEO Bill Austin last week, after the stunning departure of four of his top executives.
The statement probably communicated a little more than it intended to, since getting rid of four veteran leaders isn’t usually business as usual, even at a most unusual company.
What specifically triggered the departure of these executives isn’t yet known, and given that Starkey is privately held, it may never be. But it is easy to see how something like this could happen, in that Starkey is a mom-and-pop company that’s far too big to still operate that way. Presumably, mom or pop wanted at least one of these executives gone.
With its close relationship with a foundation that dispenses Starkey hearing aids, Starkey is an unusual company even by the standards of closely held businesses. Since the company’s start in the late 1960s, articles about its growth into one of the “big six” manufacturers in the global hearing health industry always describe Austin as the sole owner of the company and its CEO. That makes Austin the pop.
There’s a mom involved here, too, Austin’s wife, Tani Austin. She’s also a hearing aid industry veteran, and was once a Starkey employee. She has been most actively involved with the foundation, whose mission is to bring hearing aids to children and adults, mainly impoverished people abroad.
Tani Austin’s son Brandon Sawalich is a senior vice president with the company.
Sawalich, according to his profile on the LinkedIn network, started with the company in June 1994, when he was not yet 19. He became a sales representative within a year. At 40 now, he’s been a senior vice president for more than 10 years.
The website Hearing Health & Technology Matters reported last week that there has been “a long-standing rivalry” between Sawalich and former President Jerry Ruzicka, who had been at the company 38 years and was its president since 1998. Another employee let go last week told the Star Tribune, “I think it was a power struggle and we lost.”
The odds sure didn’t favor anybody not related to mom or pop emerging as the winner.
Starkey has not explained the situation beyond the statement, in which Austin said he couldn’t comment due to an ongoing investigation.
In talking with consultants who advise owners of privately held companies, like Ben Oehler of the Bashaw Group, the kind of management upheaval that erupted at Starkey last week is not at all rare among family-owned businesses.
Having a hands-on and decisive owner when a company is just getting going can be a competitive advantage, Oehler said, as a young company needs to move fast to grab growth opportunities as they present themselves.
As a company gets bigger, however, the king-of-the-realm approach to leadership invariably leads to chaos.
A lot of business owners come to see the value of making sure there are outsiders to help make better decisions, and it’s best if outsiders sit on a board of directors. A sole shareholder can obviously vote any director off the board, but only while getting an earful on what should be done differently.
Oehler called these independent directors or advisers a “buffer.” They are protecting the owners from the company, making sure the company doesn’t plunge ahead with plans that may put at risk too much of the owner’s wealth or endanger things like the owner’s philanthropic commitments.
It’s equally important to protect the company from the whims of the principal owner.
Had effective advisers to Starkey heard about what was about to happen last week, they had to have pointed out that it isn’t a good idea to abruptly throw out four senior executives with an average tenure at the company of more than 25 years. There’s at least a chance such a debate did take place, but the change in leadership still happened in about the most disruptive way it could.
Austin always has been the CEO, but he’s usually described as either very “hands-on” or very “hands-off,” which seems to suggest he must be some combination of both.
For one thing, Austin has spent much of his time working with people who needed a hearing aid, including traveling abroad for the foundation. Actually handling Starkey products and working with patients is pretty hands-on, of course, and in news interviews he can be seen wearing a white lab coat.
He also told WCCO-TV this summer that he hasn’t written a check since August 1970, had no idea who did write them and didn’t care.
He and Tani Austin also are prominent in the kind of social swirl Minnesotans don’t usually run in. One short item in Beverly Hills Resident magazine earlier this year described the prominent role the owners of Eden Prairie-based Starkey played in the musician Elton John’s annual Oscar party.
Meanwhile, back at home Ruzicka came to be a respected figure in the industry, well known to suppliers and competitors in a global business where just a half-dozen companies control the vast majority of the market.
Ruzicka was portrayed as very much part of the extended Starkey family in a book published in 2010 that prominently featured the company, called “Heart & Soul: Five American Companies That Are Making the World a Better Place.”
“Our business philosophy is to keep the company healthy so it makes money, because this allows the owner to have the freedom to really do what he wants to do,” Ruzicka told the author. “I think this is what he has me here for — and I hope I do it well for him. He doesn’t worry about money. My wife doesn’t either. But I do.”
Having someone around worrying about the money would seem to be a useful thing to have for a business owner. If only to know who wrote the checks.