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Leader With Courage: Craig Duchossois, Chairman & CEO of The Duchossois Group

 

"The Family is there to serve the business.  The business is not there to serve the Family."  Craig Duchossois

 

The Duchossois name has become synonymous with horse racing and its painstaking rebuild of Arlington Park to become one of the crown jewels of the sport. But it’s a family that’s also been associated with businesses related to access control and a broad array of investments. Since 1994, Craig Duchossois has led The Duchossois Group, Inc.

 

We had the opportunity to sit down Craig for a Leading With Courage℠ conversation about navigating a complicated set of businesses through forces of change and how he’s grooming the next generation of the Duchossois family to continue the legacy.

 

 

Leading With Courage℠ Academy:

To start us off, Craig, how did you end up in the position you’re in today?

 

Craig J. Duchossois:

After the service I had originally planned to work for a consulting firm. At the time, September 1971, my father had some issues at our freight car manufacturing plant and asked that I return to help. We had grown wonderfully well in the mid 60's and had about 1,400 people, but were a very flat organization.

 

When I joined the company in '71, I was only the third college graduate and the only one with a graduate degree, except a part-time head of engineering who had a PhD in mechanical engineering. My good fortune was being in a family business when it was beginning a very early stage of rapid growth. I enjoyed helping build the organization in many ways from scratch in terms of recruiting talent.

 

Prior to 1980, my father had decided we needed to diversify out of rail car manufacturing. We purchased a company called Chamberlain.  In 1980 he went to run Chamberlain while I stayed on to continue running the freight car manufacturing company. He ran Chamberlain until 1986 when he decided to rebuild Arlington Park Racetrack after a fire.

 

You and he had good management styles, but at the same time, very different approaches. Is that fair to say?

 

Yes. In 1994, even though he'd been up at the racetrack for six years he was still trying to, like many entrepreneurs, micromanage everything, I said, "You can't do that. You either be the CEO on a full-time basis, or you make me the full-time CEO, but we can't have Monday morning quarterbacking every time I make a decision when you're not there."

 

That was our first heart-to-heart.  I became CEO of then Duchossois Industries in 1994. We've gone through three reinventions of who we are and what we're about in the past 23 years.

 

Do have any other brothers and sisters that are active in the business as well?

 

I have two sisters who are on the board of directors. I have a daughter who is on the board of directors and a nephew and a nephew in-law who are working at Chamberlain. We're still very much a family-owned business. My father is now Founder and Chairman Emeritus.  I'm Chairman and CEO, looking to eventually pass the baton over the next two to three years to the next generation.

 

We often cite nine de-railers to a leader’s success at Leading With Courage℠ Academy – you actually mentioned a 10th one relating to integrity.  Have there been any in particular that you’ve had a struggle with or been on the alert for?

 

Many wonderfully successful entrepreneurs are micromanagers.  They're micromanagers because they can't afford to make a mistake. They don't have the balance sheet strength to back it up. To that extent, during World War II, my father learned a very important lesson that's embedded in our company culture: “Don't expect what you didn't inspect.”

 

(To read more about Craig’s thoughts on each of the 10 behaviors of effective Leaders With Courage, click here.)

 

Interesting. I've never heard that one before.

 

In the military, at war, it means when you're setting your men up at night to protect your base, you’ve got to make sure that they are where they're supposed to be. That's the responsibility of a platoon commander, a company commander or a CEO.  With growth, you get to a certain point where you can micromanage a squad, a platoon or a company, but not a battalion.   A lot of entrepreneurs don't figure this out.  (LWCA:  There are roughly 8-16 people in a squad, 25-60 in a platoon, 70-250 in a company, 300-1,000 in a battalion.)

While my father has the ability to be very proactive and anticipate problems, I also watched him surround himself with “yes men” because he didn't have time to negotiate with people. He just wanted them to follow his orders. In my case, I'm not that bright. I need people to push back because, while I'm intuitive, I also need them to say, "Wait a minute, let's slow down, let’s make sure we understand all of the options."

 

There's always a little bit of insecurity when people look around and say, "Did he earn the position or is he there because he's family?" To that extent, I learned to have great respect for humility. That's one of my vulnerabilities. Sometimes I tend to be softer and more loyal to people than I should. In fact, on your list of nine de-railers of leadership, there are things I need to go back and remind myself about from time to time -- relative to what should be a strength because sometimes it is one of my vulnerabilities.

 

Is it fair to say that Number Four – sticking with an under-performing team member too long – is something you have to be on the watch for?

 

I don't think there's any question. We all know that organizations are living, viable and constantly changing. I've recently gone through enormous change in one of our companies where, five years ago we had enjoyed success and became too cocky. I allowed a sense of complacency because the numbers were always going in the right direction. Yet, even when the numbers go in the right direction, you find comfort and you shouldn't. Sometimes the organization outgrows the executives and it's very difficult to deal with someone that brought you to the dance to say, "It's time for you to sit down and let someone else be on the dance floor."

 

One of the responsibilities a CEO has is to have lines of communication vertically throughout the organization. I have had to make three changes in over 40 years because the organization, customers or suppliers came back and said, "Were you aware of…?" After I validated that they were right from enough credible and trusting resources, I moved quickly to make the appropriate change. In two instances, I gave two CEOs 12 months to get their act together and for whatever reason they didn't believe me. They thought that I was more interested in annual earnings than creating long-term value appreciation. I had to let them go. These CEOs were competent and very good in many ways, but they had a short-term orientation. That’s not why I hired them!

 

Out of curiosity, had they come from public companies and, as a result, that was their orientation?

 

YES. It took me a while to learn that the public company mentality brings a tendency to be extraordinarily sensitive to quarterly earnings reports. It creates a spirit of confidence in the CEO if the executive has been successful at doing that. "I hear what Craig says, but I know he doesn't mean it. My annual bonus and my long-term compensation is based on always beating the numbers and that's what I'm going to do."

In both instances, particularly in the first one, I had to let a CEO go during the best performing year we've ever had because he was changing the culture in an unacceptable way and being very short-term sighted.

 

In any kind of role like yours, it’s not uncommon for people to be afraid to tell you the truth. What do you do to help people feel you’re really open to hearing the good news and the bad news?

 

I had a President once in a consumer products company we’ll call "Ed." I’d never seen anything like him. He never had any problems or at least had never come to me with any problems. Until a big one rose to the surface. I asked him…why am I just finding out about this now?

 

He said, "Craig, my job is to solve the problems before they get to your desk." I said, "Ed, that's B.S. Given the severity of the problem, I appreciate you solving all the little ones, but if it's something that's going to negatively impact shareholder value or our reputation, you've got to bring me in early enough so that I can make sure that you have the appropriate resources to deal with issues at hand."

 

It was like a light bulb went off in his head. He didn’t know he could share “bad news.”  (He was an ex-consultant.)

 

I told him, "That's what we're here for.  I expect you to not let me be surprised so we can move resources to your support." In four decades, I’ve had two CEOs that struggled with this concept. Out of their own pride, they wanted to solve the problem themselves.

 

So you give your people the latitude to fail at times.

 

It depends. I tell our people, "As I recruit senior executives, I will be patient, possibly to a fault, with a bad business call. But nobody can screw around with our values.” Our values are written.  They're very clear, they're mores that you and I both hold in esteem.

 

If you make a bad call, you’ll get a second or a third chance. If you violate a value, you don't get a second chance. So before you make that significant call, let's make sure you and I are on-board so that we can work together to solve the problem.

 

Part of my role leading the family and having full responsibility for the business is to be supportive and help run interference so we work together as best we can. It's been a long time since I've had someone who hasn't been forthright. I don't kill the messenger.

 

Can you share with me an example of how you’ve kept the lines of communication open and strong?

 

Sure. In 1981 when the freight car industry tanked as a result of deregulation, I started meeting with all of our people at the company every quarter. I would update them on where we were. I was pleased with this communication tool.  Being in front of our employees, even though it took almost a full day to talk to 1,500 people, was worth the time.  I have made this a practice in all our companies.

Based on the feedback, I insisted that every one of our business unit CEOs hold quarterly all-hands briefings pertaining to where we are and what's going on. It puts them on the spot for anonymous questions as well as questions from the floor. It helps me by carrying the message that a) we care and b) although we may not be able to solve all of your problems, the fact that you brought it to our attention means we will listen to you and keep you posted on its progress.

 

What are you doing to make sure that your values get passed down to your children and your grandchildren?

 

We work very hard on embedding values, being transparent and mentoring the next generation. Let me give you a couple of examples.

 

The mission statement that we have and is published on our website was created by the family during a Christmas break at my sister’s home in 1994. We said, “OK, you guys sit here for the next hour and craft our mission statement in terms of: What is the family business? What is the family mission? What is important to you? We're going to go upstairs and have cocktails. Call us when you're ready."

We left the room and with a few exceptions, maybe tweaking or debating a word here or there, they had crafted our mission statement.  We review it annually.  It has held the test of time.  (If you’d like to read The Duchossois Group’s mission statement, click here.)

 

In our bylaws and our Shareholder Agreement, we've tried to clearly define what is important and what family members need do if they want to have a job in the company. If they want to be in a leadership position in either the for-profit or not-for-profit sides of our operations, we share the criteria to be nominated and properly vetted. We've tried to take our values and put them in black and white.  We work hard so there is no sense of entitlement.

 

How early did you start on this message with them?

 

Very early – earlier than a lot of people might expect. My sisters came to me many years ago and said that we needed to start training the next generation. We’re talking about three five-year-olds.

 

I believe I said, “Are you kidding?”

 

We brought in a consultant and took the five-year-olds into my daughter's crafts room where they put together piggy banks. At the end of the exercise, when they completed their banks, they made a presentation to their parents and grandparents as to what they made, why they made it and what it meant to them.

 

This was the first step of doing something fun, while working together with their cousins to embed the values of saving, thrift, of charity, of future choices because they had money in the bank. I said to myself, “Now this is really cool." It’s an educational process we continue to this day.

 

What’s your final thought for CEOs who are relatively new to the role or those aspiring to the C-suite one day?

 

It's particularly important that a CEO surround himself with bright, caring people who hold the same family values and understand the importance of a culture based on mutual trust.

How many times do you end up with a CEO who enjoys success early on and is quickly convinced that the world revolves around him? Those people always, with rare exception, get their comeuppance sooner or later.  “It’s not about me.  It’s about us!”

 

 

Let’s close with a lighting round of questions with one or two-word answers.

 

First, what is your favorite word or phrase?

 

Thank you

 

Least favorite word or phrase?

 

I'm sorry.

 

Your favorite saying or expression?

 

People make the organization.

 

What's the one quality you admire most in a leader?

 

Humility

 

The quality you least admire in a leader?

 

Arrogance

 

What profession other than your own would you like to attempt?

 

Philanthropy

 

When you retire, what would you like to hear the master of ceremonies at your retirement party say about you?

 

That I was a good father, a good leader, and a good person.

 

 

Businesses that transfer leadership from one generation to the next aren’t unlike the Duchossois family in that they often have one great leader handing the company to another great leader in the making – they’re both strong managers but couldn’t be more different in many respects. At that vulnerable moment, the company could either crumble or continue on stronger than ever.

 

Which will it be for you? Give your current, new, and emerging leaders the opportunity to find their own voice and increase their capacity to handle more in the way of a bigger role. It all starts when you learn more about our intensive and interactive Leading With Courage℠ Academy.

 

Call us at 312.827.2643 and discover how much two days or less could mean as an investment in your company’s future.

 

 

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