Chief Financial Officer—King Arthur Flour, Inc.

            King Arthur Flour’s history goes back to 1790 and for five generations the company has been associated with the Sands family. It is now wholly employee-owned and led by CEO Steve Voigt. Revenue is $70M; financial performance has been especially strong in the past two years. The company seeks a CFO to complete the management team that will lead the company to fulfill its financial and human potential. The company’s hometown is Norwich, Vermont, 130 miles northwest of Boston and across the Connecticut River from Hanover, New Hampshire.

A. King Arthur Flour Now

            King Arthur is the leading retail flour brand in New England and the third-place brand in the United States. Revenue growth has averaged 16% annually over the past 10 years, driven by the company’s success in building a community of customers who are devoted to the brand and love to bake. King Arthur flour is available in grocery stores in all 50 states. The company also has a growing catalog and web business that carries flours, mixes, ingredients, utensils, and hundreds of other baking-related items. There is a retail store and café at the company headquarters in Norwich. Quality is consistently high and commands a price premium.

            Baking, family life, and devotion to quality permeate the culture. When current CEO Steve Voigt married his wife Robin in 1987, one wedding gift was a King Arthur bread-making kit from her father’s cousin, Frank Sands. Frank was president of King Arthur Flour, and the fifth generation of the Sands family to be part of the company. This wedding present launched Robin as a baker; soon thereafter she started a bakery business. Naturally, she used King Arthur Flour. When the distributor substituted another brand, it made the bakery’s signature holiday item unsalable. Thus was born Steve’s and Robin’s conviction that “the flour really does make a difference.” In 1992, when Steve joined King Arthur, he brought this conviction with him.

In 1999 Frank Sands handed the CEO reins to Steve Voigt and sold a second block of stock to the now majority-owner ESOP. The company became 100% ESOP in 2004. The company has become strongly profitable, even more so during the recession. By June 2011, the debt that financed the ownership transition will be completely paid. The company attracts tremendous loyalty and attention. Both the Tuck School and Harvard Business School have written case studies of King Arthur.

            This is a complex business for its size. There are four distinct revenue streams:  through food brokers to grocery retailers; through distributors to bakeries; through a catalog and the internet to consumers; and through the company retail store to consumers. Total revenue is $70M. Organizationally, nearly all this is managed in two divisions. The Flour Division ($48M) is the historical base business, selling flour wholesale in 2- to 50-pound bags, ultimately sold mostly in retail stores.  The Direct Division ($22M) sells flour, as well as company-made and purchased mixes and equipment (2,200 SKUs in all), through a catalog, a web site, and at the company’s Norwich retail store. In addition, the company has a world-class bakery, publishes award-winning cookbooks and newsletters, and offers hands-on teaching at its baking education center.

            There is a long-time controller with a staff of four. The controller competently manages the accounting cycle, monthly financial statements, audit, tax, variance analysis, and most of the mechanics of budgeting. Sage Platinum is the accounting software. Blueplanner software tracks trade spending. A homegrown application handles e-commerce. A remarkable variety of independent data sources feed into the general ledger and financial statements. Each division handles its own order entry, invoicing, and some reporting in Crystal Reports. The CFO position has been vacant since the departure of the previous incumbent (whose title was Vice President-Finance) in July 2009.

            There is relatively sophisticated reporting and analysis at the board level, mostly on an annual basis. A lot of financial information which is used by management is developed by the divisions in a vacuum, rather than by finance. The management team and the board are extraordinarily collegial, open, and consensus-oriented. There is a lot of two-way communication between management and employees.

            King Arthur has diverse goals and values. On the one hand, this is a company dedicated to: work-life balance, small-town living, employee ownership, open-book transparency in both governance and communication to employees, and the environment. On the other hand, this is a company with ambitions for: high long-term profitability and growth, hard work, taking market share from competitors, exacting professional standards, sophisticated analysis, and tough-minded evidence-based decision making.

            Steve Voigt, the CEO, graduated from Colgate University and received an MBA from Dartmouth’s Tuck School. He worked in McKinsey’s Cleveland office, with a focus on manufacturing. He joined King Arthur in 1992 as Vice President-Finance, became COO in 1998, and has been CEO since 1999. Steve chaired The ESOP Association. Other members of the management team are: Mike Bittel, General Manger-Flour Division; Steve Cochran, Director of IT; Karen Colberg, General Manager-Direct (catalog/internet/retail) Division; and Suzanne McDowell, Vice President-HR. The controller, reporting temporarily to the CEO, is Patti Vaughan.

            The Board of Directors includes Frank Sands, Steve Voigt, Fred Alper (former CEO of Morris Alper & Sons, former trustee of Brown University), Carol Atwood (partner at Spartacus Capital), Alison May (former CEO of Patagonia and Red Envelope), Cecil Ursprung (former CEO of Reflexite), and Terry Wolfe (Executive Director, HELP of Ojai). It is an energetic, engaged, and demanding board. See www.kingarthurflour.com for more background.

B. Four-Year Outlook

            The expectation is to reach $100M to $150M of profitable revenue in four years. This isn’t a goal for its own sake and the company isn’t a slave to the goal. Rather, the management team and board have concluded that if they serve the community of bakers, build the brand, and optimize the stewardship entrusted by the employee-owners, this magnitude of growth will come as a natural consequence. The brand is crying for growth. The company has the resources, from internally generated profit, to invest in growth. There are several possible directions:

• Build additional company-owned retail stores
  
• Do further partnering and/or expansion into flour milling
  
• Expand capacity for proprietary mixes
  
• Acquire related businesses
  
• Expand sales internationally
  
• Expand share-of-mind and share-of-pocketbook among the existing King Arthur community of baking-oriented customers

The CEO and board see early 2010 as a time to make strategic choices for the next few years. They think of King Arthur as a portfolio of revenue streams and initiatives, each being at a different stage (that is, at a different point on a “J curve” of investment and harvest).

C. Role of the CFO

            Members of the management team want to be able to say the following about the CFO:

·         “Anticipates my information needs and is responsive”

·         “Frames reports and presentations to answer the right questions and to provoke action”

·         “Shows highlights, so abnormal situations jump out at me”

·         “Gives information on how I can do things differently”

·         “When I say I’ve got a cool idea the CFO latches on and helps me work it through”

·         “Shows actual cost reduction and capacity impacts of capital projects, and how these compare to what we expected”

·         “Delivers work in finished form”

·         And, finally, CEO Steve Voigt (ex-McKinsey and himself the former VP-Finance) wants to say, “This CFO does McKinsey-like analysis and recommendations, and makes me comfortable that the CFO role is being fully handled.”

The CFO’s contribution will be vital. The controller and staff are able to manage most or all of the recurring transaction and reporting work. The CFO’s focus will be on delivering the following:

1)      Design accurate, open, and understandable measurement of divisional performance, including income statement, balance sheet, and meaningful metrics to catalyze improved performance. Use allocations and transfer pricing that can be explained and understood and that encourage rational behavior.

2)      Install and evangelize a framework for deciding where to allocate resources—that is, how to plant, cultivate, cull, and harvest an evergreen portfolio of growth and cost-savings initiatives (“J curves”).

3)      Be a thought partner with the management team, especially the CEO, in envisioning the future and continuously re-inventing the business. Engage and support their thinking by running what-if scenarios for acquisitions, new retail and manufacturing facilities, geographic expansion, product pricing, and costing. Use an effective level of precision (not too much to be paralyzing, enough to be real).

4)      Attend board meetings and become the principal management-team voice on financial and performance-measurement matters.

5)      Scan inside and outside the company for emerging threats and opportunities. Be aware of competitors, peers, other ESOP companies, suppliers, and customers.

6)      Teach and promote high performance, measurement, evidence-based decision making, ROI, openness, and fairness.

7)      Lead the annual budgeting process in a way that unifies and commits the management team.

8)      Manage the finance department and your own time and attention so that recurring work is done well and there is capacity for important new projects. Say “yes” enthusiastically to new work, or, at times, “no” for the right reasons and in an understandable, constructive way.

9)      Think of managers as your customers. Strive to discover and meet their needs. Make financial data more available and used.

10)  Understand all data flows and software tools in the company and over time work with IT to rationalize, simplify, and integrate.

11)  Administer the ESOP and the annual valuation process with the ESOP advisory firm.

12)  Be the keeper of a long-term financial model that incorporates strategic growth initiatives, enterprise valuation, ESOP redemptions, capital structure, and cost-structure trends.

D. CFO Experience, and Skills and Attributes

            As we get to know candidates, here is what we will be looking for—the experience, skills, and traits that will make success in the CFO role most likely.

Experience

• You have significant management experience in a consumer-brand business.
  
• You have been controller, CFO, or similar in a business that was $50M to $200M in revenue. Preferably, it had several divisions with differing business models.
  
• You have accounting and finance experience with catalog and internet business.
  
• You’ve worked in the food industry, preferably including experience with both food distributors and food manufacturing. If you don’t have food manufacturing experience, you have other manufacturing experience.
  
• You’ve helped a management team conduct a transparent, open process for rationally choosing investments in growth, quality, and cost reduction, and you’ve monitored performance of those investments.
  
• You have been thought partner to a CEO or business head in continually re-inventing a growing, changing business.
  
• You’ve worked in a business that had retail stores.

Skills

• What-if scenarios, modeling, and pro forma financial projections—from spur-of-the-moment white-board discussions to complex Excel models, and all points in between
  
• Financial analysis, discounted cash flow, return on investment
  
• Cost accounting
  
• Dealing with diverse accounting inputs from retailing, wholesaling, and catalog/internet
  
• Presentation and public speaking

Traits

• You are future-oriented and comfortable with change.
  
• On a continuum where one extreme is “understand and adapt to your environment” and the other extreme is “alter your environment” you are 2/3 the latter.
  
• You develop convictions based on facts and can go toe-to-toe with a CEO in a confident, constructive way.
  
• You tackle projects the CEO cares about, make them your own, and bring something of yourself to these projects.
  
• You are cooperative not territorial; open not secretive.
  
• You teach financial tools and disciplines and enroll people in their use.
  
• You see compatibility—not conflict—between long-term profit and such human values as work-life balance, corporate social responsibility, employee ownership, and kindness.
  
• People see a lot of the “owner” and “consultant” mindset in you, in addition to “manager.” You are oriented to building value, thinking conceptually, solving problems, and pitching in.
  
• You are attracted to baking, employee ownership, and small New England towns (see www.hanoverchamber.org to get a feel for the area).

E. The Search Process

The job title is Chief Financial Officer, reporting to Steve Voigt, CEO. Competitive base pay is augmented with profit sharing based on company and individual performance. Little travel; competitive vacation and group benefits; ownership in the ESOP. Steps in the search process are:

• First-pass assessment of candidates. (Ends Nov 18)
  
• Phone interviews with semi-finalists. (Ends Nov 28)
  
• First-round finalist interviews in Norwich, VT (Nov 30 and Dec 1)
  
• Second-round finalist interviews in Norwich, VT (Dec 7 and Dec 8)

The search is conducted by Jim Johnston, Johnston Company, Lexington MA. Only email responses will be considered. To respond please write a thoughtful cover letter specific to this job and include your resume. Apply through Monster or email directly to:  Jim Johnston, JimJ@JohnstonCompany.com . Please use “King Arthur CFO Search” (without quotation marks) to start your subject line.