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Is your company ready for sudden change?

Proper succession planning can save a business. (Photo: Getty Images)

News of Ollie’s Bargain Outlet CEO, president and founder Mark Butler’s death spread quickly last week, sending company officials into damage control.

The prompt naming of company COO John Swygert as interim president and CEO did little to assuage investors as the discount store chain’s stock dropped nearly 10% on the first day of the passing of its prominent face and leader.

By the end of the week, stock prices had stabilized around $60 after dropping as low as $56.83 a share.

The volatility of the value of a company is not uncommon around the unexpected exit of an organization’s leader, experts said, but what the management of a company does before and, in the short term after, sudden disruption in its leadership succession and ownership protocols, can determine its long-term success and survivability.

John Stoner, a business consulting partner and CPA with Manheim Township-based RKL LLP, said having a succession plan in place is a key component to the ongoing prosperity of a company.

“The disruption caused by the sudden loss of any key employee, whether it be the founder or the owner or just a key operational employee, is certainly a major risk factor,” he said.

Much of the work Stoner does at RKL concerns business succession planning, business valuation and helping family businesses decide how to transition when an entrepreneur or leader is gone. He advises clients think beyond the “here and now,” and take a long view of the preferred path for moving the business forward.

The best planning can always go awry, so it’s important for an organization to consider the “what-ifs,” including what happens if a key owner or leader is unable to continue in their role in the business through death, disability or a sudden resignation, Stoner said.

While Ollie’s is a large, publicly traded company, succession planning is important for small, family owned businesses as well. Perhaps more so, according to Trevor Bare, a consulting actuary at Conrad Siegel in Harrisburg.

“A company should make sure to have people in place, or being trained, to be their future leaders and are ready to step in at the time,” he said.

Figuring out in advance how a company will handle the sudden departure of a key player is often overlooked, even by large firms.

Organizations can be lackadaisical about asking a hard question, such as what is the next step if a leader gets hit by a bus? What will impact the business? Who will fill their shoes? What is the communication plan for informing customers and employees?

Most businesses are already being challenged with technological advances, more competition and changes in customer preferences, Stoner said. Factor in the loss of a boss and issues will emerge quickly. Coming up with contingency plans and a line of succession before an emergency is key.

It’s never too early for a large or small company to identify the next generation of leaders in the organization, and groom them through opportunities in education, experience and advancement so they can assume leadership roles when a sudden departure happens.

Many unprepared

Many businesses don’t have a succession plans, while others have a plan but don’t take into consideration changes that inevitably happen after a plan is implemented. A succession plans need to be reevaluated constantly to ensure key positions are filled, Stoner said.

A large publicly traded company like Ollie’s will typically have a plan in place even when it has a very visible owner like Butler, Stoner said, with the decision of next steps falling on the shoulders of the board of directors who are in place to mitigate risks.

“Every business has business risks, and a board of directors would say, ‘What are we doing to identify our risks, prioritize what we think are the more significant, impactful risks? And are we prepared to have a contingency plan that will allow the business to function normally during this period of disruption and, hopefully, stabilization over time?’” Stoner asked.

A historical example of the loss of a major company figure was the death of Walt Disney in 1966 and the subsequent search for a new leader. Stoner said there was a short period of time after Disney’s death when there were hard discussions being held to decide who was going to lead, with the board ultimately deciding on his older brother, Roy.

In many cases of companies that lose a leader who was the face of the organization, but was not involved in the day-to-day operations anymore.

“Many organizations have experienced this disruption,” Stoner said. “Some have prepared and responded better than others, but I think the public marketplace always has the sky-is-falling expectation without even knowing if the company has a plan in place and is able to pick up the pieces and sustain the business moving forward.”

Ask the right questions

A question business owners and investors need to ask is how impactful would the death or resignation of a top executive be on the long-term future of the company. They should keep in mind that the public will be watching to see if the organization has the right people to fill leadership roles, or will they need to recruit from the outside to continue the company’s vision.

Large companies that have a broad organization typically have a plan in place, Stoner said. What he sees as a more concerning issue is when an entrepreneur is the face and driving force of a business and they are suddenly gone.

Stoner said entrepreneurs in family-owned businesses are most likely to not have a succession plan, leading to the potential for disaster.

“When (an entrepreneur) is abruptly removed from the business, that’s a business that’s in peril,” he said. “But a large, diversified company probably has the business sophistication to have put in place plans – both short term and long term – on how to deal with this. But it will take some time for that plan to be accepted by the general public.”

The ownership question

An even bigger issue for the survivability of a company is when its ownership is in doubt after a sudden change. While it’s not a concern for a publicly traded company like Ollie’s, ownership has the potential to be a make-or-break factor for smaller, family-owned businesses.

Conrad Siegel’s Bare, works with smaller businesses looking to pass ownership on through an employee stock ownership program, or ESOP.  Through debt, the company is sold to the employees, and over time the employees receive ownership of the company through their retirement fund.

In this case, Bare said, the seller, typically the family of the entrepreneur who left, will get a fair market value for the company. Because the ownership stays in local hands and the employees have a stake in the company, it’s more likely the organization will not experience major changes.

If a company is sold to a competitor or a private equity firm, the future of that entity is often uncertain, including possible layoffs, rebranding or relocating.

One of the main selling points of an ESOP, is that it can preserve the legacy of the owner.

“A family may be more interested in preserving the legacy of the owner than trying to squeeze every last penny out of the transaction,” Bare said. “The ESOP is a way of keeping the company alive in the community.”

An ESOP is ideally put in place before the sudden death or departure of a business owner because it can take several months for the transaction to be finalized. In the cases where an ESOP is created after a sudden change, a company’s leadership succession plan is key in keeping the business stable and moving forward during the transition.

Ollie’s announces new CEO

Ollie’s Bargain Outlet has a new president and CEO, John Swygert, after the company’s founder Mark Butler died suddenly. (Photo: File)

Ollie’s Bargain Outlet Holdings Inc. officially announced Tuesday that its board of directors named John Swygert as its new president, CEO and member of the board.

Swygert had been serving as interim president and CEO since Dec. 2 when Ollie’s founder Mark Butler passed away suddenly over the Thanksgiving weekend. He served as executive vice president and COO of Ollie’s since January 2018.

“John’s deep and detailed knowledge of the business, passion for the Ollie’s culture and demonstrated performance make him the clear choice as Ollie’s President and CEO and he has the board’s steadfast support,” said Rich Zannino, Ollie’s board of directors member. “Working alongside Mark for the past nearly 16 years, John has been a big key to our success.  The board wholeheartedly encouraged Mark’s grooming of John as his successor and John’s development and performance over this period has been outstanding by every measure.”

Swygert first joined the Ollie’s organization in 2004 as its CFO. He was later promoted to executive vice president and CFO in 2011 before talking the COO role last year.

Prior to joining Ollie’s, Swygert was executive vice president and CFO at California-based Factory 2-U Stores Inc. and has worked in discount retail as a finance professional for 27 years.

“Ollie’s has achieved remarkable growth and success under Mark’s leadership and it has been my privilege to work closely with him over the last nearly 16 years, Swygert said. “During this time, Mark and I built deeply talented and passionate teams across all facets of the company. Looking forward, Ollie’s continues to have tremendous runway for growth and our entire team has rallied together with determination to make Mark proud. We are committed to executing this incredible business model and remain focused on driving profitable growth and shareholder value now and into the future.”

 

Mark Butler loved a bargain

Mark Butler, CEO of Ollie’s Bargain Outlet Inc., became a majority owner of the Harrisburg Senators baseball team in 2015. In the background, a banner for the Dauphin County-based retail chain hangs in the left-field section known as Ollie’s Cheap Seats. (Photo: Amy Spangler)

Mark Butler, the man who rang up the first sale at the discount chain he help create in 1982 – Ollie’s Bargain Outlet – before going on to become its CEO, was remembered this week as a master businessman and philanthropist.

Butler, also sports enthusiast who was the majority owner the Harrisburg Senators, died Sunday. He was 61. The company’s board of directors on Monday named John Swygert, the current COO, as interim president and CEO.

Butler rose to prominence in the Central Pennsylvania business scene by building a company based in Lower Paxton Township, Dauphin County that has grown to more than $1 billion in sales while focusing on providing deep discounts on goods to its customers and emphasizing its motto of “Good Stuff Cheap!”

“Mark was an exceptional entrepreneur, merchant, leader, philanthropist, friend and family man,” said Ollie’s board member Richard Zannino. “Mark built a successful and enduring retail concept, assembled an incredible team, created thousands of jobs and delivered millions of bargains to our customers, while delivering exceptional shareholder value along the way.”

Ollie’s Beginnings

Butler was part of the Ollie’s retail experiment from the very beginning, ringing up the first sale on the cash register of the chain’s original store at 6040 Carlisle Pike in Hampden Township on July 29, 1982. He had joined with co-founders Mort Bernstein, Harry Coverman and Oliver “Ollie” Rosenberg to open the chain that sells excess brand-name items and inventories.

The quirky regional chain featuring the cartoon likeness of Rosenberg and self-deprecating catch-phrases saw moderate success throughout the ’80s and the ’90s, selling factory seconds, overruns and inventory buyouts of bankrupt retail outlets. It started its “Ollie’s Army” loyalty program in 1994, giving even more discounts to repeat customers.

Ollie’s saw its greatest leap in growth when Butler took over for former CEO Bernstein in January, 2003, partnering with Greenwich, Connecticut-based private equity firm Saunders, Karp & Megrue (now known as KarpReilly). It went from 26 stores before the partnership to 345 stores today in 25 states.

Mark Butler, president and CEO of Ollie’s Bargain Outlet, rang the opening bell at the NASDAQ stock exchange in July 2015 with the help of the company’s mascot. (Photo: Submitted)

In July 2015, investors sent shares of Ollie’s stock soaring past an initial $16 public offering on the NASDAQ, hitting a high of $22.99 a share. Ollie’s raised about $143 million from the 8.9 million common shares it offered.

“It’s quite humbling,” Butler said in an interview shortly after the public offering. “We’re a Central Pennsylvania-based company. How cool is it to be in the crossroads in Times Square and looking up at the logo of your company on the big screen?”

The company’s stock has reached as high as $103 per share in July and a peak market capitalization value of $6.4 billion in May before falling back in late August on weak second-quarter results. For a brief time, Butler was a billionaire based on his stock holdings and Ollie’s high valuation.

The chain has also grown to include three large distribution centers across the country: its first opening in 2011 in East Manchester Township, York County; another that opened outside of Atlanta in 2014; and its newest one, a 615,000-square-foot facility near Dallas that, when completed, will serve 150 to 200 stores.

During an interview with the Central Penn Business Journal last December, Butler said the company had a long-range goal of opening more than 950 locations. And, according to its website, all of Ollie’s locations incorporate the same philosophy of, “No frills, bargain prices, bright, semi-lovely stores and a fun shopping environment.”

Sports Fan

Besides his tenure leading Ollie’s, Butler was also a lifelong sports fan, including the University of Maryland teams. Mark Turgeon, head coach of the University of Maryland Terrapins men’s basketball, called Butler “incredibly generous” and an “unwavering supporter” of the team, including his recent $5 million donation for renovations to the Cole Field House where games are held.

Butler took over as principal owner of the Harrisburg Senators minor league baseball team in February, 2015. Butler was known for spending time in the crowd talking with attendees of games at FNB Field, and his own Mark L. Butler Foundation donated tickets and baseball experiences to inner city organizations so local residents could go to Senators games.

Representatives from the Senators said they were “heartbroken and deeply saddened” by the news of the death of Butler.

“We are just numb,” said Kevin Kulp, president of the Senators. “This is a tragic loss for our community. Mark was such an important part of the culture of our organization. We were extremely fortunate to have had him guiding us. We’ve lost a great boss and a great friend. We’re committed to continuing on in his memory just the way he would have wanted – with passion and integrity.”

Butler was also serving as chairman of the Cal Ripken Sr. Foundation, a non-profit organization creating opportunities for youth in need through baseball. He worked with the Ripken Foundation to fund and build a baseball field at the Boys and Girls Club in Harrisburg in 2013.

Cal Ripken Jr., the National Baseball Hall of Fame member of the Baltimore Orioles and founder of the Ripken Foundation, called Butler a “friend” and a “mentor” through a statement.

“(Butler) cared deeply about his community and brought passion and caring to everything he did,” Ripken said. “His contributions to so many causes, including ours, will be a significant part of his enduring legacy. To say that Mark will be dearly missed doesn’t nearly capture the magnitude that his life has had on so many.”

Ollie’s Future

Ollie’s board of directors wasted no time on Monday by naming Swygert as its interim president and CEO. Swygert has served as executive vice president and COO of Ollie’s since January 2018 and previously served as its CFO beginning in 2004.

Zannino, who is one of five directors on Ollie’s board, said Swygert worked closely with Butler during his 15-year tenure with the company and played an integral role in its growth.

“Based on John’s intimate knowledge of the company and the closeout business, and the strength and tenure of the Ollie’s team, the board has the utmost confidence in John’s ability to successfully lead the Company at this time,” Zanninio said. “We will continue to support them in every way possible.”

The quick news of an interim CEO did little to calm investor’s nerves as Ollie’s stock dropped by 9.7% on Monday, dipping as low as $58.84 a share, its lowest level since Oct. 11.

John S. Stoner, a partner and CPA with Manheim Township-based RKL LLP, works with mostly privately owned companies to come up with contingency plans in the event of unforeseen circumstances like the death of an essential employee. Stoner said the drop in stock value is not uncommon when a leader or other influential decision makers are removed suddenly.

“In Ollie’s case, I think there’s an initial knee-jerk reaction in the marketplace, but the real question is have they put those strategic priorities in place as far as the contingency, what are the next steps and in many cases the key is the communication plan,” Stoner said.

But if Butler’s vision and outlook on his business was any indication, Ollie’s is poised to overcome hurdles.

“A bargain will never ever go out of style,” Butler said during a 2017 interview with the Business Journal. “America will always love a bargain. And as long as we can do that and deliver that, they are going to keep coming back.”

Ollie’s Bargain Outlet announces death of founder and CEO Mark Butler

Mark Butler – Submitted

Mark Butler, founder and CEO of Ollie’s Bargain Outlet Holdings Inc., died Sunday, according to company officials.

The 61-year-old passed away unexpectedly while spending the Thanksgiving holiday weekend with his family.

The board of directors on Monday named John Swygert as interim president and CEO of the company. Swygert has served as executive vice president and COO since January 2018 and previously served as Ollie’s CFO beginning in 2004.

Butler rose to prominence in the Central Pennsylvania business scene by building a multi-billion dollar company based in Lower Paxton Township, Dauphin County, that focuses on providing deep discounts on goods to its customers and selling it with a memorable motto: “Good stuff cheap!”

“Mark was an exceptional entrepreneur, merchant, leader, philanthropist, friend and family man,” said Ollie’s board member Richard Zannino. “From ringing the first sale in the first Ollie’s store in Mechanicsburg in 1982, to leading the company’s highly profitable growth to 345 stores in 25 states, Mark built a successful and enduring retail concept, assembled an incredible team, created thousands of jobs and delivered millions of bargains to our customers, while delivering exceptional shareholder value along the way.”

Butler joined with co-founders Mort Bernstein, Harry Coverman and Oliver “Ollie” Rosenberg to open the chain that sells excess brand-named items and inventories.

Besides his work with Ollie’s, Butler was also a lifelong sports fan. He was currently serving as chairman of the Cal Ripken, Sr. Foundation, a non-profit organization creating opportunities for youth in need through baseball. He worked with the Ripken Foundation to fund and build a baseball field at the Boys and Girls Club in Harrisburg in 2013.

Cal Ripken Jr., the National Baseball Hall of Fame member of the Baltimore Orioles and founder of the Ripken Foundation, called Butler a “friend” and a “mentor” through a statement.

“(Butler) cared deeply about his community and brought passion and caring to everything he did,” Ripken said. “The entire team at the Cal Ripken, Sr. Foundation is devastated by the news of his passing and our thoughts are with his family and those closest to him.  His contributions to so many causes, including ours, will be a significant part of his enduring legacy. To say that Mark will be dearly missed doesn’t nearly capture the magnitude that his life has had on so many.”

Butler took over as principal owner of the Harrisburg Senators minor league baseball team in February 2015. He was known for spending time in the crowd talking with attendees of games at FNB Field, and his own Mark L. Butler Foundation donated tickets and baseball experiences to inner-city organizations so local residents could go to the games.

Representatives from the Senators said they were “heartbroken and deeply saddened” by the news of Butler’s death.

“We are just numb,” said Kevin Kulp, president of the Senators. “This is a tragic loss for our community. Mark was such an important part of the culture of our organization. We were extremely fortunate to have had him guiding us. We’ve lost a great boss and a great friend. We’re committed to continuing on in his memory just the way he would have wanted – with passion and integrity.”

This is a developing story.

Read more about Mark Butler and Ollie’s Bargain Outlet:

Deal ticket: While other retailers struggle, Ollie’s continues to grow