Cliff Anderson at the time of this interview was President of Crown Iron Works. The company has been in existence for more than 100 years. Founded by his grandfather, as a family, private company, it fell to Cliff Anderson to guide it through the transformation from an iron company to a world-leading oilseed extraction designer and manufacturer. Cliff’s story is one of humility and inspiration with many unusual twists and turns.
Choices and Commitment
My objectives for the company were to make it the most respected, and therefore the supplier of choice to our big customers. We only sell big-ticket processing plants to big companies that can afford that kind of stuff such as ADM and Cargill and Bunge, these agricultural giants. Unless you really have a first-class operation in all respects, they’re not going to deal with you at all because they have other suppliers.
Also, because we’re primarily an engineering company now—we subcontract all our manufacturing, so we don’t have any manufacturing expertise anymore, it’s all engineering and sales—we have a very educated workforce. Just about everybody has an engineering degree and a few of them have just technical school educations, and of course there are various support staff, but they don’t respond to leadership that doesn’t have their interests at heart, because they have other options. They could go anywhere and work. They are not people that say, “I need this company to have a job.” No, they’re here because they like it as a place to work.
It wasn’t primarily pay. We just tried to be competitive. And we really can’t compete with the big companies that have some terrific avenues of promotion. Where could they go for promotion? I’m the boss’s kid that runs the place; they can’t follow that. Our pay is competitive. We have pretty normal packages of fringes, good health program, 401k and all of these things, but nothing really imaginative. But we also have a participatory bonus program where, when the company does well, they do pretty well. And it’s transparent to the point that they know exactly how things are going.
Risk and Reward
It’s a very lumpy company, up and down, up and down every year; you never know where you’re going next. But they are along for the ride, and they know it. Sometimes they can get no bonus check because we haven’t done very well, or they might get one that is 25–30% of their base salary, depending on how things are going. They’re not risk takers or adventurers, but they kind of get pushed into that because 75% of the work is overseas somewhere, so they get stuck in places sometimes in projects with people they don’t understand very well. A project might take three or four months in some places.
These are engineering types, and engineer types don’t have a lot of time for wasted anything. It’s kind of built into the training of an engineer. Meetings, by their nature, because you’ve got a dozen people sitting around the table, probably only two or three of them really have much interest in what’s going on at the table, and the rest of them are sitting there waiting and thinking “Maybe my topic will come up somewhere along the line.” They really don’t like meetings to start with. And of course, my brother is probably the leader of the pack on that. He tends to sit and doodle even though he’s part owner of the company. We kind of let them work with each other and natural relationships are going on. I don’t know what our average tenure in the company is, but it’s up in the 20- or 30-year range. Turnover is pretty minimal. It’s mostly either somebody just doesn’t work out or they retire or something.
Invention and Necessity
The process equipment business, unless there is some outside influence coming in, is not typically known for innovation after the first one. If it works, everybody is happy with it, and they want to make another one like that. And the customers feel the same way. A lot of industries have had to react to the electronic revolution, but that has minimally affected our business really. The overall control of the factory has gone very much into computer controls, but the individual machines you just sort of turn them on. There’s no controlling of our machines, they just run at a steady speed and that’s about it. There’s not too much going on there. But as a result, if you have an innovation in our industry, it’s a big deal. It’s news. About every five or ten years we came up with something that was kind of new. And nobody else did.
Inventors come along all the time with ideas. One of my friends in business would say “God save me from inventors.” He was always losing money on new ideas. And we had our share of that too. But we never tended to get legalistic about these sorts of things. Everybody is always trying to screw the inventor by moving about three degrees over, so now it’s not covered anymore, that sort of stuff. We didn’t even insist on a patent.
We paid royalties in a couple of cases, major cases, where there was no patent. It was just a know-how thing. And you know what? A couple of those guys came back with new ideas later on. They kind of liked us. Our competitors spent all of their time trying to design around it rather than take out a license. And in one case it was a German fellow with a patent, and everybody was trying to get around the patent. We didn’t; we lavished him with everything we could. And he just kept coming back with good ideas again … until he died, unfortunately.
Another fellow out in western Minnesota came up with a modification of our original extractor design. Same thing, he just died about a month ago, and we were paying him royalties along the way, and he came up with more new, good ideas and, you know what, like a lot of new ideas, they didn’t work at first. He didn’t have it totally well-baked; they needed some attention. We paid him anyway, because it was a heck of a good idea, it just needed implementation.
Long Term Thinking
We have the only private laboratory in our competitive industry; it is unique. Otherwise, there is a government laboratory at Texas A&M. Our customers come in here and pay us to use the darn thing. It’s not a profit center; it’s a loss center really. There have been about three times over the years that we’ve had it where it came up above break-even. I was over at Crown recently working on a new lease for the property and somebody said, “What if the laboratory burned down, what would we do then?”
I said, “Well, for a while you’d be a little more profitable. But eventually you’re going to have to build another one.”
Our competitors don’t have laboratories. I think I know why they don’t, and that is that they are run by investment-minded people who don’t look out decades into the future. We’re a family-owned company. I’m the third family member that’s owned it, the company is 137 years old now, and we only came into the game about 50 years late. But the last 80 years or so we’ve been in charge of the company. We kind of take a longer-term view of things. The laboratory comes into that. If you’re expecting a laboratory to pay off in the next two or three years, you shouldn’t build one, because it takes longer than that to come up with stuff and commercialize it. We had a lot of things I think a Wall Street company would think of as failures. But we didn’t give up.
It was an advantage to be private. In a capital goods industry that has ups and downs like crazy, Wall Street doesn’t believe in “downs.” It’s got to be all “ups,” and every quarter after the last one. How long would a general manager last under those conditions? I was at a seminar once with a financial type from New York. There were a couple of us around the table and we were talking about how things were a little down this year in our industry. The speaker said, “That’s absolutely relinquishing responsibility. You shouldn’t allow that kind of thing.”
I looked at him and said, “I suppose that might make sense, but in our business, you might as well say that you ought to get out of the business. But somebody has to do this stuff, this is part of the economy, somebody is going to do this stuff and if you’re a little bit patient, you can make a lot of money in the long run. You’ve just got to wait for the long run. You can’t be impatient.”
I don’t know how the long-term view got to me exactly, but it certainly was in the DNA of my father and my grandfather. My grandfather had to go through the Great Depression, obviously, and my dad took over during World War II and the Korean War that absolutely turned the industries we were in upside down, with shortages of steel—we were in the steel business—and along the way price controls when Nixon came along and all sorts of good stuff, and the company nearly went broke in 1959. Then I came in after that and you kind of sensed it isn’t exactly the Rock of Gibraltar, but it’s survived somehow or other. Somebody asked me after we’d had a couple of good years, “To what do you attribute your success?”
I said, “Well, we just sort of overachieved our plan for survival.”
Evolve or Fail
Where did this view come from? Was it my grandfather or father? I don’t know that I paid a whole lot of attention to that stuff at the time, really. I was not all that successful either athletically or academically; I just sort of worked my way through. I was in the army for a couple years and realized that I didn’t want to go that direction. I came back, went to college and got a business degree; because I learned along the way I wasn’t going to be an engineer, because if I were going to be an engineer there’d be a whole lot of failures out there.
I thrived in the business school at the University of Minnesota, got a job in industry at American Hoist, and lasted there a couple years. After that, Dad had got the company to survive; it was near death there around 1959. In 1965 I came back to the company. Dad said, “I need some help, somebody to go out in this 60-year-old factory that has some problems.” So, I came over and had some mechanical aptitude and was able to make these old machines work pretty well.
I realized I kind of like to make things work and make things operate properly, and I put in some small systems that maybe would keep things under control, as opposed to the old guys who just sort of did their stuff and didn’t think about it too much. Then I looked around and saw my brother George was starting to work there in the engineering department, but he had no patience for anything to do with management. He is an engineering genius and was a major reason why the soybean processing department was starting to become more competitive. And Dad was getting older, and frankly getting a little cranky about things sometimes, and so I thought well, the company isn’t worth a lot right now because it’s had so many ups and downs.
Iron works were going out of business right and left around town. We had a foundry that folded up because just about all the foundries in town folded for various reasons, including horrendous pollution problems. If you’ve ever seen a cast-iron furnace, called a cupola, in operation you would know what I’m talking about. It wouldn’t be allowed for two minutes in the present scheme of things. It would put out a cloud of smoke that would cover the whole part of northeast Minneapolis—it was just awful.
I realized there didn’t seem to be any real motivation there for a succession plan, it just sort of happened in the past when one generation followed another, and I’d better learn something about all of the things that go on in this business. I purposely put myself through a kind of training program. I moved around from department to department and worked there for a while. In the Army I was a draftsman; I’m not great at it, but I know what they’re doing, and I’d had some engineering training until I figured out, I wasn’t going to be an engineer. Then I went into production control, inventory control and got a handle on that. Then I went over to structural steel estimating and sales and understood that a little bit. I never really got too deep into the processing machinery department, which is where George was, which was a pretty small department at the time. It was about a quarter of our business, maybe less, but my business schools training had me looking around.
What Is Our Business?
In our then-largest department, the structural steel business, Minnesota had way more structural steel fabricators than we really can support. We were all running out to surrounding states and even across the country to get jobs. We couldn’t keep busy enough around here. Our plant was built in about 1900 with machinery to match, and some of these places were much more progressive than that, and we were about number six in size in the local industry, which is not a terrific place to be in an industry that isn’t going anywhere.
We also had the soybean processing business and the screw conveyor business. I thought: The screw conveyor business is pretty small, but it seems to be working well, so I think we’ll keep it going. The soybean processing business, though, when it has a good year, it has a really good year. We’re about number four worldwide in that business, which is probably a better position than number six in Minneapolis. But as far as size is concerned, number four is sort of like being the corner gas station compared to being General Motors.
The biggest competitor was Dravō, which was a huge engineering company and had a department in our industry. But we probably could do OK if we could work our way into that business. Everyone else was bigger, but they weren’t going anywhere. Again, Dravō didn’t have any great ambitions for this little department; they just had the department that was doing OK. Whenever Dravō wasn’t doing OK, they lost interest. That’s why they didn’t have a laboratory—why would they?
French Oil Mill Machinery Company just tells you in the name what they were about. They weren’t going anywhere either. They were family owned, and were really more interested in the rubber business. The soybean thing kind of came and went. They weren’t doing anything dynamic. And the Belgians, De Smet, had a European attitude. A lot of people didn’t relate to them well, and they tended to be chiselers sometimes. Some of our customers liked them because they did a good job and knew what they were doing, but you never quite knew where you were with those guys. They were always playing it a bit loose. So, we just kind of kept going.
The Useful Soybean
One of the keys was being located in Minneapolis, which is a soybean-processing center in the farm belt with Cargill being here, and ADM used to be here. I have to give my dad credit; he got us into that business in 1948 or 1949 because an inventor came along with an idea. The invention was soybean processing: taking the oil out of soybeans, creating soybean oil that goes into a thousand things, and meal that basically is an animal feed. To do that, you either squeeze it in a screw press, which is where the French Oil Mill Machinery Company comes into it, and then Krupp also makes screw presses. Then another company called Anderson, no relation, still does.
The solvent extraction business is just a matter of grinding it up and putting it through a solvent bath and soaking the oil out of it. That’s what we got into. Krupp, Dravō, De Smet, French Oil Mill and one other company were all in that business. The solvent they used was hexane, which is volatile and explosive under the wrong conditions, and they’d had some problems. This fellow was going to use trichloroethylene, which is non-flammable, and it did a good job.
Dad built a pilot plant in northeast Minneapolis to run this stuff, spent a lot of money. And it worked just fine, so we sold several plants. Everything was cool until, all of a sudden, a bunch of cattle got sick on the meal. The hue and cry went out that it was the meal that we were producing that was making them sick. Then the farmers got the legislature involved to the point where the State of Minnesota made it illegal to use trichloroethylene in soybean processing. So there goes our business. The plants we sold were not usable anymore because they were not built to handle flammable solvents, so you couldn’t just switch over solvents; you had to rebuild the plant.
We survived that; I’ve got to give Dad a lot of credit for his foresight that this industry was interesting. Henry Ford promoted a book back in the 30s called The Useful Soybean. His dream was that farmers would process soybeans and make car parts in their barns—distributor caps and things like that—out of plastic. He built a car out of soybean-processed stuff. We were a minor supplier to Ford Motor Company, also back in the 20s or 30s. When they built Greenfield Village, the Ford Museum in Dearborn, we got the contract to do the decorative iron in that building. We had an affinity for Ford Motor Company, plus they had a plant in St. Paul. So, Dad was intrigued when this inventor came along.
Examples of Leadership
Dad was resourceful. Persuasive, too. We had lawsuits against us of for at least a half a million dollars, which in 1950 was a lot of money, especially for us. He figured that the big chemical/petroleum company that supplied the solvent didn’t like it either. He went to the brass of that huge “big three” outfit. Now here’s Crown Iron, a veritable peanut, petitioning a colossus of industry. He talked to them and said, “You know, you’re going to get dragged into this if you don’t watch out. So far you haven’t been named. If we keep you out of this game, would you support us?” And you know, they did. They paid all the legal bills and everything else for this fiasco, and we survived it. We got through the thing. And this is kind of that spirit of, by gosh, not only are we going to survive this, but we’re going to go ahead.
My father was a big influence, although at the time, I didn’t realize it quite as much. But the spirit was certainly there. He never acted too optimistic, he was always griping and grumbling about how things were going, but he always got through it somehow or other. In fact, my mother and my wife always commented on that. “Don’t pay any attention to him. We’ll get through this thing too.”
I didn’t have a lot of real friends because I got transplanted from one part of town to the other along the way. My best friend in high school was the valedictorian of the class and a very fine fellow. I don’t know if he had much influence on me except that he was a very peace-loving kind of a guy and very scholarly. I don’t know if that rubbed off on me, exactly. But just a great fellow as far as being well grounded although not exactly a natural leader.
The Army was an influence on me kind of telling me what I didn’t want to do. The qualities of leadership were pounding on me: I could see the good, the bad and the ugly. You kind of see by exclusion something of leadership. Some of these guys were a little more effective than others who turned everybody off.
I wasn’t much of a star in school until I got into college. I came back from the Army and realized that you should follow things you’re good at rather than pound your head against things you’re not. You’ll be more successful that way, which may be carried off into business decisions. If you’re banging your head hard, you may be headed in the wrong direction. Try something that you’re successful at.
I’m not sure I can pick an exact moment when my thinking has changed. It’s been pretty gradual. I can remember one moment in school that was really flattering. I was taking a class in economics. A friend I met in the Army who got out at the same time went back to school and took the same course. We had parallel tracks. We both had been in engineering, went into the Army, worked in Huntsville, Alabama, at the Army Rocket and Guided Missile Agency, and came back to the business school at the University of Minnesota. We did all this stuff together.
This course was in macroeconomics and as the year came to an end, this professor came to us and said, “Well, where are you going now to graduate school?”
And we said, “No way, we’re out of here.”
He said, “Oh, I just assumed because you had done so well in my class that you had to be headed for graduate school.”
I said, “Well, we impressed somebody.” We came out of there walking on air.
Finding Out What Works
The only two things I understood very well in the company from the operational standpoint were the structural steel and the conveyor auger businesses. I’d never really messed around with the other. But I could see that neither one of them was going anywhere. I eventually got rid of all of those, and continued on with the soybean processing business, which I was not as qualified technically to run. I had confidence in the people to make it work. Whatever talent I do have, I’d get my nose in there once and a while. If it’s a mechanical issue, as opposed to a processing issue. I’ve never gotten any credit for any of that, but I know what I’ve done and let them think it’s their idea sometimes. I know that I’ve influenced that because some of the things on that machine wouldn’t have been done if I hadn’t been involved. Well actually they called me in one time to be a troubleshooter on a project.
We get into other things once in a while, and they don’t always turn out well. Olin had a gunpowder plant in East Alton, near St. Louis, and they were reprocessing gunpowder from the Civil War. They’d been storing this ever since in big water-filled wooden vats. They had these wooden tanks with steel straps around them all over the place down there, full of gunpowder with water poured in the top constantly since 1860 something. This is a hundred years later. They decided they wanted to get the effective chemical out of the gunpowder and reuse it.
The Vietnam War had come along, and they needed ammunition. So, they bought an extractor from us, and we had run the stuff in our laboratory, which was a foolhardy thing to do in the first place. The laboratory at that time was a little bitty shack in the back of the place next to the railroad line. A locomotive would come by every so often throwing sparks and everything else, and the tracks were in bad shape, so it actually derailed outside the window. It was only 10 feet outside the window of this little building.
We tried the gunpowder, and it worked, so they bought a full-scale machine. It was as big as a house. The machine was failing because the drive chain was breaking. The gunpowder—they had told us it just flowed like peas. Well, it turns out it packs solid when it gets in the machine. The machine ground to a halt and ripped the chain apart. And then of course they’ve got to get into the machine and take it all apart with shovels. This is gunpowder, now. So, they sent me down there to figure out what was wrong with it. I think they were trying to get rid of me.
A couple years later, they moved the machine down to Florida and they did have an explosion. They call it a “puff” in their business, much gentler sounding than an “explosion.” Anyway, I figured out how to cure the thing and got it up and running within about a month. I do know something about mechanical stuff. I redesigned their chain and managed to convince my brother and all the rest that the design of the chain was wrong, not just inadequate, and by gosh, the chains are a little better now. That one they can’t dispute.
Working with Integrity
You have to trust them; you have to also develop a little respect. I took enough engineering and chemistry and everything else to be able to understand an argument from these guys. Not necessarily to be the process problem solver. We had some really great guys there. In fact, the sales manager who was actually an engineer really, is retired now, and I still see him once and a while. They are just great people.
The other thing is, when we had a slump, I didn’t lay them off. First of all, because we didn’t have a factory hanging around our neck anymore, we didn’t have that huge overhead load going. It was only those few salaries that were the problem, not the whole factory. That was part of it. And we tried to do a little R&D along the way.
I don’t think my experience involved a single large crisis. It wasn’t a culmination of a big moment or something like that. But I hadn’t regarded myself as much of a success until later on when I started to see that I was able to make some decisions and make some difference in the company. As that happened, I started to gain a little more confidence. Up until that point I wasn’t sure I was all that smart, and then I started realizing that maybe I have something to contribute. It’s not necessarily that I’m the big genius, but maybe I can make things happen.
William Dunwoody
From afar, you see all these great people as leaders. I’m a supporter of St. Thomas and University of Minnesota engineering, as well as Dunwoody College, and I look back as far as people in the past that a lot of people don’t know about. William Dunwoody sticks out in my mind—he died more than 100 years ago—but his legacy and the things he did were amazing for someone of his time. First of all, he was a humble guy. He didn’t have his name on the Washburn Crosby Company (now General Mills), even though he was one of the founders. He was also one of the founders of Northwestern National Bank, and of the Minneapolis Art Institute, as well as Dunwoody College. He never put his name on any but the last one, and that was named after his death.
He had a lot of money. At one point in his career, the Chicago Board of Trade had a financial panic, and he bailed them out. Never had any kids. So, people don’t think of him too much except for his name on the Dunwoody College building. In founding the college, he was talking about people from every background and race and everything else. He wasn’t thinking this was just for Anglo white guys.
Employee Relationships
I think the companies that have survived are different from the ones that didn’t survive. The ones that didn’t just treat employees like machines came out of it all right, and the rest of them succumbed. The automobile companies, for instance went through hell. Some of them survived, but it took the unions to bring them around, really.
We had a union, too, which was an interesting story. Our union was a maverick union. They had been thrown out of the AFL/CIO back in the 40s because of their communist leanings. And they were very proud of that. They were also absolutely straight shooters. They believed everything they said—whether you liked them or not, that was a different issue. They didn’t care about that, either. They believed what they believed. For instance, they had a rigid rule that nobody in the union hierarchy would be paid more than the highest paid man they represent. They stuck to it.
I got to know Frank Rosen, the regional guy from Chicago. We got to be as good friends as we could be, actually. The local people were kind of hopeless old-school types, but he was a brilliant guy. His background was interesting. He had gone to work for Giddings & Lewis in Wisconsin in the days back when numerical control was just starting to change the whole industry. And he was the guy working for them who figured all this stuff out and got them into numerical control.
What they didn’t know about him was that he was a die-hard labor fanatic, and his objective, aside from his technical duty, was to unionize the company. And he did. Then he went to work for the union. He was a true-blue guy. But he was also a very logical guy. He also understood what I was up against. But the union, a national union, they were in some big companies. They were in some of the General Electric plants, but they basically lost out to the AFL/CIO types. The United Electrical Radio and Machine Workers was the name of this one, not the same as the United Electrical Workers and others.
Back in the 70s, they decided they wanted to have a union pension plan. All these bigger unions had pension plans, and they didn’t have one. Our company had a nice pension plan, actually, nothing wrong with it. So, they came along and had a big strike against us because they wanted a pension. I said, “Frank, we’ve got a new game. What the hell’s this all about? We’ve got a pension. Why do you need to change it with your pension? It won’t be any better than ours.”
He said, “That’s not the point.”
I said, “What is the point?”
“It isn’t our pension, it’s your pension.”
Now I understand the game. “Why Crown Iron Works Company?”
He said, “Well, we looked around the industry, and we knew we couldn’t fight General Electric, they’re too big. And we couldn’t fight all these little bitty companies, because they’d just fold up. You were just right.”
I said, “Frank, thank you for telling me the way it is. Where do we go from here?”
He said, “Well, we want our pension.”
And I said, “I kinda like you all right, but I don’t really trust unions a whole lot to run it. I’ve heard all the stories about these unions ripping off everybody and their pension plans and all this kind of stuff.”
And he said, “Well, I understand where you’re coming from too. How’d you like to run it?”
And I said, “Huh?”
He said, “You can run it. It’ll be our plan, but you can run it.”
So, I became the President of United Electrical and Radio Machine Workers Pension Plan. I’m a union official, or was. It went just fine. It was a little too conservatively run. I kept saying, “You ought to raise the benefits a little bit.”
They’d say, “No we’ve got to keep it solvent.” It probably still is solvent.
Later on, I decided to close the plant. A lot of these guys had been working for us for decades. And I said, “Frank, I need to do something for some of these guys. I don’t know if some of these guys will find good jobs again, some of the better ones might. I’d like to set aside some money for these guys as severance pay. I’d like to do it this way.”
He said, “No, no, that won’t fly. It’s got to be by seniority. That’s just rock-solid stuff—seniority is everything.” I knew; I had been battling that for years. Again he told me the facts of life, that’s the way it’s going to have to be. Well, that means that some of the guys who don’t really need it are going to get it, and some of the guys who need it aren’t going to get as much as they need. He said, “Well, we aren’t going to get over this hill.” We did close the plant and didn’t have too much difficulty.
Looking Ahead
If we were to start under today’s environment, I think it wouldn’t be much different. Getting into the processing industry is a little tougher than it used to be with the environmental laws. The problem would be things we didn’t know. We stumbled on things but made the solutions into competitive advantages. The things we knew, we are excellent at. The plants are exemplary. We developed a ZED system, zero emissions discharge. It’s part of our technology. There is nothing coming out of our plants except the products we intend to come out. Because of regulations coming along, we designed for that. Some of the customers don’t tend to maintain it properly, so they don’t always operate properly because of neglect, but the machines are capable.
In fact, we have an offshoot going now down in Shakopee, we have a technology where we’re recovering roofing shingles. It’s not going well. The price of oil has scuttled us. The price of asphalt has gone down precipitously, so you can’t make any money on it. But we’ve got a big chemical company looking at it now that might buy us out. It won’t make us whole, but at least the technology will survive, which is good for Crown Iron because we have an exclusive license to build that stuff. But the investors, of which I am one, are going to take a bath.
Again, it’s a zero emissions plant; there are no emissions. The only thing we had to worry about is the toilets. Unfortunately, for a long time, the plant has been operating, but we haven’t been able to sell the stuff. We had to send it to the landfill. This chemical company comes in and says, “You’re OK with anything you’ve sold, but the stuff you sent to the landfill you may be liable for.” Really? Never thought of that. It’s probably not a problem, but it’s there.
If there is anything I would say to a reader, it’s this: If you are concerned about the viability of your career and everything else, be careful of the field or the company you go into. They’re going to be looking at you as to what your character is, but you need to look at the character of the company and the field they’re in as well. What are their activities? Don’t waste yourself on somebody that isn’t worth it.