Henry L Fellowes took an extremely simple idea and turned it into a multi-million dollar enterprise that specialises in boxes, shredders and office products. Third-generation CEO Jamie tells Bruce Love how thinking outside the box made the company what it is today
Mention the Internal Revenue Service to most Americans and it is likely to produce varying degrees of loathing, suspicion or outright hatred. But for one family, the IRS deserves a special place in their hearts. For without it, their business may not even have been born.
Jamie Fellowes, chairman and chief executive officer of Fellowes, a manufacturing company based in Illinois, explains that the IRS was central to the birth of a product that helped his grandfather form the business almost a century ago.
Harry L Fellowes was an entrepreneur with a drive to succeed but according to grandson Jamie, he had limited resources and almost no formal education. "Grandfather's father was unable to work so he had to become the breadwinner of the family at the age of 12." Working as a tailor in Chicago in 1917, Harry's shop was adjacent to a store where a man named Walter Nickel was selling boxes that were especially manufactured for document storage.
In 1914, new legislation had been passed in the US requiring businesses to keep written records for tax purposes. Walter Nickel's boxes were designed as a simple, safe way to fulfil this tax requirement and Harry became fascinated by the potential mass appeal of such a seemingly simple product. "It seems strange today, but to many people, the idea of keeping these types of records was a completely foreign concept," says Jamie. "How they should be stored to fulfil the requirements and to keep them safe was a complex issue."
When Walter Nickels was called up to the First World War, Harry bought his friend's consignment of boxes for $50, believing strongly that demand would sky rocket. "All he had was the inventory," says Jamie. "He proved himself to be quite the entrepreneur to promote the product and grow the business."
The bet paid off. From that $50 investment, Harry Fellowes and subsequent generations have managed to build a company with a present turnover upwards of $700 million.
The business grew considerably through the 20s, when it dramatically increased the product line, and into the 30s, when it expanded across America with exclusive contracts with various office product dealers around the country.
It was also during the 30s that Harry's sons – Folger and John – joined the business, committed to their father's vision and winning formula of management.
"Grandfather founded the company in the field of records management and throughout the technological changes of the last century, this has remained the central core of the business ever since," says Jamie.
Jamie grew up as the third generation of Fellowes in the business, which was originally called Bankers Box. As a close-knit family, three generations at one time lived in the family home in Eastern Illinois. Jamie describes a domestic scene where there was great pride in the accomplishments of the family. "We have always been a very close family and the business has given us a common interest. My grandfather was a marvellous collector who cherished photographs documenting the company's early days and evolution into the business it is today."
The result is a rich library of information dating back almost a century – newspaper advertisements, brochures, memos. It is a collection that Jamie is proud of to this day and occasionally looks through with fascination. "It gives you a sense of a shared history and is a wonderful way of exploring there roots of the company."
Over the years, the corrugated cardboard box lines expanded to include various sizes and strengths, as well as storage drawers and magazine holders. The biggest change in direction started in 1982, when the company sold its first product that was not a storage box – a large, commercial paper shredder costing over $1,000.
"This was a big step in seemingly a completely different direction. But there was a very strong connecting point linking storage and destruction. In the consumer's mind the two hold a very similar place psychologically. If something is important, there is either a need to hold onto it, or there is a need to shred it. Because we were the people to go to for document security, document shredders were a natural next step."
In the initial stages of this new venture, the company signed a licensing agreement with a German manufacturer and imported its line of shredders. "These were big, noisy machines that needed to be kept in copy rooms in a commercial setting," says Jamie.
With the growing demand for shredders and the focus of the company diversifying from just secure boxes, Bankers Box became Fellowes in 1982, the year that Jamie was appointed president.
About seven or eight years later, Jamie went to Fellowes' German partners with an idea. The trend in computing was continuing towards decentralisation. No longer were people working off mainframes. The era of personal computing was nigh and Fellowes could see no reason for that trend not to continue into other areas of the office.
"We explained to them that people no longer wanted to have to leave their desk and go to a copy room to do their shredding. We went to them with the idea of creating a personal shredder that would retail for less than $100. They thought we were mad."
Why, their partners asked, would you possibly want to produce a product that cost less than 10% of your current product? It would be tantamount to cannibalising your own profits. But Fellowes had another vision of the future. And out of it the personal shredder was born. "It was revolutionary," says Jamie. "It was a perfect example of having the insight to know where the market was heading and the courage to follow your instinct."
And Jamie had every opportunity to gain an understanding of the markets in which the company was operating, born from a childhood spent in and around the business. "My grandfather and dad would constantly talk business at the dinner table in the evenings. There was always something going on. I cherish the memories of when grandfather lived with us at our house. There were some interesting conversation and insights every evening, and you got a understanding of the business without even realising it."
Jamie says that for a while, the advent of microfilm was a hot topic in the house: "My father was convinced it would be the ruin of us because it would negate the need for secure document boxes. Then, years later, for me the discouraging issue was the concept of the paperless office. It taught me that with any new competitive technology, it's important to keep a clear head and to understand it as much as possible."
Over the years, Jamie's instinct has led the company into a range of different product lines, adapting to new technology as it comes into being. Fellowes now offers a wide range of CD and DVD storage and labelling products, binding machines, laminating machines, and even mobile phone and iPod accessories. They have also partnered with wetsuit manufacturer Body Glove to produce a line of wetsuit material cases for a range of mobile devices. "This is very exciting for us," he says. "Body Glove is a popular consumer brand and we have come up with some innovative and stylish concepts to fit with their brand."
These product ranges may seem completely different from the 1917 cardboard banker's box, but Jamie insists that the basic premise of all of them is essentially the same – to protect the customer's information or devices. "This central idea is what I grew up with, and it's one that still drives the business to this day."
After high school, Jamie attended Denison, a small liberal arts college in Ohio, before teaching for a few years. He remembers this time as an enjoyable departure from the comfortable world of family life and the family business. "It was a way of following some other interests and to find out a little bit more about myself," he explains.
In the late 60s he was attending Northwestern University's business school (later to be called the Kellogg School of Management) when there was a death in the company that required him to leave school and take a fulltime position within the family firm.
When, in 1969, he rejoined the family fold, he says there was a distinct feeling of finding himself in the right place again. For Jamie Fellowes, the principle difference between family owned companies and other enterprises is the emotional connection.
"You see a distinct difference in the culture of family businesses. The closeness of all people involved at Fellowes is what attracted me from quite an early age to the family business. I discovered there was a very different ethic when you were working with people who are like-minded and striving for the same purpose."
Jamie worked for the business all through high school and college and has fond memories of the experience. When he came into the business full time, he believes he already had a deep understanding of it through his exposure as a child and young adult.
"I'd been to conventions with my family and had spent a lot of time as a youngster around the business and the facilities. You gain an incredible depth of understanding about the company growing up that way."
Jamie says he observed the same thing when his own son joined the company in 2001. "My son is a very bright guy but what made it even easier for him to move legitimately through the company ranks was his clear understanding of the business and the products," he explains. "He started stacking shredders in the afternoons after high school and has gone on from there."
Like most family businesses, Fellowes has had to find the correct mix between family members and outside talent. But Jamie says that even here, the family spirit permeates into the people that work for the company. He says his four most senior executives have now been with the company for five, 10, 22, and 31 years. "This isn't the way we organised it, but people tend to want to devote their career to the company. The feeling of family continues far beyond the blood lines."
In return, Jamie says Fellowes has the same deep commitment to employees, with a stock plan that has 16% of the company in trust for employees. And this sense of commitment to its staff crosses borders into the company's
Fellowes now has 14 operations outside the US. The company's overseas expansion began with the creation of an operation in the UK in 1972 and has most recently seen joint ventures in both Russia and China.
"As an American who lived through the political tensions of the 60s, 70s and 80s, I never would have dreamed we would have operations in these countries. But now these are some of our most exciting and rewarding activities. We've worked very hard at these ventures and they are some of the greatest accomplishments in our global infrastructure."
Jamie says the Fellowes strategy is to work with local entrepreneurs who can plug into the Fellowes business. Fellowes provides them with everything they need to run the businesses – supply chain, marketing, technology, and a wide range of support and assistance.
The learning process for setting up operations in some of the old Eastern Bloc countries was something that Jamie says was a real challenge. They entered Poland in the 1990s and faced a lot of business practices that "weren't the way we do things back home".
"It has been a great success, but we have had to slowly move them towards better standards, especially when it came to human resources and labour practices. It has not been one big step, but many steps over many years."
This seems to be the theme in China as well. "In China, we faced the greatest differences in practices – from labour to relationships with suppliers and government."
Fellowes already had a relationship with a manufacturer in Dongguan, in the Guangdong province, southwest China. It acquired an existing operation and made what Jamie calls "massive changes" to bring the company into conformity with the values that drive the Fellowes business worldwide.
He says what troubled him the most was that staff and employees had been seen more as an article of production rather than assets to the business: "We bought a different idea to the table, upgrading the facilities for employees, increasing remuneration and bringing a more human element to the process. This has been fruitful in more ways than just higher productivity. We have made a difference in the lives of the people who work for us."
Jamie says looking forward it is the human aspect that will drive Fellowes' continuing success: "My father always used to say that business means serving four types of people: customers, employees, the community, and your suppliers. You need to provide value to the people around you. If you can do that, then you will be successful. The profits will take care of themselves."