The picture-postcard image of British Columbia's Okanagan region suggests a vacation playground of pristine lakes and vineyard-dotted hillsides.
But a complete picture of the area's economic foundations would have to include something more prosaic – tires. Tires for big transports, tires for mining vehicles, tires for pickups and minivans.
They are the stock in trade of Kal Tire, an Okanagan family business that calls itself the largest independent tire dealer in Canada and among the five largest in North America. It has 3,700 employees, about $1-billion in annual sales, and sales and service operations in seven countries.
“They're in Vernon and that's incredible – they're this massive business,” says Judi Cunningham, executive director of University of British Columbia's Business Families Centre, which recently held a dinner honouring the company's family owners, led by founder Tom Foord, 87.
Indeed, nothing could drag the company out of Vernon, population 40,000. While the business has grown spectacularly in its 56 years, its identity remains wrapped up in the region. Mr. Foord named the company after Kalamalka Lake, which sits on one side of Vernon, with Okanagan Lake on the other.
“We live in a small town and we stay under the radar,” says president Ken Finch, Mr. Foord's son-in-law, who says the company patriarch still likes to come to the office those days when he isn't on the golf course.
Staying under the radar may be more difficult in the future as Kal Tire spreads its wings. It has plans for a major expansion in Ontario, where it owns 25 stores. And it is looking to become more of a global player as it follows Canadian mining companies around the world, changing and repairing their tires.
In fact, the mining business is Kal Tire's little known ace in the hole. Canadians, particularly Western Canadians, are familiar with its 230 tire stores, but they are not so knowledgeable about the service centres for the resources industry – one-stop shops for buying, installing, repairing and changing tires for monster vehicles in remote places.
That part got going 12 years ago when Canadian mining companies active in Chile had trouble finding tire-repair expertise on their new sites. They invited Kal Tire to move down, and now the company also has service operations in Mexico, Colombia and Argentina.
That would seem to leave Kal Tire heavily exposed to the resources sector, both in its Western retail business and its trucking and mine-equipment tires. The company has 200 people in Fort McMurray, Alta., who service the very large tires under the behemoth trucks carting bitumen out of the oil sands mines.
But the resources side has provided a pretty good balance for commercial trucking tires, which have taken a hit from the recession. While there has been plenty of bad news about future resource projects, “there really isn't any drop in production,” Mr. Finch says. “There are no new mines and the marginal mines have closed but the ones where we are present, which are typically the larger ones, are still running.”
Now, Mr. Finch says the company is talking about expansion through either acquisitions or startups in resource hotbeds such as Africa, China and Russia, as it follows its customers' march around the world.
Such geographical spread presents a challenge for a company that prides itself on being a cohesive business with small-town values. Mr. Finch says the company is knit together by a culture that emphasizes decentralized decision making, as well as employee profit sharing and a partnership between the family and senior managers.
In its store division, with about 2,000 employees, potentially 50 per cent of profit is set aside for employees, with a large chunk going to a group registered retirement savings plan, which substitutes for a pension plan. (Employees cannot get their profit-sharing money out of the group plan until they retire or leave the company.)
The plan is structured so that the employees' group RRSP gets 15 per cent of store-division profit, but workers also gain access to 35 per cent of profit at a store level, a third of which goes to the RRSP.
“We knew a long time ago that our industry would never be high-paying enough that people who spend their careers changing tires were going to get a whole lot saved for retirement,” Mr. Finch says. “So we are carrying out what we believe is our responsibility for our people.”
One result is that Kal Tire practices an open-book management policy, with each store posting its profit-and-loss numbers monthly so workers can track potential profit-sharing amounts at the end of the year.
In addition, the company operates not as a classic corporation but as a partnership between the Foord family and top managers, who are invited to acquire ownership. The official name is Kal Tire, A Corporate Partnership. While the Foords still have control, the management team is a large minority shareholder.
“They figured out a formula on how to keep the best people in a family business,” says Ms. Cunningham, who heads the UBC Business Families Centre.
Tom Foord, a small town boy from Saskatchewan who opened a service station in Vernon in the early 1950s, has also been able to move control into the second generation. He attracted Mr. Finch, an engineer, into the business 29 years ago. Five years ago, the son-in-law became president.
As he turns 64 this month, Mr. Finch is moving to the chairman's role, while his brother-in-law, Robert Foord, shifts into the president's chair. A son-in-law of Mr. Finch and his wife Jean is also employed in the business.
According to Ms. Cunningham, the key is that the family has taken a long-term view, planning for the transition over almost two decades. Like the best business families, they looked at succession as a process, not as a single event, she says.
Will a family member always occupy the president's chair? Mr. Finch acknowledges it is probably inevitable that a non-family manager will some day take the top job, given the rate of growth. “We're a billion-dollar company and it's just not realistic to expect that one family is always going to have the best talent to lead a company that large.”