July 31 marked the start of a new chapter for Neil Donaldson who, after 45 years with the family business, 35 of which were at the helm, has retired from James Donaldson & Sons (JDS). His sons, Michael and Andrew, have now taken over the roles of chairman and chief executive respectively.
JDS now comprises seven different trading arms encompassing sawmilling, timber engineering, merchanting and manufacturing.
Its growth has accelerated in the last two years, with acquisitions including Nu- Style in 2016, Cambridge Roof Truss in 2018 and Robert Reid & Sons in 2019 and doorset, staircase, and window specialist Rowan Manufacturing and kitchen maker Smith & Frater early this year. JDS now has 1,100 employees and, prior to the Covid-19 pandemic, it was on course to turn over £240m this year.
It’s certainly a far cry from the traditional sawmilling company that Neil joined in 1975 and he recalls a key turning point was in 1984 when he was in the process of taking over the reins as managing director from his father, George, and the original Tayport site was sold.
“It was where the company started in 1860 so it was a big decision,” he said. “But it was very close to our site at Leven so it didn’t make sense [to keep it on anymore]. We sold the site to a company of which we became 50% partners and we developed it for housing. It was our first venture outwith the timber trade and it gave us the confidence to do other things.”
The timing coincided with Neil studying for a Masters degree at Heriot Watt university. The focus was on strategic planning, which encouraged him to look at what was on the horizon, rather than at just the day-to-day.
As a result, the next milestone came up rapidly. The company already made roof trusses but in 1985 it set up Donaldson Timber Engineering (DTE) – now the UK’s largest manufacturer of roof trusses.
“It was the first time we’d had another company,” said Neil. “Our goal was to have 25% of the market in Scotland within two years and to guarantee delivery of trusses within seven days. At that time trusses were taking six to eight weeks to be delivered, so this was a real disruptor in the market place. It worked and we actually got 25% of the Scottish market within 12 months.”
In the 1990s Neil honed his entrepreneurial skills further when he studied at Harvard. The two business programmes he took were eye opening in more ways than one.
“There were 80 people in the class and I was the only one who didn’t have an email address,” he said, “But I realised they were no different to me. It opened my eyes and gave me the confidence to put into practice some of the strategic stuff I had learned at university and with the launch of DTE. I learned that I did have the ability to think bigger and to do things differently.”
So, in 2000 the site of the old Leven sawmill was sold to Sainsbury and the funds this garnered kick-started further growth. “It was millions of pounds and really gave us the fighting fund to help us develop other strategic initiatives, the first of which was to buy 50% of MGM Timber in 2002,” said Neil.
JDS bought the other 50% in 2005 and the three arms of the business – sawmilling, timber engineering and merchanting – began to flourish as a group. The whole was greater than the sum of its parts and it provided a really solid foundation for further progress. Another seminal moment was taking on non-executives.
“They are so important to the business,” said Neil. “They bring independence of view and they bring in controls.”
And, speaking of controls, gearing – the amount of debt relative to the net assets value of the business – has never been more than 50%.
“It has always been our golden rule,” said Neil. “We have always felt that was a prudent level of borrowing to have and we have never been tempted to go beyond it.”
There’s a lot to be proud of but top of the list is that, 160 years on, the business is not only surviving but thriving – and that the Donaldson name is still above the door.
“When I joined the company in 1975, I was in awe of companies in Scotland, such as Brownlies, Mallinson-Denny, Woykas, Elgin City Sawmills and Garland & Roger, which were all well-known family timber businesses. Every single one of them has gone.
“I’m proud of the fact that we have grown the business, we are national in some regards, we have a good balance sheet and we have kept the family business ethics. We’re still here and punching above our weight in many different areas.”
Personal achievements have also stacked up along the way, with Neil serving terms as TRADA chairman, TTF president and STTA president, to name a few, but one achievement that doesn’t have a title attached to it and which he is most proud of is his skill in recruiting “good people”.
“I think I’ve been quite good at talent spotting and we have never been shy to recruit people from outside the business,” he said. And he’s proud of the fact that the status of JDS is such that it can attract top flight talent.
“Our new chief finance offer, Arlene Cairns, was the global financial officer for Aviva, our business technology director Les Calder was head of IT for Devro plc and one of our non-execs, Pamela Scott, has just joined us from Diageo. They see our desire to succeed and that attracts them to us.”
As mentioned, many of the names of yesteryear have gone and Neil cites consolidation as one of the biggest changes he has witnessed in the timber industry during his career. The route to market has also changed radically.
“When I was doing my thesis for my Masters degree it was all about the shipper, the agent and the importer and even back then I wondered if those marketing channels were going to be put under pressure – and they certainly were.
“We have seen the emergence of terminal operators, which has been really good for us as an importer and timber engineering business because it has enabled us to be very specific about what we want to buy, when we want it. I remember my dad used to spend hours thinking ‘I’ll need another two packs of 63×175 redwood and I’ll probably need that in March’ and it’s astonishing to think how that has all changed. We now think nothing of picking up the phone to Vida or Södra and ordering a couple of loads for the next day and in it comes.
“I think relationships are much better now than they were,” he continued. “People have realised that the only way to survive and be successful is to work in partnership, so suppliers and customers work really closely together now. For customers the emphasis has moved away from ‘what’s the price?’ to ‘can you get it?’ and that can only happen when you build that relationship.
“We have to have a common vision. Our suppliers have to understand our business and, when we sell to customers, we have to understand their business. We can’t succeed if we don’t do that.”
He believes that the Covid-19 crisis has put the industry at a crossroads in terms of how it will trade in the future.
“We are all learning a great deal about ourselves, how to be more efficient, how not to waste money. An element of home working is going to be the norm and really good IT is going to be more important than ever.”
It’s the sixth generation of Donaldsons – Michael and Andrew – who will steer the group through the next few decades and Neil is understandably delighted to see them in the driving seats where they bring “different and complementary skills”.
He says it’s hard to put a finger on how the family business ethos has played a role in the company’s success but says there has to be respect for whoever is leading the organisation and that the people who work there, want to work for them.
“We view the role of everybody in the company as being important,” he said.
“They are definitely not just a number.”
He went on to say that, had Covid-19 not kyboshed the plan, he had intended to tour the business to shake hands with every employee before he retired.
There is no doubt that Michael and Andrew have inherited the family business ethos in spades, but if Neil was to give them any advice it would be “always do for others what you would have others do for you. Always respect other people. Know your place and show a bit of humility from time to time. Nobody likes a smart arse.
“I would also advise them to listen to the non-executive directors for an independent view, but also to follow their instincts because they know the business better than anyone else and if there are things they can do that might make a material change, they should certainly investigate that.
“I would also say, listen to your shareholders. I’m delighted to say that more than half of our shareholders are employees.
That is something new for us and it gives them buy-in.”
His final piece of advice would be “never risk the family silver. By all means take a risk but don’t put the whole lot on number six”.
He would love to see the seventh generation join the family business and as he has eight “genuinely bright” grandchildren, it seems a real possibility. However, he stresses that this should be in the interests of the business and not down to sentimentality.
“Our business isn’t a toy you can play with,” he said. “Eleven hundred families depend on our success and so it would only work if they [the grandchildren] were interested and if it was in the best interests of all the stakeholders.
“There are huge issues to be considered with succession like this, from the ability of the individual to their respect for others’ abilities,” he said. “Home life is hugely important as well.”
Neil will have more time for home life now, of course, and is looking forward to spending more time salmon fishing and at the family’s villa in Portugal. He is also very involved with the Royal and Ancient Golf Club of St Andrews and is chairman of the Baillie Gifford Shin Nippon investment trust.
“It’s the second investment trust I have been chairman of and I find the governance issues, the protocols and dealing with 15,000- 20,000 shareholders fascinating.”
He’ll also remain very much involved with the Donaldson Leadership Academy, a charity the company set up in 2010 to raise money to send local children from disadvantaged backgrounds to Columba 1400, an Isle of Skye-based charitable organisation. During their time there the children go canoeing and mountain climbing and learn core values such as integrity, perseverance, service and focus.
“We have put 160 young people through the programme now and the feedback is very positive,” said Neil. “I get letters from people saying their grandchild has been on it and it’s transformed them and made them into a much better person. I’m really chuffed with that and it’s a legacy that hopefully will continue for many years to come. Myself, my wife, Val, Andrew, Michael and my daughter Jennifer are all trustees.”
Although he’ll certainly have plenty to occupy himself with, Neil concedes he will find it hard to step back from the business.
“I keep saying to everybody that it will be easy but I think I’m just being brave! It’s 45 years of my life, something I wanted to do as a boy and I’ve loved every minute. But every year I stay on is experience I deny my successor, so it’s time to move on.”
On retirement Neil will become president of JDS, a role “with a bit of authority but no responsibility”, and he remains the major shareholder. He also won’t be completely disappearing from the industry he loves.
“I’d like to say a big thank you to all my friends in the industry for their support, guidance and friendship over the years,” he said. “And I’m going to be around and keen to keep in touch with anybody who is similarly inclined.”
