Setting son.

Facing an often-fatal illness, Boyden Henley speeds up the reorganization and transition of his family business.

Boyden Henley Jr. has a mind for dates, and Feb. 20, 1998, was one to remember. Henley Paper Co., the 65-year-old Greensboro family business he ran, would complete a transformation he started in 1996.

Henley, president and chairman, had reached an agreement to sell the distributor's printing-paper division, a mainstay for more than 50 years, to focus on its faster-growing industrial-products line - packaging, furniture and maintenance supplies. That winter Friday, it would transfer the inventory to Jacksonville-based Mac Papers Inc. to finalize the deal, setting the stage for Henley Paper's name change to Henley Corp. It had been a frenetic 12 months for Boyden Henley. Under his direction, the $100 million company had restructured along product lines and trimmed its work force 25%. On top of that, Henley, then 64, was grooming his son, A.B. Henley III, then 33, to take over.

Still, he had a lot more than business on his mind that day. Even as several million dollars of inventory from six Henley Paper warehouses in the Carolinas changed hands, doctors were performing exploratory surgery to find the cause of pain and severe weight loss he had suffered since early November 1997.

While his physicians suspected cancer or lymphoma, the surgery revealed neither, so they rendered a diagnosis of chronic pancreatitis - good news considering the alternative. But a CAT scan done as a precautionary follow-up two months later changed their minds. He had pancreatic cancer. He recalls the exact day, April 29. In an instant, the orderly succession at Henley Corp. took on a new level of urgency.

Cancer of the pancreas is one of the most lethal. The mortality rate is more than 95%, 82% the first year after it's diagnosed. While Henley has responded well to treatment and keeps a quietly determined optimism, his condition demanded he speed up his plans to turn over day-to-day management to his son. On May 4, less than a week after the new diagnosis and the first day of the company's fiscal year, he made his son president. Originally, that was not supposed to happen until next September. "You've got to be flexible and deal with what is, instead of the way you want things to be," Henley says. "You can't compromise the company if there's a question of your stamina."

Father and son hit the road to break the news about both the illness and the leadership change to employees. With 180 in six locations in North and South Carolina, there was a lot of ground to cover, but the Henleys thought a memo wouldn't be enough. They wanted to reassure workers that there wouldn't be a leadership void at a time when the company was in the midst of so much change. "Dad's a paternal figure to a lot of people here," A.B. Henley says. "It was real important to him to go to our locations to tell people himself."

The Henleys met with about 50 workers in Greensboro, 40 in Charlotte and smaller groups at the other locations. Local management set up each meeting very early or late in the day so truck drivers could participate. Boyden Henley followed no script. He related the frustrating search to find what was wrong with him, which had taken him to doctors as far away as Charleston, S.C. He talked about the seriousness of the diagnosis and discussed his treatment. And he explained how the succession would work.

Jim Montgomery, vice president of sales, attended five of the six sessions. "Because he'd spent 40 years with the company, there was a tremendous amount of emotion," he says. "We have very little in the way of turnover, so there are people who've been here 25, 30 years who've literally grown up with him." Sally Henley, his daughter and a key-account manager for the company in Charlotte, recalls, in particular, the reaction of one salesman, normally an office cutup. "When I saw that first tear come down his face, you knew how it was going to be."

"If there was a defining moment, it was an expression of how he's been a part of each and everybody's life here," says Montgomery, who joined the company last year after 37 years with paper-products giant Mead Corp. "I had never seen this sort of affection for the head of a company."

Henley gave them his personal assurance that his son was committed to the company. "It was very important to avoid the stigma sometimes associated with the third generation of a family business," Montgomery says. "It seems that a lot of times, they often sell it off and go have fun."

The sessions, he says, were as beneficial to Henley as they were to the employees. "He isn't participating in cancer support groups, and it's therapeutic for him to talk about his illness. Coming to these meetings is his support group." Henley continues to use work to keep his mind off the illness. In late August, he was still coming in every day, working six to seven hours. "Daytime television will kill you," he says.

One thing that made passing the baton easier was that the process began the day the son joined the business as chief operating officer. "A.B. started with us Feb. 15, 1997," recalls his dad, who punctuates his conversation with dates, pinpointing milestones that took place 40 years ago as quickly as events last month. "It was known that he was being groomed to run the company."

Boyden Henley was determined not to repeat the sorts of problems that followed the death of his father, A.B. Henley Sr. When he died at 73 in 1979, he left a succession plan his son describes as a "total vacuum." It consisted of a one-sentence document the father signed just before his death. It named Boyden's younger brother, Nixon, president and head of sales; Boyden would be in charge of administration. Their relationship was already strained, and over the next few years control seesawed between them. Unhappy with the company's lack of direction, Boyden lobbied to replace his brother, and the board elected him president in 1983. Nixon got the job back in 1985. "I started making changes that made people nervous," Boyden explains.

All the internal focus hurt Henley Paper's ability to adapt to change, particularly in shipping and delivery. The company had built its headquarters next to a railroad, and Boyden Henley thinks it stuck with that as its main transportation too long. Its competitors had switched to shipping by truck, which was both faster and safer. "In the early '80s, we had damaged goods arriving at the warehouse that were slated for orders already in hand," he recalls.

It took 17 years for the fallout from A.B. Henley Sr.'s death to settle. The key was getting outside directors who were open to change. Until 1995, the board was made up entirely of employees. That year, Boyden Henley was reinstated as president. "On April 14, 1996, we eliminated 21 jobs, mostly in upper management," he says. "The management team we had in place wanted the status quo." That December, Nixon Henley agreed to sell his share of the business.

With that settled, Boyden Henley began to restructure along product lines, dropping geographic territories - a move proposed by his son. He set up two business units - one for industrial products and the other for printing paper - and gave them parallel structures. After six months, it was clear industrial products was carrying the weight. "That really opened our eyes that one unit had been so successful and had the potential to be even more successful," A.B. Henley says. Printing paper generated about a third of revenues, but its margins were eroding fast. Industrial products was enjoying double-digit annual growth.

"The printing-paper industry has become such a commodity business," A.B. Henley says. "The larger national distributors were the only ones set up to finance the incredible amount of inventory necessary to support the selection of paper people wanted." Paper mills began ditching exclusive regional deals with smaller distributors such as Henley, so the company put its unit on the block.

Like his father, who remained president until his death, Boyden Henley found it difficult to loosen his grip on the company. But he knew he had to let his son get experience.

"Family businesses typically do a poor job of succession planning, and for all the typical reasons," says Mike Henderson, director of the Center for Family Business in Arthur Andersen LLP's Charlotte office. "The head of a family business tends to just keep on doing everything himself. It's important that they shift their mind-set from being a doer to being a teacher."

Boyden Henley agrees. "While my brother and I were still in school, my father told us he'd turned down several offers for the company because he was saving it for us. But once we were there, it seemed he spent more time working with other people than with us."

In the case of A.B. Henley III, it helped that he had already established a career on his own. After earning his bachelor's in industrial relations in 1986 from UNC Chapel Hill, his father's alma mater, he worked for C&S Bank in South Carolina (since absorbed by Nations-Bank Corp.) and in the Charlotte office of High Point-based First Factors Corp. He returned to Carolina for an MBA in 1993. He then started a small-business lending division for First Factors called Southeastern Factors (now GE Capital Commercial Funding, after GE Capital bought First Factors). While he began working day-to-day at his father's company only last year, he had been a director and secretary since 1995.

He quickly put his financial experience to work. "He was the one who identified the printing-paper problems," his father says. "I'm too lazy a bum to do that kind of analysis. He presented it in a very fair fashion, but there was no denying the numbers."

Some of his other ideas didn't sit as well with his father. "Early on, because Dad and I had never worked together, we were at odds on a number of things," the son says. "It was very stressful the first three or four months into it." The Henleys had a Carolina professor in common, Richard Levin. They brought him in as a mediator as the son assumed more responsibility. "We relied on him to help with how we evolved our relationship," A.B. Henley says.

Their biggest problem was that they had trouble communicating with each other. Having agreed on a point, they made different assumptions about the timing and course of action. "We didn't know how to really get into it," the father says. "Dick Levin gave us some rules to go by."

The Henleys carved out an hour a week to talk about the company's direction, though, as Boyden Henley notes, "it always took longer." They gave each other a written agenda of points they wanted to discuss. The process forced them to develop enough communication to where bouncing ideas around came naturally. By last November, they had become used to talking to each other as businessmen, not just father and son. "We never would have gotten into the habit of communicating well if we hadn't had some structure," A.B. Henley says. "We also learned each other's sacred cows and learned to respect that."

While A.B. Henley brought an aptitude for finance and sales, his father had much to teach him about personnel. "A.B. had six or seven people to manage at Southeastern Factors," the father points out. "There's a very big change in the management techniques in a small office versus a bigger company." The son tends to be more analytical and his father, more intuitive. "That intuition is backed by 40 years of experience," the son adds. "I think he knew there were problems with the printing business before we split it out."

The way the Henleys treated their succession plan as a process, not an event, proved critical once Boyden Henley became ill. They had laid enough groundwork that they could speed it up. By holding a series of family meetings that included A.B. Henley's sister Sally, the company avoided the sibling rivalry that plagued its last succession.

"So often you hear about family businesses where the executive dies suddenly and everyone sits around and has their opinion on how he or she would have wanted the business set up," A.B. Henley says. "Dad has communicated his wishes to me and Sally and the rest of the family. Going on record as saying this is what's best for the future of our business is 90% of getting things well under way. We've been fortunate in that I don't want to do what she does, and she doesn't want to do what I do."

Still, moving the target date up 18 months with the company still adjusting to its new structure was tough. A.B. Henley had less time than he planned to get to know customers before he took over. While he talks with his son every day, Boyden Henley, who turned 65 in September, lets him handle day-to-day responsibilities. Still chairman, the father has held on to only one duty, administering the company's retirement plan.

"There's a tremendous amount of change going on in the distribution business today, and we can't put any of our critical initiatives on hold," the son points out. "During the time when Dad wouldn't be able to give it 100%, our competition is not going to sit back and let us catch up. No one's going to say, 'Hey, time out - Henley's got four men on the court instead of five.'"

In late July, Boyden Henley completed the second phase of treatment, an experimental chemotherapy taken orally instead of intravenously, which has fewer side effects. "I've been doing well. The treatment has not been debilitating to the point that I can't stay on. I'm real proud to be a part of that program, because regardless of what happens to me, the study will benefit other cancer patients."

Besides having to take a bunch of pills, his daily routine hasn't changed much. "People are surprised that I'm at work, but I've been getting along well with it. I can't lift 200 pounds, but I couldn't do that before."

Powell Slaughter is a staff writer at Furniture/Today newspaper.