Businessman Treated Customers as Friends

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Businessman treated customers as friends

Innovative founder of Lee Valley Tools was an ‘ethical capitalist’ who shared his company’s success with employees

Lee Valley Tools founder Leonard Lee was an entrepreneur and an innovator who shared his success by paying employees well, giving them a cut of the company’s profits, and making sure they never experienced layoffs.

Mr. Lee raised eyebrows in the business community by promising that no executive in his company would make more than 10 times the wage of the lowestpaid worker, a ratio almost unheard of in Canadian industry.

The company has never laid off staff, and 25 per cent of pre-tax profits are paid out to employees each year as a bonus – with every worker getting the exact same cut.

“I get the same amount as the cleaner,” Mr. Lee told The Globe and Mail in 2013 when he was the company’s chairman, noting that empowered and properly compensated employees work hard to make customers happy.

“You get tremendous loyalty from employees if they enjoy their work and they are participating in the income and they have the authority that they need to execute their job,” he said.

Mr. Lee, who died in hospital in Ottawa on July 7 at the age of 77, parlayed a small mail-order business into an empire that now sells about $150-million annually of woodworking and gardening tools, along with kitchen equipment, hardware and clothing. It has 19 retail stores across Canada in addition to its catalogue business, and 850 full time employees.

“He was an ethical capitalist,” said his son Robin Lee, who took the reins as president of Lee Valley Tools when his father stepped back from direct management more than a decade ago.

His father’s roots on a marginal Saskatchewan farm made him want to share the company’s resources and give his workers as much security and autonomy as possible, Robin said.

Leonard Gordon Patrick Lee was born in Wadena, Sask., on July 17, 1938, and grew up in a log house with no electricity or running water. His parents were homesteaders – his father was from Ontario, his mother from England – who were trying to eke out a living on a poor piece of land.

“It was a very socialist rural farming community where you helped your neighbours and shared what you had because not everybody had good years all the time,” Robin said. “[There were] very basic tenets of fairness and honesty and sharing.”

Leonard’s parents were intent that he and his three siblings would get a good education, and after high school he headed to Kingston to study at Royal Military College.

Eventually, he received an engineering diploma from Royal Roads Military College in Victoria and an economics degree from Queen’s University in Kingston.

He then entered the federal civil service in 1963.

“My grandmother thought he’d won the lottery,” Robin said, because a government job seemed so secure. Leonard had foreign affairs postings in Chicago and Lima, then did a six-year stint at the federal department of industry, trade and commerce.

But as his 40th birthday approached, Mr. Lee got antsy about the slow pace of decisionmaking in the civil service, which was becoming bigger and more bureaucratic.

“I wouldn’t say I was suicidal when I was in government,” he said in a 2008 interview. “But what was driving me crazy were the number of people who would say, ‘I have 17 years, eight months, two weeks, two days, and seven hours before I retire.’ I’m sure shorter sentences were being served in Alcatraz at the time.”

In 1976 he and his wife, Lorraine, began a part-time mail order business in Ottawa selling cast-iron barrel stove kits, where parts and a door were bolted on a 45-gallon drum that had a hole cut in it.

“That’s what heated the school I went to as a kid,” Mr. Lee said.

“I wanted one for the shed on my farm and I tried marketing this.”

The stove sales did well and built his confidence, prompting him to quit his government post and try another mail-order business. Lee Valley Tools was launched as a catalogue operation in 1978, partly stemming from his frustration about the difficulties he had had in finding specialized woodworking hand tools for his own use.

Mr. Lee approached Garry Chinn, an entrepreneur who ran a mail-order tool business in the United States called Garrett Wade, and the two collaborated on starting the Canadian operation. Mr. Chinn supplied the artwork for the first Lee Valley Tools catalogue, and he guaranteed Mr. Lee’s debts to international tool suppliers, in return for a small share of the company.

“I liked the cut of his jib right off the bat,” said Mr. Chinn, who remained a friend and colleague of Mr. Lee and is still a shareholder in Lee Valley Tools.

“He was always full of energy, full of beans, full of ideas … he was constantly churning up new ideas and continued to do that right up until the end,” Mr. Chinn said.

At first Lee Valley only sold tools made elsewhere, but that soon became frustrating to Mr. Lee. “If customers wanted changes made, he would try to deal directly with the manufacturer,” his son Robin said. “But the hand-tool industry was very traditional at that point” and it was very difficult to get anything redesigned.

The company began to get some custom work on specialized tools done by outside fabricators, then eventually bought a machine shop in Ottawa to make the tools itself. Today it makes hundreds of unique products.

When Mr. Lee started the business, he thought he might employ as many as a dozen or 15 people – “that was his aspiration,” Robin said. “To his delight it got completely out of control.”

But the mail-order business had some rocky times. A lengthy postal strike in 1981 almost sank Lee Valley Tools, and prompted Mr. Lee to establish a chain of retail outlets to supplement the mail-dependent catalogue business. A new store was opened roughly every two years, a pace that has accelerated in recent years. He also started a publishing company to print books about woodworking and gardening.

In 1998, Mr. Lee made one of his most ambitious moves, establishing a new company to sell medical instruments, after an Ottawa plastic surgeon said he was using Lee Valley woodworking knives for surgery.

Canica Design Inc. made specialized scalpels and an innovative wound-closure system. But the difficulties of selling to the Canadian medical system proved frustrating, and the rights to the devices were eventually sold to a health-care product company in Barrie, Ont., in 2014.

The medical tools business was the enterprise “that he was most proud of and most disappointed by,” Robin said. One product, used for preparing children for cleft palate surgery, was particularly innovative and gratified his father, he said.

In recent years, after Mr. Lee shifted management of Lee Valley Tools to his son, he altered his focus to designing and sourcing new tools with a small team at an office near his home in Almonte, Ont., about 50 kilometres southwest of Ottawa.

He was slowed by vascular dementia, which struck him initially about three years ago. In mid-2015, the company opened an old-fashioned hardware store on the ground floor of the Almonte office, where Mr. Lee could stay engaged with customers and maintain a social outlet.

He was there until last December, when his health had deteriorated to the point where he could no longer work actively.

Mr. Lee leaves his wife, Lorraine (née King); sons Robin and James; four grandchildren; brother Bob Lee and sister Faye Sundholm; and extended family.

Peter Gowdy, assistant manager at Lee Valley Tool’s store on King Street in downtown Toronto, said some customers who have been shopping with the company for 30 years or more sometimes come in and reminisce about Mr. Lee. “They’ll remember buying their first tools from Leonard out of his home,” he said.

Mr. Lee’s philosophy – to treat customers as friends – still pervades the business. His actions to provide fair compensation for employees and allow them to share in the profits keeps workers loyal, but it also appeals to customers, Mr. Gowdy said.

“That’s something that our customers comment on a lot. They appreciate shopping here because they know the money is not all being funnelled to the top.”

 

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