The New England Patriots are playing in the Super Bowl. Again.
This will be the Patriots’ 10th Super Bowl appearance since 1996. The 2018 season was the 18th consecutive year in which the Patriots have finished above .500. The Patriots have gone to the playoffs all but five times in the past 24 years. That is 80% of the time. No other American football team has ever accomplished this feat. Edward DeBartolo Jr.’s (1980s-1990s) San Francisco 49ers are a distant second. The 49ers went to the playoffs 15 times in DeBartolo’s 23-year tenure. That was 65% of the time.
You are probably wondering: Why do the New England Patriots always win?
While most media focus is rightfully on coach Bill Belichick and quarterback Tom Brady, little attention is given to owner Robert Kraft.
As we said about Roger Penske, it’s impressive when an intelligent fanatic in business dominates another field simultaneously. The Krafts have dominated paper and packaging and the NFL concurrently. Their paper and packaging businesses today are ranked top five in the United States.
Few are familiar with Robert Kraft’s takeover of the New England Patriots franchise in 1994. Even fewer know of his businesses - Rand Whitney and International Forest Products - and Jacob Hiatt, the man who started it all.
Let’s learn more about Jacob Hiatt - Robert’s father-in-law - and trace the winning culture established in the 1930s to the companies dominating the cardboard box industry, paper trading and football today.
Jacob Hiatt was born in Lithuania in 1905. Hiatt would thrive in his home country receiving his bachelor’s degree and degree in jurisprudence from the University of Lithuania. He soon became an assistant district attorney and a circuit judge. During that time he tried and convicted some of the first Nazi spies. Despite achieving a measure of greatness in his home country, Hiatt, a Jew, thought that it would be dangerous to stay in his home country.
Hiatt chose to immigrate to the US in 1935. He spoke no English.
Jacob Hiatt settled in Worcester, Massachusetts. There he assisted his cousin Al Hiatt’s shoe business. Jacob’s role was to set up the shoe boxes.
On a side note, Al Hiatt’s business ultimately became Stride Rite Corporation, one of today’s largest shoe manufacturers, led by Arnold Hiatt, Al’s son and Jacob’s cousin once removed.
Jacob Hiatt soon left his cousin’s business. He got a job working for E.F. Dodge Paper Box Corp. in Leominster, Massachusetts. That business was founded in 1857 by Elvira F. Dodge. She began making folding cartons in her home and grew the business from there. Over time the business evolved into converting paper into packaging.
By the late 1930s, E.F. Dodge was one of the most prosperous medium-sized organizations in Leominster. The company employed more than 50 men and women. E.F. Dodge also enjoyed good business despite recessions in 1927 and prior. Jacob Hiatt worked from the bottom as he mastered English.
The untimely death of Benjamin F. Phillips, then owner of E.F. Dodge, in 1938 left ownership and leadership of the company vacant. E.F. Dodge went into bankruptcy that year. Herbert Cohan was trustee for the company and put Jacob Hiatt in charge. Jacob turned the company around.
Hiatt built the business on win-wins. He always put others before himself. One person described Hiatt as a “very modest man who lived simply without a display of wealth. Courtly in manner, he was self deprecating and generous with his praise of others.”
Workers often got their children’s college tuition paid for by Hiatt himself. Ed Gastonguay’s father worked for Hiatt. Ed said, “I had an interview with Mr. Hiatt and two weeks later I was accepted at Brandeis [University] and I paid $400 a year when Brandeis was $5,000 a year.”
The company was built on family values. Compensation was generous and the work environment was ahead of the curve. Many generations of families have been employed by the business ever since.
Under Jacob Hiatt’s control the company generated a significant amount of cash. E.F. Dodge acquired a number of businesses such as Albia Box Co. in 1953 and Libbie Printing Co in 1958. E.F. Dodge Paper Box was acquired by Whitney Box forming Dodge-Whitney Company. Hiatt maintained his control and, in 1962, merged Dodge-Whitney with three other businesses to form Rand-Whitney Corporation.
Jacob Hiatt inspired his people to get things done. James V. Wertsch, a former professor of psychology at Clark and now at Washington University, described, “Oh, he [Hiatt] is not a saint. There is another side to that calm, unassuming demeanor. Jack is very smart and tough. He is absolutely resolute. While others may be sidetracked by extenuating issues, Jack can cut through the core and compel others with the strength of his vision.”
As a philanthropist Jacob gave more than $30 million dollars away to charity during his lifetime.
Jacob Hiatt had set the foundation. It was up to another generation to take the business to the next level.
Robert Kraft, who married Jacob’s daughter Myra, joined Rand-Whitney in the early 1970s. Subsequently, Robert purchased half of Rand-Whitney in a leveraged buyout. As Jacob’s daughter Myra said, “My father brought it to a certain point, but it was Robert’s vision for what a paper company could be that developed it into what it is today.”
In 1972, Robert took over a paper mill in Newfoundland.
He described the risky purchase:
“It was very risky. I made a taker pay arrangement that I’d either sell their product or I’d buy it – 200,000 tons – I didn’t have the net worth to do it. Thank goodness there was no internet. Their checking was not as good as it should have been. I got lucky. Within six months when I took over that commitment to take over that mill President Nixon put in price freezes here. I had the only new product going from Canada to anywhere in the world. None of the American companies could do that. So I had people in Korea, Iran and it was legal in those days all over the world coming to me and I was able to leverage that to in a situation where we built a company where today we are in over 100 countries in the world.”
Like the band U2, and many other intelligent fanatics, Robert Kraft built his businesses and reputation around reciprocity. He said, “We never let the other side do a bad deal…If you make sure the other side does well then they’ll be coming back to you.”
Today, International Forest Products (IFP) is the 5th largest exporter from North America. The company exported 109,500 twenty-foot equivalent units (TEUs) of packaging, paper products, forest products and recyclables in 2017. The Kraft’s two companies - Rand-Whitney and IFP – are run by Robert’s sons and make up the largest privately held paper and packaging concern in the United States.
Rand-Whitney and IFP gave Robert Kraft the capital base to do other things.
Master of Long-Range Planning
Robert Kraft could be best described as patient and tenacious. For him, the big money was not in the buying or selling, it was in the waiting. But to be successful in waiting you have to know what to look for and you have to be prepared.
Kraft, like other intelligent fanatics, can hit targets others cannot see. He wanted to buy the Patriots, and was initially turned down, but could see the steps to get there.
The first opportunity came in 1985. A 10-year option on the land surrounding the old football stadium in Foxborough, Massachusetts was being sold. At the time the land was underdeveloped. It was home to the Foxboro Raceway, a horse race track, and was costly. Robert purchased the option seeing it as a potential stepping stone toward taking over the New England Patriots team. He was proved right.
In 1988, Billy Sullivan - the owner of the Patriots Stadium - was suffering from multiple bad investments. Sullivan was forced to sell control of his stadium that year. Robert Kraft was the highest bidder paying $22 million for the stadium. Kraft now had the stadium and surrounding land. Included in the stadium’s purchase was a lease with the Patriots until 2001. The lease proved to be an invaluable asset. By 1993, Patriot’s owner James Orthwein, great-grandson of Adophus Busch – founder of Anheuser-Busch, wanted to move the team to St. Louis, but the Krafts were adamant in breaking the lease.
Orthwein offered $75 million to end the lease, but again Robert Kraft turned him down. Like the risky 1972 purchase of a paper mill, Kraft later said that his passion for the Patriots led him to “break every one of my financial rules” in pursuit for the team. The Krafts instead purchased the Patriots for $172 million in 1994. That was the highest price paid for an NFL team.
Evolution Favors Those That Adapt
Shortly after Robert Kraft bought the Patriots, the NFL put in a salary cap, which meant every team would pay with the same amount of dollars for their personnel. Many NFL owners had trouble adapting to the new rules. Robert, on the other hand, was prepared.
To the Kraft family of businesses “it’s all about the culture”. Robert said, “For me, the key to life is hanging out with good people and collecting good people. I get the turkeys out of my life.”
Robert Kraft described the most important keys in his hiring process:
“Most important thing to me is integrity, character and loyalty. That is the first quality. Number two is work ethic. Number three is brains.”
Robert looks for antifragile individuals, people who get stronger during times of stress. He added:
“In the end, life is about going through hard times and tough times. Most times people crack or give up. Most people, I have a saying – football analogy, most people want to play between the 40 yard lines where its clean and neat. Looking for leadership when your in the red zone when you are going through tough times it’s who do you want in the fox hole with you. You people with character and loyalty. I’ve had to build relationships globally. That is how we’ve built our export company and what we’ve done in all our companies. Try to build relationships where people trust us through thick and thin.”
Robert’s first key hire was Bill Belichick. No one else could see Bill Belichick’s value. He wasn’t all that successful. In the five years Belichick was head coach of the Cleveland Browns, he won 42% of his games.
Robert saw something different. He said:
“I had developed a sympatico with him [Bill] and I believed he had a unique understanding of the NFL… I think Bill is brillant not just Xs and Os but he understands the value of the player under our system. Most of the traditional coaches didn’t.”
As we’ve said time-and-time again - intelligent fanatics simply look for people like themselves. Robert Kraft saw himself in Bill Belichick. Then, in 2000, Bill Belichick saw himself in a quarterback from Michigan. Every other team passed. Belichick drafted Tom Brady as the 199th overall pick. Brady proved himself to be the hardest working player on the team, elevating the team as a whole. Kraft ensured Belichick and Brady remained a pair in New England.
Another keystone of Robert Kraft’s culture is team mentality, which unlocks velocity. The boring paper businesses have thrived without superstars. It is about getting everyone to go all in for the team. The total is much greater than the sum of the parts. This is the value of the player Kraft saw in Belichick. Consequently, the back half of the Patriots roster gets significant attention from Bill Belichick, which is often overlooked by other teams.
The Patriots’ culture also keeps big egos in check. Robert calls it not “selling your soul for a bowl of porridge”. In the process the Patriots team is more like a family. This is exactly how Rand-Whitney and IFP have operated for decades. When the average football coach tenure is 3 years, Robert Kraft has been able to retain Bill Belichick for 18 years. The same is true for Tom Brady. “It goes back to building relationships and not being transactional,” said Kraft.
Vehicle For Good Works
Building on Jacob Hiatt’s socially responsible mentality, Kraft has turned NFL ownership into a vehicle for good works. Long before community service was a common activity for NFL players Robert Kraft required all his players who sign contracts to perform community service. Kraft’s Patriots were the first team to adopt a gender-violence prevention program. And Kraft, like his father-in-law, places an emphasis on helping athletes return to school to get a degree.
Contracts and programs are nice, but actions are better. Kraft was the first NFL owner to cut a player for physically abusing women. In 1996, the Patriots’ 5th-round draft choice was defensive tackle Christian Peter. Upon learning about Peter’s past, Kraft immediately relinquished their rights to Peters.
The Ultimate Edge - Culture
I’ll ask it again: Why do the New England Patriots Always Win?
Whether it’s in the boring paper and paper products business or the flashy sports business, culture eats strategy for breakfast. Even though Robert Kraft and Bill Belichick’s operational and leadership styles are known, no one can reverse engineer and repeat their success.
Critics say Belichick must not be that great of a leader because very few of his assistant coaches have gone on to have great head coaching careers. But he is known as a process oriented learning machine. Those that have tried to emulate him are only using the tools they witnessed him using at the time they assisted under him. He is constantly evolving. Additionally, Belichick disciples lack one key – a Robert Kraft-like owner.
The Patriots – you either love them or hate them. But one thing is certain - culture works. The foundation set by Jacob Hiatt, and amplified by Robert Kraft, has been successful on the football field and off.
Today, Kraft Group’s operating businesses generate $1 billion in annual sales. In addition to Rand-Whitney and IFP, Kraft Group owns an Israeli packaging company, a money management firm and Major League Soccer’s New England Revolution.
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