Citius, altius, fortius

Veli-Matti Kärkkäinen’s family is one of Kesla’s main owners and founders. Veli-Matti himself is actively involved in Kesla’s Board.

The first ten years on Kesla’s Board of Directors were a learning experience for Veli-Matti Kärkkäinen. The company lived on, but the third-generation Kärkkäinen did not have firm grip on things. The company’s financial distress worsened in the early 2010s and Kärkkäinen noted the paralysis of the personnel.

When Eeva Punta, previously Chairwoman of the Board, stepped aside after 2013, Veli-Matti Kärkkäinen was offered the position of Chairman.

“At first, I was a little doubtful if I was up for it. Of course, I had already had some practice as Vice-Chairman of the Board of Directors,” says Veli-Matti Kärkkäinen.

Kärkkäinen’s hesitation was understandable. The company had invested heavily and at the same time the market melted down. The subsidiary MFG was in serious difficulties and sales receivables also piled up. “The people I saw in the corridors seemed dejected and unhappy. I was afraid that, especially in sales, people’s work motivation was completely disappearing.” Simo Saastamoinen as CEO proved to be logical decisions.

“Communications in the company improved. The challenging slump was overcome, and finally the light at the end of the tunnel was more than just the light of the oncoming train.” The functioning communication – or lack thereof – also played a role in Kesla not yet having have a clear strategy internalised by the organisation in the early 2010s. Of course, the Board of Directors had been holding strategy days since the 1990s. However, they failed to get the organisation to commit. “When the strategies of the time were presented to the organisation, people laughed outright.”

Straight talk

When the reform of Kesla’s management culture started after 2015, a new approach was taken to strategy work. Clarification of the company’s vision and strategy was needed in the market and at least as much now also in the company. An external consultant was hired to assist.

“The consultant said right from the start, ‘Listen, boys, let’s get that ownership strategy on paper first and then we’ll move on.’ As far as I know, until then, the Kärkkäinen and Paajanen families didn’t have anything on paper – who wants what and why.”

Communication issues

Veli-Matti Kärkkäinen’s chairmanship of the Board initiated major changes in the company, not the least among them the departure from the company of Jari Nevalainen, who been managing Kesla for 14 years.

In recent years, more formal practices than what the previous generation had have been created for Kesla.

The ownership strategy was refined for about three months. During the process, for example, a policy emerged that 40% of the company’s profit would be distributed in dividends, though of course nothing was carved in stone. The percentage can be considered moderate. The money will continue to be used for investment and growth. “In regard to the ownership strategy, we are still lacking in reflection on what happens after us… Jouni and I still feel young,” says Veli-Matti Kärkkäinen with a laugh – and gets serious right after: “In recent years, more formal practices than what the previous generation had have been created for Kesla to support the company’s growth. Here, too, Jouni and I have to sit down every year and think about the future from the perspective of the owners.”

At the heart of the strategy

As Chairman of the Board, Kärkkäinen highlights some of the top themes of Kesla’s strategy: “The values defined for the company – responsible, innovative, quick and reliable performer – guide decision-making in the company. We carefully define our markets, in smaller segments if necessary. It is not realistic to think that we can conquer the whole world here and now.” Veli-Matti Kärkkäinen emphasises that Kesla does not compete for the best third or fourth place in the market area. “Wherever we are, we want to be number one, or at least number one’s first challenger.” The Chairman of the Board also has a clear vision that Kesla must strive hard forward – faster, higher, stronger. “Kesla is still a small company heavily affected by external shocks in the market. We must grow it into a bigger company so that it can better withstand pressure.” Speaking of growth targets, the Chairman of the Board is not content to stick to the organic growth target. The company is also ready to grow through acquisitions when suitable purchases appear. “The Board is vigilant.”

Kesla is still a small company heavily affected by external shocks in the market. We must grow it into a bigger company so that it can better withstand pressure.

Kesla’s Board in 2020. Jouni Paajanen (left), Ritva Toivanen, Veli-Matti Kärkkäinen, Vesa Tuomi and Ari Virtanen.

Not even summer jobs

“The boys are not allowed to join the company until they earn their spurs elsewhere.” That wasthe policy of Seppo Kärkkäinen and Esko Paajanen, two of Kesla’s largest owners.

Seppo Kärkkäinen, son of Kesla’s founder Antti Kärkkäinen, had served as CEO of Kesla from 1971 until 1976. In 1976, Seppo Kärkkäinen became Chairman of Kesla’s Board of Directors and Esko Paajanen, who had been hired as Marketing Manager in 1974, was appointed CEO of Kesla.

“My father Seppo has always been such an impulsive person. He got new ideas all the time, but completing things was more challenging for him. Not the best quality for a CEO,” says Veli-Matti Kärkkäinen, explaining the reasons for changing CEOs. The Kärkkäinen and Paajanen families lived next door to each other in Kesälahti. Veli-Matti Kärkkäinen and Esko Paajanen’s son Jouni Paajanen were both born in 1967.

“I recall that one summer I had a summer job at the company, working on the building extension. Esko and Seppo had words about it and agreed that it must not happen again,” says Veli-Matti Kärkkäinen. Both Veli-Matti Kärkkäinen and Jouni Paajanen graduated with a Master’s Degree of Social Sciences. Kärkkäinen has since worked, for example, as a Researcher and since 1997 as the Managing Director of Lipu Oy. Jouni Paajanen built a career in information technology at Fujitsu Finland Oy, among others. They were appointed members of Kesla’s Board of Directors at the same time in 2003. Esko Paajanen served as CEO of Kesla on two different occasions – in 1976–1992 and 2000– 2001. He resigned as Chairman of the Board of Directors in 2009. Seppo Kärkkäinen served on Kesla’s Board of Directors until 2006.

I recall that one summer I had a summer job at the company, working on the building extension. Esko and Seppo had words about it and agreed that it must not happen again.