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Family-owned oil company looks to next generation – as father and daughter go back to school

Posted in ,   |  October 5, 2021

Freeman, South Dakota – population approximately 1,500 – isn’t the sort of place you might expect to discover a growing oil company.

“There were other people that said the same thing,” laughed Scott Stern, who became CEO in 2018.

“My father was pretty tenacious. We were tenacious. If you take care of the customer, the business takes care of itself. We found customers that had needs and expanded beyond the boundaries of the community.”

Stern’s father, Gillas, worked for a telephone utility but didn’t want to move from Freeman, which corporate advancement would have mandated.

So when he had the opportunity to begin servicing local farmers and commercial accounts with fuel, “he said I’ll take a swing at this,” Stern said.

He started with one employee and a bulk truck.

“But we collectively always had bigger ambitions,” said Stern, who joined his father in the business in 1983. “We had visions of supporting anything and everything that comes out of a barrel of crude oil. So we kept adding products – lubricants were big, asphalt oils, propane and kerosene. We just kept expanding that footprint of capacity.”

Stern recently was named Mobil’s exclusive authorized distributor for the region. The company now serves more than 2,000 customers and covers all of South Dakota and Nebraska, plus 17 counties in Iowa, four in Minnesota and seven in Wyoming.

And it’s evolving toward a third generation in an especially interesting way – as Stern’s daughter, Kaitlyn Reinesch, recently joined the business in sales, and the two are working together to complete their MBAs through the USD Beacom School of Business.

“They have the humility, the great values and the passion to acquire more knowledge,” said Venky Venkatachalam, dean at the Beacom School of Business.

“Stern Oil is a very, very well-managed operation. They have been expanding in other states, and they’re growing very fast. Scott has built an amazing team of professionals.”

Stern recently was recognized by USD Beacom with its Distinguished Service Award, which is given annually to a leader in the business community who represents the values and commitment to service that the Beacom School of Business upholds in its curriculum.

“The key in the 21st century for any business is talent,” Venkatachalam said. “And Scott is able to acquire human capital and manage by his own leadership values and track record. He has an talented team of people who work for him, and that’s what’s making the business so successful.”

Growing through generations

Stern’s history at USD goes back to his own undergraduate career as a business major, though he acknowledges he’s “kind of a chemistry nut” too, which drew him to that side of the oil business.

“I actually had visions of doing other things after graduation short term and knew I’d come back to the business. But it was growing, and my dad said he needed me back right out of college.”

He spent nearly three decades growing Stern Oil before moving briefly to the West Coast and then returning to South Dakota and serving in state government as commissioner of the Governor’s Office of Economic Development from 2016 to 2018.

“At that point, my dad was ready to sell the business, so I transitioned back in 2019, and my dad still comes in a couple hours a week,” Stern said.

Reinesch inherited her dad’s interest in chemistry and made it her major at USD.

“I thought I wanted to be a Ph.D. and be a chemist full time, and my mom was in education and badly wanted one of us to be a teacher of some kind,” she said. “In South Dakota, math and science teachers are hard to find, so you can teach right out of a college.”

She taught high school math and science in Aberdeen for a year, “and I loved the students, but I wanted something as a career that wasn’t as routine,” she said.

She became an analytical chemist for a seed-testing company before a sales position opened up with Stern in Brookings.

“Our parents had always told us there was no pressure to come back to the business, only if you want to, but if you do come back, you must start in sales,” Reinesch said. “They thought it was important to get to know the customers and why they use the products and how it enhances their profitability, sustainability and viability.”

That was definitely the right call, she said. She returned in 2019.

“I’m still in sales but now as a sales and marketing coordinator, so I support all the field reps managing data and assisting with overcoming obstacles and bridging the gap with operations.”

Back to school

Reinesch points to something her brother-in-law, Trent Arlint, who serves as Stern’s CFO and general counsel, said to her as inspiration for seeking her MBA.

“I’m the youngest on the sales team, and everybody has more experience, so he said, ‘If you can’t out-experience, you can out-educate, so why don’t you go back to school and get your MBA?’ I did all the research and, of course, looked at USD’s online program because why look anywhere else?” she said.

“And then I found out they were waiving the GMAT, which I’m sure would have been fine but not having that pressure and then enrolling was really nice.”

So she called her dad.

“And I said, ‘Hey, what do you think?’”

Her dad’s response: “I think you should do it. And I’ll do it with you.”

So father and daughter enrolled at USD Beacom. Stern had started on his MBA in the 1990s but didn’t finish, so he had credits, “and Kaitlyn in her infinite wisdom reminded me that I always taught them you should finish what you start and never quit learning,” he said. “So when she started, I also went back to finish my degree.”

While she is taking more classes to catch up with her dad, the goal is to graduate together in 2023 or 2024.

“It is so unique to have a parent and child go through the program together, and it says so much about both of them. Scott is so humble he realizes he has so much to learn and therefore was going to get into the program,” Venkatachalam said.

“Our online MBA program has been ranked in the top 25 six years in a row by Princeton Review, so we are shoulder to shoulder with some of the best schools in the country. And that’s because we have a program with a very high rigor and we deploy the best faculty in the program.”

Working professionals drive the program, he added.

“They are juggling work and family responsibilities with school, so we give them flexibility, and we waive the GMAT because they have tremendous business knowledge already acquired through experience,” he said. “It’s a very appropriate strategy to open up the opportunities for many working professionals.”

The connections between Stern and USD go deeper, too, Venkatachalam continued.

“Scott serves on the dean’s advisory board, and we have had student teams work on projects for his company for two years in a row, and our student teams have amazing things to say about Stern Oil.”

Stern and Reinesch also are enjoying their MBA courses, they said. She helps her dad figure out the technology-related components of the program, and both say they’re learning a lot.

“It’s been absolutely fascinating,” Stern said. “I enjoy it and found in some cases I want to do that versus real work because I enjoy the learning.”

The self-paced course work is helpful too, Reinesch said.

“I’ve learned so much too,” she said. “I don’t know what I’d do without this knowledge in the coming years, so it’s been very valuable.”

Next steps

She and the team also continue to learn in practice as they continue to evolve Stern Co.

With connections formed through the Prairie Family Business Association, they began implementing the entrepreneurial operating system, or EOS.

“It’s just a great road map they have built out that allows us to take a process and use it and focus on what we need to do to sell our products and services and operate those business,” Stern said.

Reinesch was introduced to it through the association’s annual conference.

“I’m very detail-oriented, and I came back that day with pages of notes after they had an EOS keynote speaker,” she said. “I said we have to do this, this is so exciting, and we worked a little on our own but weren’t getting the same traction as when we began working with an implementer, which has been really helpful. We rolled the concept out to our entire organization, and we’ll be implementing that throughout the rest of the year.”

The association also has helped improve communication for the family within the business, which includes Reinesch’s husband, Trevor, who works as wholesale fuels and business development manager.

“It was a really nice bonding opportunity, and it makes you talk about things you normally neglect as a family,” she said. “I joined a peer group recently and absolutely love it. People our age don’t really understand why we commit all our time and energy to this business. Our friends get up and go to work and are devoted to their career, but it’s not the same pressure as working in a family business, so it’s nice to have a connection with people my age going through similar challenges.”

The association also is helping guide the family through eventual transition, Stern said.

“I think parents want the business, this functional and living, breathing entity, to have someone to continue to parent it and nurture it and advance because it’s our baby,” he said. “It was my dad’s, it’s mine, and when it’s time to transition that to the next generation, they’ll do better than ever.”

In the short term, the company is focusing on its consumer energy portfolio and has started a business in the liquified natural gas space as a transition to cleaner energy.

“We’re looking at how we position our company for that next move. That’s getting a lot of strategic time and attention,” Stern said.

“And at the same time, we took on a significant expansion in Nebraska. And July 1, we took on that space very quickly. In the throes of the transition, our children took on a lot more responsibility, but it’s a once-in-a-lifetime opportunity.”

That significantly larger footprint also plays into his broader succession planning.

“That will include succession planning, both from a human resources and a strategic planning perspective. We weren’t counting on the opportunity that we secured this year, and at the same time, demand has come roaring back. Prices have escalated, and supply has been decimated,” Stern said.

The Stern family and business look to continue to develop the next generation in efforts to grow the business in the state they love, they said.

“We haven’t set a date for a transition,” Stern said. “But my role at this point is to get the business set up for success going forward.”