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A Woman's Entrepreneurial Journey: Hydraflow Corporation

Going with the flow, from employee to CEO, selling hoses, valves and couplings

Steel hoses

Cindy Ayloush is chief executive officer and chief financial officer of Hydraflow Corp., a Fullerton, California-based manufacturer of valves, hoses and couplings. The company’s primary customers are in the commercial and military aviation industries, which use Hydraflow products in galleys, lavatories, oxygen systems and fuel lines.

Cindy’s father, Leonard Ullrich, a former aerospace engineer, founded the business in 1961 as a parts distributor, expanding it in 1968 to include component design and manufacture. Her father ensured that Hydraflow was always a family affair, Cindy says. “My mother served on the company’s board, but did not take a job at the company because my father believed that spouses should not work together.” Her brother, Dennis, joined Hydraflow after high school, working in the manufacturing plant before transitioning into sales. Cindy remembers helping out as a preschooler on the factory floor. She worked at the company in her teens, then took time off to attend San Diego State University and Pepperdine University and afterwards to work in retail, where she became a manager at a department store. During this time she remained on Hydraflow’s board. Eventually, finding that her retail work schedule was interfering with her plans for marriage and children, she rejoined Hydraflow in 1979, working in a range of positions before becoming CFO.

From its founding, Cindy says, her father imbued Hydraflow with his Midwestern values. “The company culture emphasized hard work, frugality, ethics and care about family and community,” she says. Ullrich also established high standards for customer service and care for the environment, values that propel the company to this day, Cindy says. “Our mission statement focuses on designing and manufacturing products that reduce the impact on landfills, limit water consumption, use energy efficiently and nurture the well- being and education of employees and the community.”

"Seek out experts if considering a family business transition."

Unexpected Events

In 2002, shortly after the company moved to its current 174,000-square-foot facility, Cindy’s father and mother tragically passed away, just months apart. Cindy’s father had established a second-to-die life insurance policy, which provided liquidity for the family to pay estate taxes on the transfer of the company to Cindy and her brother.

As new owners, the siblings found they had many questions. Should they keep the company or sell it? What about preparing for a transition of the business to the next generation? What were the best practices for running the company?

As Cindy and her brother were adjusting to their new roles, a banker invited her to a meeting at the Center for Family Business at Cal State Fullerton. There, Cindy took advantage of a range of business resources related to multigeneration family enterprises and learned that experts discourage the somewhat casual way she and her brother joined the business. According to best practices, she says, “next-gen family members should prove themselves at jobs elsewhere, for at least four or five years, before joining a family business,” which is her family’s policy today. Fifteen years after this difficult transition period, Cindy says wistfully that “it took a tremendous amount of time and work.”

As part of Hydraflow’s succession plans, with Cindy and her brother each owning 47% of the company, her three children and her brother’s three children each received a 1% interest in the company. Two of her children started taking family business dynamics classes at the university, and they began having regular family meetings — “all part of our plans for a future transition,” she says.

FAMILY COUNCIL CHARTER

Over the decades, Cindy’s family refined the rules foremploymentand governance, eventually producing a four-page “Len Ullrich Family Council Charter,” which defines the requirements for a family member to join Hydraflow. They include:

  • Earning a four-year college degree and spending four to six years in a related business and receiving at least one promotion.
  • Being held to the same standards as other employees.
  • Having no spouses join thecompany (a rule for all employees).

The charter goes on to define the purpose, mission, values and membership of the council (limited to direct descendants, no spouses). It also defines the structure, rules of conduct, including conflict resolution, rules of engagement and communication rules. Another rule: Each member must serve on the board of a nonprofit. As for the current council, it consists of Cindy, her three children and her brother’s three children.

Cindy experienced another tragic loss, when her brother, Dennis, died unexpectedly, in 2016. His passing prompted her to initiate a transfer of his 47% ownership to his three children. Along with that significant change, Cindy also began navigating the challenge of potentially buying Hydraflow stock from her brother’s children, which “would help them pay estate taxes,” she says. “The company’s disciplined strategy of debt-free growth means it has significant cash that could help in this transition.”

In another transition step, Cindy promoted a longtime employee to be the first president who was not a family member. “At 55, he has served the company for 27 years,” she says. “Meanwhile, my daughter is 34 and my son is 28, so they are not quite ready to be executives.” Since 2002, the president has known that he would not become an owner but remains committed to keeping Hydraflow in the family and helps mentor the next generation.

Challenges

The parts Hydraflow manufactures tend to last longer than the planes they are in, so the business depends heavily on the construction of new planes. Hydraflow, and almost the entire aerospace industry, suffered badly after the terrorist attacks of 9/11, when airline travel slowed and manufacturing orders for new planes dwindled. “One of the things that worries me most is another jolting disruption to the aerospace industry,” she says.

She has also found hiring qualified people a challenge. After Cindy and her older daughter simultaneously enrolled in school to pursue their MBAs, she found out why. ”Virtually no one in business school focuses on developing or encouraging leaders for manufacturing companies,” she says. “As a result, Hydraflow created a formal initiative with local schools and colleges to encourage vocational and manufacturing management programs.”

Cindy says she’s seen more women entering engineering, “and that pleases me; in my opinion, more women’s voices can only help corporate culture.” She maintains that women are skilled at understanding the fundamentals of problems and at resolving the emotional factors that are often at the root of conflicts. Hydraflow has a number of women in key positions, she says..

Perhaps surprisingly, as a female leader, she reports no issues with her predominantly male aerospace customers. In fact, she says, many have told her that they wish others had her corporate culture and that they prefer to partner with Hydraflow as a women-led company. “And our clients are very happy to see two of my children in the business,” she says.

Lessons Learned

Cindy, now 67, feels that she “waited too long to assume the leadership role. I was in my 50s when my father passed away, and I stepped up. I encourage women in family businesses to step up for leadership while they are still young.”

The disciplined financial policies that Cindy uses to run her company are also at the heart of her personal wealth creation strategy. She saves steadily, she says, has no personal debt and conscientiously invests. “I’ve also created a big safety net, both for myself personally and for my company,” she says. At some point, she imagines, a future source of income will come when her children start buying her shares.

"I encourage women in family business to step up for leadership while they are still young."

Cindy currently works full time but admits that she often thinks about her next chapter, which she expects will focus on education. On a related note, in 2016, Hydraflow received an award for excellence in education, as the company pays for advanced education courses employees elect to take.

Who might be next in line to lead the company? Cindy thinks it could be her daughter. “She’s the oldest child, came to the company first and takes naturally to leadership,” she says. Cindy has a second daughter, who currently lives elsewhere, with her husband and a daughter of her own. ”I’m hopeful that she’ll move here with her family, join Hydraflow, and perhaps even encourage my granddaughter to become the fourth-generation president of Hydraflow.”

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