FBC Members Prove Succession Can Succeed!
by Shel Horowitz
Four pairs of fathers and children have successfully passed the baton-and they came to share their achievement with other Center members May 23 at the Delaney House.
The panel included: retired CEOs Fran Johnson of the former Nevada Bob's (now Fran Johnson's Golf and Racquet Headquarters), a golf retailer; Dick Haas of Hillside Plastics, manufacturer of containers; Gary Hagopian of Hoppe Tool; Roger Neveu of Notch Mechanical Constructors-and their children, current CEOs Cindy Johnson, Peter Haas, Eric Hagopian, and Steve Neveu.
All of these families have been part of the Family Business Center for years, and all credited FBC's programs with helping them manage a successful transition of power. But active participation in FBC didn't always come easily. Fran Johnson: "Cindy and my wife joined without my consent. I got dragged to one meeting and saw that I'd made a mistake." The Johnsons' need to participate was urgent; Fran Johnson had accepted a preliminary buyout offer from a non-family member, never realizing that his daughter was interested in continuing the business. Luckily for Cindy Johnson, the deal fell through. "It took me nine months to get a business plan in place. Had I done my homework sooner," he wouldn't have entertained the outside buyout offer." Her advice to the second generation: do your business plan before you talk to your parents.
Perhaps the most interesting buyout arrangement was at Notch. Steve Neveu and four of his siblings each agreed to personally guarantee 20% of the total debt to take over the company. "That ensured our seriousness-that we have a legally binding responsibility. Roger didn't ask for it, but I pushed for it because it would make my siblings better partners."
Peter Haas is one of three children in senior management at Hillside Plastics; his brother is Vice President of Operations, and his sister is Vice President of Finance. It was the company's outside board of advisors that really pushed Dick Haas to face the succession question, and selected Peter as the new president.
Like the Haases, the Hagopians are in a capital-intensive industry. And where Dick Haas bought out an existing business after working there for a while, Gary Hagopian took over the now-60-year-old company from his own father-and it was a struggle. "We went eyeball to eyeball. No one ever thought my dad would relinquish." And when it came time for Gary's sons to step in, "I said 'fine.' I had great confidence in their abilities."
While Roger Neveu hoped one of his seven children would want to take over the business one day, he never dared to express this wish. But steve started working with the business in his mid-20s, got an engineering degree and then an MBA, and had lots of grand plans. "He was pushing me all the time and I wanted to take it easy. I knew the only way I could goof off was if these guys took over."
Still, the timing of ownership transfer can be crucial. Again, roger neveu: "Once they get past 35 or 45, they lose their interest in running a business. I realized I either had to turn it over or lose the chance."
Gary Hagopian agrees: "I've seen the danger of an elder owner hanging on too long."
Steve made a point of making sure his father was well provided for in his plans-and the company transitioned gradually. "It was strategic. We did the management transition before the ownership transition. Dad got to see if I could run the business before I could buy it out. That's a good two-step procedure; we had to understand that we were working with his retirement. We had a deal that Roger would not do management, but he loves crane operation and Computer-aided design. We pay him per hour. For a parent, it's very rewarding to still be involved."
Hillside Plastics went through the same pattern, and the elder Haas is still very much involved. Says Peter, "It's wonderful when Dad checks in on weekends. We run seven days, 24 hours, and we appreciate the help."
When an entrepreneurial parent passes responsibility to a managerial child, the second generation is typically more people-oriented, more likely to seek consensus, and much more likely to delegate. Not surprisingly, all the families see these differences in style. Says Steve Neveu, "If they're accountable for the decision, give them the free rein. I have five or six people that report to me, and I have to extend the same level of trust."