Financing Key To Wachusett Mountain Ski Area's Growth
Crowleys, BofA Forge Strong Path To Successful Family Business
By Nora Lockwood Tooher, Special To Banker & Tradesman
In the early 1980s, the Crowley family's ski business was skidding down the slopes toward financial disaster.
Under the helm of chairman Ralph Crowley Sr., Wachusett Mountain Ski Area in Princeton had just undergone an ambitious, $12-million expansion that included development of new trails and construction of a base lodge.
But cost overruns, high-interest debt and lackluster revenue due to an unseasonably warm winter threatened to bury the business in an avalanche of red ink.
A determined owner and family-business-savvy bankers, however, saved Wachusett.
"We ended up getting BankBoston to come in with a $6 million loan, which was instrumental in getting it back under the Crowley family control," recalls Jeff Crowley, Ralph's son and Wachusett Mountain Ski Area's president.
Of course, there were proper guarantees in place, but the relationship between BankBoston bankers and Ralph Crowley Sr. was critical. "A lot of it relied on personal qualities: They were bankers who knew our family," Jeff Crowley recalls. The family used the loan from BankBoston - which eventually morphed into Bank of America (BofA) - to repay lenders for the project and buy enough time to start generating cash flow again.
"The good news is Ralph Crowley Sr. persevered, and through his working closely with various bankers, he was able to save the resort from either getting into other people's hands or losing it altogether," Jeff Crowley recalls. "We haven't looked back."
Fast-forward 40 years, and dramatic advances in snowmaking technology, as well as ongoing improvements have made Wachusett Mountain Ski Area an industry success and area economic engine.
The resort employs about 1,000 during the ski season, and its reputation as a recreational destination is helping attract biotech firms and other employers to North Central Massachusetts. Many other family businesses, however, haven't been able to get the money they need to weather tough times.
Ski Trip Partners
A survey by the National Small Business Association found that nearly half of small-business respondents - many of them family firms - needed funds during the recent economic downturn, but were unable to find anyone to front the money. Nearly one in three said that their lines of credit were reduced. And nearly one in 10 had their loans or lines of credit called in early by the bank.
Family businesses are hailed as the backbone of our economy, but a lot of lenders are spineless when it comes to extending them credit. "It's harder and harder to have a banking relationship," says Ira Bryck, director of the UMass Amherst Family Business Center. "Your [banking] relationship manager must have more loyalty to the bank than you, and these days, the bank has to have more loyalty to the federal government."
But it's not always the banker at fault. "A lot of entrepreneurs have trouble thinking through the worst-case scenario, and the bank really wants to know that the business owner understands the risk," Bryck notes. "I think that family businesses need to get over this secretiveness that is often part of it," he continues. "Your bank is your partner, like it or not."
Jeff Crowley is the first to admit that running a ski resort is a high-risk enterprise. "When you think of the amount of money we've invested in the ski lifts, it's so capital-intensive," he says.
But Wachusett's BoA banking team, headed by Michael Palmer in Boston and Kevin Cunningham in Connecticut, know the business and realize that one out of every five years is probably not going to be a great year for the ski area. "They understand that, and they're there to stand behind you," Jeff Crowley says.
It helps that that the Crowley family business empire includes an entirely different business - Polar Beverages - that can balance financial fluctuations in the ski industry. Jeff Crowley, along with siblings Carolyn Crowley Simpson and David Crowley, run Wachusett Mountain Ski Area and Wachusett Village Inn & Conference Center. Their brothers, Ralph Crowley Jr. and Chris Crowley, run Worcester-based Polar Beverages - the largest privately-owned, soft-drink bottler in the United States. Ralph Jr. and Chris also operate Adirondack Beverages in Scotia, N.Y.
The five siblings are fourth-generation members of the Crowley family business, and equal shareholders in all the companies. Their bankers, Jeff Crowley says, "really like that we've got two counter-cyclical businesses." "We're now at the point where we've got a wonderful relationship with Bank of America," says Jeff Crowley. "We've gone from being one of those ski areas everyone thought was going to disappear or go bankrupt to becoming one of the more successful medium-sized ski areas in the country." Not bad for a family skiing operation that nearly crashed.
JUNE 2012, FROM THE BLOG OF WILLIAM AND CHOUTEAU LEVINE, ALTERNATIVE DISPUTE RESOLUTION
FAMILY BUSINESS: WHERE DOES IT HURT? We recently attended a Family Firm Institute program that was presented by Ira Bryck of the University of Massachusetts (Amherst) Family Business Center, and Ted Clark of the Northeastern University Center for Family Business. University-based programs, such as these throughout the country, focus with differing emphases on promoting the health of family owned businesses by providing education, peer support and guidance to families experiencing challenges to, and stresses within, this important way of life.
Family businesses have played an historic role in building the society in which we live and the economy that feeds us all. Keeping the culture of family businesses alive and vibrant is primarily up to the families themselves. The challenges of first, second and later generation family businesses can be enormous. In addition to facing the economics of the industry or profession in which the family business must compete, and those of the local, state, national, regional and world economies, these companies must also address the health and well-being of the family unit, or units, that make the enterprise run.
Mr. Clark and Mr. Bryck’s programs run on the premise that knowledge, the experience of others with a desire to share and learn and a “place to turn” when in need or even crisis, will benefit individual families, their companies, the economy (the UMass program is heavily focused on the needs of its immediate region – Western Massachusetts), and, in turn, the universities themselves in their connection to the business community and the world at large.
Sometimes, the services that these programs provide include access to private dispute resolution such as mediation and arbitration, to keep families together, or where necessary, separate them in ways that may maximize business viability, promote efficient wind-down and minimize family conflict – or at least reduce economic impact. When used, these processes promote privacy, fairness and cost-efficiency; and escape from the specter of public litigation.
Mr. Bryck, executive director of the UMass program for the last 19 years, analogized his role in learning how his program might help business family members in conflict, to that of a family doctor. In assessing a situation, he leads a conversation seeking to reveal “where does it hurt?” Like the body, the “hurt” is a symptom that can lead to a diagnosis, without which a cure is not possible.
The hurt may be strictly commercial, but often it is related to interpersonal conflict within or across generations. Family members may struggle for more influence, for less responsibility, for greater compensation, for an exit strategy or simply for an intangible sense of “fairness”. For some people, the family business is the best of life itself, while to others it is a seemingly inescapable trap.
The idea of a family business as a body is itself interesting – an organism made up of many parts, some functioning more efficiently than others, some stronger, others more vulnerable; at times ambitious, at others exhausted. Sometimes the body parts work at cross-purposes to each other and sometimes one part can bring the body, or the business, to its knees. To learn more how programs like those at UMass and Northeastern can help, you can check out www.umass.edu/fambiz/ and http://cba.neu.edu/cfb/.
"ALL THE NEWS THAT FITS, WE PRINT "
HE KEEPS FAMILY BUSINESSES LEARNING, LAUGHING
By John Sippel
Business West Magazine
The family business, that seething arena in which so much of the American dream is pursued, is Ira Bryck's home turf. He grew up in his family's children's clothing store and, as director of the UMass Amherst Family Business Center, has served for the past 18 years as cheerleader and wise uncle to a wide variety of western Massachusetts ventures.
The Center, as its website notes, "offers owners and managers a comprehensive learning community, including presentations by experts from the fields of psychology, management, law, accounting, financial and estate planning, health care, and banking." Bryck calls it a place to learn to "treat your business like a business and your family like a family."
Doing that has never been simple and hasn't gotten any easier. "Over the past few years," Bryck says, "people running family businesses—mostly aging baby boomers—have been confronting the toughest economy they've ever seen. They're coming to see that they need to become frugal, scrappy, and fearless, to throw some toys and perks overboard and get back to core competencies."
Those competencies cover a lot of territory. Bryck resents people who hear "family business" and think only of mom-and-pop candy stores or corner groceries. Family Business Center members, of whom there are currently 65, include small and medium-size companies in a wide range of domains, some of them high-tech. And, Bryck points out, on a national level family businesses account for a third of Fortune 500 companies and something like two-thirds of new jobs. "As family business goes," he asserts, "so goes the world economy."
The Center offers a community in which everyone involved in or directly affected by those businesses—including family members who aren't employees, and employees who aren't family members—can find a safe haven in which to open up about the challenges they face.
"There's hardly a family business out there," Bryck says, "that doesn't secretly believe itself to be the most dysfunctional one on earth. Getting together with other business families and realizing that you're not alone is an essential part of what we offer. Learning from others' experiences, hearing how they got up again after falling down, can be tremendously rewarding."
Bryck wryly notes that many family businesses don't see themselves as such. "They'll tell me 'I work with my wife' or 'My children work for me' but somehow they don't think of themselves as a family business. Coming to terms with the fact that they are is often a first step to solving their problems."
One of the more surprising facts about the Center is that a good third of its members are non-family businesses. "Any small or medium-sized business," Bryck explains, "is going to be interested in 85 percent of what we do: generational succession, for example, is something every business faces. Any motivated listener can pull out what's useful for him or her."
The Center, Bryck notes, "is made up of a practical group of people who may not think of themselves as philosophers but whose stories, warnings, brags, examples, and even dilemmas can make you a wiser solver of your own problems."
To those who question what the orchard owner has to learn from the guy who runs a construction business, or the bookseller has to learn from the pharmacist, he says, "You'd be amazed at how much you can learn from companies who might be in a completely different industry or stage of business life than yours."
Ice-Breaking and Empathy
The Family Business Center offers three basic types of programs.
Dinner forums, held in catering halls, are relaxed events in which a speaker or corporate partner gives a short talk and fields audience questions on the evening's topic. Among the topics slated for the coming season are "Beating the Odds: What a Family Business Needs to Do Right, or Else!" "Sibling Partnerships Consider the Future," and "Secrets of Some of Our Region's Greatest Human Resource Directors."
Roundtables are confidential discussions in which, Bryck says, "a dozen or so owner/managers from different companies get together to probe some of their organizations' deepest defects and explore how the family factor affects the business and vice versa. An unprecedented level of trust and safety grows in these groups; conversations happen that don't happen elsewhere. We create a safe space that's open during the session and closed thereafter.
"There's very little advice-giving and not a lot of judgment, but plenty of empathy. We ask clarifying and strategic questions and help participants think about things; we don't tell them what to do. This encourages true out-of-the-box thinking in which you're able to see your box from the vantage point of other boxes."
Finally, the Center offers consultation on mediation, conflict resolution, and other matters, selling what Bryck calls "the invisible: wisdom, experience, frankness, and honesty." Here in particular Bryck shines as a diagnostician. "I dig into each business's story," he says, "and then, like a doctor, press in at a given point and ask, 'Does this hurt?' Then I press at another point and ask, 'Does that hurt?' And we usually get to the core of the problem pretty quickly."
In whatever program type it's offered, however, all of the advice dispensed by the Family Business Center is provisional, conditional, and to be applied only at the customer's discretion. Bryck always tells his audiences that their business and its circumstances are unique and that universal answers won't work for them.
Even when introducing the authors of best-selling business books he'll tell his audiences, "What you're about to hear is a big theory and it's unlikely you're going to swallow it whole. I give you permission to cherry-pick, and when this is over I'll help you figure out what pieces might work best for you." He then does everything he can to inspire the audience to ask provocative and even irreverent questions. If it all leaves some authors a bit nonplussed, others find the experience challenging and stimulating. Members, needless to say, love it.
Bryck wholeheartedly endorses the theory of Dr. Joseph Astrachan, the dean of family business researchers, that many things that people think are causal are in fact coincidental. Some family businesses function well with an "outside" board of directors, but some don't. Some do well by offering merit-based compensation while others thrive by paying all family managers equally. Some are well advised to have their new college-graduate son or daughter work elsewhere for awhile before returning to the fold, and some aren't.
"Nothing you can learn about what works for others will necessarily work for you," says Bryck. "At the Center, members learn enough and think things through enough to come up with solutions that are right for them. The speakers they like best are those who actually run family businesses and have stories to tell and good stuff to communicate. By and large, entrepreneurs are smart but not necessarily scholarly; they're suspicious of dry theoretical thinking."
Up Through the Retail Ranks
Which is just as well for Bryck, who cheerfully admits to being no academic but a pure product of the School of Hard Knocks. In his family's store—Barasch's, in Freeport, on Long Island's South Shore—he was sweeping floors by age 6, making change by age 8, and soon thereafter waiting on customers and keeping a sharp eye out for shoplifters.
He was a hard worker. "If my father asked me to fold a hundred boxes," he says, "I'd fold two hundred. Before I turned ten he told me that that I had what it takes—that I was a merchant, not a shopkeeper." Even so, the pay was meager—"just enough to buy comic books"—and at 15 Bryck left to start working in restaurants. "My father gave me his blessing but told me, 'If all else fails, there's always the family business.'" says Bryck. "Which I took to mean, 'If you're a failure, you can always come here.'"
After majoring in education at SUNY Buffalo Bryck briefly ran a cooperative free school. There he discovered that the idealistic pedagogic doctrine he'd been fed in college didn't necessarily hold water: "Given total freedom to make their own choices, kids don't naturally gravitate toward good food over junk food, or learning over playing."
By 1976, unsure what to do next, Bryck was back at the store for what was supposed to be the summer. He stayed 17 years.
At first it was painful. For three years he refused to have a business card. He chafed whenever anyone cocked an eyebrow and asked, "So you still work for your parents?"
Gradually, however, he came to terms with his situation. He told his father, "Whatever aspects of the job you hate, I'll take from you." Over the years he took on more and more. He and his father, both having grown up brotherless, became something akin to brothers.
Keeping the store, however, became an increasingly uphill battle as the neighborhood deteriorated. By the time Bryck's father retired there was little fun left in the game.
"A lot of stores on the street were closing," he recalls, "and at the end I really wanted out of Long Island. I thought that closing the store would kill my parents, but when I finally told them I wanted to my mother said, 'What took you so long?'"
Giving Them What They Want
Arriving at the Family Business Center, Bryck realized that he'd "spent my whole life in a family business but had never given any real thought to what it meant." The Center was born of a national movement fueled by the frustration that expert advisers—insurance agents, bankers, attorneys, accountants—felt in trying to convey information on such important matters as estate planning and generational succession to family businesses who tended to write it all off as a sales pitch. Centers were conceived of as places where, as Bryck puts it, "owners could hear things that their own accountant or attorney might not feel comfortable telling them."
Having begun with four corporate partners, the Center now has seven: Bulkley, Richardson and Gelinas LLP, Charter Oak Insurance and Financial Services, Epstein Financial Services, the management-consulting firm Giombetti Associates, Hampden Bank, Health New England, and Meyers Brothers Kalicka, P.C. Bryck proudly points out that the Center has the highest corporate-partner retention rate of any family business program in the country. He counts as an education partner UMass Amherst Continuing and Professional Education, of which the Center is part.
There were perhaps a hundred such organizations nationwide in those early days, each covering its own territory. Something like forty survive, including five in New England. Bryck sometimes collaborates with the other one in Massachusetts, at Northeastern University, to present events in Worcester. Directors from other centers early on warned Bryck, "These are busy people. If they don't like what they're hearing they're going to stand up and walk out, and it's not going to be polite." Bryck, his sense of showmanship honed by his years in retail, took heart. He's a passionate advocate for edu-tainment, for making people laugh while they learn.
"I keep my ear to the ground," he says, "talk to business owners about what might be of help to them, and find people who can provide that help. Then I make sure that the presentation is as innovative, engaging, and fun as I can make it." He excels at the latter, having received Innovative Program Awards from both the International Family Business Program Association and the University Continuing and Professional Education Association.
Even so, Bryck sees substantive content as being essential. "If people leave without taking away something they can plug in, whether it's a new method or a practical theory, they won't see us as a useful resource," he says. "These days my people are short of money and they're really short of time, because they've had to take on the roles of people they've let go. When people leave a program of mine the highest compliment I can get is, 'This was a good use of my time.'"
He hears that a lot.
ALL IN THE FAMILY
By Joy Jordan
Cape and Plymouth Business Magazine
To some, working with one's family sounds like a dream come true; for others, a nightmare. It is true that working in a family owned business presents its own set of challenges – but the rewards are great, as well. Much of our region's economy was founded on family owned businesses. They are clearly a cornerstone of our economy, and a way for a family to build a legacy for generations to come.
While sound business practices are always critical to success, owning, managing or working in a family owned business requires special considerations. There can be great opportunities and lasting success, but there are also risks – hurt feelings, lack of separation between work and home, accusations of nepotism, and more.
With proper planning, sound advice and commitment by all parties, these obstacles can be overcome. Luckily, we have spoken to experts in family businesses, as well as those involved in family businesses themselves, to share their expertise and experiences.
Family businesses often get a bad rap or are incorrectly seen as more likely to fail.
"Perhaps the biggest misconception about family businesses is that they have a high failure rate," says Ted Clark, Executive Director of the Northeastern University Center for Family Business. "Consultants and critics constantly tout that less than 3 percent of family businesses make it to the third generation. While the 3 per- cent statistic is true, when you compare to the failure rates of non-family businesses with that of family businesses, you find they have fairly similar failure rates."
It is important to remember that while family businesses may have special concerns, there are many different types of families and businesses. Ira Bryck, Director of the UMass Amherst Family Business Center at UMass Amherst Continuing and Professional Education, notes, "I think there are twin misconceptions that need to be stated as 2 sides of a coin: (1) that family members will be able to put aside their conflicts and assumptions, in order to perform their job functions, and focus on productivity, profits and professionalism; and (2) that they won't be able to. There is no ONE thing that is how a family business works, so these opposites are true, in various cases."
The benefits of a family business can be many, from creating an empire to leaving a legacy. They can also offer an edge over other businesses in the community. "As a competitive advantage family businesses can provide a personal connection to the customer that a corporation or non-family business can never pro- vide," says Clark. "Generally, people buy from people that they like. People buy from people they trust. Creating and maintaining a personal connection with your customers is an incredible opportunity that every family business should strive to capture." For those involved in the business, the positives can be great. "Family business at its best offers a lifestyle advantage, to family members and non-family, too: Offering work/life balance, job security, meritocracy," says Bryck. "Even in cases where there's a glass ceiling (i.e., non-family will not get to the top), talent will be recognized and rewarded. Family business at its worst will not offer these advantages."
The best way to avoid the pitfalls that can befall a family business is to educate yourself. Risks lie in the failure to plan, failure to equally recognize the efforts of family and non-family team members, and failure to properly structure an exit strategy – all of which can be avoided with proper attention.
"Perhaps the one of the greatest mistakes a family business can make is the failure to develop future management," says Clark. "Whether or not the businesses stays in the family, to build value in the business and wealth for the owners, the business needs to cultivate future management."
Bryck notes that there are differing concerns for family members and non-family members. Family members in the business often err by thinking that it's OK to trade on your family membership in any way; also, that you have to be twice as good to get half the credit. Non- family members: in most cases, that the family business is like a non-family business in its ability to be a professional organization, no matter the age or size.
One of the greatest challenges lies in how family and non-family employees can best be integrated into the business without risking favoritism. Management must institute a culture of fairness and merit-based advancement from the top down.
"Developing management requires the development of opportunity for both family and non-family," says Clark. "Opportunities need to be created and visibly available for both family and non-family. If non-family members see opportunity there is a higher likelihood that will stay motivated and perform and stay with the company.
"Create standards and measures that are absolutely applied equally to all; and specific practices to measure performance and compensation," adds Bryck. "And then, clearly establish your tolerances for applying a double standard – aka affirmative action for family – and don't waver from it."
There are steps that management can take to ensure smooth operation of a family business – most boil down to clear communication and thoughtful planning.
"Studies point to three keys for long-term success in a family business: The development of a Board of Directors, Strategic Planning and Family Meetings," says Clark. "These activities keep the focus where it should be: on the strategic direction of the business; on the operations of the business; and ensure good communications within the family."
By setting clear policies and procedures that delineate roles and responsibilities, it will be easier to assign work and promote staffers on merit, regardless of family position. "Document all practices – a la The E-Myth – to create a sys- tem that the owners run, that any owners could run in the same way," says Bryck.
This also eases the way when the business is sold or transferred, whether to another family member or not. Having an appropriate exit strategy is critical, not just for family businesses, but for any business.
"The truth is that succession planning is not a family business issue," notes Clark. "Succession planning is an every business issue. Succession, either in the form of a change of management, shutting the firm down or a sale, is going to happen to every business from the smallest sole proprietorship to the largest for- tune 500. The question is really then: Are you driving the bus, or being driven? It's going to happen, so plan for it and make the best of it or take what you get."
Bryck concurs: " It has been researched and simply observed that big, life-of-the-party leaders often produce lesser followers, who await what the great leader will do next; so no leader should be allowed to grow so be big or be considered so indispensable that you don't know what happens when their leadership ends. The most indispensable boss can be quickly dispensed with by any bus."
There are unmeasurable or 'soft' reasons why business owners fail to plan for transition. According to Terence Shepherd of ROCG~Shepherd & Goldstein, an inter- national professional service and consulting firm with offices throughout North America, Europe and the Asia Pacific region, a lot of the emotional issues business owners struggle with, have to do with the fear factor. These include the fear of letting go, the fear of loss of wealth, the fear of loss of control, the fear of conflict.
"It is human nature to draw away from pain," notes Shepherd. "And boy, are these subjects uncomfortable and potentially painful. But just as you and your advisors have to work through the tangible obstacles that may prevent a formal plan going forward, it is just as important for you to understand, discuss and plan for these intangible elements. If not, in addition to possibly preventing a written plan from ever going forward, not getting a handle on the 'soft' issues that can cause stress and anguish, could easily derail your plan once it does get started. In situations where this is prevalent, it is up to the lead advisor, and hopefully one that has had experience in dealing with such emotional issues, to help you navigate through these potential land mines. Ignoring them because it is uncomfortable should be done at your own peril."
When it comes to participating in a family business, you can't communicate too much, says Clark. "Have regular board meetings to keep the lines of communication open and flowing in the business and family meetings to keep things running smoothly in the family. As a part of your communications, discuss and create appropriate levels of expectations. Often the biggest problems result from goal misalignment and poor communications."
Clear communication, proper planning and a commitment to fairness can lead to great success for those family businesses willing to take the time and make the effort. "Businesses that are too busy to think through these issues are like trees that do not bend in the wind," cautions Bryck. "They will snap."
Pest Control Technology Magazine All in the family 3/31/2011
Whether you’re preparing to sell your business or not, pest management professionals walk a high wire when they mix business and family. Here are some strategies to prevent your family from a fall.
When a family business succeeds, it’s a thing of beauty: father and son, brother and sister sharing in the rewards and support that only family can provide. But when a family firm goes wrong, it can go very wrong, ripping a family tree apart by the roots and leaving a mound of psychological and financial debris behind. So how can your family avoid a disaster?
Put extra emphasis on documentation, communication and professionalism, says family business expert Ira Bryck. “Ultimately you have to treat your business like a business and your family like a family,” Bryck says. It’s a catchy slogan, but its full meaning translates into hard work and due diligence. “Treating your business like a business really means going overboard with professional structure and processes, even though your coworkers are family,” Bryck says. Bryck worked alongside his parents for 17 years and now advises family-run firms as director of the University of Massachusetts Family Business Center. Based on his interaction with thousands of entrepreneurial families, Bryck says these strategies will keep your family and its businesses on the right path.
Above All, Be Honest. It’s easy for families to swing between being overly critical or overly forgiving with one another at work. The antidote to both ills is honest, yet tactful, communication, beginning with a realistic assessment of whether or not you can work together. “Your family must have the ability to peacefully resolve conflict,” Bryck says. “If you don’t have the flexibility and sense of humor to be able to appreciate each other, then you are really asking for trouble. And, frankly, many families don’t have that.”
Document, Document, Document. Because the employees are mom and dad, brother and sister, families who work together often falsely assume they don’t need much documentation. But Bryck stresses that paperwork is even more important for family-run firms because when family drama creeps into the workplace, a foundation of written principles will keep everyone on the same page. Most states require a partnership agreement, a legal contract stipulating the details of how individuals will collaborate in business and how they intend to share profits and losses among involved parties. Beyond that, Bryck suggests a family business create a partnership charter, a series of documents that stipulate the business’ vision, goals, code of conduct, employee handbook, processes and systems, emergency planning, succession planning and more. “Lock the family in a room and talk frankly about what is expected from each family member and what the business is about. Once the major issues are agreed upon, then it’s time to put the details in writing. Then reevaluate and update those documents every year,” Bryck says.
Build A Meritocracy. The biggest issues facing a family business are how to divide the responsibilities among individual family members and how to handle compensation. It may be tempting to “keep things equal,” thinking that paying each family member the same amount will keep the peace. But that’s a recipe for mediocrity, Bryck says. Accordingly, he suggests every family business use written job descriptions with each job having a set compensation level based on the job and the free market value of the required skill set. What’s more, compensation should be bolstered by incentives and performance-based bonuses — documented with written goals and benchmarks — so that high-achieving family members are rewarded for their successes. “This kind of documentation helps avoid miscommunication and resolve conflicts over how and why individual family members are compensated,” Bryck says. When it comes to ownership and profit-sharing, it often makes sense to split things evenly. But with annual salary, a performance-based system is vital for keeping each family member properly motivated. Further, the sense of fairness and opportunity created by a meritocracy is crucial for attracting and retaining non-family employees as the business expands.
A Major Corporation. Families who work together often become too informal, assuming, for example, that a conversation over Sunday night dinner is sufficient for planning the work week ahead. While Bryck doesn’t object to talking shop at home, he cautions that it’s dangerous for families to ignore the formalities of a professionally run enterprise. Ultimately, the more room you leave for miscommunication, the more volatile a family firm can become. Hold weekly staff meetings at the office, even if the “staff” is mom, dad, cousin and sister. “If Dad has an idea, he needs to write it down and add it to that week’s meeting agenda, rather than calling Junior at midnight on a Saturday,” Bryck cautions.
Seek Outside Perspective. Because it’s easy for family members to get complacent and comfortable with one another, it’s crucial to solicit feedback from outside professionals. Family business owners should assemble a board of advisors who can periodically provide a candid evaluation of the business and its employees, without the filter of familial relationships. “And if you don’t have a board of advisors, join a roundtable at your local Chamber or business organization,” Bryck says. “And if you don’t have access to one of those, then just go out to lunch occasionally with other business owners who have an angle on something you need to know about.”
Keep Business Separate. Fortunately, Bryck says, he rarely sees a complete disintegration of the family when a family business fails. “Usually family businesses succeed or fail, rather than completely blow up. But when they do burst apart, it is usually because one party feels like he or she has been wronged and that’s when litigation ensues.” That’s why it’s so vital to spell out key details in writing and get the buy-in, even signed agreements, from all involved family members. With every detail clear up-front, there’s much less chance for hurt feelings later on. Plus, the structure and professional culture you’ve created at the business will help minimize the impact when a family relationship hits a rough patch outside of work. Once the parameters of the business are in place and running, make every effort to separate work time and work roles, from family time and family roles. “You really need to sit down with your family right in the beginning and formally lay out what the business is and document it. Then make it clear that love for each family member will be expressed separately from opinions about what the business needs to succeed,” Bryck says. But be clear, Bryck warns, no matter how well you’ve structured your business, ultimately working with family requires all involved to possess an advanced level of maturity, a level head, loads of personal discipline and exceptional communication. If you can’t say that about your family, think twice about including them in your venture.
The author is a former editor of PCT magazine. He can be reached at firstname.lastname@example.org.
Tony Packo family fight laid bare by court filings Heirs battle for control of busines
By SHEENA HARRISON BLADE BUSINESS WRITER
Robin Horvath sat inside a conference room at the Tony Packo's Inc. offices on Toledo's east side, waiting to meet with his uncle Tony Packo, Jr., and his cousin Tony Packo III — a meeting he already knew wasn't going to happen.
Sitting with Mr. Horvath that afternoon on July 14, 2010, were his lawyer, a court reporter, a soft briefcase filled with $100,000 in cash, and two armed guards who helped secure the large sum of cash from the bank. At stake was ownership of the family restaurant chain that was started nearly 80 years earlier by his and Mr. Packo III's grandfather, Tony Packo, Sr.
Mr. Horvath, who owns half of the business, had planned to buy the Packos' 50 percent stake in the company, claiming he had the right under the company's bylaws to do so for that price. But the Packos declined to meet. After a half-hour of waiting, Mr. Horvath left. Nine days later, he sued. "I believe I own Tony Packo's," Mr. Horvath told The Blade this month. His relatives adamantly disagree. The nonmeeting was one of the colorful snippets in the months-long conflict that has become a publicly aired family fight over the landmark East Toledo business. The intrigue ranges from a heart ailment to late-night records searches to an ongoing criminal investigation to a business version of Russian roulette. Who will own and run one of Toledo's signature businesses, known for its Hungarian hot dogs and its secret sauce, remains at question. The fate of Tony Packo's Inc., which has $8 million to $10 million in annual revenue, rests in the hands of a judge who could decide whether the firm should be sold to an investor group that includes the Packos as minority owners, potentially taking the restaurants out of family control for the first time since 1932. Mr. Horvath would no longer be a company shareholder, if that bid is approved. Lucas County Common Pleas Judge Gary Cook, who was to decide on the pending bid, stepped down from the case Friday. Mr. Horvath's lawyers asked Judge Cook to recuse himself this month, alleging he was biased. The case is awaiting reassignment. To explain why the family members, who have shared offices for many years on the second floor of Tony Packo's building at 1902 Front St., have become adversaries, The Blade sought interviews with the parties in the past two weeks. Mr. Horvath agreed, but Tony Packo III repeatedly declined and his father, Tony Packo, Jr., did not respond to repeated messages. The Packos' lawyer also declined to answer most questions, referring to filings in the court case initiated by Mr. Horvath.
The firm's finances Interviews indicate that the family squabble began with Mr. Horvath's heart problem. The company's chief operating officer, secretary, and treasurer passed out on an escalator at the downtown SeaGate Convention Centre in December, 2008. He awakened by the time he reached the next floor. His doctors determined that he had an abnormal heart rhythm. After a week in a hospital, Mr. Horvath, 54, was sent home with medication to manage his condition. He said the heart ailment and the medicine's side effects slowed him down, and he spent two to three days a month out of the office. Because of the downtime, he said, he let go of the company's financial duties "temporarily" in early 2009, trusting Controller Cathleen Dooley and Tony Packo III, the company's executive vice president, to look after the books. Mr. Horvath said his doctor gave him a "clean bill of health" in December, 2009, after surgery fixed his heart condition. He returned to work full time, asking Ms. Dooley to provide him with the company's monthly 2009 financial statements. That's when the conflict started, Mr. Horvath said. When he received the records in February, 2010, he said, he found "anomalies" that raised red flags for him on how the company finances were being managed. In his lawsuit on July 23, 2010, Mr. Horvath said he "discovered and identified a number of questionable transactions" paid by the Tony Packo's company "in which Packo III, Dooley, and/or Packo, Jr., were the payees or beneficiaries." He also said in the filing that those transactions didn't appear to have "proper supporting documentation." On March 1, according to court documents, Mr. Horvath met with the Packos, the company's then-corporate attorney, Thomas Killam of Marshall & Melhorn LLC, and Jack Simonetti, who is not a family member and was added to the company's board in 2002 as a tie-breaker in family disputes. At that meeting, Mr. Horvath said in court filings, he "had identified more than $100,000 in questionable transactions that had been paid to Packo III and/or Dooley." Each of the opposing parties in the case denies the accusations. James Rogers, a lawyer who represents the Packos, said they "strongly disagree" with Mr. Horvath's allegations. Mark Jacobs, a lawyer for Ms. Dooley, declined to comment on details of the case. Ms. Dooley has denied Mr. Horvath's allegations in court filings and is countersuing him for defamation of character, based on his claims in court filings. Family issues Contention between the family members has happened before. In 2002, Nancy Packo Horvath, the founder's daughter, and Mr. Horvath, her son, sued the Packos for libel, breach of duty, and trying to force Mrs. Horvath out of the business. A week later, Tony Packo, Jr., and Tony Packo III countersued to dissolve the company, claiming it was no longer practical to carry on the business because the owners were at an impasse. Three months later, the families reached an agreement, electing to add an impartial third person to the company's board, Mr. Simonetti. At the time, Mrs. Horvath called the dispute with her younger brother and nephew "painful and uncomfortable." Part of the problem, family members said, was that the company previously didn't have procedures in place to resolve family conflicts. Ira Bryck, director of the University of Massachusetts Family Business Center, said some family-owned businesses have an advantage because the relatives often have an incentive to support each other. However, there often are complicated interpersonal dynamics and feelings that can lead to squabbles. "I've seen where family members would rather have the other person lose than they themselves win," Mr. Bryck said.
Mrs. Horvath died in 2003, and her company shares were left to Mr. Horvath, who has been with the company for 34 years. Included in the 2002 agreement were a new set of bylaws and an employment agreement. Copies of them are included in court filings. Two key provisions from those agreements are now being disputed in court. One is the "deadlock-breaking mechanism," a provision for how the Packos and the Horvaths could buy out each other's shares. The bylaws say, in short, that one family group would need to notify the other family group that they intend to buy all of their shares and are appointing an appraiser to determine the shares' value. That's followed by a second notice specifying the price they're willing to pay for the other party's stock, based on the appraiser's valuation. The second party has 90 days to consider the offer and either accept it or flip it and buy the first party's stock for the offered price. The payment must be handed over in cash at closing. Family members refer informally to this provision as the "Russian Roulette" clause. The separate employment agreement drafted at the time of the 2002 resolution says employees can be terminated for "the misappropriation (or attempted misappropriation) of any of [Tony Packo's] funds or property." If Mr. Horvath's case prevails and either Tony Packo, Jr., or Tony Packo III is terminated, the bylaws say that person's shares would be offered for sale — first to the remaining Packo and ultimately to Mr. Horvath. After Mr. Horvath raised concerns in March about company funds, he said, Tony Packo III approached him in his office and told him that they couldn't continue to work together. Mr Horvath said he told his cousin to refer to the provision in the company bylaws for buying out shareholders. On April 14, 2010, Mr. Horvath's lawyer was sent an e-mail from Thomas Killam, who was then the company's corporate attorney, offering Mr. Horvath $1.25 million to be paid over 12 years, including $100,000 in cash up front for his shares. The e-mail, filed in court documents, stated that the offer was not "intended to trigger the ‘Deadlock Breaking Mechanism.'?" Still, on June 14, Mr. Horvath's counsel invoked the "Russian Roulette" clause, indicating to the Packos' attorney that he intended to buy the Packos' company shares, with a closing scheduled for July 14, according to court filings. The Packos' attorney responded, in an e-mail exhibit in court documents, to say they would not attend "any purported closing" and "will not be transferring any shares to your client." In a September court filing, the Packos said the Russian Roulette provision applies only to forced sales and doesn't prevent a voluntary acceptance of a buyout offer. Also, the same filing said the deadlock-breaking mechanism "must be followed with exactitude" in order to be enforced, and that they never intended to invoke the mechanism. It was this series of communications that, Mr. Horvath said, should have given him full ownership of the company. In his suit filed nine days after the July 14 nonmeeting, Mr. Horvath asked the court to grant a forced sale of the Packos' shares and monetary damages to him of at least $200,000. Mr. Horvath told The Blade that for months early last year, anxious about what he viewed as problems with the company financial records, he would return to the Tony Packo's building at about 9 p.m. each night after he would have expected that Ms. Dooley and the Packos had left for the day. He sometimes stayed until 1 a.m., poring over the records.
A sensitive subject
Misappropriation is a sensitive topic for Mr. Horvath. He said employee theft nearly ruined Tony Packo's in the 1960s and again in 1979. He has taken personal responsibility for implementing the company's "one strike, you're out" theft policy, firing employees who have stolen from the company in the past. Security cameras placed around the businesses have caught workers taking everything from two hot dogs — employees have a lunch allowance, but are required to buy additional food at a discount — to cash out of the company's registers. On his allegations against the Packos and Ms. Dooley, Mr. Horvath told The Blade that he is concerned about company payments that don't appear to have "hard receipts," which specify the product or service that was bought and the place where it was delivered. According to court filings, Mr. Horvath has said $400,000 of the company's money has been improperly spent over several years. In their court-filed response in August to Mr. Horvath's lawsuit, the Packos claimed that Mr. Horvath had not been "involved in the ‘day-to-day' operations of the business for quite some time" and argued that he "has little knowledge as to the operations of the business." Company resolutions from July 26, 2010, stated that the company's accountants and auditors found Mr. Horvath's allegations to be "unfounded and without merit," with the exception of two items. The Packos say, in court filings, that "approximately $3,000 of alleged improper payments were discovered" during a review by Sobb Roberts Inc., the Toledo accounting firm that handled the business' tax filings. One included a June, 2009, roofing job worth $2,460 at the home of Tony Packo III's mother. The second transaction involved $640 for a glass shower door apparently installed at TonyPacko III's home in August, 2009. In both cases, Mr. Simonetti and either Tony Packo, Jr., or Tony Packo III signed agreements on July 26, 2010 — three days after Mr. Horvath filed his suit — requiring Mr. Packo III to repay the company for those transactions. The agreements also said Mr. Horvath was to "cease and desist from making unfounded allegations and creating dissension and confusion" among Tony Packo's employees. A Packos court filing says that the two disputed transactions were "promptly repaid." Mr. Horvath refused to sign the agreements, in part, he said, because of the "cease and desist" statement, which he called a "death certificate" to his inquiry. He told The Blade that he has been blocked from having full access to company documents that would allow him to see the company's financial state. Mr. Simonetti, who resigned from the Tony Packo's board July 27, could not be reached for comment. Tony Packo's owes Tony Packo III about $124,000 from a personal loan that he took out to help the company in 2006, Mr. Horvath said. The company was in financial trouble at the time after Tony Packo's closed a Findlay restaurant it had opened about a year earlier. "We took a $1 million bath in there," Mr. Horvath said about the loss. It's unclear whether Tony Packo III may have considered the roofing and glass transactions part of his repayment from the business. Mr. Bryck of the Family Business Center in Massachusetts said it is a good idea for family companies to have an independent board of directors and a financial referee who can manage the company's money outside of any family issues. "It's important to document all of that flow of money, and it's important to have a CFO who can impose the proper oversight on the family," he said.In addition to filing the civil suit, Mr. Horvath told The Blade, he has turned over his records of Tony Packo's finances to the Lucas County prosecutor's office. John Weglian, chief of the special units division of the Prosecutor's Office, confirmed last week that he met with Mr. Horvath twice and said an "active investigation" is pending. He declined to identify the targets or the basis of the investigation.
Bid for ownership
How the family argument will play out for Tony Packo's five restaurants and 200 employees remains to be seen. An auction bid that would give Tony Packo III and other investors control of the company is awaiting judicial approval. The bid, submitted during a closed auction last month, would have Packo family members owning 2 percent of the business, the restaurant-owning Mancy family 49 percent, and former local bowling alley owner Darrell Ducat and Huntington Insurance executive Mario Procaccini the remaining 49 percent. Mr. Horvath would own none of it. Under the terms of the bid, Tony Packo III would have the right to buy out Mr. Ducat and Mr. Procaccini's shares during the next five years and then would own a majority of the business. The bid amount was not disclosed, but the investors agreed to take on $5 million in secured and unsecured debt for the business. Skutch Co. Ltd. of Ottawa Hills, a court-appointed receiver in the case, has filed a motion for Judge Cook to approve the Packos bid. Principal Steve Skutch declined to comment to The Blade on details of the case. Mr. Horvath did not submit a bid in the auction but told The Blade that he secured financing. He disagreed that outside investors should have been able to bid on the company and said that the process should only have been open to "my checkbook plus my bank versus their checkbook and their bank." Furthermore, Mr. Horvath claims that he, without having better information about the company's finances and dealings, can't bid fairly on the company, he told The Blade. Attorneys for the Packos argue, in court records, that Mr. Horvath and his attorneys "overestimated [his] ability to obtain financing and/or raise the capital necessary to submit a bid." In a filing this month, Mr. Skutch said that "it appears that Mr. Horvath made tactical errors in this litigation" and may have filed the recusal motion "in an effort to undermine proceedings associated with the sale of the entities in this litigation."
Although Mr. Horvath told The Blade that bridges have been burned between him and Tony Packo III, he previously viewed his cousin as his exit plan from the company. "He was my retirement ticket," Mr. Horvath said, referring to turning over the reins to the next generation. Mr. Horvath told The Blade he does not think his uncle has misappropriated funds from the company but said he named Tony Packo, Jr., in the suit because he "possibly facilitated or ordained" improper activity. "I think he's just being a protective father," he said. Mr. Horvath plans to appeal if a judge approves Tony Packo III's pending auction bid. Despite everything, he said the company should be able to survive. He said he hopes some semblance of family ties can be maintained if he gains control of the firm. "We'd have to resolve the issue of whether Tony, Jr., and I can work together again," Mr. Horvath said.
from Massachusetts Family Business Magazine, Dec 2010
by Christina O'Neill
Ira Bryck is Director of the UMass Family Business Center. Here, he discusses the challenges and choices of selling the family business – before, during, and after.
Q: For those who sell to non-family versus family, what are the different priorities in each scenario?
A proper positioning for sale of the business to a non-family entity requires more preparation, including: getting the ‘toys’ out of the business, specifically, boats, cars, camps in Maine, and other perk bloat. Some sellers choose to add these items back into the value of the company, so some brokers say don't worry about them-- but a clean looking company will be less suspicious. Too many toys makes the buyer think that where there's smoke, there's fire, in the form of other types of waste they're not seeing.
Then there's the task of figuring out the proper salaries that will be paid once the business is out of family hands, more arm's length terms on compensation for family members remaining in the business. Selling to family requires figuring out the discount or special pricing you'd give to family members (and calculating the right amount to pay the retiring parent, whether it's "enough to fairly maintain my lifestyle" or "pay me my salary until I die, and then to your mother, and after that, it's yours" or even "what the business is worth, considering that the child/buyer may be the one who added much of the increase in value")This is also a touchy discussion, especially if the seller's retirement or gifting to the children who are not in the business requires the right sales price. But in either case, it's healthy to get an objective appraisal of the value of the company, to avoid resentment and second guessing.
Q: For family business founders who remain involved in the business: What roles do they take on – advisor, chairman, business development, what?
Several founders have stepped back to some of the original jobs they liked best from the beginning- operating a crane, deliveries, etc. Others have done the opposite- researching the cutting edge future business opportunities - ie: what business are we really in? Delivery, not pizza; memories, not photography-- and how to be best at that. If there's a way to get back in touch with an aspect of the business that got lost to you when you had to sit behind a desk, that might re-ignite a passion that could lead to mentoring others who could benefit from your entrepreneurial rebirth.
Q: For sellers who exit the family business, are all of them looking for retirement-style endeavors, or are they ‘serial entrepreneurs’?
Many people sell a company due to burnout. But I think more people who sell are finished with that chapter, but still have fire in the belly for something else. They look to create something that has many of the pros and much fewer of the cons of what they sold. So it could be a smaller, hands on, organization, with no ‘administrivia’. Or if what they sold was something they fell into, but weren't passionate about, they intuitively do what Gail Sheehy suggested in Passages: to do something you were in love with when you were 12, but which you now have the resources to explore in a fuller way. Many others consult in some way, specializing in an aspect of their work that they did with gusto.
Q: Those who mentor: Do they join Service Corps of Retired Executives (SCORE) or do their own version?
Both. SCORE is good not only for the mentoring, but it's good camaraderie for like minded retired entrepreneurs- a good think tank. But their own version could also include serving on a board of a nonprofit, or doing something to "give back" that they never could afford to do before (i.e.: volunteer in schools, or work with charity)
Q: For those who undertake philanthropic activites, are their adopted causes relevant to what they did in business? Example: Former construction-business founder who is now helping rebuild Haiti.
All sorts of projects come into play here. Maybe a relative had a certain disease, and working for a cure is helpful and therapeutic. Or, there is a problem of society that you always complained about, about which you can now do something locally.
From Pest Control Technology Magazine, December 2010
All In The Family
Pest management professionals walk a high wire when they mix business and family, but these strategies will prevent your family from a fall.
By Steve Smith
When a family business succeeds, it’s a thing of beauty: father and son, brother and sister sharing in the rewards and support that only family can provide. But when a family firm goes wrong, it can go very wrong, ripping a family tree apart by the roots and leaving a mound of psychological and financial debris behind.
So how can your family avoid a disaster? Put extra emphasis on documentation, communication and professionalism, says family business expert Ira Bryck.
“Ultimately you have to treat your business like a business and your family like a family,” Bryck says. It’s a catchy slogan, but its full meaning translates into hard work and due diligence. “Treating your business like a business really means going overboard with professional structure and processes, even though your coworkers are family,” Bryck says.
Bryck worked alongside his parents for 17 years and now advises family run firms as director of the University of Massachusetts’ Family Business Center. Based on his interaction with thousands of entrepreneurial families, Bryck says these strategies will keep your family and its businesses on the right path.
Above All, Be Honest.
It’s easy for families to swing between being overly critical or overly forgiving with one another at work. The antidote to both ills is honest, yet tactful, communication, beginning with a realistic assessment of whether or not you can work together. “Your family must have the ability to peacefully resolve conflict,” Bryck says. “If you don’t have the flexibility and sense of humor to be able to appreciate each other, then you are really asking for trouble. And, frankly, many families don’t have that.”
Document, Document, Document.
Because the employees are mom and dad, brother and sister, families who work together often falsely assume they don’t need much documentation. But Bryck stresses that paperwork is even more important for family run firms because when family drama creeps into the workplace, a foundation of written principles will keep everyone on the same page.
Most states require a partnership agreement, a legal contract stipulating the details of how individuals will collaborate in business and how they intend to share profits and losses among involved parties. Beyond that, Bryck suggests a family business create a partnership charter, a series of documents that stipulate the business’ vision, goals, code of conduct, employee handbook, processes and systems, emergency planning, succession planning and more. “Lock the family in a room and talk frankly about what is expected from each family member and what the business is about. Once the major issues are agreed upon, then it’s time to put the details in writing. Then revaluate and update those documents every year,” Bryck says.
Build A Meritocracy.
The biggest issues facing a family business are how to divide the responsibilities among individual family members and how to handle compensation. It may be tempting to “keep things equal,” thinking that paying each family member the same amount will keep the peace. But that’s a recipe for mediocrity, Bryck says. Accordingly, he suggests every family business use written job descriptions with each job having a set compensation level based on the job and the free market value of the required skill set. What’s more, compensation should be bolstered by incentives and performance-based bonuses—documented with written goals and benchmarks—so that high-achieving family members are rewarded for their successes. “This kind of documentation helps avoid miscommunication and resolve conflicts over how and why individual family members are compensated,” Bryck says.
When it comes to ownership and profit-sharing, it often makes sense to split things evenly. But with annual salary, a performance-based system is vital for keeping each family member properly motivated. Further, the sense of fairness and opportunity created by a meritocracy is crucial for attracting and retaining non-family employees as the business expands.
Behave As If You’re A Major Corporation.
Families who work together often become too informal, assuming, for example, that a conversation over Sunday night dinner is sufficient for planning the work week ahead. While Bryck doesn’t object to talking shop at home, he cautions that it’s dangerous for families to ignore the formalities of a professionally run enterprise. Ultimately, the more room you leave for miscommunication, the more volatile a family firm can become. So hold weekly staff meetings at the office, even if the “staff” is mom, dad, cousin and sister. “If Dad has an idea, he needs to write it down and add it to that week’s meeting agenda, rather than calling Junior at midnight on a Saturday,” Bryck cautions.
Seek Outside Perspective.
Because it’s easy for family members to get complacent and comfortable with one another, it’s crucial to solicit feedback from outside professionals. Family business owners should assemble a board of advisors who can periodically provide a candid evaluation of the business and its employees, without the filter of familial relationships. “And if you don’t have a board of advisors, join a roundtable at your local Chamber or business organization,” Bryck says. “And if you don’t have access to one of those, then just go out to lunch occasionally with other business owners who have an angle on something you need to know about.”
Keep Business Separate.
Fortunately, Bryck says, he rarely sees a complete disintegration of the family when a family business fails. “Usually family businesses succeed or fail, rather than completely blow up. But when they do burst apart, it is usually because one party feels like he or she has been wronged and that’s when litigation ensues.” That’s why it’s so vital to spell out key details in writing and get the buy-in, even signed agreements, from all involved family members. With every detail clear upfront, there’s much less chance for hurt feelings later on. Plus, the structure and professional culture you’ve created at the business will help minimize the impact when a family relationship hits a rough patch outside of work.
Once the parameters of the business are in place and running, make every effort to separate work time and work roles, from family time and family roles. “You really need to sit down with your family right in the beginning and formally lay out what the business is and document it. Then make it clear that love for each family member will be expressed separately from opinions about what the business needs to succeed,” Bryck says.
But be clear, Bryck warns, no matter how well you’ve structured your business, ultimately working with family requires all involved to possess an advanced level of maturity, a level head, loads of personal discipline and exceptional communication. If you can’t say that about your family, think twice about including them in your venture.
FROM ROMANIA, HOME OF MY MATERNAL ANCESTORS!
Cum a schimbat criza afacerile de familie Criza a adus si altfel de schimbari in afacerile de familie, pe langa bugetele reduse: daca pana acum, copiii erau angajati la firmele parintilor, recent criza a facut ca tot mai multi seniori sa ajunga angajati la firmele copiilor. Parintii se gasesc nevoiti sa apeleze la ajutorul copiilor, daca acestia sunt antreprenori, in conditiile in care veniturile sunt din ce in ce mai mici. Batranii cu pensii mici, cei pe care boala nu ii mai lasa sa munceasca atat cat si-ar dori si cu aceleasi performante, dar si cei care nu isi gasesc loc de munca din pricina varstei inaintate, raman deseori doar cu optiunea angajarii la o firma a copiilor, arata Secondact. Aici, acestia pot gasi intelegere in privinta programului, care poate fi flexibil, sau in privinta modalitatii de lucru, care poate fi conforma cu necesitatile lor, spre deosebire de alte firme. Multi batrani aleg aceasta varianta pentru a-si suplimenta veniturile din pensii sau pentru a isi continua cariera, chiar daca nu mai pot fi angajati full-time. Cu toate acestea, schimbarea poate fi dificila din pricina factorului emotional implicat in astfel de relatii, arata expertii. Parintii care vad ca un copil devenit antreprenor este pe cale de a lua o decizie gresita se vad nevoiti sa accepte acest lucru, in conditiile in care decizia apartine, pana la urma managerului. Pot aparea deseori conflicte din cauza modalitatii de lucru diferite dintre exponentii unor generatii. Mai mult, atunci cand copilul arata ca are anumite obiective pe care parintele trebuie neaparat sa le indeplineasca, sau cere disciplina la locul de munca, lucrurile se complica. Deseori insa, parintii au un mare avantaj prin obtinerea unor astfel de posturi: ii pot oferi copilului un ajutor, prin experienta pe care o detin, si pot privi indeaproape evolutia sa ca adult, fiind mandri de ceea ce realizeaza impreuna. Specialistii recomanda ca, in astfel de cazuri, copiii si parintii sa nu piarda din vedere relatia pe care o au in afara companiei: "Este foarte important ca si parintii si copilul sa isi mentina relatia familiala in afara companiei. Trebuie organizate intalniri si in circumstante in care nu se discuta despre afaceri", spune Ira Bryck, director al Centrului pentru Afaceri Familiale Amherst, de la Universitatea din Massachusetts.
Feb 15, 2010 A Providence Business News
SPECIAL SECTION: 2010 FAMILY-OWNED BUSINESS When business, family intersect By Mary Lhowe Contributing Writer PBN PHOTO/DAVID LEVESQUE MAKING IT WORK:
The director of the University of Massachusetts Amherst Family Business Center has a New Yorker cartoon posted on his door that depicts a man speaking to a cluster of young children. He is saying, “I’ve called the family together to announce that, because of inflation, I’m going to have to let two of you go.”
In a nutshell, the picture demonstrates one challenge of family-owned businesses. That is, some principles of the business world, like controlling costs and using human resources efficiently, are in conflict with principles of the family, like loving, supporting and sustaining younger and struggling members.
“You always have to be very clear about what hat you are wearing,” said Ira Bryck, director of the family business center at UMass, in Hadley, Mass. “A company president might need to tell a worker, ‘Speaking as your brother, I would give you a kidney; speaking as your employer, we are thinning the herd here, and you have to go.’ ”
American Mussel Harvesters Inc. founder Bill Silkes, 60, says that maintaining his boss role and his father role is a constant challenge.
The North Kingstown company grows, ships, and markets live shellfish to customers across the country. Silkes founded the business in 1986, and its 35 employees include his sons, Gregory, 28, Adam, 26, and Mason, 22. The elder Silkes also owns the 9-year-old Saltwater Farms, an oyster and mussel farming operation.
“I ask myself,” Silkes said, “Am I being fair to all of the children and do they perceive it that way, or do they think I am showing favoritism?”
For example, Silkes decided to send his second son, Adam, to an aquaculture conference in San Diego because Adam was the more logical choice due to the nature of his work. So Silkes talked to his older son, Gregory, to make sure he did not feel slighted. One factor that helped in this instance, Silkes said, was that all the sons’ job descriptions are well-defined.
At the Jenn Lee Group, a rule prohibiting talk about work after 7 p.m. was put in place when Jennifer Lee Bogutt, president and founder, decided in January to hire her husband, Michael Bogutt, as the East Greenwich company’s new director of business development. The 7-year-old firm works on advertising, marketing and public relations.
Jennifer Bogutt said she and her husband talked exhaustively about the risks and benefits of bringing him onto her staff before they took the plunge. Ultimately, they decided that Michael could bring the passion and abstract thinking that the position needed. She said the two have a successful marriage, and they decided to make a parallel move into work, for the benefit of the business.
Michael Bogutt said he and his wife had been talking for years about the daily tasks and challenges of her communications business before he came onboard. He quipped, “I’m finally getting paid for all this advice I’ve been giving.” Because of their frequent and open conversation, he said, they have both evolved past the point where they get bent out of shape over disagreements. The solution to working through disagreements, Michael Bogutt said, “is to keep the argument within the context of the topic.” He believes this maturation in their personal life also will serve them well in business.
Daily life at the office since he joined the staff has been smooth, Michael said. The 10-person staff bustles, with everyone busy with his or her own tasks. “We don’t spend much time together during the day,” he said. “It is not like we get home at night and look at each other and say, ‘oh, not you again.’
Michael and Jennifer drive separately to work, he said, because both need a car during the day. On the occasions that they have driven to work together, they turn the radio on and refrain from business talk until they get to the office. The 7 p.m. rule applies until the 9 a.m. whistle blows the next day
PERSONAL FINANCE, FAMILY, LENDING, BORROWING, INTEREST RATES
by Jessica Rao CNBC.com 08 Feb 2010 |
Five years ago, Dorothy Fuscaldo, a personal trainer in Westchester County, N.Y., lent $5,000 to a close friend, someone she considers a sister.
“She was having problems at home, with her family, and she wanted to be out on her own,” Fuscaldo says. So, Fuscaldo agreed to lend her money toward a down payment for an apartment. A few months later, her friend decided not to buy her own place. Instead, she got into a relationship and moved in with the person. Fuscaldo, on the other hand, never got her money back.
Though the loan has come up in conversations over the years and they remain close, Fuscaldo has never asked her point blank for the money.
“'I know I still owe you the money, but right now I got this, that and the other thing,” she recalls her friend saying, “Now what do you do.”
"What pissed me off,” Fuscaldo says, “is that she bought a motorcycle about two years ago. It was not a necessary item, medical bills I would understand. That could have been my three thousand dollars.”
Even though it doesn’t look likely, Fuscaldo still feels somehow, she will get the money back.
What can we learn from her?
Rules of the Road
If Fuscaldo had spoken to Dennis Stearns, President of Stearns Financial Services Group in Greensboro, N.C., she might have done things a bit differently.
Though Stearns does not believe like some that it is never a good idea to lend money to family or loved ones, he says, “we try to determine what type of situation it is and that a lot of times determines whether you should do it or not.”
It also establishes how much structure and interest to charge. Though his philosophy is based on parents lending money to their children, he says it can also apply to other close relationships with some caveats.
Stearns’ schema for identifying good and bad borrowers includes three primary types.
The first category Stearns describes as “Grounded.” These children have run into temporary problems and may need a onetime fix. They tend to pay parents back and it tends to be a very positive thing that they are helped out, so there is no real harm done to the relationship.
“We’ve done two of those loans just this week and we encourage them all the time,” says Stearns.
He calls the second type “Accident Prone.” This child gets into trouble occasionally, and needs more structure in the loan in the form of written documents and also more coaching. They frequently need to have a family member or a financial advisor talk to them through the situation and how to avoid letting it happen again.
The key is to make sure they don't drift towards becoming type three, what Stearns calls “Maladjusted.” This type always seems to need more money, and the money perpetuates further poor decisions or bad behavior.
“These loans need lots of structure and sometimes tough love, or not bailing them out, is the right answer,” he says. Type three people almost always require counseling by a financial planner, accountant or family lawyer.
How much interest should you charge in each case?
Stearns recommends using the short-, mid-, and long-term rates that the IRS mandates under the Applicable Federal Rate. The short-term rate of 0.57 percent is great for type one and some type twos. The mid-term rate of 2.45 percent represents most loans to type twos and threes, but in some cases the long-term rate of 4.11 percent is necessary.
Business Before Friendship
Though some of the same thinking applies, there is a bit of a difference when the loan is funding a business venture, says Ira Bryck, Director of the University of Massachusetts- Amherst Family Business Center.
These days, with the lack of access to capital, he says he sees a lot of small- and medium- sized companies that need money, and they are going to friends and family to borrow, “even though it is really hard for friends and family to act professionally or to say it’s just business.”
If asked for a loan, Bryck recommends sitting the person down and giving them a five-minute speech something on the order of: If you are going to use me as your bank, than I am going to act like a bank and I am going to ask what is your business plan, what is your return on investment, what sort of risk am I taking?
“A bank would not lend you money without looking at the three Cs—character, cash, collateral. If I am lending you $10,000 and you’ve invested $50,000, at least I know you have skin in the game, but if I’m funding the entire operation, that’s wrong,” he says.
“It pays to sit down and reflect on the conversation, rather than having a knee jerk reaction and saying sure here is the money because I feel guilty or there is no way in hell I’m going to lend it to you.”
Outside of that, Bryck says, as a family member, it is important to lend only what you absolutely can afford to lose. If someone is borrowing money for a business, there is risk involved.
“Entrepreneur means one willing to accept risk. If you are lending to an entrepreneur, you are an entrepreneur,” he says.
Online Lending Solutions
Bryck recommends using an intermediary like Virgin Money USA. It's documents formalize loans between people who know each other; users can create and customize them outline, says Sarah Deklin, Virgin Money USA Chief Marketing Officer.
“It is certainly not a bad thing to lend money to family and friends, and can be extremely productive for both parties,” she says, “but what is important is that you talk ahead of time to make sure that everyone is clear on what the expectations are around the terms and the timing and schedule of repayment.”
Parents frequently use this service to lend money to children for college or to buy homes, and friends and colleagues, lend to each other to start or fund businesses. There are requirements on the state level about what consititutes an acceptable interest rate.
On the low end, you need to charge a minimum interest rate or the lender could be subject to a gift tax, and on the high end, you need to charge interest rates under a certain threshold which varies by state, otherwise it could be deemed usury.
“Typically, at the end of the day, what happens is the borrower is getting a lower interest rate than they would get from a traditional lender, and the lender is earning a higher interest rate than they would on a typical fixed investment.”
Fuscaldo could have used Virgin Money US, legalzoom.com or nolo.com to customize or download a promissory note or other legal documents.
Bryck shared that, on a personal note, twice he lent a few thousand dollars to friends, and both times, he wasn’t paid back in what was “loosely defined as a reasonable period of time.”
So, what he wound up doing in each case was going to his friends and basically writing off the loan, saying that their friendship was more important than the money.
The unexpected outcome? Each time, Bryck wound up getting paid back. Once, because his friend felt so shamed by the conversation that he returned the money, and the second because the next day, ironically, his friend won money and gave it to him.
At this point, may be Fuscaldo's best and only hope of getting repaid.
© 2010 CNBC.com
the first of the 3 plays created by Ira Bryck (The Perils of Pauline's Family Business), is performed regularly in Spain (known there at Los problemas del negocia familiar de Cristina):
18/1/2010 Una obra teatral expone en Teruel los problemas del proceso de sucesión de las empresas familiares “Los problemas del negocio familiar de Cristina” es una obra teatral que muestra la problemática de la sucesión generacional. Una de sus conclusiones es que el traspaso debe comenzar a planearse con un mínimo de 10 años de antelación. La función tendrá lugar este jueves en Teruel, donde más del 90 % de los negocios son familiares. La obra va dirigida a todos los miembros de la familia empresarial porque relata los problemas de la sucesión Teruel.- La obra teatral “Los problemas del negocio familiar de Cristina” que tendrá lugar este jueves a las 19.00 horas en el Palacio de Exposiciones y Congresos de Teruel, pretende hacer vivir la experiencia de una empresa familiar a través de dos generaciones. El argumento central de la misma se basa en la representación del proceso de sucesión, por lo que va dirigida a todos los miembros de la familia empresarial. “El guión de la función que pertenece a Ira Bryck y Michael Camerota, ha sido adaptado a la particularidad empresarial aragonesa”, tal y como ha indicado Isabel Lecina, de la Fundación Basilio Paraíso. Lecina ha explicado que, a lo largo de tres actos, los asistentes podrán revivir todas las emociones que cada uno de los miembros de la familia experimentan en uno de los momentos más importantes para la continuidad de la empresa como es el tránsito generacional. En este sentido, la obra aborda aspectos como la elección de sucesor y su impacto en cada uno de los participantes, las dificultades para separar los distintos roles como familia, empresarios y accionistas, los conflictos familiares, el papel de la mujer en la empresa familiar y la participación de los familiares políticos, entre otros. En “Los problemas del negocio familiar de Cristina”, el público tiene una participación activa muy importante. Durante cada uno de los entreactos, con ayuda de un conductor, los empresarios familiares asistentes contribuirán con su experiencia a ofrecer alternativas y soluciones a conflictos que la familia de la obra experimenta en cada una de las fases del proceso de transición generacional. Según Isabel Lecina, más del 90% de las empresas turolenses son familiares y cerca del 80% no supera el proceso de sucesión. Por eso y por todos los temas que aborda la obra, la gerente de la Fundación Teruel Siglo XXI, Carmen Sancho, ha resaltado que deben acudir todos los miembros de la familia empresarial. Lecina también ha animado a la asistencia de todos los empresarios y sus familiares porque “van a verse reflejados en cada uno de los aspectos que relata la representación”. Además, “queremos sensibilizar a los pequeños empresarios que deben anticipar y prevenir convenientemente el proceso de sucesión”, ha explicado Lecina. Según la miembro de la Fundación Basilio Paraíso, “este proceso de anticipación tiene que ser por lo menos de 10 años”. Para el director de la Caja Rural de Teruel, José Antonio Pérez, “esta obra aporta conclusiones que deben ser conocidas por todos los empresarios ya que tan importante es traer nuevas empresas a la provincia como mantener las existentes”. La Fundación Basilio Paraíso han sido los encargados de organizar esta obra teatral en la capital turolense en colaboración con la Fundación Teruel Siglo XXI, la Cámara de Comercio de Teruel, Caja Rural e Ibercaja,
article from Mass Family Business Magazine discussing working with your spouse, interviewing some members of the UMass Family Business Center, and presenters, who partook in our recent Summit for Spouses in Business CLICK HERE
From a respected business newspaper that does not allow free posting of its articles:
An article on 12/21/09 about "Closer Management in Difficult Times " quoted Ira Bryck:
Dow Jones does not authorize the self-posting of any parts of its content to websites. However referring to an article or creating a brief summary in your own words would not require our permission. Thank you for honoring our copyright. Best regards, Gail Bondi Dow Jones & Company, Inc. Reprint and Permission Services (5/11/07)
Balancing Job of Overseeing With Overdoing
CEOs Are More Hands On During Downturn but Risk Drowning in Minutiae and Causing Resentment Over Micromanagement
Dec 21, 2009
By CARI TUNA
Across the country, managers are scrutinizing budgets, asking employees for more frequent updates, stepping in to close deals and taking on other duties they normally delegate. They're struggling not to micromanage, wary of crushing morale or drowning in minutiae. But many say the extra control is necessary in an uncertain economic environment with razor-thin margins for error.
Experts insist closer management in a downturn is warranted. But Ira Bryck, director of the University of Massachusetts Amherst Family Business Center, cautioned that closer management can devolve into micromanagement, which adds to stress and discourages initiative among employees.
UMass Family Business Center: Outreach to Key Economic Sector
(written for UMass Outreach Development report)
Since 1948, Grynn & Barrett Studios has survived boom and bust economies, growing from a small full-service photography studio to dominating the school picture market in the Northeast. The business has gone from being a sole proprietor operated by its founder, Robert Grenier, to a partnership run by his four sons. Much of the business’s evolution – new markets, new name, new technology, and new headquarters in Holyoke, Mass. – occurred under the tenure of brothers Larry, Daniel, Marc, and Chris. Their success is due to their savvy in the world of business and with an assist from the UMass Amherst Family Business Center. Started 15 years ago, the 70-member center offers professional education to family business owners with opportunities to network and consult with each other at dinner forums and roundtable events about problems and solutions inherent in family enterprises. Larry Grenier, president and CEO of Grynn & Barrett says the center’s programs are engaging and help him and his brothers make strategic business decisions as well as grapple with issues such as succession planning. Grenier and his brothers took over the reins of the 40-employee firm in 1982. Since then, revenue at the firm increased by 900 percent. “If I have critical issues I bring it up at the CEO roundtable. It’s a tight group and very confidential,” says Grenier. He says he rarely misses a dinner, where there are nationally renowned guest speakers, or a roundtable discussion. “To me it’s part of my routine, when the yearly schedule comes out, I put it in my calendar right away,” says Grenier. Ira Bryck, the director of the center, says companies such as Grynn & Barrett are the backbone of the Western Massachusetts economy. They support the center both financially by paying $2700 annually and by providing feedback reflecting their needs and interests, which determines the agenda. . Though delivering a valuable service, for some family businesses, the fee can be a deterrent to joining the center. Gifts that help support membership costs are one way of expanding the center’s good works and helping other family businesses not just survive, but prosper.
HOW TO MAKE THE SUCCESSION SUCCEED
Ira Bryck says that asking the right questions about one’s family business will dictate how the succession plan can succeed.
Business West, January 2009
By DAN CHASE
Cindy Johnson, president of Fran Johnson’s Golf and Tennis in West Springfield, remembered the shock of discovering that her father, Fran, the founder of the family business, had decided to sell the company.
“When Fran made the deal, my brother Val and I were totally blindsided,” she said. “We both worked at the store. We never had any idea that he was looking outside the business, let alone outside the family. When he sat us down, it wasn’t ‘here’s what I’m thinking about,’ it was ‘here’s what is going to happen.’”
Over the course of the next nine months, as the prospective buyers constantly tried to renegotiate the purchase plan, and finally tried to change the closing date a third time, Fran said, “enough is enough.” Luckily, Cindy had been attending programs staged by the UMass Amherst Family Business Center during this time, and suggested a different plan to her father, one where she would buy the company. The original deal ultimately fell through, and the Johnsons were able to keep the business in the family.
Such stories are not uncommon, said Ira Bryck, director of the Family Business Center (FBC), who is a specialist in family-business succession planning and has essentially seen it all when it comes to this aspect of business management.
“There are people who tell me, ‘I want the most beautiful succession, one where there is no conflict, and the company switches hands without skipping a beat,’” he said. “I tell them, ‘that doesn’t exist.’”
Since 1994 Bryck has been assisting in the often-complex, murky, or just plain difficult trials of a company as it passes from one generation to the next. While Bryck said the FBC is a branch of UMass Amherst’s network, it is a resource that is available to any local business owner preparing for either their succession planning or the other problems and pitfalls of a family company.
Bryck calls the FBC a member-based organization with a roster mostly of small to medium-sized businesses, because that is the nature of this area, and he encourages anyone interested to come to both their scheduled roundtable-style discussions and what he calls “well-catered dinner forums.”
Recently, BusinessWest sat down with Bryck to talk about some of the situations and solutions faced by those running a family business as they get ready to pass the torch.
Good, Bad, and Ugly
Perhaps the most logistically complex issue for the family-run business is the change in ownership from one generation to the next.
“When you talk about ownership, you get into some very sticky questions,” said Bryck. “How does the parent set a value on their business? For them, problems can range from their low-balling the worth of the company, ‘just something they started in their garage,’ all the way to an over-exaggerated notion of worth, that ‘this is the most valuable thing ever.’ But if the parent doesn’t give their business enough worth, is there going to be enough money for them to retire?”
While experts might suggest that a retiree can live on 80% of their working salary, Bryck noted that often such a figure is completely unrealistic. One can easily find their needs surpassing 100% of their former income, now that there is the possibility of travel, or money spent on grandchildren, or simply the fact that an earlier generation has a ‘Depression-era’ mentality, with the attitude of “I’m mortified at the idea of not having more than enough.”
At the other end of the pricing spectrum, if a parent sets the value of the business too high, will there be enough money for the children to successfully manage themselves in the new economy? Will there be a chance to invest in corporate growth, or to take risk? The new owners might need to run the business in an overly conservative way just to pay off their parents. Pricing the family business can get thorny when the children say, “it was me who helped make this company what it is today. Why should I have to pay you for this success that I helped create?”
Within the passage of ownership, there can arise questions that stem from the different children’s roles in the business. What happens when some are in the business and some aren’t? Does the parent give or sell the company to the children who have worked within it, perhaps leaving the real estate to the other children in an effort to be fair to all?
“In that situation,” Bryck laughed, “imagine the siblings saying, ‘great. Now you’re my landlord. That’s nice. If we never got along very well in the past, now we have landlord/ tenant disputes.’”
The transition of management is another problem for the business. The younger generation might be running the business; they are the general manager, and their parent might be called the president. The successor may be running the business completely, but they have no ownership whatsoever. While this might be seen as a way to avoid heavy taxes in the transference of ownership, Bryck said that, “in most cases, the smartest family-business owners are the ones who can sit down and have the discussion about that which is undiscussable: ‘my children are running the company. Now, how are we going to effectively get this out of my hands and into their hands?’”
Crippling estate taxes are a situation that very few family companies need to face, yet that is often an unrealistic fear fostered by a lack of professional advice.
But often, the most difficult aspects of transferring ownership are the very things that aren’t or can’t be said. The mindset of the parent, getting ready to cede control, and that of the next generation looking to take over may make it challenging to even begin the conversation. While the operational aspect, the day-to-day work, can be addressed with business plans and legal expertise, one needs to understand that, for the former owner, there’s often a great deal of themselves tied to the business.
“Not to take away anything from the owner’s family,” said Bryck, “but you are dealing with the retirement of someone who might consider the business their baby. They might have more of an attachment to the business as their child than they do to their own family. This could be a man with no hobbies. The business is his self-identification. They say that the average founder of the family business has 90% of his assets tied up in that business. I would further offer that the business has 110% of their self-esteem.”
Not only is it difficult for the parent to talk about leaving the company, it might be difficult for them to even think about it, Bryck continued. “The junior generation will ask, ‘how do I start this discussion with my parents?’ but the older generation will interpret a question about their retirement as ‘when are you going to die?’
“As a counterpoint to this psychological showdown, the senior generation will say, ‘how do I start a discussion with my children about taking over some responsibility in the company when they seem content with where they are? They don’t want me to take my name off the bank note, they don’t want to put their own personal property on the note — they don’t want to take the risk.”
Bryck offered that these personal perspectives can often dismantle the entire logical structure of a sound succession strategy. “While the older generation might say, ‘you don’t work as hard as I do,’ the younger generation will say, ‘we do work as hard, we’re just more efficient, and we have a better work/life balance.’”
Advice from the Expert
Bryck has spent a lifetime dealing with such family-business succession issues. As the fourth generation of retailers on Long Island, Bryck said that where he is today is totally a result of what he has seen in his own family’s history.
“We were the oldest children’s clothing store in the nation. My father said to me, ‘you’re the only one of your siblings who can take over here.’ When he told me that I could always return to the business if all else fails, I interpreted that as, I’d only come back to work there if I were a failure.”
After struggling with the store for many years in a neighborhood wracked with crime, Bryck said he made the difficult decision to shutter the business. He’s written three plays based on his experiences with family business, with the most recent, A Tough Nut to Crack, dealing with the decline of that family store.
With a lifetime of firsthand experience, and more than a decade of consultation and mediation in family-business strategies, Bryck today travels extensively, speaking on succession planning and a host of other family business-related topics. When asked to give his perspective on how a family business should begin to address its own generational transition, he offered some advice.
Succession planning has several parts to it, he explained. For starters, as simple as it might seem, a succession plan should be approached realistically. A business doesn’t one day switch owners, with the parent handing over the keys, while all day-to-day operations continue to run as usual.
Often, some of the most important events in the family business’s existence, ownership transition and the family’s succession plan, are not things that can be cookie-cut for any industry.
“If people think that succession is as simple as the parent going to pasture with the children instantly stepping into their shoes, they couldn’t be any more wrong,” said Bryck. “It shouldn’t even be considered an event, because it is more a process, ideally taking place over five to 10 years of very slow passing. Think of an Olympic race — the handover doesn’t take place at one point in time, because you’d drop the baton. There’s a section of track where the two runners are side by side, so that there’s no slowing down, and they pass it between them effortlessly.”
To start the process, Bryck suggested that the primary stage is to convene a board of advisors comprised of an accountant, lawyer, banker, and financial advisor. If one hasn’t had them on board before, now is the time. Pay them their per diem, and have them create an agenda to focus on the individual’s welfare and the business, he said.
“Tell them what your goals are, and have them come up with a battle plan — measures that can provide a course of action for your next few years. Have the questions ready for this board that will dictate what you want to happen for your business, but also your family.”
A series of questions is a good way to assess what both generations want from their succession, he continued. The first question, before talking to anyone else, that all parties involved need to ask themselves is, “where do I want to be in 10 years?”
Bryck quotes best-selling author and excellence guru Steven Covey, with his statement, “begin with the end in mind.” The younger generation needs to ask, “is this realistically what I want to be doing with my life?” If there are other professional goals, it would be wise to begin that planning now, not to wait for the inherited business to run itself into the ground before attempting the next venture. For the parent generation, the question to ask is, ‘what am I going to be doing with myself now? I’ve been my own employer for the last few decades; do I find a smaller role in the company, or do I now find myself wanting to go in a different direction altogether?”
Bryck mentioned that many questions need to be asked about the role of the family. Does family come before business? From a social perspective, is the business the only tie to keeping the family together?
In the case of the extended family, do the parents want the kids to remain friendly, and what do they need to do not to screw that up? If in 10 years their children want mom and dad to be living a comfortable lifestyle, what do they need to do not to screw that up? Bryck offered that the parents need to have a realistic assessment of how much money they need to live, and that the question of how much value to assess their business can best come from an unbiased professional.
As the company prepares to shift ownership, it will be important to re-evaluate aspects of the business that have been lagging. In addition to asking the questions about each family member’s goals, what about the goals of the company? Is now the time to imagine some form of restructuring?
“You might need to get rid of some of the toys, some of the deadwood staff,” said Bryck. “If the ultimate plan is to sell the business outside of the family, perhaps you want to ‘bulk up,’ which might be completely artificial growth, but, from a sales perspective, a good strategy to make the company a viable, marketable venture.”
Setting these benchmarks with one’s board of professionals is necessary, Bryck continued. While not an easy task with the economy in such a state of flux, the process is important, and individuals must ask themselves what their lifestyle is going to look like, and how much they need the business to help them get there. “Are your children going to want to continue to work in the business, and what would that mean for you if they didn’t?”
When such initial questions are put on the table, Bryck suggested that now is the time to come to the FBC and to begin taking part in its events.
“This isn’t something like ‘Business Anonymous,’” he said. “These forums are a place for you to meet others who have gone through various stages of their own company’s existence. Perhaps the speaker that night doesn’t address your needs directly, but ultimately you are going to meet people with whom you can relay your thoughts and fears.”
Looking at the archives of past speakers and lectures, all available on the FBC’s Web site, it is clear that the scope of the center is extensive, and the caliber of speakers is always high.
The next scheduled meeting, taking place on March 11 at the Delaney House in Holyoke, is called “What Kind of Company Would You Run If You Could Produce Money?” with a talk given by Charles Kittredge, scion and CEO of the Crane Paper Co., current manufacturers of the paper supplied to the U.S Mint. to produce currency.
Daughter Knows Best
Cindy Johnson gives the FBC a great deal of credit with helping her secure the legacy of her business. “Before our dad dropped the bombshell about the outside sale,” she said, “we didn’t have any kind of succession plan in place.”
Today, Fran enjoys his retirement in Florida, and Johnson says that their relationship is as strong as ever. “I might send him ads to look over from time to time, and he’ll send it back with ‘that’s a good idea,’ or ‘focus on this instead.’”
When asked if she has learned from the past, Johnson laughed. “Well, I don’t have any children of my own. I like to say that I have 25 kids — all of my employees. My brother has a son who loves to come in to work, and Val does a great job of not making this seem like a chore, or something forced upon him. One day about two years ago, when he was 7, we were having lunch, my nephew Coby and I, and he asked me, ‘Grampa gave you the store, didn’t he?’ in that way kids have with ideas on how things work. I thought to myself, yeah, sure, he gave me the store.
“Coby went on, ‘who are you going to give it to next?’ followed by, ‘not me, right? I want to do something a little more active,’” she continued. “Out of the mouths of babes, but who knows where he’s going to be in another 20 years? If nothing else, I want him to continue to come to work, keep it fun, develop good people skills, and see what happens down the road.”
Because eventually, the current generation of the Johnson family will have to cope with succession, just like the one before it.
Amherst firm said to be 12th oldest in America
By Nick Grabbe, Daily Hampshire Gazette
Created 01/20/2009 - 05:25
AMHERST - Family businesses have only a 30 percent chance of surviving into the second generation, and third- or fourth-generation ownership is rare.
So it's all the more impressive that the Cowls Companies of North Amherst - which manufacture lumber, manage timberland and operate a building supply store - are in the ninth generation of family ownership.
"That's off the charts," said Ira Bryck, director of the University of Massachusetts Family Business Center. "For an American company, it's astounding."
The Cowls Companies are cited in the current issue of Family Business magazine as tied for 12th place among the oldest family businesses in the U.S., and tied for 84th place in the world.
Most of oldest American family businesses are based in New England. The oldest is the Avedis Zildjian Co., a Norwell-based company that's been making cymbals since 1623, and No. 2 is Tuttle Farm of Dover, N.H., founded in 1635, according to the magazine.
Neither comes close to the world's oldest family business, Houshi Onsen, innkeepers in Komatsu, Japan, since the 8th century, according to the magazine.
Recognition of the Cowls Companies' longevity comes as Hadley is starting to celebrate its 350th anniversary and Amherst its 250th. The Cowls family was involved in founding both.
Jonathan and Hannah Cowls were a founding family in Hadley, and in 1741 their great-grandsons acquired the land in North Amherst where the company is still based.
Ninth-generation siblings Cinda and Evan Jones still meet there every morning at 6 with their father and aunt, Paul Jones and Gert Wegel.
To survive so long, family businesses need a reason for existing other than making money, said Bryck, who himself was the fourth generation to run a children's clothing store.
"They need to have a soul," he said. "They need values that support the business and the family but support the business more."
Bryck cited six keys to longevity delineated by family business expert William O'Hara. They are: respect for elders, business before family, a commitment to manage conflict constructively, freedom from competing interests of outside shareholders, an unwillingness to be responsible for the failure of a centuries-old enterprise, and an ability to change without forsaking the family's basic values.
"A smart family business has an institutional memory where they can look back and say, #We survived the war and the Depression, so what were the secrets of success that made us so resilient and how can we do that again?'" he said.
The Joneses admire the motto, "We won't allow the business to destroy the family, and we won't allow the family to destroy the business," Cinda Jones said.
She said she wants to not only pass the business on to the next generation, but to "make a contribution to help it change and grow to meet the needs of our time."
The company is facing a challenge from the new Home Depot store on Route 9 and the Lowe's Home Improvement Center just to the west, which is due to start construction this spring.
"We have a responsibility as a community member and service provider," Cinda Jones said.
"We don't take it for granted that we deserve anything. We need to prove to customers every day we're serious and we have integrity and work twice as hard as the competition."
Daily Hampshire Gazette © 2008 All rights reserved
From a respected business newspaper that does not allow free posting of its articles:
An article on 11/3/08 about "Micromanaging Bosses" quoted Ira Bryck:
Dow Jones does not authorize the self-posting of any parts of its content to websites. However referring to an article or creating a brief summary in your own words would not require our permission. Thank you for honoring our copyright. Best regards, Gail Bondi Dow Jones & Company, Inc. Reprint and Permission Services (5/11/07)
Frontline workers often are best suited to identify problems and suggest creative solutions, says Ira Bryck, director of University of Massachusetts's Family Business Center in Hadley, Mass. But when conditioned to rely on a heavy-handed manager for guidance, employees become complacent, he says.
Managers should give employees goals and leave them to work out the details, Mr. Bryck says. They should resist the temptation to take control when subordinates make minor mistakes.
Some micromanagers need a push from others to break the habit. Mr. Bryck recalls the CEO of a small software company who asked him why employees didn't follow instructions. After interviewing employees, Mr. Bryck determined they resented the boss's heavy hand. He asked the employees to rewrite the CEO's job description to help him understand where his guidance wasn't necessary.
From a respected business newspaper that does not allow free posting of its articles:
An article on 8/8/08 about "Preparing Kids for a Family Business" quoted Ira Bryck:
Dow Jones does not authorize the self-posting of any parts of its content to websites. However referring to an article or creating a brief summary in your own words would not require our permission. Thank you for honoring our copyright. Best regards, Gail Bondi Dow Jones & Company, Inc. Reprint and Permission Services (5/11/07)
Business owners concerned that their well-off heirs will be ill-equipped for business ownership can teach them the value of hard work and the drive needed to run a successful company. Ira Bryck, director of the University of Massachusetts Family Business Center, recently offered some advice:
1) Teach kids the value of money from a very young age. Start by giving them an allowance. Also teach them exactly how the business makes money. “There are a lot of people who work for family businesses who think you just show up and make money,” Mr. Bryck says. (Read this Wealth Report post on teaching wealthy offspring the value of money.)
2) After college, have them work outside the business for three to five years to gauge their strengths, weaknesses and work ethic.
3) Grown kids interested in the family business should be assessed for their leadership abilities as anyone else. When choosing a successor, interview nonfamily employees and outside candidates, and assess your children using the same criteria.
“If it’s a tie, then the family member gets it,” he says. If the nonfamily candidate is clearly better-suited, encourage the family member to do something else. Some companies and family-business centers can offer leadership assessments for family businesses.
March 31, 2008
Running a family business can be challenging, but that doesn't make it unpopular:
At least 80 percent of all businesses in the United States are family owned, according to family business experts.
Still, only about 12 percent of family businesses survive into the third generation, and just 3 percent make it to the fourth generation and beyond, according to The Family Firm Institute in Boston, Mass.
So if you're involved in one of these businesses or contemplating launching one, it's important to know how to resolve conflict and work together as a family to increase your company's chance of survival.
"It's really complicated to not only be a family member but also a family business member," says Wayne Rivers, president of the Family Business Institute, a consulting and educational organization in Raleigh, N.C. "Being in a family is hard enough, and this adds to the complexity of their roles."
It may be difficult to combine family and business, but success is possible if you keep a few key pointers in mind.
For starters, don't force family members into a business against their will, experts say. That would only create more stress.
On behalf of the family members, parents often make decisions as "benevolent dictators" in a business, Rivers says.
"Your adult children ceased being children a long time ago, but parents never cease being parents," he adds. "Why not go to the people who have to live with these decisions and find out what their dreams and ambitions are?"
Also, assess whether the family members you bring into the business are capable of doing the job. "You need to make it part of your mission that you're going to fill every job with the most qualified person," says Ira Bryck, director of the UMass Amherst Family Business Center, who once stood at the helm of his own family's 90- year-old, fourth-generation children's clothing store in Freeport. "It's not possible [that] the most qualified person is always in your gene pool."
The bottom line: Treat your business like a business and your family like a family, says Bryck, who closed the family store in 1993 when he decided it was time to move on.
If you have trouble separating family and business, he says, it pays to get an outside perspective.
Hold regular family meetings - at least every quarter - and bring in a neutral outside facilitator to help run them, Bryck suggests. It also pays to have an outside board of advisers or directors.
David Friedfeld, president of ClearVision Optical, a family-owned and managed business in Hauppauge, has come to rely on such a board.
The 59-year-old eyewear distributor, started by David's father, Fred, has five non-relatives as advisers in addition to four family members (David, Fred and David's mother, Mimi, and his brother Peter, who serves as ClearVision's executive vice president). In addition, two family members and two nonfamily members belong to a business advisory group, Vistage, made up of local CEOs and senior executives. "It provides us with a lot of good feedback," says Friedfeld, 51.
Good communication and a clear delineation of roles are essential if a family business is to survive, he says. ClearVision has a formal organizational chart to clarify everyone's responsibilities, and the brothers try not to step on each other's toes.
This is valuable, notes Stewart Austin, senior vice president of information technology for family-owned Austin Travel in Melville. "You have to know your responsibilities and trust each other," says Austin, 45, the youngest of three siblings who all hold key roles at the 53-year-old firm started by their dad, Larry.
He doesn't tell his brother Jeff, the president, or Jamie, senior vice president of sales, how to do their jobs, and they don't tell him how to do his.
"There has to be a line in the sand," says Austin, who concedes that at times working with family isn't always easy.
"We definitely have fights, but we always work it out. You know they've got your back."
SOME RULES OF THUMB
Have a succession plan. Start work on it up to 10 years before turning over the business.
DON"T pay siblings equally, but according to their levels of contribution to the company. (see correction below)
Hold family members accountable.
Don't take out family problems at work.
Periodically reassess the strengths of the business. Your business model needs to reflect changes since the business was started.
SOURCE: IRA BRYCK, WAYNE RIVERS
Copyright © 2008, Newsday Inc.
Pay siblings equally despite their levels of contribution to the company. [CORRECTION: One of the "rules of thumb" in a box with Monday's Small Business column about family businesses was incorrect, because of an editing error. It should have said that family businesses should avoid paying siblings equally despite their levels of contribution to the company. (A15 ALL 04/02/08)]
Business Week SmallBiz -- Families February 20, 2008,
More entrepreneurs are coming out of retirement to help run their children's businesses
Steve Bernard figured he had cashed in all his chips—that is, Cape Cod Potato Chips, the company he'd founded, sold to Anheuser-Busch (BUD), and repurchased after the brewer shuttered its snack-food business. Along the way he'd also started Chatham Village Foods, a maker of fancy salad croutons. In 1999, Bernard, then 60, sold both companies for good. "I thought, all right, I'm free at last," he says. Bernard spent the next few years in Florida and on the Cape, happily paring his golf handicap.
Then his daughter, Nicole, called with a request. Nicole, who had worked at both of her father's operations, told him she wanted to start an organic-snack company—with him as her partner. Steve's first reaction was to say no. He assumed her business would have a lot of relatives on staff, as his startups had, and he wasn't sure she understood what she was getting into. "I don't think people have any idea how difficult it is to work and stay close as a family," he says. "When you throw in the financial pressure and problems of a startup, it's just incredibly hard."
But Nicole, 34, persisted, and in 2003 they launched Late July, the 15-person, $12 million maker of organic crackers and sandwich cookies in flavors including peanut butter and vanilla bean with green tea.
No one can say for sure how many veteran entrepreneurs have started companies with their kids, but family business counselors expect this sort of enterprise to grow more popular. Today's young adults are comfortable having their parents as mentors, coaches, and advocates throughout their lives. As for their parents, Lloyd Shefsky, co-director of the Center for Family Enterprises at the Kellogg School of Management, points to all the folks reinventing themselves in their 50s and 60s. "More people are starting businesses at this age," says Shefsky, "and if you want to come out of retirement, this is one way to do it." Many entrepreneurs, too, thrive on the startup phase and lose interest as a business matures. A partnership in which they pitch in during the hectic early days and pare back while their child takes over can be perfect for both.
But transforming a parent-child dynamic into a business partnership poses emotional and practical questions, from how to address one another in front of clients to who makes decisions when you disagree. The occasional dramatic flareup seems inevitable. Running Late July with her father has been like "the Steve Bernard MBA program," Nicole says, which is what she'd hoped at the start. Still, her father admits the transition to business partners was a little rocky. "I love that I'm able to work with Nicole and we're getting to the point where things are starting to smooth out," he says. "But there have been times when we've wanted to kill each other."
Every family and business is different, so there's no right way to address such concerns. What matters, says Shefsky, is that communication be fluid and frank—often a challenge when family is involved. Both partners must aim to agree on major issues such as mission, responsibilities, and exit strategy.
Given Mom or Dad's prior success, chances are the parent has startup capital or access to credit that the younger partner lacks. Before launching, talk about this financial inequality and its implications for control and responsibility. Some parents think putting up the money gives them additional rights. "They feel the buck stops with them, and if it doesn't work they can pull out and walk away," says Ira Bryck, director of the Family Business Center at the University of Massachusetts at Amherst.
Such has been the model at Petlane, a $500,000, six-person company in Concord, Calif., founded by Tara Nemeth, 32, and her mother, Lane Nemeth, 60. Lane started her first company, Discovery Toys, when she couldn't find worthwhile educational playthings for Tara. She sold it to Avon in 1997. Her daughter inspired Petlane as well. Five years ago, Tara bought a puppy, and Lane saw an opportunity to develop safe and healthful pet products and sell them via Tupperware (TUP)-style sales representatives, the way Discovery had sold toys. Tara was in graduate school studying psychology, and abandoned her search for a job. The two founded Petlane in 2004.
Theirs is clearly a mentor-protégé relationship. Lane brings money, knowledge, and experience, while Tara contributes mainly a willingness to learn. "If we have a disagreement we can't resolve, I'm the CEO and I have the final say," Lane says. Tara rotates from job to job, learning all aspects of running a business, from inventory management to bookkeeping, and figuring out what she does best. Currently she's director of sales: Her background in psychology makes her an adept coach of new reps. She's also the company's product guru and its face at trade shows. Tara says of her mother: "She gives me room to make decisions and run with them but will help me when I need it. I've never had that balance before."
Other parents expect their young partners to ante up at least some startup capital. At Late July, Steve told Nicole that although he'd contribute most of the funds, she would have to "put in to the point where she can't put in any more." Says Steve: "I wanted to make sure her interest level was where it should be and that she saw it as a real endeavor." The financial structure has helped them forge a partnership based on consensus decision-making. Steve calls his daughter Nicky, even at work, where she refers to him as Dad. But they both admit to being strong-willed and competitive. A situation in which her opinions carried less weight or where both didn't feel free to go at each other toe to toe probably wouldn't have worked. "In my personal life I always defer to him. At work I don't," says Nicole. "He is CEO and I'm president, and if I feel strongly about something I will fight for it, and so will he."
MOM'S NOT ALWAYS RIGHT
Kicking in cash is one way for a child to gain equal footing. Having special knowledge is another. That's how it works for Sondra and Allyson Ames, founders of Wonderland Bakery, a $1 million Newport Beach (Calif.) novelty retail bakery chain with 22 employees. Allyson, who was gleaning tips from the Food Network while her schoolmates were still watching cartoons, went from high school to culinary school, where she dreamed up an elaborately themed retail bakery—think Willy Wonka meets Alice in Wonderland—that would sell bright-colored confections along with gifts such as baking sets and aprons. The 22-year-old asked her mother, who earlier had founded and sold Global Exchange Network, a business-to-business bartering service, to help turn the imaginary store into a company.
Sondra, 53, borrowed against her house to raise startup capital. But Allyson's creations, from cupcakes topped with candy martini glasses to Manolo Blahnik shoe cookies, make the business special. So the two have a partnership in which Sondra, as CEO, handles functions such as hiring, training, and lease agreements, while Allyson rules the kitchen as president and executive chef.
Making the move from mother and daughter to partners was challenging nonetheless. "At the beginning it was difficult to have my mom tell me what to do in a business environment," says Allyson. "We had to develop two different relationships, the professional relationship and the fun one." And Sondra had never had a partner before and found working together to be harder than she expected. "We butted heads a few times at the start because we both wanted to be in charge," she says.
Mom finally loosened her grip when she saw she didn't always know best. Bottom-line-oriented by nature, Sondra typically looked for moves to save a few dollars. But she didn't understand how a professional kitchen works, and some of her decisions backfired. She purchased lemon flavoring in quantities that the business would never be able to use, and over Allyson's objections insisted on buying a $5,500 dough-rolling machine. The device turned out to be a temperamental space hog that took more time to roll dough than Allyson needed to do the job by hand. Allyson resumed her low-tech ways, and they sold the machine at a $1,000 loss.
From that point on, Allyson demanded that Sondra respect her expertise. "She had to get used to not having the final say about everything," says Allyson. Sondra agreed, and they set a new rule: Any purchases over $1,000 must be approved by both. They codified their professional relationship, too. At work, Allyson calls her mother by her first name. They have a ten-minute chat by phone or in person every morning and touch base again in the evening. Each takes the lead in the part of the business where she's stronger, but only the smallest and most routine decisions are made unilaterally.
Dual-generation companies must also have a plan for managing emotional eruptions. When the Ames women feel a confrontation looming, they'll wait to hash the matter out until employees aren't around. The Bernards are used to boisterous dealings and expect their staff (which includes relatives) to roll with the tide. But they will put an issue on hold for a few days if tempers get too high.
As with any startup, the founders in a family business should plan for the unexpected—say, if sales grow faster or slower than anticipated or if a buyout offer materializes. They must also plan for the time when one party wants to leave the company. Parent-child businesses have an extra layer of complexity because the partners are at different stages of life, with widely divergent lifestyles and financial needs.
Those disparities are apt to grow with time, notes Bryck. A parent itching to do something new at 60 might not feel so comfortable with financial risk ten years later. And children at 50 are likely to have different desires than 40-year-olds, perhaps wanting to take charge once and for all or bring their own kids into the business. The reverse can happen, too: A parent who had intended to step aside might have a hard time leaving, or a child who thought running a business would be a lifetime passion might change his mind after starting a family. Bryck suggests agreeing on an exit strategy and then figuring out what to do in case of an unexpected illness or problem. His favored approach is for the child to gradually buy out the parent. "This way the parent is covered and the kid is free to do what he wants with the business," he says.
At Wonderland Bakery, Allyson's youth has always been a factor in the company's long-term planning. Sondra worries her daughter will regret trading the social and educational pursuits of youth for a baker's long hours. Indeed, while Allyson calls the bakery her baby, she can tick off other things she'd like to do in her 20s, like traveling or furthering her culinary training at Le Cordon Bleu in Paris. So the two have settled on a way to let each of them either wind down or stay fully engaged. Plan A, says Sondra, is for the pair to work really hard for five years, then sell part of the business. Both would then withdraw from daily operations while staying involved in some manner, perhaps with Allyson as spokesperson or executive chef and Sondra as a consultant on branded products. But there's also a Plan B: a buyout agreement if mother or daughter wants to keep running the company after the other is ready to ease off.
The Bernards don't have that sort of formal arrangement at Late July, but they have discussed the future. At minimum, they know they want to keep the business in the family. "My plan would be to step back eventually and pick and choose what I do," says Steve. "But Nicky would like to continue growing the company. If she wants to buy me out over time, I wouldn't have a problem with that." The Nemeths might face a tougher transition. Neither mother nor daughter can imagine Petlane without Lane. "My mother will retire when she's dead," Tara says. Both say Lane will take an advisory role in 10 or 15 years, when Tara becomes CEO. Whether Lane will want to stay away from day-to-day operations is another question. "I cashed out once, and it was not very fulfilling," says Lane. "It's more fun to run things." And she adds frankly: "I haven't thought at all about how the money would work." She'll only allow that, if she does trade in chew toys for golf clubs someday, the two will arrange a buyout or take the company public. "I'm just confident we'll work it out," she says. Lane's confidence in the future may reflect no more than her best intentions. But her faith in Tara is the kind you can have only in a partner you've raised from a pup.
Working for Your Kids
More and more retirement-age executives are taking jobs at their children's companies. How families are becoming co-workers without anyone having to take a time-out.
By Anne Fisher, Fortune Magazine senior writer
June 21, 2007, 12:42 p.m. EDT
(Fortune Magazine)—Imagine you're the 64-year old retired CEO of a manufacturing company. Would you carry a pink business card with a tiny photo of a pug named Wheezie on it? What if your boss said you had to? What if, moreover, your boss was your 28-year-old daughter?
Robert Shipman carries that card. The pug in question is the mascot of a cosmetics company called the Balm that his daughter Marissa, now 33, started in 2003. At first Shipman - who had sold his clothing manufacturing company that had $130 million in annual sales and retired in 1980 - balked at both the pink and the pug, but then he relented.
"We disagree on a lot of things, but I usually give in, because I'm amazed at her talent," he says of his elder child. (Her younger sister, Jordana, now works for the Balm too.) "She's created a product line with a national market. That isn't easy to do. I bow down to that."
Smart move. Going to work for one of your kids, as more and more retirement-age executives are doing, is a challenge. It requires a huge psychological shift on both sides, and experts say that many an enterprise has gone down in flames because parents and their children can't shed old habits and adopt new, businesslike roles.
"The biological model is, the parent instructs and makes decisions for the kids. Reversing that is swimming against the tide of 10,000 years of human evolution," says Wayne Rivers, CEO of the Family Business Institute, a research and consulting firm in Raleigh.
For a grown child, managing Mom or Dad can be fraught with issues too: What if you have to (gulp) fire a parent?
Most entrepreneurs with a parent in their employ admit to experiencing déjà vu, especially if the employee is also a stockholder. Because her dad owns 25% of her company, Marissa Shipman says, "sometimes when I need to spend money to launch a new product, it reminds me of being a kid asking him for my allowance."
When Laine Caspi started a baby-products company called Parents of Invention in 2002, her father, Doug Harmon, had recently retired from a 37-year career as a systems engineer and IT manager at IBM, Citigroup, and Merrill Lynch. He pitched in to help Caspi get her books in order.
"When Dad got into the business, I sent him a big box full of eight months' worth of sloppy financial records with lots of important documents missing," she says.
Harmon straightened out the mess with nary a word of complaint, but, Caspi recalls, "I felt like a bad girl who hadn't cleaned her room."
For about a year, every time she asked Harmon to do something, Caspi recalls, "it was like being back in high school asking for the car keys. But I got over it."
Unlike in the movie Freaky Friday, there are no magic fortune cookies to speed the adjustment process along. The surest way to avoid turning the workplace into dysfunction junction is to follow a few tested strategies.
This approach worked well for Steve Lancashire, who bought a Mayflower moving franchise in Austin in 1995 and changed its name to American Relocation Systems.
Lancashire hired his father, Ben, a retired CEO of Inland Container Corp., and put him in charge of payroll, accounting, taxes, insurance, and long-term financial strategy.
"I knew the moving business," says Lancashire the younger, a former Mayflower executive, "but I really needed his expertise on everything else."
Says Ben Lancashire: "The natural tendency, especially for someone with my corporate background, is to try to take charge. But I backed off and stuck to my part of it. Now I rarely challenge his decisions. He has some pretty darn good ideas."
Ask strategic questions
Plenty of parents know they need to back off and let the kid run the company, but they just don't know how.
Ira Bryck, director of the Family Business Center at the University of Massachusetts at Amherst, recommends learning a new way of making suggestions that he calls strategic questioning.
"Lots of people already have a parent's blaming, critical voice inside their heads. They don't need to hear that voice from an employee at work every day," he says.
If a child is about to do something a parent thinks is boneheaded, Bryck says he should refrain from saying, for example, "For crying out loud, that will never work!"
Instead ask strategic questions like "Can you tell me how you see that fitting into your overall strategy?" or "Have you thought about [insert perceived problem here]?"
The alternative, alas, can get nasty.
Wayne Rivers of the Family Business Institute coached one business owner who was so sick of his dad's domineering ways and so unable to confront the old man that if he saw his dad's car in the company parking lot "he'd just keep driving," says Rivers. "He'd usually head for the golf course, where he could whack away at little balls all day." (Paging Dr. Freud, Dr. Sigmund Freud ...)
Not surprisingly, with the nominal boss AWOL most of the time, the business nearly went under.
The deadliest power struggles, it seems, occur between fathers and sons.
Joseph Astrachan, director of the Cox Family Enterprise Center in Kennesaw, Ga., notes that a substantial body of academic research shows that "fathers and daughters generally make great business partners, because they aren't in competition. Daughters want their dads to stay heroic. They are aiming to protect that image, both in their own minds and in their fathers' minds. Sons are different. Sons want to replace their fathers as heroes."
When the Oedipus myth plays out in a family business, and neither father nor son is willing to give an inch to the other, says Astrachan, "I've seen conflicts that have destroyed both the business and the family, a total blowup."
Plan for conflict
Some families work out private code words for defusing the stress of an argument. "There are times when we get pissy and frustrated with each other and the conversation just feels like it's going all wrong," says Doug Harmon. "Then usually one or the other of us will yell, 'Keeee-YAH!' That's our signal to back off, cool down, and maybe even laugh about it."
Adds daughter (and boss) Laine Caspi: "We got that from my son, who learned it in a martial arts class. It's what you yell before every blow."
Others invite a third, neutral party into their donnybrooks. "Whenever we have a big disagreement, we try to be very professional about it, but we're Italian," says Hank Datelle. "We get mad and yell and scream for 15 minutes, and then it's over and forgotten."
Datelle, 65, began his career at IBM and then started three successful Internet companies. In 2001 his daughter Lisa, 36, who had been working for a big pharmaceutical benefits-management company, decided to start her own firm, Cypress Care, to compete with her former employer.
At first Cypress Care operated out of the basement of Lisa's house in an Atlanta suburb. She persuaded her father to come aboard, along with her brother Marc, 38, an information-technology and finance whiz.
Says Hank: "I researched the field and realized that Lisa was right about what was lacking in the industry. With my startup experience, I figured I could help." So he bankrolled the venture, now a $200 million company with 150 employees.
The Datelles hired a moderator, in the form of a chief operating officer who is no relation, to make sure that their arguments did not lead to bad decisions.
Says Lisa: "My dad knows more than I do about some things. And I know more than he does about other things. So we've made an effort to hire people who know more than either of us." In the event of an impasse, the COO casts the deciding vote.
Lose the ego
As any boss knows, giving somebody a lousy performance review is hard - so hard that many studies show that the majority of corporate managers, if they have a choice, avoid those conversations altogether.
Now just imagine having to tell your mom or dad that his or her work is simply not good enough.
Says Mike Johnston, 40, who hired both his retired parents to work at Savory Spice Shop, his gourmet spice business with stores in Denver and suburban Littleton: "It's really hard to tell your mom or dad what to do, or to give them constructive criticism. They're your parents. We've had some difficult conversations."
Obviously, having your kid pick apart your work is no day at the beach either. As in so much else, humility helps. As Johnston's dad, Charlie, 65, puts it, "I made up my mind at the outset that Mike knows spice. What he says goes."
Having performance objectives from the get-go can make a huge difference.
Andrew Keyt, executive director of the Loyola University Chicago Family Business Center, often gets called in to help entrepreneurs give performance reviews in sensitive situations.
"If goals are marked out in advance," he says, "then negative feedback becomes much easier on both sides, because it's not personal." What if worst comes to worst and your child decides your services are, um, no longer required?
Rivers of the Family Business Institute says that firing a parent is so traumatic for most business owners that "it really can't be done in one brief meeting, as you probably would fire any other employee. It's a process that generally takes four or five months."
If you work for a son or daughter, and if he or she has been gradually taking projects away from you and encouraging you to take more vacation time, guess what? You're probably being eased out of your job.
Have an exit strategy
Ben Lancashire is gradually stepping aside after almost 12 years of working for son Steve's moving company. "He's learned a lot about general management," says the elder Lancashire, who is 78. "I can play more of an occasional consulting role now."
Hank Datelle plans to stay with Cypress Care for two more years - it's part of the deal he and Lisa made with private-equity investors who bought 70% of the company last summer - and then go work on his golf game or (who knows?) maybe start another company.
Laine Caspi has hired a chief financial officer to replace her dad, who's training the new person, because her parents will be moving to Mexico in August. Why? "We like it there," says Dad. "I'm ready to get back to retirement and relax."
Parents of Invention, Caspi's company, has grown 100% a year every year since 2003 and has expanded its product line from one item, a baby carrier called the Ultimate Babywrap, to about 20. Caspi says that without her dad's support, she would have had to abandon the business in its infancy.
"All entrepreneurs go through these dark days where you just think you are crazy to believe your business will ever take off. When I was really down, I called my dad and said, 'This company will never succeed,'" she recalls.
"He said, 'Are you having fun with it?' And I said, 'Well, most of the time, yes.'
He answered, 'Then you're already a success.' That picked me up and kept me going." Then again, that pep talk sounds very much like a dad and not very much like a CFO..
Telis Demos contributed to this article.
Small Businesses Tempting More Buyers
© 2007 The Associated Press
May 14, 2007, 12:46 a.m.
NEW YORK — Small businesses are hot prospects for buyers these days.
Financiers with money to spend are turning more frequently to the mini-mart or small trucking company as a good investment. Among the most avid buyers are private equity funds flush with cash.
"There's no question that small businesses are becoming more frequent takeover targets," said Joe Astrachan, director of the Cox Family Enterprise Center at Kennesaw State University and editor of the Family Business Review. "Ten years ago, this didn't happen at all."
Buyers have gotten far more sophisticated about gauging the risks of taking over a small business, and as a result are going after those "all the way down into the area of 100 employees or fewer," Astrachan said.
But new buyers pose some challenges as well as opportunities for small business owners looking to sell. Along with capital, they may bring performance contracts that require owners to stay in the business and keep it growing. Moreover, buyers may suddenly swoop in with an offer unexpectedly — which may require a more rigorous approach to keeping the business ship-shape.
Proof that the buying spree has heated up is partly in the growing ranks of business owners and executives seeking out advisers for a review of their personal finances, according to M. Holly Isdale, managing director and head of wealth advisory services at Lehman Brothers Inc.
"There are bids being made that may tip family or closely held companies into selling because the price is right," said Isdale. "Executives are coming to us and for a look at how their finances are structured."
How small is small? Mom-and-Pop outfits continue to fly under the radar of the acquisition-hungry — these are the tiny corner grocery or liquor stores whose owners struggle to make ends meet. As ever, such businesses are more likely to fall victim to the local superstore than become the object of buyer desire.
Prime targets are well-oiled businesses with an annual profit of at least $150,000. Manufacturing, trucking and garbage collecting concerns are popular targets.
"It really depends on the industry, but most deals are being done with businesses with around $250,000 or up in annual profits," said Grafton "Cap" Willey, a shareholder and managing partner of the Rhode Island offices of Tofias PC, a regional accounting firm, and chairman of the National Small Business Association.
Common sense comes into play. If an owner is working more than 60 hours a week and the business is bringing in only a modest profit, there's probably not a queue around the block to take it off his hands.
"If it's more like a job than a business, why would someone want to buy it?" said Paul Hense, president of Hense & Associates, a small accounting firm in Grand Rapids, Mich.
Still, there seem to be more people now looking for profitable small businesses than are available, according to Hense, who has seen many of his good clients bought out.
"That's the awful part of being a small CPA firm," said Hense. "We're good at taking other small firms and making them work. Then they go away when they get bought."
Private-equity funds are the biggest driver of small business takeovers these days, though retired executives looking to get back into action with companies to call their own are also buyers.
"Buyout firms are raising huge pools of capital," said Isdale. "There's just so much money going into buyouts."
A common modus operandi for a private-equity fund: Take a minority stake in a business through a performance-based contract that grants representation on the board of directors. A bigger share of ownership results if the company doesn't perform well, and a buyout can follow.
Small business owners who get into a deal with private equity should remember that these arrangements may exert uncomfortable pressure. Often, a partner is looking to turn around the investment in two to five years.
"We like to say that small business owners are looking for patient capital," said Willey. "Venture capitalists, by their nature, aren't patient."
So it's important for business owners to make sure they have a good exit strategy should things go wrong, said Colin C. Blaydon, director of the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth College in Hanover, N.H. "Owners have to make sure they're in control of their own destiny."
Ira Bryck, director of the University of Massachusetts Amherst Family Business Center in Hadley, Mass., said he sees numerous people with small family businesses who want to sell.
People in that position should consider a number of things, said Bryck. Among them is making sure the business isn't bloated with vacation homes and other "toys." These can make it hard to tell the true value of the business.
"When it comes time to sell your company, which often comes unexpectedly, you have to throw all of that stuff overboard and clean house fast," said Bryck. "You have to get rid of anything in the business that's not a value-added part of it."
Indeed, the element of surprise is more often in play these days, as private equity funds get more aggressive.
"We're starting to see more hostile takeovers," said Isdale. "It used to be that as a senior vice president, I would have a say, but now takeovers are coming out of the woodwork."
Understanding the real value of the business is also key. Small business owners are "notoriously bad at judging the value of their own business," said Astrachan. Often, an owner thinks it's worth a lot more or less than it really is, he said.
"They also need to figure out what value they derive from the business that isn't financial," said Astrachan. "What's the thing they get out of it that would be hardest to purchase? Lots of times, the financial offer might be great, but it just wouldn't make up for what the business adds to your life."
From a respected business newspaper that does not allow free posting of its articles:
An article about fraud in small business quoted Ira Bryck:
"Keeping compensation clean is important. It's best for an owner to be paid separately for roles as owner and manager. As a manager, an owner "should be paid a salary that you would pay anyone for doing your job . Separately, the owner is entitled to a dividend based on the company's financial performance."
By Colleen DeBaise,
December 5, 2006
RICK TRAMONTO and Gale Gand are a masterful culinary duo. For 25 years, the Chicago pair has made beautiful meals together, most notably at top-flight eatery Tru, where customers dine on Tramonto's sumptuous main courses and Gand's delicate desserts.
But while they make magic in the kitchen, the same is not true at home: The once-happily-married chefs have been divorced since 2000, a year after they opened Tru. Despite the breakup, their business has thrived, and the former husband-and-wife team (who remain amicable) are currently opening four new restaurants in suburban Chicago.
"We are the poster children for a divorced couple who can still work together," says Gand. "People come to us and ask for advice as they are splitting up, and they marvel."
Most couples who start a business together but wind up divorcing are used to bitter endings, not the sweet times that Tramonto and Gand are enjoying. About 1.2 million husband-and-wife teams run a business together, according to the National Federation of Independent Business. And when love fails, the business often does, too, with many ex-spouses liquidating their shared endeavor.
Yet in some cases, as the restaurateurs' story illustrates, the passion for the business can supplant the passion the partners once had for each other. Some divorce experts say that shouldn't be so unusual. Especially as more soon-to-be-ex-spouses try the "collaborative" approach — which focuses on new and amicable ways to resolve disputes — running a business together post-divorce emerges as a distinct possibility.
"We ask ex-spouses to be parenting partners; it only makes sense, on a financial level, to at least let the couple explore the option of being business partners," says Susan Hansen, a family-law attorney in Milwaukee who serves as president of the International Academy of Collaborative Professionals. "If you can co-parent — and we have that as a reasonable expectation — you should be able to co-own a business."
Debi Davis was an early, unwitting proponent of the idea. In 1991, she started nutritional-supplement company Fit America with husband Byron in Fort Lauderdale, Fla. A year later, they divorced. And then they spent the next 14 years growing the business together.
"It initially started out as survival," says Davis, of their unusual arrangement. The couple, strapped for cash because of a previous business failure, started Fit America when their children were nine months and five years old. "We had two kids — because of that we needed to stay focused and do what was right for the family."
Their business not only survived but took off. By 1997, it was bringing in close to $45 million in sales. (Byron left the company last year to explore new options.) Davis says it worked because the two "were great partners." Her ex-husband's expertise was marketing and finance, while she was adept at operational management. "We really brought two different aspects of the business together," she says, "although we personally wanted different things out of life."
Couples who decide to divorce each other but not the business need to do careful planning, experts advise. It's especially critical to have a partnership agreement in place, which will spell out each other's responsibilities and outline what happens if the business partnership (like the marriage) sours1.
The ex-spouses may want to consult a mediator or even a therapist, who can advise them on how to resolve conflicts. And, bottom line, the arrangement won't work if the two can't get along. "They have to have the ability to communicate, and there has to be some reasonable degree of trust and respect," says IACP's Hansen.
Clients, she says, were often confused. "People would say, 'Are you guys divorced?' and I'd say, 'Yes,'" she says. "Byron would look at me and say, 'We are? I didn't get the memo!' That was his standard line."
Most ex-spouses don't enjoy such camaraderie — which is why divorce lawyers usually don't recommend that they try to run a business together. "I've been doing this for 20 years," says Lee Rosen, a certified family-law specialist and president of divorce firm Rosen Law Firm in Raleigh, N.C. "And I don't think it normally works."
He's seen couples attempt to work together, post-divorce, usually because the company's revenues support the family and both partners are critical to its success. And he's watched those efforts fail. "The same issues that were happening in the marriage were continuing to happen in the office," he says.
Also, some divorcing couples forget to be realistic. "When people think they are going to do this, they haven't considered dating," he adds. "The minute that starts happening, it's like 'Oh, we didn't think of this.'"
In the most unpleasant of situations, ex-spouses will continue in the business together because neither wants to give up control. "The worst-case scenario is kind of a 'War of the Roses' and they both have too much invested to get out, so it's not a strategic relationship but a spiteful sort of thing," says IRA BRYCK, director of the University of Massachusetts Family Business Center in Amherst, Mass. "The real ugliness there is they can draw employees into taking sides, and even customers into taking sides."
For that reason, restaurateurs Tramonto and Gand hid their breakup from their 100-member staff for the first six months. "We didn't want to scare them," she explains. "We didn't want our clients to think the restaurant was going to close."
Why did they decide to stick together? "We were way better business partners and co-chefs than anything else," Tramonto says. "It was natural, and I think that's why it worked." The former spouses also knew they would always be linked by their son Gio, who's now 10. Running a successful business is perhaps "the new and improved version of staying together for the kids," Gand says.
Ultimately, the former couple's shared history in the restaurant business and a mutual respect for one another kept them together. Both have remarried and had children with new spouses. But at work, their long partnership still produces delicious results.
"Last night, he had me taste his Brussels sprouts with béarnaise sauce — it was great," Gand says. "He just tasted the tuna fish sandwich from my new coffee bar, and I could tell from his eyes that it wasn't perfect. He can zero in on the thing that I'm missing." After so many years together, "we can read each other's minds," she says. "And she totally understands what I'm looking for, without me having to say it," Tramonto adds.
Sticking together as business partners when you've decided to untie the knot is rare.
Most divorce experts recommend that ex-spouses explore other options first:
One spouse could buy the other out. That's an especially good choice if one spouse started the business, or is more passionate about it.
Sell it, and divvy up the profits. Often, it's tough to unload a small business, but if the company operates smoothly and profitably, then it's possible to find a buyer.
Split it. Generally, this only works if the company is large enough to have separate units that can be spun off from one another.
Speed up the succession plan. Family businesses often name children as successors; a divorcing couple with adult children may be able to choose this option.
Liquidate the business. It may not be pretty, but liquidation allows both parties to walk away and start over on their own.
Daily Hampshire Gazette "Business School"
February 12, 2007
Name and title:
Ira Bryck, Director
Business name, address and description:
UMass Amherst Family Business Center, UMass Continuing & Professional Education, 100 Venture Way, Hadley, MA
The UMass Amherst Family Business Center is a learning community that helps you:
- Strategize the transition to the next generation
- Professionalize through use of more formal governance structures.
- Trade on family strengths, and inoculate from liabilities
- Treat your business like a business and your family like a family.
For more info, see www.umass.edu/fambiz or call (413) 545-1537
Experience in the field: Director of the UMass Amherst Family Business Center since inception in 1994; speaker, writer, advisor on family business matters; 4th generation president of family’s childrenswear retail store on Long Island; author of 3 plays about issues facing family business
Philosophy of business success:
My motto, “Treat Your Business Like a Business, and Your Family Like a Family,” begins on a one-way street of professionalizing. One step inevitably leads to the next.
- Don’t join your family business unless you are passionate and talented in what they do (but understand what they do: Domino’s says they’re in the delivery business, not the pizza business)
- Hire only the right people, that add something vital, but control quality with job descriptions that focus on everyone’s highest value activities, delegating what they are merely competent at. You may add “what my job isn’t,” for the founder who can’t quit as chief cook and bottle-washer, who needs to delegate, like it or not.
- Family business founders often rely on powerful gut feelings, and are not known as obsessive planners, but to succeed, you need to create specific, measurable, achievable, realistic, time-related goals and objectives (SMART, to Drucker fans). There’s no better way to know where you’re going, and determine when you’ve arrived, or that you’re lost.
- Family businesses are famously secretive (hence “private” and “closely held”) and don’t like to be told what to do, or how they’re doing. But without performance evaluations, you can’t definitively separate the endowed from the entitled. This is how you can all Tell the Truth.
- To equate a given level of success to an earned level of reward, establish compensation policies. For family members, this helps salary to not feel so much like allowance from mom and dad.
- To succeed wildly, and be rewarded in kind, you need to know your company’s capacity to invest and incent, impossible without getting great at budgets.
- But if only the elite knows how your company makes money, you’re limiting how much everyone can row together, so you need to foster a stakeholder, “Company of Owners” mentality in the ranks. Once that happens, you’ve built the better mousetrap that will attract the best and the brightest. This takes us full circle, where the only family members that will qualify for employment are the passionate and talented. Next step is making your family a welcoming and healthy nest, whether you’re in the business or not. Stay tuned.
Not All in the Family
An outsider can help a family business thrive and grow. Here's how to find such a leader and make the transition successful.
By Fred Sandsmark, iQ MAGAZINE—Cisco Systems
All family businesses eventually reach a crossroads. Many family businesses were originally created after World War II, and now their founders are aging. The founder's children or grandchildren often have other career interests. Today about 30% of family businesses are handed to a second generation, and less than 10% make it to a third.
Family businesses are the engine of the world's economy.
- Globally, 80% of businesses are family-owned, according to a 2004 study by the International Family Enterprise Research Academy.
- In the United States, they account for 62% of total employment and 78% of all new jobs, according to the Cox Family Enterprise Center at Kennesaw State University in Georgia.
Outside leadership of family businesses isn't a widespread trend, yet. Only 14% of family businesses had hired a CEO from outside the family, according to the 2002 American Family Business (AFB) Survey, still considered the most definitive study of U.S. family businesses.
Businesses that did hire from outside were pleased with the result: 71% of them rated their experience as either "extremely successful" or "very successful."
Filling Big Shoes
There are many reasons to bring outsiders into a family business, including:
- No single family member has all the skills and management aptitude to lead the company.
- When family members disagree about who should lead the company, an outsider may be a good compromise.
- If you have ambitions to grow the company to the next level, it may require someone with fresh ideas and different qualifications than a family member.
- If you're growing quickly, according to IRA BRYCK, director of the UMass Amherst Family Business Center: "You need to look outside and see what talent is going to make you better, faster, and cheaper."
The AFB study found that 55% of family-business CEOs older than 60 who expected to retire in the next five years had not yet picked a successor. "Such lack of planning sets the stage for stressful transitions that may divert precious resources needed to run the business effectively," says Joe Astrachan, director of the Cox Family Enterprise Center.
Hiring from the outside is a new frontier for many family-owned companies. Not only might the family lack experience in looking for and working with outside leadership, but executives might be reluctant to join a close-knit family operation. The following are some tips from experts:
- Conduct a professional search. Be as specific as you can in the job description, and include company cultural elements. "The big difference between a family business and a nonfamily business is that the cultural fit of the person is paramount," says Cynthia Scherr, principal of Scherr Management Consulting.
- Use the Internet to help define the job responsibilities, scope, and background required. Nick Parham, career coach and principal of Zitron Parham Career Services, recommends studying online job postings from similar companies. "You start to see that some challenges are universal," he says. "You also discover what's different about your business, so you can better describe what you need."
- Be honest about the connection between family and business. The family and the business are inextricable. "The one critical success factor, above all others, is that the outside CEO views the family as part of their job," says Astrachan. This includes management of emotions, expectations, and nonfinancial rewards.
Attracting Top Candidates
Family-owned companies may need to make changes to attract well-qualified candidates. Family businesses that are secretive may have to become more open. "Financial information, productivity metrics, and communication about where the company is going all have to be available," says Scherr.
Outsiders, says BRYCK, often fear that family businesses are saddled with outdated, inefficient technology and personality-driven procedures: "The more a company can use technology to perform systematically, the more appealing the company is to capable new leaders."
When a Leader Is Made, Not Born
Parham advises family companies to approach a leadership transition with an open mind. "You'll have your traditions, processes, and thinking challenged," he says. "You may not be convinced that a new approach will work, but you should be open to testing it."
Specific, measurable goals can lessen the emotional component of evaluating a new leader's performance, BRYCK notes.
Finally, clear, honest, two-way communication is the primary factor in making new leadership successful. Parham says, "An open dialogue can build a relationship with the candidate that causes them to say, 'I want to work with these people.'"
About the Author
iQ Magazine contributor Fred Sandsmark is among the 70% of children of family business owners who chose not to follow in their parents' footsteps.
Lost in Transition
If you don’t take steps to ensure your company’s future now, you may not have the chance later. Here’s how to plan for a smooth business transition.
By Carol Tice, Entrepreneur Magazine
Online exclusive: Have more questions about transition planning? Read The Monitor Group’s answers to the most common business transition questions.
It still smarts when Terri Getman recalls the financial disaster that befell her family because her father didn’t plan ahead. He owned a minority stake in a closely held Georgia paper-making machinery manufacturer, but died suddenly six months after the business was launched.
With no written plan outlining his ownership rights, the family was cut out by the other partners. These owners later sold the business to a German firm for a handsome profit, pocketing the funds themselves. “We did 11 years of litigation to get nothing,” Getman ruefully recalls.
Her story is far from unique. A study of more than 1,400 business owners conducted last April by investment consulting firm The Monitor Group in McLean, Virginia, revealed that more than 82 percent had no written plan describing what they’d like to see happen when they leave the business.
The result is often lost income to the founder or his or her heirs, and a business that doesn’t thrive or even survive after the founder’s departure. Consider two more tales of transitions gone wrong.
A story in the Puget Sound Business Journal explains that when Wilson Products Inc. owner Kenneth Wilson died unexpectedly in 2003, his three daughters found themselves in charge of Wilson’s $12 million aircraft-parts business. All three had grown up around the Auburn, Washington-based company but were never trained to take the helm.
With the aerospace industry going through rapid change, the business floundered, filing for bankruptcy last year. With $20 million in orders on the books, the Wilsons couldn’t find a buyer, and the company’s assets were auctioned.
According to the St. Louis Business Journal the second-generation owner of Missouri frozen custard company Southern Products Co., fought with his son Mark Dorsey over how the business was run. So the younger Dorsey left in 2004, got his MBA, and started a competitor, Pacific Valley Dairy Inc.
Southern Products, which had $100 million in annual sales, went bankrupt in 2005. The winning bidder at the 56-year-old company’s bankruptcy auction was Pacific Valley Dairy, which paid less than $3 million for it.
With so much at stake, why do so few entrepreneurs plan for their departure? Such planning brings up a host of uncomfortable issues, including death, the company’s true value, and often, touchy family relationships.
“People know they have to prepare themselves, their family and their business to have a well-planned and well-valued sale transaction,” says The Monitor Group president Glenn Kautt. “But most aren’t doing it.”
Experts say even owners who don’t have a clear sense of when or how they’d like to leave their business can get the process rolling with a few basic steps.
1. Write Down Your Wishes
Begin by mapping out what you’d like to see happen when you depart. Then create a timeline for when you’d like that to occur, says Trudy Nearn, owner of Sacramento, California, estate-planning law firm Generations.
“People either haven’t thought about it at all, or they have unrealistic expectations,” she says.
She recalls one client who wanted to leave her day-care center to one daughter while leaving the land under it to another daughter. The owner assumed this second daughter would be willing to charge the day-care center affordable rent.
Nearn pointed out that the land-owning daughter would want to maximize the value of her inheritance. So instead, one daughter inherited the business and land while the other got an insurance policy of equal value.
An important part of planning is envisioning what the owner wants to do after departing the business, says University of Massachusetts Family Business Center director IRA BRYCK. Some fear they’ll be unhappy and bored once they relinquish their position. In fact, less than 17 percent of respondents in the Monitor study imagined they would retire after leaving their business. More than 45 percent said they planned to start another company. Still others relinquish control but stay on in smaller roles. In any case, having a plan for your next chapter can be the impetus to move forward.
Notable and quotable:
By Faye Wolfe, UMass Website main article
week of August 13, 2006
UMass Amherst faculty lend their expertise to the media on topics from global warming to kids’ TV
Geosciences professor Ray Bradley (center), with graduate students Ted Lewis and Tim Cook, is frequently contacted by national news media to comment on his research. (photo by Ben Barnhart)
IRA BRYCK's expertise in family-run businesses comes from first-hand experience. He grew up working in his father's clothing store. Ira is on the left. (IRA BRYCK personal photo)
Listed in many a newspaper or television reporter's rolodex are phone numbers in the 413 area code that begin with 545 or 577, the main UMass Amherst exchanges. Stories on most every topic gain heft from expert sources, and there are plenty of experts on this campus. A few weeks ago, CNN news anchor Lou Dobbs got in touch with geosciences professor Raymond Bradley to talk about a widely-discussed National Academy of Sciences report on global warming. It wasn’t the first time that Bradley cropped up in a national news story. As one of the authors of a landmark paper charting climatic change over millennia, he is often interviewed on the subject.
About the same time, fans of NPR’s Marketplace might have tuned in to hear host Kai Ryssdal discussing with IRA BRYCK whether you should ever loan money to your brother. BRYCK, the director of the UMass Amherst Family Business Center, advised, “If you were a banker, you would be considering that person’s character and their collateral, and I think that as the lender you have every right to consider those same things..”
BRYCK is in the media again, in the June issue of BusinessWeek Online he discusses what it takes to bring the younger generation into your family busiiness.
UMass Amherst faculty show up in media all over the place. Rick Wolff, from the Economics department, was quoted recently in London’s Daily Telegraph, talking about the U.S. housing boom going bust, and predicting that it could “take the U.S. economy down with it.” The August issue of the Chicago-based magazine In These Times quotes another campus economist, Robert Pollin, in a story about the effect of living wage mandates for garment workers on consumer prices.
The formidable grasp of their subject make many UMass Amherst faculty sought-after sources. To mention a few: Political science professor Sheldon Goldman comments frequently on Supreme Court–related developments—like the hearings this spring on Justice Alito’s nomination to the court. He's been quoted in The Christian Science Monitor, Newsday, USA Today, and MSNBC. Fergus Clydesdale from food science, talked turkey with The New York Times, was tapped for his take on trans fats by The Washington Post, and spoke to other nutrition-related issues elsewhere. Psychology professor Ervin Staub, a source for a recent L.A. Times article about the “potentially immoral forces of groups,” has offered his insights into news events like Abu Ghraib on CNN, in Reuters, and on NPR. And when Emily Bazelon, a senior editor at the online magazine Slate wrote earlier this year about the television program, The Electric Company, she turned to psychology professor Daniel Anderson—“kids-TV guru” was how she described him—for his opinion on how children relate to the “disco feel” of the ’70s educational show.
What makes a professor notable and quotable? Obviously, profound knowledge of an area of research and study is key. Being an author, like Bradley, of a high-profile paper or a member of a prominent committee may catch a reporter’s eye, too. For instance, Clydesdale served on the Advisory Committee on the Dietary Guidelines for Americans; its report, released in 2005, received widespread coverage. In May, The Wall Street Journal sought out the opinion of James Young from Judaic and Near Eastern studies on soaring cost estimates for the New York World Trade Center Memorial—not surprising, given that he was a member of the jury that selected the original design for the memorial. And the PBS program Frontline ran an excerpt from Young’s book At Memory's Edge: After-Images of the Holocaust in Contemporary Art and Architecture on its Web site because, as it explained, he was “the only foreigner and the only Jew to serve on Germany's commission to select the its national Holocaust memorial.”
Media savvy is vital to forging a successful relationship with journalists, according to Ed Blaguszewski, director of the UMass Amherst News Office. He says,“Faculty who become regular commentators follow the news, understand how their knowledge intersects with current events, and articulate an opinion concisely. They also understand that in today's 24/7news environment, speed is prized. Journalists often request to speak with an expert today, if not within the hour. The best expert is often the available expert.”
The News Office works with the media to find available experts. Says Blaguszewski, “We're matchmakers. We interview faculty to discover their research and expertise, and we talk daily with reporters to pitch stories and identify their interests. Those conversations, combined with an experts database that Blaguszewski's office maintains and a national media request service, help us connect the right experts to receptive journalists.”
Some academics may avoid the limelight; but points out Blaguszewksi, for those who do go public, “The rewards are many: increased visibility and recognition for the campus, its programs, and individual faculty, and the opportunity to educate the public and contribute to civic debate.”
The aforementioned IRA BRYCK is one who has become expert at being an expert. Having been on Marketplace several times, for instance, he knows that, “Radio is an entertainment medium. Points need to be pithy, not too raggedy. I know that I’m not talking to an audience who has specifically shown up to hear me speak, so I try to give what I say general appeal, so that someone might think, ‘I never thought about family business like that before.’ I also like having the chance to debunk accepted wisdom, the oft-repeated ideas that come from research being misconstrued. For instance, family businesses fail at a horrific rate, but so do all businesses. Ultimately, I want what I say to be true.”
“I also want to be careful about what I become noted for,” he says. “I became an ‘expert’ on family business loans from one article I did.”
And there are outcomes you can’t anticipate. “When I did the Marketplace story on lending to family members, a childhood friend who hadn’t seen me in years heard it,” BRYCK says. “He didn’t know it was me until the end of the interview. He told me, ‘I thought this person really knows what he’s talking about.’ And then, he asked me for money.” The good news? He was kidding.
Room To Grow
By Eileen P. Gunn, BUSINESS WEEK, SMALLBIZ—MANAGING
Advancement Communications, August 9, 2006
You want your kids to join the family business. They want to do their own thing. Here's how you both can win
As a teenager, Justin Glaze had little interest in his family's business, Westfield (Mass.)-based Decorated Products. The company makes metal identification stickers for heavy equipment such as boilers, and Justin's passion was racing four-wheel all-terrain vehicles called quads. Then he had an idea that brought the two together. He asked his father if Decorated Products could start selling durable decals that racers could use to customize their quads.
At first, Jeffrey Glaze thought his son's idea was farfetched. Then he got to thinking. The decals would give Decorated Products a route into the consumer market. And after recalling his own rocky entry into the company his father founded in the 1950s, he realized that the decals were a chance to draw Justin into the business. So in 1999, Jeffrey created a division called Go For It Graphics. More than just a unit to produce the decals, Go For It was designed as a sort of laboratory where Jeffrey could explore new markets and employees could learn new printing technologies. Justin could get to know the company as he attended trade shows and advised the company's graphic designers about what quad racers wanted. By the time Justin, now 21, joined Go For It Graphics full-time last year, "he had his own area of expertise, which he is respected for," says Jeffrey. "And a place that was his own." As technical adviser, Justin is lending his knowledge of racing to the business while gaining familiarity with other aspects of the company's operations.
Business extensions, or labs, are a way to bring younger members of the family into the business while benefiting both the company and the next generation. Done right, a lab lets up-and-comers use their skills and interests to develop a product or market that's related to the core business. They can learn about the company while discovering their own strengths and weaknesses and building relationships with other employees. That'll help smooth the transition should your child eventually become part of senior management.
A lab can boost the core business as well. The younger generation's fresh eyes can spot opportunities that owners caught up in the day-to-day running of a business may have missed. "The older generation sees the company selling golf clubs, while the younger generation sees them selling relaxation," says IRA BRYCK, director of the University of Massachusetts Family Business Center in Amherst. "That broader view opens up opportunities." As the Glazes discovered, it can also lead to new revenue streams. In 2005, Go For It Graphics accounted for 10% of Decorated Products' sales of $3 million.
That doesn't mean everyone will welcome the idea. Other employees may see the venture as pure nepotism and be reluctant to chip in. Tensions can also rise at home, especially if your other children are involved in the company. And no matter how good the idea, if you're ambivalent about the new venture, the project won't fly.
For a lab to succeed, you and your offspring need to treat it as serious business. You'll want to draw up a plan that includes a budget and the goals and expectations of both your child and your other employees. The goal is to provide the support the next generation needs without clipping your child's wings. With a little effort on both sides, a lab can bring your kids into the business you love and help them take it to the next level.
The idea for a lab often comes from the younger generation, but as CEO you'll need to believe in the business payoff and be able to get behind the project. "The older and younger generations have to agree that there is a need for this offshoot, that there are customers that want it," says Andy Birol, owner of Birol Growth Consulting in Solon, Ohio. "And the project should clearly be leveraging skills that the business or the child has."
The need was acute at Underwood Travel Associates, a 35-employee travel agency in Carnegie, Pa., that books business trips and tours. After September 11, Underwood's only steady business came from a client who organized NASCAR racing tour packages. That made a strong impression on David Underwood, 36, who had joined his father Jeffrey's company in 1999 as a salesman and was eager to make his mark. "In a family business you don't feel part of the team until you see yourself making a big impact on the bottom line," says David.
The Underwoods knew they had to develop new revenue streams, but they also needed a buffer against the cyclical nature of the corporate business. Early in 2002, David persuaded his father to buy the NASCAR client's tour company, bringing Underwood's corporate travel expertise to a niche retail market. But it soon became clear that the operation was a cash-flow disaster. The previous owner had spent thousands to buy hotel rooms and race tickets a year in advance but collected money from customers only a month or two before the trips. While Jeffrey was willing to take out loans to carry the operation for a time, he had to concentrate on Underwood's main business. That left David to do the heavy lifting for the new venture. "I made it clear to David that if we were going to do it, he would have to be the one to figure things out," says Jeffrey.
David got to work. He renegotiated with the hotels to pay a deposit when he booked and the balance when his customers paid him. He also negotiated installment plans with the racetracks, timed so that his last payments were due after his clients paid for their trips. The previous owner discarded unused tickets, but David started selling them on eBay. By 2005 the NASCAR business, called Choice Racing Tours, accounted for about 15% of Underwood's $30 million in revenue.
Both Jeffrey Underwood and Jeffrey Glaze quickly saw the potential of their sons' ideas. More often, the younger generation has to push hard to win over parents and older employees who aren't comfortable with change. Larina Kase, owner of Performance & Success Coaching in Philadelphia, says laboratories give the often gun-shy older generation more time to get comfortable with the notion of change. "The older generation is more likely to see any change as messing with what works, and they're afraid of that," she says.
Joseph Fontana learned that firsthand. Fontana, now 40, joined his family's business, Detroit-based Michigan Box Co., after college. He rotated through manufacturing, logistics, and customer service jobs before settling in sales. But Fontana was much more interested in technology and graphic design, and as personal computers took off in the 1990s he began thinking about applying his tech savvy at work. At the time, Michigan Box mostly produced plain white cardboard boxes for pizzerias and bakeries. Fontana began using new industrial printing technologies to develop boxes that were more sophisticated and personalized. He suggested that clients try high-gloss boxes with photos of their products or four-color designs.
Clients liked the designs, but Fontana's mother, Elaine, then CEO, and the company's board were much less receptive. Both the business and the local economy were shrinking, and they didn't want to take a chance on unproven products. "I didn't think I was in a position to start something new," says Elaine. "People fear change, especially when it has to do with technology, and we had to be convinced."
Undaunted, Fontana made mock-ups for clients, sometimes farming out work to a graphic design firm. He brought his mother to sales meetings to hear how clients responded to the suggestions and to trade shows to see that competitors were moving in this direction. "He was stubborn as hell," says Elaine. In 1999, after two years of pitching, Fontana got an order from a local bakery for a glossy, colorful box for a line of Greek pastries it was selling in supermarkets. That sale changed some minds. The board budgeted $10,000 for computer equipment and software. Last year, custom orders accounted for 40% of the company's $17 million in revenues, and Fontana was named CEO. Even so, he knows the two-year delay has meant a lot of lost dollars and clients. "If I'd been allowed to carry the ball and had money to invest where I saw fit, it would have accelerated the whole process," says Fontana.
A formal business plan can help the younger and older generations agree on the venture's goals as well as the resources it needs. If your child wants seed money, ask for a rough budget, along with a timetable and revenue projections. Of course, you needn't give them exactly what they want, but some financial support is a good idea. "I would insist on the parent having skin in the game," says Birol. "And I don't just mean money; I mean some emotional buy-in of the idea."
Your offspring should demonstrate the skills needed to run the venture, but that doesn't mean they have to fly solo. From the start, your child should know he can seek advice when he needs it and is responsible for reporting progress on the venture. "You need to schedule periodic check-ins and have an open-door policy," says Kase. The younger generation should feel they have room to make decisions and potentially small mistakes without your whole business taking a hit. "There is some coddling going on," admits Jeffrey Glaze.
The plan for the venture should also include how the project will be staffed. Ideally, you'll hire one or two new employees to focus on the new business and show its importance. But many companies wait until a project is generating revenue before spending on new hires, so it's likely that current employees will be asked to help. This is where your visible support will make a difference. "The parents set expectations and the employees follow," says Kase. All the employees will get excited about the venture "if the parent says it will be a good learning experience for the whole company." But if employees sense any reluctance on the CEO's part, they are more likely to push back instead of pitch in.
At Michigan Box, Fontana found revving up the sales team was almost as challenging as winning over the board. "Some of them were intimidated because it's a more complicated sale. There are more things to do, and it takes longer," he says. "But when we showed them what it was all about, they started to get it." Some staffers embraced certain new projects but resisted others that seemed too ambitious. Fontana says it was a gradual process of training people, showing them the potential this new venture offered, and coaxing them past their fears. "One by one, people had their 'aha!' moment," he says.
Things ran less smoothly at Ovation In-Store, a maker of store displays in Queens, N.Y. Marc Weshler, 35, started a lab to develop real-time Internet-based displays to complement the company's traditional plastic and cardboard constructions. After he had the idea in 2001, Weshler crafted a business plan that explained how much money he needed, what kind of technology he wanted to develop, and who potential clients would be to get his father, Benjamin, to seed the idea. He built a prototype and made his first sale in 2003.
But the plan hadn't spelled out whether any of the company's 65 employees would be involved with the venture. At the time, Ovation's business was slow, and the designers and engineers Marc needed to work on the project were eager to do something new. But Marc's sister Melissa, the executive vice-president for operations, saw things differently. She thought employees were neglecting current clients in favor of an unproven venture. Eventually, after the Net displays started bringing in money, Marc's lab was integrated into the main company and the staff reorganized. In retrospect, Melissa concedes that she was "territorial." And Marc, now chief marketing officer, says: "I didn't do as good a job communicating the project down as I should have." Had their plan addressed what staffers and other company resources Marc could use, neither he nor Melissa would have felt ambushed.
Finally, your son or daughter should be prepared for you to pull the plug if the venture doesn't reach agreed-on milestones or income goals. Says Birol: "The child might not suffer the same adverse consequences as another employee would if the business doesn't work, but there should still be accountability and standards by which you measure the venture's success."
David and Jeffrey Underwood recently hired someone to run Choice Racing Tours. David has taken a senior role in the main business, running corporate sales and scouting for other niche travel services to develop. And the lab has created a ripple that has spread throughout the company. Choice Racing's success has helped all employees step out of their comfort zones. "We are more willing to try new things in general, now," says David, adding that Underwood recently launched another niche business, Choice Music Tours, for high school bands.
Back in the main fold, David says he can see that the experiment gave him the leadership credibility he had craved. "The other employees used to come to my father when they had questions, even on something I was familiar with," he says. "Now they'll come to me first." And Justin Glaze has found that his father's company is a far more exciting place than he imagined. "I've learned the whole business by doing Go For It Graphics, and it's all interesting to me now," he says. That sounds like an experiment gone right.
The money pit: Should you lend to friends?
NPR Marketplace Money,
aired on June 23, 2006
Listen to this story at http://marketplacemoney.publicradio.org/display/web/2006/06/23/the_money_pit
Should you loan money to your relatives or friends? What should you ask for in return? And how do you say no? Kai finds out from IRA BRYCK, the Director of the UMass Amherst Family Business Center.
KAI RYSSDAL: There are a lot of names for it: moolah, cash, dough. Whatever you call it, doesn't change one simple truth: Money can't bring you happiness. And sometimes it can bring you pain. Case in point, an e-mail we got not too long ago from a listener. His friend asked him for a loan. Let's just say afterward, the friendship dropped like a bad stock. IRA BRYCK is the director of the University of Massachusetts Family Business Center. Mr. Brick can it ever end well, money between friends?
IRA BRYCK: Well, usually it does. There's a 14 percent rate of default which is never a happy ending but in many cases it can have some advantages if you have the right honest discussion.
KAI RYSSDAL: Well, let's lay out a couple of hypotheticals here. My brother comes to me and he says 'listen I need $15,000 to start up this business idea I've had, it's been just killing me for years I haven't been able to do it, can you help me out?' What do I do?
IRA BRYCK: Well first of all if you were a banker you would be considering that person's character and their collateral and I think that as the lender you have every right to consider those same things. And so right away, you do have the right to say no and there's a certain science to saying no. But assuming that you said yes I think you would also have the right to hear more about that person's strategy. A lot of entrepreneurs are very short on putting it down on paper and that's something that a bank would certainly want to see.
KAI RYSSDAL: I mean in all honesty if this is a close friend of mine or a relative, I'm going to eat the $15,000 and chalk it up to experience.
IRA BRYCK: Well that's something that you should consider beforehand. First of all, there's a good chance that you're not going to get it back. Be ready that that loan could turn into some sort of gift or debt that you'll be writing off before too long.
KAI RYSSDAL: Let's get back to that science of saying no thing. How do you do that?
IRA BRYCK: There's always the option—this wouldn't happen between friends as much as maybe between a parent and a child—where if you said, 'I respect your willingness to take a risk with that money that I'd lend you, but I'm not as risk-tolerant as you and I would feel much safer paying towards my grandchildren's education. 'So you could dedicate the money that they would not then have to spend.
Blame it on somebody else. Say 'I'm protecting myself from the IRS and I need this loan documented' or 'My accountant would never let me make a loan without the proper paperwork.'
You could also say, you know, 'If you pass all the requirements that a bank would have you run through, don't take it personally, I'm just not a great banker.'
KAI RYSSDAL: Should you consult an attorney and get some formal contract thing signed up or is this one of those do-it-yourself kinds of gizmos?
IRA BRYCK: Certainly. I mean there are forms that you could buy in any stationary store that would help you document this, but if the loan is not paid back and you want to write off a bad debt, the IRS is gonna want to see that you have properly documented this loan and that there's the right rate of interest for it to even be considered a right loan. So certainly it's worth the small investment of an attorney to make sure that it all goes right.
There are also companies out there that will just officiate a little bit and make sure that you are serviced in your loan in the proper way. Circle Lending, they're in Cambridge, Mass., and you can read all about how to think about the loan as a lender or a borrower and they will do everything that a bank will do including be the middle man there. But certainly they would help you get it all down on paper with the ts and the is properly crossed and dotted.
KAI RYSSDAL: Let's say a close friend of mine comes to me and says 'Listen I need $7,000 can you help me out?' I mean am I allowed to say 'Well wait a minute, what do you need it for?'
IRA BRYCK: Well yes I think that you could say it in a way that is loving and friendly, and you could explain that you have some reservations. First of all, that you can't live easily without the $7,000 and that you've heard all sorts of stories about loans being defaulted on and you value your friendship so much that you don't want your friendship to end over $7,000.
KAI RYSSDAL: I suppose there are qualitative differences as well depending on what the money might be used for. It's one thing to give somebody $10,000 or $15,000 that they can then put into a business that they have a really solid plan and other investors and it's another to give somebody some money to pay off a recurring credit card debt.
IRA BRYCK: Right and you might make a mercy loan for that person who has just hit a rough patch and they can explain to you why they're going to get out from under and pay you back. If you really feel that that $7,000 is going to go to drink or interest and they're borrowing from three other people next month, then you should just consider that this is the cost of your friendship to loan the $7,000 or lose the friend etc. So sometimes it's a business decision but sometimes it really is a judgment call
KAI RYSSDAL: IRA BRYCK is the director of the University of Massachusetts Family Business Center. Mr. BRYCK thanks very much for your time.
IRA BRYCK: My pleasure.
May 8, 2006
from a respected business newspaper that does not allow free posting of its articles:
An article on Sibling Rivalries, and the trickiness of passing along a family business, especially when some of the heirs work for the company and some don't, quoted Ira Bryck:
IRA BRYCK, falls into the "fair" camp (of equal vs fair). Children who don't work in the business, he says, "don't know what investment is needed, and shouldn't be able to say, 'You can't reinvest in the business if it costs me my dividend.' "
The article discusses the Neveu family, that followed the same philosophy, and joined the UMass Amherst Family Business Center, "just to talk about the dynamics of being a family business," says Stephen Neveu. The article discusses that at the center's forums they heard about the pitfalls of giving voting stock to siblings outside the business. Mr. Neveu recalls hearing family-business speakers talk about conflict-of-interest disasters. Outside family members might wonder, for example, whether insiders were making decisions for the benefit of the company or themselves -- and demand that insiders take a pay cut.
Business Home Schooling
The UMass Amherst Family Business Center Celebrates 10 Years Of Love And Money
by Deborah Klenotic, UMass Magazine
They hesitate to name one another in public and sometimes meet in undisclosed locations.They learn, while sipping apertifs in business dress, about “competitive intelligence gathering” from former CIA operatives and about emotional intelligence from Daniel Goleman. They strategize on buyouts, takeovers, partnerships. Cold wars brew; key rings and sometimes fists fly.
The G8? Mafia? Disney board of directors?
No, but you’re getting warmer. They’re members of the approximately 75 families in western New England who have successfully ventured into business together and have joined forces through the University of Massachusetts Amherst Family Business Center.
Under the guidance of director IRA BRYCK, the Family Business Center, a Continuing Education outreach program, recently celebrated its 10th year of educating family businesses on best business practices as they apply to all companies (such as how to collect from delinquent customers) and to family business in particular (such as whom to have on the board of directors), while revving their entrepreneurial engines with lessons like “Get off the same page!” The center also serves as a confidential forum for members to bring their family dynamics to the table, getting things out in the open with each other and with other people who know what it’s like to have Dad decide whether you’ll be promoted or have your sister sign your paycheck.
For its extensive programs; its mix of business instruction and family counseling; and the relaxed, productive atmosphere of its meetings--an atmosphere fostered by BRYCK’s respectful emphasis on the group’s confidentiality and, stemming from 17 years’ experience with his family’s childrenswear store, his compassionate sense of humor about the foibles of family businesses--the Family Business Center is earning accolades. It was recently named “Most Innovative and Creative Continuing Education Program” by the University Continuing Education Association and “Most Innovative Program” by the International Family Business Program Association. Yahoo Internet Life magazine named BRYCK’s Web site (umass.edu/fambiz) the “Most Comprehensive Family Business Web Site, By Far.”
“The Family Business Center is one of my favorite things,” says Cindy Johnson, the briskly energetic young owner of Fran Johnson’s Discount Golf and Tennis, who’s been a member for over ten years. Johnson and her father, from whom she bought the thriving sporting goods business, recently sat on an FBC panel about business succession plans. Thanks in part to the FBC, says Johnson, “my father and I have come a long way from when I first approached him about buying the business, and he kept saying, ‘you’re pushing me out!’ Family time was not fun then.”
Money. Family relationships. Office politics. Considering what bumpy territory each can be, it’s a wonder that anyone braves a family business, which requires charting all of them at once. (Of course, you do have time to unwind after you’ve put in your sixty hours a week.)
In fact, 80 to 90 percent of the 24 million U.S. companies, including one-third of the Fortune 500, are family owned or managed. We all know some of them: Wal-Mart, Cargill, Mars, Ford, Crane Paper, Disney.
“Many family businesses get along well, especially if familyness is their message, such as ‘We bring good things to life,’” says BRYCK, sitting in his office. On his computer screen is an electronic version of his newsletter, Related Matters, and on the wall nearby, a 1977 Polaroid of BRYCK and his father standing side by side—but a ways apart from each other front of racks of boys suits.
“Family businesses also break up more often than marriages, with two- thirds failing in the second generation,” BRYCK notes. “Almost no business schools in the United States teach family business. University-based family business centers—there are about a hundred--try to fill the educational and support gap.”
Members of the Family Business Center gather in formal dinners, where they’re wined and dined and enlightened by business visionaries as well as by plays written by BRYCK that dramatize family dynamics behind the counter or on the shop floor. They also regularly meet in smaller roundtables for specific types of family business members, such as siblings or presidents. In addition, the center provides pro bono consulting sessions with BRYCK for individual companies and free technical information sessions from its six corporate sponsors (the center receives no state funding).
“When members first start coming to our dinners,” says BRYCK, a big guy with an English sheepdog geniality who is clearly expert in the art of communication, “they comment on the quality--this is not your bad coffee and stale croissant affair--and say how good the conversation was and how they felt normal for once. Every day, many of these people have been thinking, ‘Our family is screwing it up, we’re so dysfunctional.’ For them to walk out feeling normal—that’s a big thing.”
Member Karen Randall (2nd year member), owner of Randall’s Farm and Greenhouse in Ludlow, Mass., says that although all family businesses, including Randall’s, have family issues to deal with, theirs doesn’t have any particular problems right now. “Probably because I’m single and don’t have children,” she says, acknowledging the gigantic workload of the business owner, “and am the sole owner by mutual consent of the family,” including the two sisters who work for her.
“For us,” says Randall, “the Family Business Center is more an opportunity for growth, a chance to step back from what we do every day”—such as signing about a hundred paychecks every Friday morning, as she’s preparing to do now with her mom, Elsie, in her office overlooking the store-- “and to listen to intelligent people speak about entrepreneurship. To have a fantastic entrepreneur like Stu Leonard, who owns the biggest dairy store in the world, come and speak to our group is an amazing opportunity. I took eight employees to that dinner.”
The center also is also a grow light for this produce business owner. “Because the roundtable is a very confidential venue, you’re not afraid to vent to other business owners, to talk about sales, anything. And you listen to other people and think, ‘Wow, they don’t see their business like I see mine.’ It definitely inspires me.”
Although since age 11, she was washing and packing the squash and scallions they grew on the farm. “I never thought I wanted to come back to the store--I got my degree in elementary education—but I did always feel a commitment to it.” She bought the family business in 1996, about ten years after the death of her father, who started it as a roadside egg stand in the 1950s, and has turned it into one of Babson College’s Top 100 Women-Owned Businesses in Massachusetts. Asked whether she has moments now when she concludes that things worked out perfectly after all, Randall responds, “No, never. There’s always a conflict.” Maybe so, but Randall appears perfectly content as she fields phone calls and interruptions—a truck won’t go into reverse, an employee wants to attend a produce show, someone needs to sand the entrance— while sitting down to a stack of paychecks with Elsie.
Ambivalence toward the family business is common, says BRYCK, as is an inadvertent but nevertheless long-term commitment to the Mom and Pop operation.
“In many family businesses, the founder is likely to have started it because he hated his job and wanted the American dream of owning a business,” explains BRYCK. “Children come in because they want to or because they lost their job or decided they didn’t want to be a dentist after all. The way my father always expressed it to me—and he did this unintentionally—was, ‘if all else fails, there’s the business.’” BRYCK returned to his family’s store in his twenties, after getting an education degree and briefly running a small, private K-6 school.
For this and other reasons, says BRYCK, “many families have a hard time treating the business like a business. Some employees may not start at the bottom and work their way up, but others have to. Employees who are not family may be treated too informally, or, conversely, they may be required to follow rules, like punching a clock, that family employees ignore. The owners may not be sure how much to pay themselves; they may not be sure how to decide who should be president.”
Outreach staff use humor to focus on customer service
Humor was a key ingredient in a professional development workshop on customer service conducted recently for 120 Outreach staff.
from UMass Amherst "In the Loop" online newsletter
March 21, 2006
IRA BRYCK, director of Continuing Education’s Family Business Center, started with videotaped interviews of staff members from each of the five Outreach units, collecting stories typifying where customer service could be improved. Then, with co-facilitator Helmi Pucino, a local trainer, he assembled a troupe of improvisers, including UMass students Michelle Whitaker and Scott Braidman (members of Mission IMPROVable), Kelsey Flynn of Villa Jidiots, and local actor Nick Simms.
The group performed six skits riddled with customer service problems. After an audience discussion, facilitated by IRA BRYCK, on ways to improve attitude, make structural changes, and adopt best practices, the vignettes were re-staged to demonstrate the better methods.
The event was followed on March 1 by a presentation by Isenberg School of Management professor Alan Robinson, author of "Ideas Are Free," on how Outreach can best gather and implement a steady stream of ideas from employees for continuous improvement and solutions to challenges.
Theory of Relativity
By Lorraine Duffy Merkl, New York Post @ Work
April 3, 2006
Some dads don't just bring their sons to the office—they hire them.
AS if trying to get ahead at work isn't hard enough. Competition for the most coveted assignments, raises and promotions - not to mention the boss' attention - can transform the office into a minefield of intrigue straight out of "The Apprentice." But honestly, do you think any of the show's winners would have had a snowball's chance if, say, Donald Jr., Ivanka, Eric, Tiffany or baby Barron were among the contestants? Oh, let's not even pretend.
"Nepotism is not going to go away," says IRA BRYCK, director of the Family Business Center at the University of Massachusetts.
It's here to stay - but as Adam Bellow, author of "In Praise of Nepotism: A History of Family Enterprise from King David to George W. Bush," says, "We have to figure out how to practice it well."
Practiced arbitrarily, nepotism is an embarrassment to everyone, especially the incompetent beneficiary - whom others end up taking pleasure in mocking.
Steve, an employee at a major utility company, works side by side with the son of an upper-management honcho - a man who miraculously jumped from entry to supervisory level.
"The guy never went through any training," says Steve. "He's having a horrible time. And it's not his fault. They shouldn't have hired him in the first place."
Marc, a former account executive at a major ad agency, once got saddled with an assistant AE, who happened to be a client's daughter.
"She got a window office right off the bat and assignments all her own."
That was all very well and good, but when her father stopped being a client, she was nudged into a tiny cubicle, an event which Marc calls "the high point of [his] time there."
While he got to have the last laugh, dealing firsthand with office nepotism often drives people - not the boss' nephew - to throw up their hands in frustration. After spending a year reporting to the boss' daughter, Theresa left her graphic design job at a marketing company.
"She cut out early every single day and messed up packaging and other things because she had too many tasks for someone who worked such a short day," says Theresa.
"Plus, she made employees walk the family dog."
It's hard to watch a bigwig's nincompoop niece get hired - even harder not to be jealous of those with "an uncle in the business." For some, nepotism is so unsettling that intelligent professionals suddenly lose all sense of decorum.
One of two things generally happens. Either the sacred cow kicks into effect, and the employee is handled with kid gloves - or the exact opposite happens, and the rest of the office piles on the work (and the resentment) and generally treats the relative like an untouchable.
So how do you deal when you find yourself working 9-to-5 with someone who got their job because of who they know? "Don't over-think the problem," says Bettina Seidman, a Manhattan-based career management coach, who works with clients face to face and by telephone.
"The connected person often doesn't want to be treated specially. They just want to be left alone to do their work. At the beginning, don't discriminate; treat the person as you would anyone else."
Here's what to do if the nepotistic hire is:
Your colleague: They might be getting away with murder on a regular basis, but stay out of it. It's not your job to monitor or gossip about their salary, hours or workload. "Just be in charge of yourself and do your job the best you can," says Seidman. Regardless of relation, employees who do quality work get the boss' attention. Who knows? Work well, and you could end up as the golden girl/guy of the office with the best assignments - and the ability to get away with things yourself. If you think about it, it's sort of hypocritical to dislike someone because they're connected, when we all seek to create a mentor/prot‚g‚ bond with our superior to help us get ahead.
Your subordinate: If they have some problems at the onset, act as you would with any new employee; Counsel them. If they heed your advice and show improvement, have another meeting and acknowledge the elephant in the room - something along the lines of, "We both know you got the job because you're related to so-and-so, but you're doing good work and I'm glad you're on the team." They deserve that.
"What these people don't deserve is the instant judgment that they are getting something they have not earned," says BRYCK, who also conducts seminars for outside managers at family-owned companies. Donny Deutsch, Christy Hefner, Aerin Lauder, David Lauren - they all have the education and qualifications, as well as the right genes.
Bellow, who is also executive editor-at-large for Doubleday, stresses that having an "in" isn't enough. "No one succeeds without effort." In fact, those who have been hired by family, scoff at the idea of having been given preferential consideration.
"My father was more demanding of me because he wanted me to learn the right way to do things," says John Masi, who worked in his dad's bakery while growing up in Yonkers.
As for the assertion that family members will often throw their weight around to get their way, that's rubbish, he says.
"I was expected to earn people's respect by working hard."
If, however, your subordinate proves not to be of the afore- mentioned ilk, then you will have to have another disciplinary meeting; perhaps many.
Document the unacceptable behavior and record all the times you sat down with the person to discuss difficulties. When evaluation time rolls around, you can go to the boss with firm examples of how his nephew is not cutting it and all the things you have done to help him get with the program. No, we didn't say this conversation would be fun.
Your manager: Then, my friend, you have a very special problem. It is never advisable to go over your boss' head (whether or not nepotism is involved) and "tattle" to their boss. Without that as an option, an employee's first instinct might be to head for a new company that has policies against hiring family members or friends; where opportunities and advantages to people are based on ability and they can "make it on their own."
The truth? Bellow says, "The idea of the self-made man or woman is a myth. The most prominent examples of people who were supposed to be self-made, weren't. They received benefits, gifts and help at critical points."
You can still get passed over by someone who may not be related to the boss - just liked by him/her - and that's who'll get the support.
"Don't rush to jump from the job," says Seidman.
"If you like the company and the work, don't let the emotions of the situation dictate your leaving. Talk to the manager first."
Try something like, "We've gotten off on the wrong foot, what can I do to work more smoothly with you?"
If you can't do that, then perhaps try an HR person, company mentor, or a career counselor to seek advice from.
And before you get too defensive about family hiring family or friends, keep in mind that 90 percent of businesses in America are family-owned - which includes one-third of the Fortune 500 companies.
And 78 percent of all new jobs are created by family businesses and most of those positions are filled by nonfamily members.
Before hiring a relative:
- Don't hire yours or anyone else's just because they "need" a job. Make sure he or she is a viable candidate before you make an offer, and that they have the skills needed to do the job. You're running a business, not a charity.
- Don't supervise one of your own. If you could never get your son to do his homework at home, how will you get him to do the report you need ASAP?
- Don't put relatives together so they can play out their family dynamic in the office. Imagine Jan Brady: "Marcia, Marcia, Marcia. She always gets to supervise."
- Do establish boundaries. At work, it's important to be professional. It also cuts down on reminding other employees that you and another employee have a personal relationship.
- Do clearly define the relative's position so he doesn't have to jump through all kinds of special hoops to achieve the same success as a nonfamily member.
Before joining a family-owned company:
- Understand why you are being hired. Is it to groom someone's relative so they can fill a higher-level position and eventually be your boss?
- Are they recruiting you for a special expertise that no one in the family can offer? That's a great position to be in.
- Research the company's reward system. Do only family members or relatives of people in high places get the best jobs?
- An outsider brings a sense of professionalism to what could be called the "casual atmosphere" of family members working together. Are they open to this more formal approach to business?
- Make sure you have support from higher-ups and that they make it clear to your underlings that you are in a position of authority. As such, they have to respect you -even though you are not "one of them."
Quotes from upcoming article in Best Life Magazine (Rodale Press)
Think carefully about where you slot the child who will succeed you. If he/she leap-frogs senior employees they’ll be demoralized, warns IRA BRYCK, director of the University of Massachusetts Family Business Center. Conversely, you can’t shortchange your kid just because he’s your heir. Provide real responsibility—then develop a training program with goal setting, evaluations, and a reward system, and send a clear message to all that your company is a meritocracy, with a slight bias of affirmative action for family.
Here’s where most patriarchs fail. George Berkowitz, founder of the Boston-based Legal Sea Foods restaurant chain, split his company into two to appease dueling sons, who each wanted control. One son felt cheated by the deal, quit, and sued. The lesson? You don’t have to treat kids equally to be equitable. Fairness is more important than equality, assuming that your family can play fair.
Dear Son, You’re Fired
By Anne Field, Small Business Review,
February 28, 2006, 4:50 p.m.
Dealing with the non-performing family member
Here’s a scenario that has played out in many a small business: For seven years after taking his first-born son into the business, the founder watched for signs that the kid really was a chip off the old block. He wasn’t. Assuming that he would take over no matter what, he put little effort into the job and dismissed all criticism. Finally, the father promoted his No.2 son, who had worked diligently, over the older brother.
That wasn’t the end of the problem, of course. The passed-over son is furious and isn’t speaking to his brother or his father. Other employees are forced to tiptoe around, generally doing everything they can to avoid the older son. So far, the situation hasn’t harmed results at the company, a 50-employee manufacturing firm. But unless some resolution is reached, it will, predicts Jane Zalman, a consultant with Zalman Family Business Solutions in New York, who is working with the family.
Zalman empathizes with the father. “It’s very hard to tell our siblings or children they’re not doing a very good job,” she says. “But it’s even harder to fire them.”
But ultimately, the non-performing son has to shape up or Dad has to get him out of the picture. The younger son is now doing the work of two and other senior employees will grow increasingly resentful as they watch No. 1 collect a fat salary for doing nothing. Those who can do so will may leave. Meantime, productivity will likely suffer, decision-making will be stalled and the company could make strategic mistakes.
In these situations, the business owner is torn, of course. Can he do right by the business and keep his family intact? “You still have to sit down with him on Thanksgiving,” says Zalman. But Zalman and other small-business experts say there are steps you can take to make this difficult situation easier to get through:
Insist on traditional performance measurement systems. Business owners make things worse for themselves and their companies when family members (or any employee) is not given a specific job description and regular performance reviews. This puts the feedback on a professional basis. It also helps to add a 360-degree review system, so input comes from peers, customers and subordinates, too When possible, have the family member report to a non-family employee. (Note: If your company does not have formal job descriptions and regular performance evaluations, goals and measurement systems, etc., a lazy son is the least of your problems!)
Confront the person directly—through someone else. Lots of times, families do everything they can to avoid dealing with the problem. Again, you can get around this by making sure the individual reports to a non-family member. You may have to change the reporting structure before you can deal with the problem. If the problem child/relative must be a direct report, consider hiring a coach who specializes in family businesses to provide impartial input.
But don’t expect a quick fix. Only in movies does that helpful heart-to-heart yield instant results. Chances are, you will have to commit to a series of discussions. IRA BRYCK, director of the University of Massachusetts Family Business Center in Hadley, Mass., is working with three owners—two siblings and a cousin—of a 20-employee retail firm. Two told him that the third, the eldest, is “doing work that could be performed by a high school student,” he says. But they were too intimidated to confront him. After working with BRYCK, they broached the touchy subject and began discussing what each individual’s role should be. They have a long way to go, says BRYCK. But, he adds: “At least they’re now talking about who’s helping and who’s hurting the company.”
Find a better slot. Could be, the person is simply in the wrong job. Thomas Davidow, head of Thomas D. Davidow & Associates, a family business consultancy in Brookline, Mass., recalls a five-employee real estate firm, in which the founder’s son floundered for a year-and-a-half as a salesman. Finally, he had the guts to admit he wasn’t happy. He moved to marketing—where he’s become a whiz.
Send the rookie to a farm team. Before bringing a young relative into the business, let him or her make their mistakes and learn about the world of work in somebody else’s shop. Use your connections to find the kid an entry-level spot in a similar or related business. “The chance of people saying yes is high, especially if they know you’ll do the same thing for them,” says Davidow.
Examine the kind of mentoring you’ve provided. In some cases, the individual may just need a little more training. “Some people feel their kids should have the skills, just because it’s their son or daughter,” says Vince Vecchiarelli, president of Hank’s Auto Body West, a third-generation family-owned business in Wheat Ridge, Col., who also does consulting for family-owned businesses. When he joined the company in 1983, his father almost immediately put him in charge of starting a new office, but with little direction or supervision. The business started to grow—so much so, in fact, that Vecchiarelli, himself, feared he wasn’t up to the job. On his suggestion, they ended up hiring a seasoned CPA to act as his right-hand man and tutor. “We could focus on what my father couldn’t teach me,” he says.
Make sure the person really is screwing up. Before you get ready to confront the problem child, make sure that you’re not the problem. Often, successful business founders have unrealistic expectations. “For some people, no one will be good enough,” says Davidow. BRYCK tells the story of a founder and son, who stepped out of day-to-day operations of their family business—and have done nothing but criticize the performance of another son, now the president, ever since. “He’s actually doing fine,” says BRYCK. His solution: BRYCK is working with all three to come up with specific objectives for the president and ways to measure his performance. This will force the outsiders to be specific and constructive. Until now, he says, they have only been “second guessing him.”
Families find therapy of a sort in help running businesses
By Stephen Singer, AP Business Writer
Long Island Newsday, January 29, 2006, 12:02 p.m. EST
STORRS, Conn.—At a time when most people are enjoying their retirement, 73-year-old Stephen Altschuler is grappling with his company's future—and his family's role in it.
Altschuler founded an electronics assembly manufacturer 34 years ago and built it into a company that now employs 96 workers. Based in Torrington, the privately-held Altek Electronics Inc. makes circuit boards and electronic assemblies for original equipment manufacturing companies, primarily in Connecticut.
Preparing to hand his company over to the next generation has been a source of stress for Altschuler and his two children, who are vice presidents of Altek Electronics. The family hired an outsider with experience running manufacturing facilities six years ago to help settle future ownership issues.
"Most entrepreneurs don't ever want to let go of their business ever," said Altschuler's daughter, Sabrina Beck. "Children want the opportunity to take the steering wheel and drive the car."
Conflicts in family firms are common. Up to 90 percent of businesses in the United States are family-controlled and more than one-third are expected to go through ownership changes in the next five years due to retirement, according to the University of Connecticut's Family Business Program.
UConn and other universities have established programs to help family-owned businesses mediate such conflicts, which can cause turmoil for the family, employees, suppliers and customers.
"It's less like therapy and more of having the difficult conversations and discussing the undiscussable," said Michael Stern, who runs a consulting group and works with the Family Business Program.
The UConn program, part of the School of Business, offers itself as a "think tank" for family business owners, successors, family members and non-family managers. It helps family-owned businesses wrestling with thorny problems such as how to promote, demote or fire a family member.
Academic interest in family-owned businesses has gone worldwide. The University of Pennsylvania's Wharton School has launched the Global Family Alliance to research and share best practices of family enterprises of "substantial net worth."
"We know very little about corporate governance vs. family governance," said Raphael Amit, chairman of the Global Family Alliance executive committee. "We need to look at families from around the world."
IRA BRYCK, director of the University of Massachusetts Family Business Center, a continuing education program, said his service is "therapeutic, but is not therapy."
"Where family businesses are closely held, businesses and secrets are closely held, there's a certain secrecy, a certain shame that our family is dysfunctional when all families are dysfunctional. When you get over that you can think more creatively," he said.
At Altek, the Altschuler family decided to share ownership with Richard Razza, hired in 2000 and soon promoted from production manager to company president. He also mentors Sabrina and her brother, David Altschuler.
"That took some of the heat off the relationship with me and my kids," Stephen Altschuler said.
The company also posted a "perpetuation plan" on its Web site to reassure vendors and would-be customers that the company would continue after Altschuler's departure.
University mediation programs help family-owned businesses through personnel and staffing issues, in addition to issues of who will eventually run the firm.
"As a parent you want to support or enable your child, but as a boss you may have to fire your child and bring in better management," Stern said.
Other issues focus on whether entering a family business is a birthright or a reward based on merit, Stern said. And compensation can be a problem, too.
"Parents frequently tend to give kids equal amounts for Christmas and Hanukkah, but do you pay an office manager the same as a sales manager or do you pay the market rate for those positions?" he asked.
Companies founded as family enterprises run the gamut from titans such as Wal-Mart and Ford Motor Co. to the local hardware store. While many publicly traded businesses have escaped the stresses of family personalities and relationships, far more firms still feel the pull of pressures among parents, children and other kin.
Richard N. Dino, associate dean for graduate programs at UConn, said succession is among the most complicated issues family businesses confront "and if not done correctly, leads to the demise of the company."
David Altschuler, a vice president of Altek and the son of the company's founder, is practical in one detail in the operation of his family business: He calls his father by his first name.
"At work I call him Stephen. At Christmas I call him Dad," he said. "We try to remain professional in the company. Sometimes we succeed. Sometimes we don't."
It's All Relative
Family Business Center Marks 10 Years of Discourse and High Drama
By George O'Brien, Business West Magazine,
March 21, 2005
The UMass Amherst Family Business Center recently marked the 10th anniversary of its creation. The FBC, as it's called, has won numerous awards for its innovative programs and approaches to carrying out its mission — including the use of theater. But more important to director IRA BRYCK are the accolades from members, who say the center provides invaluable help with navigating the challenges involved with both family and business.
A IRA BRYCK gets a lot of mileage out of the statistic, calculated by noted family therapist John Bradshaw, that 99% of all families are dysfunctional.
"He makes it 99, because I guess nothing is really 100%," said BRYCK, director of the UMass Amherst Family Business Center, who told BusinessWest that whenever he addresses groups he asks if anyone believes they qualify for inclusion in that other 1%.
"No one ever raised their hand," he said, "until very recently, when I asked and one woman put her hand up. She took it down quickly, though, because everyone started laughing."
Bringing family members together in a business venture certainly doesn't make them any more functional, said BRYCK, noting that this simple fact was one of the primary inspirations for the business center, which recently marked the 10th anniversary of its inception.
BRYCK, who can talk for hours about what his center does and how it does it, may have boiled it down to a few simple, effective words when he said, "people tell us that we make them feel normal."
By that, he meant that the center, or the FBC, as it's called, helps people with the many challenges associated with the two terms that comprise its name — family and business. "We focus on everything from social psychology to how to read a balance sheet," said BRYCK, noting that this work goes on in a setting that promotes discussion, especially in the form of questions.
Cindy Johnson has had many of those during her nine-year association with the FBC, which she credits with helping her manage and expand the business, Fran Johnson's Golf & Racquet Headquarters, that was started by her father 30 years ago.
As she describes the sequence of events that led to the transition of the company from one generation to the next, Johnson borrows a golf term: mulligan. She wishes she had one for the time when her father was sending signals that he wanted to exit the business.
Fran Johnson didn't have a succession plan in place then, didn't think his son and daughter had the wherewithal to buy him out, and, what's more, he thought they were trying to push him out the door. But Cindy Johnson doesn't blame him for the nine-month nightmare period that ended with a transition to the next generation after a planned sale to a Boston-based group fell through; she blames herself.
"Looking back, I remember that I was waiting for him to approach us," she recalled, referring to her and her brother, Val, who eventually joined her as partner, left, and recently returned as an employee. "In the traditional business sale, the buyer approaches the seller, not the other way around. I shouldn't have waited — I should have taken the initiative."
Johnson passes that advice on to many FBC members — and others who approach her — who find themselves in a similar situation. It is part of the give-and-take, she says, that makes the center such an invaluable asset. Nate Nourse agrees.
He's one of several members of his family that together run Whately-based Nourse Farms, which specializes in several different types of berries and supplies plants to farms across the country. Nourse said the monthly roundtable meetings staged by the FBC (the center has four different groups, three that are co-ed and one for women only) provide what he called a "mini board of directors" comprised of individuals from many business sectors and personal backgrounds.
"Together, they're a great sounding board," he said. "The roundtables have become great problem-solving forums where we can get things out in the open."
The FBC has a number of other vehicles for generating discussion, including several dinner meetings featuring noted speakers, a comprehensive newsletter, and even a dramatic component. Indeed, BRYCK has penned several plays that have been used to offer lessons and inspire dialogue.
The plays are one example of how the FBC has taken on the personality of its director, said Jason Mark, president of Northampton-based Gravity Switch, a company specializing in Web design and CD-Rom creation. He told BusinessWest that BRYCK is a high-energy manager who is constantly striving to raise the bar when it comes to innovation and quality. The center's diverse programs reflect that.
"I belong to a number of business groups," he said, "but this one is different, it really is an asset. It's unbelievable to sit in a room with people experiencing the same problems that you are, and also with people who experienced them 20 years ago.
"When they say, 'son, you're not the first one to go through this,'" he continued, "you really do feel more normal, and that's comforting in many ways."
Mom & Pop Operation
BusinessWest looks this month at the genesis of the FBC, its growth and evolution, and plans for the future.
By George O'Brien, Business West Magazine
As he talked about the FBC and its mission, BRYCK described it as a "company selling an invisible product.
"And that's challenging," he said. "It's different than selling widgets; we sell knowledge, wisdom, and experience, things you can't see."
And it's been doing so since the fall of 1994, when, in response to growing awareness nationwide about the institution of family businesses and the common challenges facing them, a group of local business owners created a center in conjunction with UMass/Amherst and its Continuing Education Department.
How BRYCK came to lead the FBC is an intriguing story.
He had come to Northampton to start a retail clothing venture, but the business plan he drew up seemed to say, ëno, don't do it.' So he didn't. He was then set to take a job managing a Burlington Coat Factory store in New York when, on a lark, he applied for a position he'd heard about at the family business center being created in the Valley.
Actually, the search panel had already hired a director. But it "unhired him" after talking with BRYCK, who brought to the table some 15 years of experience working in a family business — a fourth-generation childrens clothing store that he closed after a 90-year run — and the sales drive that would be needed to get the new family business group off the ground.
Indeed, when asked why the center hit its membership goal of 50 in one year instead of two, BRYCK said, "because I've been selling since I was 3 and I don't take rejection personally."
The sales job, as BRYCK describes it, involves more than coaxing businesses to join as members or continue their involvement. It also entails the generation of enthusiasm among members, the creation of imaginative programs, and even the recruitment of high-profile speakers, which BRYCK has managed despite a limited budget.
The FBC's track record has earned it several honors. It was recently named "Most Innovative and Creative Continuing Education Program" by the university's Continuing Education Assoc. and "Most Innovative Program" by the International Family Business Program Assoc. Meanwhile, BRYCK's plays, including his most recent offering, A Tough Nut to Crack, based on his family's business, have been performed before audiences across the country and even overseas.
But BRYCK says the more poignant accolades come in the form of comments from members who say the FBC has helped make the twin jobs of managing a business and functioning as a family that much easier.
And these comments inspire him to work even harder to make programs, such as quarterly dinner meetings, entertaining and valuable. And to focus on what he calls "gems."
"I want everyone to come away from these meetings with at least one gem, something practical that they can plug in the next morning, even if it's a theory," he explained, adding that the gems will be different for each of the dozens of people who heard the same speaker.
While early FBC members included Peter Pan Bus Lines, Big Y Foods, and American Saw & Mfg. — which joined primarily to help get the center started — the membership list is dotted with the small businesses that define the region.
Some companies are relatively young, while some go back several generations. The business sectors range from Web design to berry farming and everything in between.
It is this mix of businesses, all with the common denominator of a family at the helm, that makes the group and its programs so effective, said Nourse, adding that this commonality, coupled with confidentiality, enables people to open up far more than they would at a Chamber of Commerce function.
Nourse had just returned from a roundtable meeting at the Scibelli Enterprise Center at STCC when he spoke with BusinessWest. He couldn't mention who was there or what they talked about due to strict confidentiality rules, but he did discuss what goes on generally.
"These are problem-solving forums," he said of the roundtables, staged on the first Wednesday of every month. "They provide a way to get your frustrations out in the open, which is a good first step in solving those problems.
"You get viewpoints from people in different industries and with different slants on things," he continued, returning to his though that the roundtables act in much the same way that a board of directors would.
Topics of discussion vary from cash-flow management to succession planning, he said, adding that the latter is now an issue at Nourse Farms, although he expects his father to continue the tradition of Yankee farmers and work into his '90s, as his grandfather did.
And, like BRYCK and others we spoke with, Nourse said he takes comfort from the fact his family's issues and challenges are not unique.
"You find out that when your family's scrapping over things, that's normal," he said. "You find out that working long hours is normal, and you find out that having some flaky issues is pretty normal.
"Overall, you discover that you're not alone in this thing you do," he continued, "and it's very comforting that way."
When Mark tells people he runs a business with a wife, the common response is a look skyward and the reply, 'whew ... I could never could do that.'
He understands those comments — sort of.
"When you're doing something you really love and you're doing it with your best friend, what can be better than that," he said, acknowledging that some (perhaps many) couples could not work in such close quarters or be around each other almost 24/7. For him, though, it's not like that. "My wife is one of the hardest people in the office to get a meeting with."
But there are issues that concern him when it comes to working with family, in this case, his wife.
"For example, how do you stop talking about work," he said. "If you're at the movies and you're standing in line, how do you not get roped into that work talk? If you have a spouse that isn't in the same business as you it's OK for both of you to talk about work when you're on a date because you can both relax and get things off your chest.
"But once you're working in the same place, it's no longer getting things off your chest — it's going back to work," he continued. "Working together creates new lines and boundaries that are sometimes challenging and sometimes exciting and invigorating."
Mark said that there has been discussion on such topics during the roundtables, which are open forums in which views on a wide range of matters involving family, business, and a family running a business, can be aired.
Like Nourse, Mark enjoys the depth and quality of experience that is shared at the forums.
"It's great to talk to this group because not only have all of them been through some version of what you're going through, but they also have at least one good friend who's a family business owner," he said. "So they can share not only their own experiences, but those that other people have had as well.
"When you multiply that out by how many people are in the room," he continued, "then you have this incredible wealth of knowledge."
It was this knowledge and the desire to share it that kept Johnson in the FBC even when her company was no longer technically a family business; her brother had left and her mother, who had worked there in some capacity for many years, had retired.
"I stayed in it because it's a great asset and I really like having that sounding board," she said, noting that she has had discussions, formal and informal, with members on issues ranging from succession planning to health insurance and other benefits.
Johnson said FBC members have been helpful in her efforts to take the company beyond golf, which is not growing as a sport or a business. Fran Johnson's has recently added several new products, including a line of Vera Bradley luggage and accessories, in a broad effort to diversify and expand. "We're not standing still ... we're changing and adding new items."
This is the 30th anniversary of the start of Fran Johnson's, and the store has a special display near its entrance. There are many old photographs from the days when the business was run out of the Johnson family's basement.
The look back offers Johnson some perspective, but it also brings back memories of a time that was very difficult for the family. And through her involvement with the FBC, she is helping to make similar situations less painful for others.
Birth of a Notion
Mark told BusinessWest that it will probably be at least 16 or 17 years before he has to worry about his son Max (now 16 months old) or any other offspring joining his business.
But he's already starting to think about it.
That's because he knows the statistics — 80% of family businesses fail in the second generation — and he's in close contact with people who have lived through that and have a vast wealth of knowledge to impart on that subject.
He's confident that with the FBC's help he can handle whatever situation arises, because the group will make him feel normal as he carries on as part of one those dysfunctional families.
George O'Brien can be reached at email@example.com
Texas Ventures: Daughter drives firm in time of need
By Victor Godinez, The Dallas Morning News;
Ricky Moon, Special Contributor
Saturday, October 22, 2005, 8:51 a.m. CDT
Erin Rucker never imagined she’d be running her father’s custom motorcycle and car shop.
But when a motorcycle accident left Bill Rucker, 48, in a coma and, eventually, without his left leg, she didn’t have much of choice.
“The accident happened on a Thursday,” she said. “So Monday I had a meeting with everyone that was here, and I told them that we were going to continue on business as usual. We’re going to keep working. We’re going to move forward, and that any decisions that needed to be made, I would make them.”
While her father has recovered and returned to the helm of Rucker Performance Motorcycle Co., Ms. Rucker, 24, has gone from part-time employee to full-time operations officer.
As her father was convalescing between August 2004 and this past January, Ms. Rucker took charge of nearly every aspect of the high-end Fort Worth bike maker.
IRA BRYCK, director of the UMass Amherst Family Business Center in Amherst, Mass., (www.umass.edu/fambiz) said children who step in to run businesses owned by their parents can be successful under the right conditions.
“It helps if the child has business talent and interest in the business,” he said. “Assuming that that is somewhat the case, if the business was well run professionally beforehand, they’re might be enough of paper trail, enough professional managers and well trained employees, so that the thing has some
An English major, Ms. Rucker had some experience working at her father’s previous company, American IronHorse Motorcycle Co., but still had a lot to learn.
“I had worked in the marketing department,” she said. “So I was familiar with marketing plans and advertising and some of those things.
“But I had never had any understanding with the manufacturing side, parts issues, any problems with suppliers getting things here,” she said. “There are 10,000 pieces that make up one motorcycle, and if you’re missing 15, it can set you back a week or two weeks, depending how long it takes to get those
‘Handling it all’
So she had to master everything from payroll to accounts receivable to customer service.
“There was a graphic designer that worked here, but we didn’t have a receptionist,” Ms. Rucker said. “So she and I took turns answering the phones, running downstairs if anyone came in. In addition, I called the dealers, I got the orders, I went through the orders with everyone here, made sure it got
“Then I had to invoice, collect the money, pay our bills with the money, handle any kind of warranty issue that came up with the motorcycles. Pretty much, I was handling it all.”
Nor was she taking over an established firm.
Doing what it takes
Rucker Performance had not yet celebrated its first birthday when Mr. Rucker was hurt.
“From that point, we had just been in an R&D stage,” she said. “We weren’t producing anything. So I had to go from not producing anything to producing motorcycles to sell to dealers to make money.”
The company’s bikes are about as far as you can get from mass-produced.
They’re screaming machines that sell for $50,000 to more than $80,000, and they require exquisite attention to detail.
The company also customizes cars, such as a searing yellow 1932 Ford Highboy roadster on display outside the shop last week.
But Ms. Rucker was able to make the transition from startup to established business. Now the company is selling about one bike a week, and it has a six-month backlog of orders for custom cars.
Ms. Rucker credits employees for much of the firm’s success.
“There was a lot of the staff that really kind of rallied up and
said, ‘Anything you need. However late we have to work. Whatever we have to
do. Let’s just keep going.’.”
There were plenty of challenges, though.
Ms. Rucker said she had to fire one worker who assumed she didn’t know what she was doing, and the company’s accountant quit a week after her father’s accident.
“I spent nights up here till 10 or 11 sometimes going through all of our payables and spreading them out on the floor to see what invoices had been paid and what hadn’t been, what was outstanding,” she said. “And that was one of the biggest things that really stressed me out, was the financial end.”
Gradually, as the staff grew and her father recovered, Ms. Rucker was able to share more of the responsibility. But she still oversees just about every aspect of the company except making the bikes.
And she’s discovered what she wants to do with her career.
“This is definitely a business that I’m passionate about,” she said. “Before, I never really felt as connected to it. I felt like it was my dad’s business, my dad’s vision. Now I feel like it’s our vision, our goals, it’s what we want the company to do.”
In a family-owned company, it’s critical for the family members to have a good relationship, Mr. BRYCK said.
“If you had terrible fights about allowance, you’re going to have terrible fights about salary,” he said. “If your parents did a decent job of teaching you how to drive a car or ride a bike, you do have some examples of looking at how you can teach and learn together.”
Having identical business philosophies is less important, though, said Mr. BRYCK, whose father raised him in the retail business.
“My father was a very hard sell, hard charging,” he said. “Not a bull in a china shop, but if he wanted to sell a suit, he would sell a suit to whoever walked in the door. I was a good salesman, but I was a soft sell.”
But the two got along and the company prospered.
Mr. Rucker, who calls his daughter’s CEO stint a “trial by fire,” said his
transition back to the company has been seamless.
“It’s a tremendous point of pride to know that she stepped in and ran it as well as I did,” he said. “And that in turn has made it very, very easy for me, coming back, to specialize in the areas that I need to specialize in, and know that she can handle the areas that she needs to handle.”
Family businesses can be problematic
By Cathy Flynn, MetroWest Daily News, Worcester, MA
Thursday, October 20, 2005
Is blood thicker than water when running a business?
According to IRA BRYCK, director of the University of Massachusetts Family Business Center in Amherst, "It depends on the blood."
While many relatives in business together manage to get along, BRYCK said that family owned businesses like Weston Nurseries often face conflicts that others don't.
"If they don't get along personally and strategically, they won't do any better in business than they do in the living room," BRYCK said.
And without a strong professional staff running the business, "they tend to take things personally, and the conflicts are filled with stuff from when they were growing up," said BRYCK, who runs a roundtable for family owned businesses and has his own consulting practice. He said the businesses that fail do so because family members cannot communicate or handle conflict.
On the other hand, he said, stockholder-owned businesses tend to have more politicking and backbiting. And a well-run family business "can out perform the stock market nine times over."
BRYCK, whose family owned a children's apparel shop on Long Island, has been studying family businesses for decades. He estimates 90 percent of all businesses are family owned, including a third of the Fortune 500.
One of the first speakers for BRYCK's roundtable was Legal Seafoods founder George Berkowitz, who told the group he agonized over how to pass down the business to his two sons. He chose current head Roger Berkowitz, a move that alienated him from his other son, Mark, and his grandchildren.
Berkowitz told the Family Business Center roundtable in 1994 that he gave Mark a position at a newly created company, Legal Ventures, and offered him the same money as his brother.
"They had the same title, the same money, but it wasn't enough," he said.
Berkowitz quoted from management guru Peter Drucker, who once said, "You take care of the business and it will take care of the business and the family. If you only take care of the family, the business won't do anybody any good."
from a respected business newspaper that does not allow free posting of its articles:
An article on how Technology Can Be a Cause of Conflict in Family Businesses (9/05) quoted Ira Bryck:
"Comparing the cost of buying a new machine to "the cost of doing nothing" will resonate with older executives."
from a respected business newspaper that does not allow free posting of its articles:
An article on how How to Succeed At a Family-Owned Firm quoted Ira Bryck:
"Poorly functioning families often are under the delusion that no one knows about their dysfunctionality"
Look beyond how the company operates at the top. The way the company functions at lower levels speaks volumes about its style.
Despite thorough research and questioning, it's possible to miss signs of dysfunction because family members often are on their best behavior during the recruiting process. Candidates "don't figure out whom they're working for until it's too late."
Sometimes, issues are so subtle that a new hire decides the wrong person is the "problem." Usually, it's a family member who's a scapegoat. That can be the person who's telling the most truthful tale about the family," he says. "They're not the root of the problem but the inflammation that the family has assigned."
"There's a tendency to base compensation on the needs of family members, because if they're underpaid, there's always the promise of, `Someday this will all be yours.' The nonfamily member isn't getting promised that someday all this will be his, because he most likely won't be sticking around until then, so he might be resentful if he isn't getting paid fairly."
Ensure you'll have necessary support to make changes.
Family owners bring in outsiders because they want to professionalize the company and establish "a more formal governance structure instead of just shooting from the hip all the time. The process of shaking up a family-owned company can be stressful and disruptive. To succeed, you must have steadfast support from the top.
"When it's done right, and it often is, the family can be very grateful to a nonfamily member, or several of them, who bring professionalism. If the family is able to accept the talent and experience of a competent nonfamily member, it will heap all sorts of praise and recognition on them."
from a respected business newspaper that does not allow free posting of its articles:
An article on how Whether a non family manager should accept a job at a family firm quoted Ira Bryck:
"Family members never can escape their past or be seen as truly adults."
"Cousins will fight and continue the feud of their parents. Nonfamily members don't have that baggage, so when that person speaks, family members might not [think], 'What did he mean by that?' "You need to distance yourself from family dynamics in the same way a psychologist would. Without that baggage, a nonfamily member might be heard more clearly."
"It's not unusual to find that business families have a collective trait toward risk-aversion," "Three-fourths of family businesses that want to continue the business -- not sell or close it -- want to hand it off to a relative. But the vast majority haven't yet named a relative or competent heir or don't have an heir who's competent yet. Succession in a family business is a process, not an event."
Joint-Venture Couples Live by Special Marital Rules
SMALL BUSINESS: New York Times
By Ellen L. Rosen, January 13, 2005
Eric Cohen and Joyce Shulman of Long Island were sharing a pizza with friends several years ago when they realized they had never seen independent advertising on cardboard pizza boxes.
Mr. Cohen, with a marketing and advertising background, and Ms. Shulman, a lawyer, saw an opportunity for a business. Through a friend, they arranged a meeting with Gil Korine, the owner of Avco Industries, one of the nation's largest manufacturers of pizza boxes, and proposed forming a joint venture with him to solicit advertising for Avco's containers.
He agreed, and four years ago, they started Mangia Media in Water Mill, N.Y. After a frustrating first year, Mr. Cohen said, Mangia Media is thriving, with two full-time employees, two independent sales representatives on the West Coast and 2004 revenue of more than $3 million.
Mr. Cohen, 41, and Ms. Shulman, 39, joined a small but significant exodus of professional couples leaving often disparate careers to enter the world of small business. Bored with their jobs or just bitten by the entrepreneurial bug, they combine their talents to pursue a dream.
"It was really exhausting fighting other people's battles for a living," Ms. Shulman said. "I wanted to build something instead."
In building a small business, couples must overcome more than the usual challenges that face entrepreneurs, like raising capital, hiring workers and marketing products. They must also deal with the strains their shared undertaking puts on their personal relationship.
"You get the stress of two people living together and the additional stress of trying to run a business and making it grow," said James Lea, a professor of family medicine at the University of North Carolina at Chapel Hill and a consultant on family businesses.
In some cases, the tension threatens to tear the couple apart. If that happens, business specialists said, the wise course is for one of the partners to retreat. People can and do switch employers or careers if they become bogged down in their jobs, but it is harder to leave a family business, IRA BRYCK, head of the UMass Amherst Family Business Center in Amherst, Mass., said.
"People feel that if they quit, the spouse will feel that they are leaving," Mr. BRYCK said. "But if the thrill is gone from work, and you quit, you can still be a loving spouse."
Another couple, Mara Solomon and MaryEllen Auger of Massachusetts, started Homebase Abroad in 1995 to rent Italian villas to American vacationers, but reached a point where the business, while successful, was all-consuming.
"At a certain point, we had to ask if we had a relationship outside of the business," said Ms. Auger, 50, who had worked as a sales and marketing consultant before starting the business. "We'd travel without taking a day off, working morning, noon and night. It was exhausting."
Once the business succeeded, the two decided that Ms. Auger would stay home to be with their twins, now 7. Ms. Solomon, 47, said it was a "gift to focus on the business day-to-day" and helpful to have Ms. Auger offering her views while one step removed from the operation. They declined to disclose revenue.
That division of labor reflects their skills, they said. "MaryEllen is very goal-oriented and I'm more process- oriented," Ms. Solomon said. "They're not mutually exclusive, but she is very good on keeping her eye on the horizon, while I can get down to the details and am a strong relationship builder."
More often than not, couples discover that running a business together enriches their marriage. "You get to know each other in other ways and add another dimension to your relationship," said Mr. Lea, the consultant.
Susan Polis Schutz, 60, a former teacher and freelance writer, and her husband, Stephen, a physicist, abandoned their salaried jobs 35 years ago to start Blue Mountain Arts, a greeting card and publishing company in Colorado. They traveled the country selling their work from the back of a van because they wanted to "work together and be together," Ms. Schutz said.
Along the way, they ran into difficulties operating a Web site and fought a lengthy legal battle with Hallmark cards, but their company now employs about 150 people and uses the services of 250 independent sales representatives. Ms. Schutz, who also declined to disclose annual revenue, has chronicled the couple's business venture in a book, "Blue Mountain."
While many couples start their ventures before they reach middle age, others wait until their retirement years. For 40 years, Remi Mintz ran a real estate business while his wife, Alisa, raised their three daughters in Worcester, Mass. Not long after Mr. Mintz sold his business four years ago, Ms. Mintz earned her real estate license and began selling for a local agency.
A native of Colombia, Ms. Mintz saw opportunity in offering real estate services to the growing Hispanic population in the Worcester area. So she left the agency to form Mintz Associates in Worcester with her husband. Their skills and personalities mesh perfectly, they said. Ms. Mintz, 68, who is fluent in Spanish, does the selling, while her 72-year-old husband provides technical expertise.
"Customers like the interplay of Alisa showing the house and my explaining the good and bad points, which a lot of brokers won't do," Mr. Mintz said. Together, they sold homes valued at $3 million last year, yielding revenue of about $75,000. The Mintzes, like many of those interviewed, maintain separate outside interests. Mr. Mintz plays bridge competitively, for example, while Ms. Mintz plays for fun.
Partners "need to find a way to avoid corrosive, 24/7 exposure to each other," Mr. Lea, the consultant, said. For example, he said, a couple could "go to separate conferences or trips or something else that frees them from being together all the time."
That point is not lost on Ms. Shulman, the co-founder of Mangia Media. While her legal skills complement her husband's marketing abilities, she said she would "never in a million years physically share an office" with him because she was neat and he was not.
Couples working together said it was important to determine each spouse's place in the office.
Glenn Gale, 45, a garment-industry executive, joined his wife, Cynthia, in her jewelry business in Manhattan, GeoArt by Cynthia Gale, in 1995. She said they had found the right mix. "He leaves the designing to me" and concentrates on finances and production, said Ms. Gale, 41.
Mitchell Goldman, 49, a dermatologist in California, and his wife, Dianne York- Goldman, 51, a model and an actress, opened La Jolla Spa MD two years ago. She runs the spa on the ground floor of their office and handles all business matters. He maintains his practice, along with four cosmetic surgeons, on the second floor. La Jolla Spa MD had about $8 million in revenue last year.
Because they rarely see each other during the day, they said, business discussions are natural after hours. But by 8 p.m., shop talk must cease, a rule Dr. Goldman said he had imposed.
"My problem is my wife works more than I do," he said. "I cook and I'm waiting for her to come home. She works too much and likes to talk about work too much. It's role reversal. You can't have it both ways and, truthfully, I'd rather have it this way."
from a respected business newspaper that does not allow free posting of its articles:
An article on how Recruitment, Pay and Getting Ahead (11/04) quoted Ira Bryck:
Working with family members presents a host of complexities, from unexpected dilemmas such as what to call dad to agonizing decisions such as whether to fire your sibling. These stresses are surprisingly widespread in American workplaces.
As the job market begins to pick up, many of the new opportunities could come from family companies: Most new jobs are created in family- owned or -controlled businesses. And with the job market still so hotly competitive, many people use family connections to help open doors.
The family way
San Antonio Express-News
Web Posted: October 30, 2004, 12:00 a.m. CDT
Starting off with a ninth-grade education and a $150 loan from his aunt and uncle, Pedro "Pete" Cortez built a multimillion-dollar restaurant enterprise and revitalized a blighted part of downtown San Antonio that is now one of the most coveted corners of real estate in the city.
When visitors throughout the world come to San Antonio, they're likely to stop off at one of the three restaurants he founded, Mi Tierra Café, La Margarita and Pico de Gallo. When they're shopping for souvenirs, they're likely to spend some money at El Mercado, or the Market Square, which he bought and redeveloped during the 1960s and 1970s.
When he died suddenly in 1984 at the age of 66, leaving a wife, five children, 22 grandchildren and more than 500 employees behind, the family business could have tattered into pieces like so many others.
But with good advice and succession planning, Cortez's wife, Cruz Cortez, divested the ownership shares she had inherited and divided them evenly among her children, Manuel, George, David, Rosalinda and Ruben.
First-born Manuel Cortez, died in 1995 at age 54, leaving his shares with his wife and children. Manuel's eldest son, Michael, 36, represents the family in board meetings.
Today, the business is a sophisticated family corporation — MTC Inc. — with professional advisory board members counseling the five principal family shareholders.
The family corporation has a strategic plan that includes growth and expansion into the city's North Side. And a succession plan for the third generation is already in place.
"He was very conscious (of the need for succession) and that's when he hired Oscar Mascorro, who is a CPA, because he wanted to start seeing on how to pass on the business," said George Cortez, the eldest of the siblings.
"So I think that his experience of serving on different boards made him aware that he wanted to be sure that everything would go properly," George Cortez said. "Of course he passed very suddenly, so it kind of fell on my mother's lap."
Quite often when the charismatic leader of a family business dies, heirs are unprepared to take the helm because a plan for succession — how ownership shares will be passed along, what management positioning will look like, and a strategic business plan — is not in place.
"People don't want to talk about some of these tough issues," said Morrison Woods, director for the Small Business Development Center at the University of Texas San Antonio. "It's not an easy thing to sit down and say 'You play an important role in the company, but you're not the one who should be leading it in the future.'
"It's a real psychological challenge to go through that, which is why a lot of this should be planned years in advance. But it's easy to put off."
Because succession planning involves a discussion of death and taxes, two of the more unpleasant business topics, many family business owners avoid such planning altogether, thinking a will and life insurance is sufficient.
"Succession planning should be a part of a strategic plan," said IRA BRYCK, director of the University of Massachusetts Family Business Center in Amherst. "Succession is part of what happens to any company and people should take time out to discuss how the business will look like in six months, in three years, after the current CEO has passed."
Of the 22 million businesses in the United States, 90 percent are family controlled, according to BRYCK. Of all family businesses, two out of three fail to make it to the second generation. And by the time a business is passed along to the fourth generation, it has a 1 in 1,000 chance of family members still being actively involved.
Part of the failure of family businesses to thrive into succeeding generations, BRYCK said, is the failure of the preceding generation to take time to devise a succession plan, divest ownership shares in the company and relinquish control of the business while still alive.
said grooming the next generation of leaders is one of the biggest steps in succession planning. In the Cortez family, grooming has traditionally started at an early age.
"We grew up in the family business," said David Cortez, who started working in the family business at age 10. "Our father wanted to keep us busy and out of trouble. I wanted to come to work because my brothers were working. Manuel was working and George was working. The business was a lot smaller back then and we saw the sacrifices that he made and the growth of the business."
All the siblings worked in the family business. Many of the grandchildren also grew up working — at least during the summers — in the family business.
With this family, it wasn't a question of whether any of the potential successors had the talent or knowledge to run the family business.
"We all went to college and we all decided to stay with our father because of his vision and his love for the community," George Cortez said.
The question for this family was how it should be divided among the siblings and who should lead the business in the day-to-day operations.
Before the elder Cortez's death, he had established a corporation that ran his restaurant and real estate companies, and consulted his children and wife on business decisions. He was the CEO and president of the company.
That quasi-corporate board structure made division of the family business somewhat easier after he passed, although that didn't mean there weren't some problems along the way.
After eldest sibling Manuel Cortez died, the family argued as to who should retain his shares and voting power. At the time, it was a crisis that involved lawsuits and legal counterclaims that threatened to tear the family apart.
"I think as time went on, we learned that each one of us has different strengths. And we learned how to respect each other's different strengths," said Ruben Cortez, 44.
"It's a family business and there are dynamics. But as long as there is love in the family, and that is a big part of our lives here — the love that we have for our father and mother and just the passion that we have for the business," he said. "Our parents planted a seed in each one of us. And even though we may all be different, we all want the same thing."
Added Pete Cortez, son of George Cortez and the eldest of the third generation: "The age difference between my father and Ruben is like 17 years. That's almost a generation. What he's thinking and what Ruben is thinking, sometimes it takes a while before we're all on the same page. It would be nice to say we walk into a room and say, hey that's great, let's do that. But it takes time."
The family members settled their disputes out of court in 2000 and soon after retained advisers to help them strengthen their governance and management of the business and to devise a clearer plan for succession.
"My grandfather was the chairman, the COO, the CEO — he was the guy," said Pete Cortez, 39. "He always consulted with his children and my grandmother, but that's the way it worked. As it went to the second generation, there were still only five of them and it was still very manageable.
"But after my uncle passed away, it opened everybody's eyes as to what was out there. It went from two owners to five owners, to probably six and 10 owners and as it starts to grow, it's going to branch to more until eventually, it started becoming apparent that there were going to be 25, 40 shareholders. And we need to get this thing done now and get that structure in place."
With the help of consultants, the family members created a more formal business structure, a strategic plan, a more objective corporate board, and a family and business mission statement.
They also established a management team — the three brothers, George, David and Ruben — who makes the day-to-day operational decisions for the company.
Additionally, each of the surviving siblings established their own succession plans and named successors — whether family members or not — for their seats on the board.
"This was a fairly rigorous process, because there were all sorts of tax issues that needed to be addressed, the overall succession and how the business is growing," Pete Cortez said. "It involved attorneys with lots of experience who helped take the family's wishes and memorialize all of that into a set of formal bylaws."
Pete Cortez likened the process to creating a family business version of the U.S. Constitution.
With the help of a facilitator, the family established this mission statement for themselves: "We will glorify God by honoring our founders and valuing family, preserving our culture and offering a world class experience."
For the employees, they wrote this mission statement: "To feed the minds, bodies and spirits of our customers by offering 'lo mejor de lo nuestro.'"
The company formalized its board structure and solicited the help of four outside board members — Art Taylor of Pancho's Mexican Buffet, Clark Mandigo of Loan Star Steakhouse, Pat Frost of Frost Bank and Berto Guerra, formerly of SBC.
"I wouldn't say it's a unique concept, because if you look at this throughout the country, and look at much larger family-run businesses, it's not that unique to have nonfamily members on your board," Pete Cortez said. "But I think something on the local level, it's a fairly sophisticated concept."
George Cortez credits his father with the idea of incorporating advisory board members. But, he said, he didn't live to see the day that this idea would be implemented.
"After he passed away and we were getting our house in order, we decided this was a very important part of this," George Cortez said. "He advised us that he wanted to do this model, but there was so much work to do.
"I think because he served in the community quite a bit, he was a very progressive thinker. He was always seeing ideas for his family. He was concerned about his family continuing the business in a healthy way."
The more formal structure with outside input has helped the family principals objectively analyze each other's ideas.
"When a discussion goes on, we agree to disagree," said Michael Cortez, 36. "We come to a consensus by talking and discussing. But once a decision is made, everyone falls behind that and we come out of that office or that room with one way of thinking of how we're going to solve a particular problem."
The structure has helped to both encourage and temper the enthusiasm of the younger generation. And it has helped the older generation see through the eyes of outsiders what the younger generation is capable of accomplishing.
Currently, the family has plans to branch out from the core downtown area into a North Side property.
The corporate board structure, the principals agree, has helped the family retain reason and respect in their discussions.
"I think from our perspective, it's absolutely critical that we do this (move to the North Side) not just from a business perspective, but that we do this also while they are here," Pete Cortez said.
"I don't think that we would at all feel as confident as the next generation if my father was not here or my uncle Ruben or my uncle David were not here to really lend their experience and give their blessings and impart their wisdom on the decisions we make. I think that's an important part of where we are now and taking the next step."
Thicker than water: Family ties bring strong commitment to businesses
By Suzanne Brown, Staff writer, The Salem News Online Edition
Monday, August 02, 2004
Family businesses consistently outpace and outperform non-family competitors, said business counselor Jane Hilburt-Davis.
Economically, their impact is so significant, "if family business failed, we would have a worldwide depression," said IRA , director of the University of Massachusetts Family Business Center.
Eighty percent of U.S. businesses are family-owned and family businesses produce half of the gross domestic product, according to Hilburt-Davis, founder of Key Resources, a Lexington-based consulting company for family businesses.
Key to their success, she says, is loyalty. "When your name is on the door, the business is part of your legacy," she said.
Mixing family and business
The advantage family businesses have over their non-family competitors is the ability to make changes quickly, Hilburt-Davis said. "Family businesses are nimbler," she said.
"They are not weighed down by bureaucracy."
Hilburt-Davis also said it is often easier for family business owners and executives to create an equitable work-life balance.
"Your family wants you to have a happy life, not just a happy professional life," said Jessica Stevens, who signed on as director of the Andrew Michaels Spa and Salon in Salem three years ago. She watched her stepfather, Andrew Michaels grow his business from a small salon on Essex Street to the upscale location on Ocean Avenue.
Francis Murphy and son Frank, who own Murphy Funeral Home in Salem and Marblehead, have found running a successful business means making personal sacrifices.
"Our business doesn't have hours," said Francis Murphy, whose Irish immigrant great-grandfather founded the funeral home in 1893 as one of the first in Salem. "It is a way of life for the whole family."
The Murphys' wives, Pamela and Maura, are not on the front lines all the time but both men agree they play a key role, offering moral and family support.
"Without an understanding woman, you really can't function," Francis said.
The nature of the business makes its rewards and its drawbacks one in the same.
"Families can realize values, achieve a shared vision and find joy in working together," said. But because their ties to thebusiness are so personal they can feel trapped, he added.
For Stevens, running her family business is "not just a job."
"I have a lot of pride and family stuff invested in this business. So the rewards, I feel them deeper but when something goes wrong I feel that deeper, too."
Richardson's Farms Inc. in Middleton is on its ninth generation of farmers with brothers Chris and Peter Richardson. Their father, Paul Richardson is president of the company that grew out of the farm his family has owned since the late 15th century.
Six members of the family play major roles in the company's operations. Paul Richardson and his brother-in-law Bill Daniels manage the company's operations and work alongside four other family members at Richardson's Ice Cream on Route 114 in Middleton. Daniels' son David makes all the ice cream. Peter takes care of the cows while his brother Chris manages sales and their mother, Susan, takes orders.
Paul Richardson finds security in knowing "no one is going to fire me." He stressed how much he enjoys working with his family, even on days when it's "not so nice."
"When you put your name on it, you really care about it," Paul Richardson said. "It's a lot different than working for someone else."
How does the lifelong dairy farmer know?
"I learned about it in college," he said.
Looking to the future
Those involved in the family business are more heavily invested in their work, Hilburt-Davis said. This may be the key to a family business' longevity or its downfall.
said sustainability is a common problem for family business owners who have ties to a service or way of operating that may not be relevant anymore.
"They say this is the year of the (17-year) cicadas," a species of the buzzing insect that emerges after 17 years of dormancy, said. "Those cicadas will be surprised to see a Wal-Mart."
The Murphy, Richardson and Michaels families believe they buck the trend.
"After I retire, I'm sure there will be different ideas," Richardson said. "But I can follow someone else."
The Murphys said there is "a lot of talk before something is changed" in their business. Francis said he appreciates the younger generation's perspective, though. When he was working under his father, he brought the first computer into the office.
"My father said, 'What are you going to do with that?' I said, 'I have no idea, but I know we are going to use it.'" That move eventually led to Murphy Funeral Home becoming one of the first mortuaries in the area to have its own Web site.
Andrew Michaels, owner of Andrew Michaels Spa and Salon, appointed his 27-year-old stepdaughter to the helm of a business he's spent more than 20 years building early in order to focus on expanding further.
"I knew she could see the past, present and future of this business and that is why I could trust her to do the job," Michaels said.
In their blood
The decision to remain a part of the family business or to involve one's children is a complicated one.
"Children don't really know what they want professionally at the point they join the family business," said.
Stevens was in high school when she worked as a receptionist at Michaels' salon on Essex Street. She came back after college and took on a bigger role writing the menus and Web site, meanwhile searching for an opportunity for a career elsewhere.
"Everything I was seeking - the opportunity to write, be creative, work with people - I was already doing," Stevens said. "It's what my job is all about."
The children of these business owners were given options and some opted out.
Murphy's son Matthew is a magazine editor and his son Patrick is an editor on the Discovery Channel program American Choppers.
Richardson's son Philip is an attorney.
"Usually you want on your resume something like vice president of marketing," Richardson said. "Here you're making or delivering ice cream."
Before he became director of the Family Business Center, was also involved in his own family's business. His parents encouraged him to try something new but said, "If all else fails, there's always the family business." He had to learn how to say, "Just cause I'm here doesn't mean I'm a failure." gives the same advice to other children who are uncertain about their own future in their family's business.
"They shouldn't feel like it is the only job anyone would ever give them," he said.
Frank Murphy was encouraged by his family to try another profession. He took a job with Fidelity Investments for a year before settling in to his role at the funeral home. The business has seen five changes in family leadership over two centuries.
Changing of the guard
Conflict comes from lack of communication about goals or clashing values, Hilburt-Davis said. Creating specific job descriptions or roles for each family member involved in the business can help.
"Outside of work, I think of Jessica as my daughter," Michaels said. "But when I walk in the door (of the spa), she is director of operations."
Hilburt-Davis said it isn't usual that families will have a shared understanding of their business' direction. Michaels and Stevens said knowing one another's ambitions is what makes them such a great team.
The ability to "switch hats" and treat business like business and family like family is an indicator of professionalism and success in a family business, said.
Reluctance to introduce change is not an issue for these North Shore business families, two of whom have already seen their businesses change hands or transition to the next generation.
As a result, they haven't fallen victim to what Hilburt-Davis calls the Prince Charles-Queen Elizabeth Syndrome. "He doesn't know if he'll ever be king," she said.
Having a succession plan, even informally, over the life of the next generation is needed, Hilburt-Davis said. It is a time when the successor learns about the company's goals and values by observing, working in the trenches.
As a boy, Frank Murphy shoveled snow outside his family's funeral home. He also saw his father take business calls at home and work late hours. Something he does as director of Murphy Funeral Home today.
For business owners of retirement age, the decision to retire is a difficult one. Many, particularly the baby boomers, say they might never retire, said. In fact, involvement keeps them vital and retirement is often interpreted as death to a business owner. Children cannot ask a parent "Why don't you retire?" because the parent hears "Why don't you die?"
There is also the question of whether an owner can afford to retire and have a fulfilling life outside the business. Francis Murphy and Andrew Michaels have taken an official step back from the daily operations of their family businesses but have not walked away. Paul Richardson, 57, said he plans to walk around his dairy farm when he is 90.
Michaels' and Murphy's successors said they value the input they get from their fathers but have gained confidence from making their own mistakes.
'It's all about relationships'
By Marcia Blomberg, Staff writer, Springfield Republican,
September 28, 2003, firstname.lastname@example.org
Tamora L. Lincoln is only 25, but she figured out how to boost sales without having to hire more employees.
She treats her six workers with respect - and to lunch.
She also lowered the price on overhauls at AAA Transmission in West Springfield, which brought in more business.
Higher average productivity than their male counterparts and better people-management skills are among attributes female owners bring to family businesses, according to a recent study authored by the Center for Women's Leadership at Babson College in Wellesley and paid for by MassMutual Financial Group.
Some of the study's findings were surprising to co-author Nan S. Langowitz, director of the Babson Center.
"The first thing that is startling is the improved productivity of the woman-owned family businesses over their male-owned counterparts," by a factor of almost two, Langowitz said.
The study found that women-owned family businesses had average annual revenues of $26.9 million in 2002, with 26 workers.
By comparison, the male-owned firms had average annual revenues of $30.4 million but they had a median of 50 workers.
Lincoln, whose sales grew in 2002 by $50,000 to $275,000 while she held employment at four full-timers and two part-timers, said her price strategy drew in the business but her employees made it work.
She brings in pizza for lunch one day a week, Chinese food another day, and takes the staff out to dinner for steaks once a month.
And, she emphasized, she never yells. Lincoln cited a college professor's advice: "If you treat your staff with respect, you get back 100 percent more."
"I never, ever yell, because problems are inevitable," Lincoln said. "You just fix them and move on."
IRA , director of the Family Business Center at the University of Massachusetts, attributed the finding of greater productivity to women's experience "juggling their roles as mother, wife and worker, so they're better multi-taskers."
Women business owners often aren't interested in hierarchy, he said.
"It's not like they need team managers ruling over middle managers ruling over assembly-line people," said. "They can get the job done with less levels and layers."
And, added, women are accustomed to putting "the recipe together as fast as possible. If you don't have all the ingredients, find another ingredient."
Langowitz noted that the average female-owned family firm is 10 years younger than male-owned firms, and that fact could partly explain their greater productivity.
"They haven't had as much time to add on those bureaucratic layers," she said.
"But I also think there's something going on in the management style of these leaders."
Susan W. Sweetser, second vice president of the Women's Markets Initiative at MassMutual, echoed that thought.
The study confirms that women "are able to utilize resources in a more productive way," she said.
"Part of that comes from just their own leadership style. Women tend to be more collaborative, less hierarchical, working together in teams, getting folks to buy into what they're doing."
The Women's Markets Initiative is focused on making MassMutual "the company of choice for women who are seeking financial services, financial advice, financial products or a career in financial services," Sweetser said.
The study notes that woman-owned businesses have increased by 14 percent in the past five years.
According to the Center for Women's Business Research in Washington, D.C., there are 10.1 million privately held U.S. businesses that are owned 50 percent or more by women. Those businesses generate 18.2 million jobs and contribute more than $2.3 trillion in sales.
At 23-year-old AAA Transmission, which Lincoln took over when her father, Dominic Moccia, became ill, Lincoln last year lowered the price on transmission overhauls by about $200, to between $1,195 and $1,295. Dominic Moccia died in February.
Customers who are comparison-shopping are brought in by the prices, she said. The quality work done by her mechanics keeps corporate customers coming back, she said. They include several local auto dealerships, used-car dealers and towing companies.
Lincoln's brother, Justin B. Lincoln, helps out part-time at the transmission shop. While Tamora Lincoln enjoys running the business, she said she also knows hows a transmission works - she grew up helping her father - and enjoys cleaning out transmission cores occasionally.
Lincoln, who said she is a big fan of clearance racks, has reduced the business's running debt and tries to buy parts in large quantities to get volume discounts.
While the study found that women-owned family businesses tend to have less debt than male-owned firms, that can be a double-edged sword, Sweetser noted.
Having less debt makes it easier to ride out a down economy - "they don't have to worry as much about making those debt payments," Sweetser noted - but it may also inhibit growth.
Whether the women owners are less risk-averse than male business owners, or are running into gender bias when they go for loans, is not clear from the study.
Women may be a little more fiscally conservative regarding debt, Sweetser said, "but if we look at that factor in 10 years, it may be different."
The study's glowing report on women-owned family businesses shows "there's a lot of promise in this sector of the market, because the number of business owners has gone up 37 percent in the last five years," Langowitz said. "If that continues, it will be good for the economy in general."
While male owners of family businesses may suffer by comparison, said "it doesn't make males look bad as much as it makes females look good.
Male business owners are starting to be more aware "that it's all about relationships," he said. "All studies show an MBA degree will get you the job, but it's your emotional intelligence that keeps you moving along."
Male and female business owners can learn from each other, Sweetser said.
She added that "it's great for women business owners to feel good about what they've accomplished, and it's good for a woman looking for an entrepreneurial career to know that there are a lot of success stories out there, and that there's nothing holding her back."
Copyright 2003 MassLive.com. All Rights Reserved.
Research finds family-owned businesses tend to be more ethical
MARKETPLACE MORNING REPORT
Wednesday, February 12, 2003, 6:50 a.m. ET
Copyright 2003 Minnesota Public Radio. All Rights Reserved
From Los Angeles, this is MARKETPLACE. I'm Kai Ryssdal.
This past year has been pretty tough on capitalism's true believers. Revelations of corporate corruption have rocked many people's faith in big publicly held businesses. But are family-owned companies any more
ethical? From the MARKETPLACE work and family desk, Sarah Gardner has the story.
SARAH GARDNER reporting:
The research on ethics in family business is still pretty new, but the answer so far appears to be yes, family businesses tend to be more ethical. That's what the folks who make lemon Pledge and Windex believe,
(Excerpt from SC Johnson commercial)
GARDNER: Yep, that's SC Johnson, as in the old Johnson's flooring wax. This company makes some of the best-known household products in the world, and it's still family owned and operated out of Racine, Wisconsin. Business ethicists also consistently applaud its philanthropy and progressive personnel policies. Sam Johnson, chairman emeritus and great-grandson of the founder, says as a private company, SC Johnson doesn't have to worry about short-term profits and therefore isn't tempted to cook the books. The 74-year-old says he also had his grandfather's famous words drummed into him since he was a tot: the goodwill of the people is the only enduring thing in business.
Mr. SAM JOHNSON (Chairman Emeritus, SC Johnson): Principles and values of--that have made you what you are tend to be easier to pass down from generation to generation within a family than from one CEO who then retires and—and another unaffiliated CEO comes in from another community or another company.
GARDNER: Family business scholar Joseph Astrachan says family companies also have more to lose if they lie and cheat; that is, if they're caught.
Mr. JOSEPH ASTRACHAN (Family Business Scholar): Typically a family business has 75 percent of the family's wealth invested in the business, so if you do something wrong with the business, unethical, you're really risking a significant part of yourself and your family.
(Excerpt from "Dallas" theme)
GARDNER: Well, that didn't seem to stop the shenanigans of J.R., Bobby and the rest of the oil barons on TV's "Dallas," did it? Astrachan admits there are exceptions, especially when a family does not own the
majority of the stock but still controls the company either through the executive suite or the boardroom. Think Adelphia, the huge cable company whose founder and his two sons were accused of using that corporation as their personal piggy bank.
Mr. IRA BRYCK: (Director, Family Business Center, University of Massachusetts): It's boys with their toys, and the business is just a bigger toy.
GARDNER: IRA , who directs the University of Massachusetts' Family Business Center, has counseled hundreds of feuding family members over the years.
Mr. IRA BRYCK: One will accuse the other of stealing from the business, and the other one said, 'I'm just taking what's entitled to me, exactly the same salary that you're paying your wife that does no work at all.'
GARDNER: More than 60 percent of all public companies are family controlled, some of them honest, others not. IRA 's advice to investors and consumers: The good ones draw up policies that regulate family involvement in the company and they promote relatives who are competent, not just lucky to be related. I'm Sarah Gardner for MARKETPLACE.
RYSSDAL: And in Los Angeles, I'm Kai Ryssdal. Thanks for being with us.
LOAD-DATE: June 13, 2003
Family or friends seeking loans? Proceed with caution
By Andrea Coombes, CBS.MarketWatch.com
September 3, 2003
SAN FRANCISCO (CBS.MW)—When it comes to loaning money to family and friends, financial planners say don't.
But that's a difficult rule to live by as tough economic times mean more Americans are likely tapping their nearest and dearest for help.
For entrepreneurs, first-time homebuyers or those skating on the thin ice of credit-card debt, the first source of financial help is often a parent or close friend.
Potential familial lenders need to be willing to judge the borrower's ability to repay before shelling out the cash, but in the cases when it's done right, lenders may find their loan repaid at interest rates that exceed the current return of, say, a money-market fund.
Nationwide, an estimated $65 billion is loaned between family and friends, according to CircleLending, an online financial-service company that manages and services personal loans.
"When unemployment numbers go up and people start tightening their wallets, we see more lending occurring between family and friends," said Craig Venezia, CircleLending's vice president of marketing.
The company's loan volume has grown by about 25 percent quarterly, to more than $3 million now, Venezia said.
With the nationwide default rate on person-to-person debt estimated at 14 percent, family members and friends who are tapped for money should consider their response carefully before agreeing to lend.
Perhaps even more important than the money at stake is the risk that the relationship itself may be tested. "How are you going to feel if they can't pay it off?" said James H. Braziel, a certified financial planner based in Chico, Calif. "It puts extreme strain on the relationship."
To better the chances of making a successful person-to-person loan, potential lenders should find out exactly what kind of debt it is, and question the borrower as a professional lender would, said Mark Oleson, assistant professor in human development and family studies, and director of the Financial Counseling Clinic, at Iowa State University in Ames.
For instance, with credit-card debt, ask "how did you accumulate it, how much do you have, do you have additional debt, are you going to be able pay me, how much are you going to be able pay me?" he said.
If the answers to your questions reveal someone in over his or her head, and you're likely to never see the money again, you have two options, experts said.
Consider offering a gift instead of a loan -- or just say no. "Too often I encounter people who are dysfunctional with money going from handout to handout," said Michael Kidwell, vice president and co-founder of Myvesta.org, a nonprofit consumer education organization.
"If you're not careful to look for the warning signs, you could be fostering someone's negative money behaviors. You could be damaging someone," he said. Those warning signs include previous bankruptcies or a recurring problem with living beyond their means -- such as purchasing a new car or TV when they're still struggling with debt, he said.
At the other end of the spectrum, a borrower seeking help with buying a home or expanding a business may offer the lender an opportunity for greater return than a low-interest-rate money market fund or other savings vehicle.
For instance, assuming "that a lender could be promised a 6 percent return on their money over three years, it's a good source of income," said IRA , director of the University of Massachusetts's Family Business Center, which helps family-run businesses succeed.
"It's a good time to lend money if you think you're going to get it back," he said. But, "if you don't have faith in the idea, you should consider that you're giving money to family members. There are an astonishingly high number of these sorts of loans that are not repaid and relationships are ruined, including between nuclear family members."
Once the borrower has satisfied your initial questions, draw up a document with the loan terms. "Set up an amortization schedule, and a payment schedule and draw up a note, just as you would with any other loan," said Susan Freed, a certified financial planner based in Chevy Chase, Md.
CircleLending will draw up documents and administer the loan for a set-up fee ranging from $49 to $500, depending on the size of the loan, plus a service fee, for a service that includes electronic fund transfers.
Don't forget the taxman in your documentation. If you make a loan, the IRS will expect you to pay tax on the interest you collect. If no interest is received, you've made a gift, not a loan, and the dollar amount will either fall under the $11,000 annual gift-tax exclusion limit, or your gift could be affected by taxes.
Beyond the financial
Sometimes, despite careful planning and nary a late payment, simply the fact there is an outstanding loan can change personal relationships, experts said.
"Sadly, it ends up many times that it's the borrower who's uncomfortable with the arrangement," Braziel said. The borrower may distance himself from the lender, because the loan reminds him that "I can't cut it, I need your help," Braziel said.
Some advisers go against pure financial advice and warn of these psychological repercussions. While a financial counselor would recommend borrowing from a friend or relative because of better terms, Oleson said, "you may rather borrow it from a bank at 8 or 10 percent just because of the fact that it won't enter into your relationship. For some people, that's going to be more important than the financial benefit."
Andrea Coombes is a reporter for CBS.MarketWatch.com in San Francisco.
Children May Not Want the Business
By Karen Goldberg Goff, The Washington Times,
June 22, 2003
Mom and Dad had dreams of Junior being the next CEO or, on a smaller scale, running the shoe store for the next 30 years. Junior's plans, however, include being a dentist, an artist, a teacher - anything but working in the family business. It is a situation many families face, says James Lea, a professor of family medicine at the University of North Carolina at Chapel Hill, who runs a Web site devoted to solving family business conflicts.
"In the best of all worlds, this decision does not come as a surprise," Mr. Lea says. "Hopefully, when you get to this point, it completes a process that has been started early on."
If Junior comes to the decision that the family business is not for him, he should make his decision clear, Mr. Lea says. Because that business likely supported the family -enabling the children to get the education and pursue the interests that led to this decision - it is best to not to deride the company.
"Approach it in a positive way," he says. "Don't go in saying, 'I wouldn't work in your crummy business.' Instead, say, 'I can contribute moral support for the rest of the family.'
Saying what you can do is part of being clear about your role, Mr. Lea says. "A lot of times, people in this situation hesitate to be perfectly clear," he says, "but it will hurt more if you are not."
A lot of emotions are tied to entering or not entering the family business, says IRA , director of the Family Business Center at the University of Massachusetts. The center is one of about 100 university-based groups that serve as resources for family-owned businesses.
Mr. also has written three plays about being in a family business. The plays are based partly on his own experience running his family's children's clothing store on Long Island.
His personal story is similar to that of many owners of small family businesses. For four generations, his family owned and operated the store. Mr. had to make the tough decision to close the store in 1993 after competition from national chain stores became too stiff.
Some people grow up feeling that the family business was a place they could go when all else fails, Mr. says. So often, if they do find themselves there, they feel they somehow failed.
"I do see a lot of people in family businesses who feel failed," he says. "They feel they have fallen into the safety net." If a family business is in your future, Mr. advises doing some soul-searching. For instance, selling furniture or making pizzas may have been your father's passion. However, don't feel guilty if it is not yours.
"A lot of people who start a business usually love it," he says, "but there is no reason to think you will. Life is short. If someone does not have the passion for the business, it can always be sold. The money would probably be better off in the stock market, and then the person can get a job they like." The Washington Times www.washingtontimes.com
By Karen Goldberg Goff, The Washington Times,
June 22, 2003
Gwen Loftin's family has been selling hardware in downtown Washington for five generations. That's more than 100 years of stocking nails and glue, hinges and tools, keys and paint at W.J. Candey Hardware.
Mrs. Loftin's store on 18th Street NW is the kind of place where you can find a box fan in the dead of winter or an obscure appliance part that might be hidden away behind merchandise stacked to the ceiling.
It also is where you can find Mrs. Loftin, 69, and her son-in-law, Eric Mattsson, the store's general manager, discussing small details, such as a customer's order, or the big picture, such as how the store can evolve to stay in business another 100 years.
W.J. Candey Hardware is the quintessential family business. In this era of corporate mergers and national chain stores, Mrs. Loftin takes pride in the store and her relationship with her two grown daughters and Mr. Mattsson, all of whom have a hand in the store's operation.
"We're family, so no matter what it is, you stick with it," says Mrs. Loftin, who unexpectedly took over the store in 1978, when her husband, E.L., died suddenly at age 43. "When it isn't family and you don't care, you can go and do something else. We're certainly not having the best year, between September 11 and the war and the big box stores, but people always need hardware. I feel bad for the other family businesses downtown that have closed."
The term "family business" covers a lot of territory, says IRA , director of the Family Business Center at the University of Massachusetts. Mr. 's center is one of about 100 university-based groups that serve as resources for family-owned businesses.
A vast majority of companies in the United States are family-owned businesses, he says. That includes everything from such behemoths as Wal-Mart to such shops as Mrs. Loftin's. In most of those companies, time has to be spent negotiating business decisions while dealing with typical family dynamics.
"Ninety percent of businesses are family-owned," says Mr. , who spent 17 years running his family's children's clothing store on Long Island, "but a whole lot of those businesses don't function well because owners and managers are still victims of sibling rivalries and that type of thing. I say, 'Treat your business like a business and your family like a family.'"
That means having regular meetings to discuss the company's goals, who is in charge and how those in charge are going to be accountable, he says.
"Not every company is going to save the world," Mr. says. "You need to be realistic. You need a shared vision, and you need to be open to a diversity of opinions. That doesn't mean you have to do it just like dad did or get out."
While the overall economy has been stumbling, the outlook looks good for larger family-owned businesses. The Raymond Family Business Institute, a nonprofit family-business consulting group, and MassMutual Financial Group, a financial services organization, recently surveyed 1,000 family-owned businesses spread across the manufacturing, wholesaling, construction and retail industries. The nationwide survey found that mean revenues from those companies have grown to $36.5 million &emdash; up more than 50 percent since 1997.
More than half of the respondents said they planned to increase staff over the next year, and nine out of 10 respondents said they believed the same family would control the company in five years. A quarter of those businesses said they carry no debt, and more than a third said they expect that the next chief executive may be a woman.
On the downside, 73 percent of the businesses said they had no formal, written strategic plan. Nineteen percent said they had not completed estate planning, a situation that could mean disaster upon the death of the senior owner.
"I constantly harp on family companies professionalizing," says James Lea, a professor of family medicine at the University of North Carolina at Chapel Hill. Though he doesn't own a business, writing and speaking about family business issues is his specialty. "There need to be written policies and procedures on everything from everyday perks to who gets hired. Doing that would save so much grief."
Making the transition
Cindy Bertaut made sure everything was legal and formal when she bought her father's business, Glogau Photography Studio, in 1994. She wanted both the business, located in Bethesda, and the relationship with her father, Earl Goldstein, to thrive.
"I knew of some family businesses that just dissolved because of relationship issues," says Ms. Bertaut, 43. "We had separate lawyers, and we drew up detailed contracts that covered everything from how payments would be made to professional responsibilities to the specifics of the lease."
Still, much that goes on at the photo studio is a result of the good relationship between Mr. Goldstein and his only child and not the work of contract specifics. Mr. Goldstein, 75 and mostly retired, still pitches in by covering the occasional wedding assignment. He returned to work full time for several months in 1995 so Ms. Bertaut could take a proper maternity leave.
When she was growing up, Ms. Bertaut didn't necessarily plan on being a photographer or taking over the studio. She studied science in college, then worked for the Smithsonian Institution for several years. After her job was eliminated, she tried the family business. Ms. Bertaut learned the art of photography &emdash; as well as the business side of the studio &emdash; from her father.
"After I worked here full time for a couple years, I caught the bug," she says. "I apprenticed with Dad. It was five years before I even took a picture. When I came to work, some people thought I was going to get all these perks, but I was an hourly employee, learning the business from the ground up."
The transition from Mr. Goldstein's being in charge to having Ms. Bertaut run the studio was not completely seamless. Soon after Ms. Bertaut took over, she let two longtime employees go.
"People said, 'I can't believe Cindy did that, " Ms. Bertaut says, "but I was good at explaining why. You have to keep your emotions out of things. That can be hard." It also was a transition for Mr. Goldstein to go from being his own boss to being his daughter's part-time employee.
"I think it can be a tough thing when someone takes over for a parent," Mr. Goldstein says, "but I am so fortunate to have my daughter in the business."
'We're really close'
When your co-workers are your siblings, it helps to like each other a lot. That's the advice of David Loeb, who runs Loeb's New York Deli in Northwest Washington with his sister, Marlene, and his brother, Steven. Mr. Loeb's parents, Walter and Sigrid, opened the restaurant near McPherson Square in 1959. The parents recently retired, leaving Loeb's in the hands of their offspring, who have been working in the business more than a decade.
"To run a family business, you have to be able to do a little of everything," says Mr. Loeb, 38. "You have to be able to work with your siblings. You have to have good communication skills. You have to be able to deal with the public. My siblings and I get along fine. We're really close. We each have different roles here, so we can work together."
It is not written in stone, but the division of labor goes something like this: Steven, 28, does a lot of the cooking. David takes care of the purchasing and bookkeeping. Marlene, 36, is in charge of the catering operation. She also is the de facto boss by virtue of being involved in the business the longest.
"She leads us because she has a lot of experience," David Loeb says, "but we discuss everything. Sure, there is conflict, but that is normal in a family business. You can't take anything personally. At the end of the day, it is all forgotten."
In fact, if something needs to be discussed before Loeb's, which is open only on weekdays, closes for the weekend, David and Marlene would rather talk about it over dinner Friday than think about it all weekend.
"Since we all work together during the week, we do not hang out together on weekends," David Loeb says. "Everyone has their own life. In a family business, you can't just put everything down on Friday afternoon, so we will talk about it on Friday night. We do not want to take business into the weekend."
Mr. Loeb says he is in the restaurant business for the long haul but he never was pressured to join it. He spent a few years working to turn his passion for sports into a career when he graduated with a bachelor of arts degree in communications from the University of Maryland in the 1980s.
"Marlene was more interested in the business when she was younger," he says. "I knew it would always be there, but I wasn't sure I wanted to be involved in it. I was never forced into the business &emdash; none of us were. In 1989, we thought it would be a good idea for me to try the business."
Like Ms. Bertaut at the photo studio, Mr. Loeb had to learn the restaurant business from the bottom up. That meant everything from slicing corned beef to running the cash register.
Family-run restaurants also have been affected by national chains. Diners have a plethora of choices when they head out of the office for a sandwich or coffee. Even though Loeb's has been in business 44 years, staying in business relies on a number of things, Mr. Loeb says. "We believe you can beat the competition by working hard, closely managing the store, coming up with new ideas and providing friendly service and a quality product," he says. "Some popular restaurants are run by a corporation. When you have a family restaurant, it is more of an emotional investment."
For heirs, life does exist after the sale
by Anthony Rifilato, Long Island Business News,
July 7, 2000
After leaving college and a stint at the Playboy Club in Atlanta, Mitch Shapiro returned to his dad's catering hall, The Swan Club, where he had toiled throughout his childhood years, working his way up to beverage manager and Landscape chief Expecting it to be his lifelong career, Shapiro was in for a shock in 1994 when his father suddenly decided to sell the club, giving the younger Shapiro no say in the matter.
"After the club, I had no sense of direction," said Shapiro, adding that he received no money from the sale. "When it was sold, I kept asking myself, what do I do now?"
The new owners agreed to let Shapiro and his sister continue working at the club, but Shapiro said their roles changed, and the once-pervasive personality of his family in the business had vanished.
"We felt out of place, and I wish my father had never let it go," Shapiro said. Within two years, both Shapiro and his sister decided to leave.
Shapiro's tale is typical of what happens to the adult children of family-owned entities after they are sold, according to family business consultant Alan Robinson.
Only a third of family businesses make it to the second generation, and only half of those make it to the third, he said.
"The children have a need for the parents to turn the business over to them," Robinson said. "The children have not really worked anywhere else, and some have no other skills or confidence when the business is sold."
IRA , director of the Family Business Center at University of Massachusetts, agreed that the old adage, "someday this will all be yours, kid," doesn't often pan out.
says in today's fluid business world, where buyouts and mergers are commonplace, many family business owners are deciding to sell rather than pass the company onto their children.
To add insult to injury, once a business is sold, many adult children don't even share in the proceeds, and may find themselves in their 30s and 40s without marketable job skills, said Stephen Breitstone, an attorney who handles family limited partnerships.
"The father in charge of the business is compelled to make decisions based on the company's needs," Breitstone said. "These needs may be at odds with family loyalties, which sometimes makes life difficult for the children when the business is sold."
Then there are those children who find that their temperaments and interests aren't suited to carry on the family tradition. was one of them. He grew up working in his dad's business, Barasch's Kidstore, in Freeport, and eventually took it over. But didn't enjoy the lifestyle, and opted to close the business several years ago.
"I decided to get out of retail in an age where the retail giants are killing each other," said.
Instead, he moved to Massachusetts, where he became a family business consultant, authoring two plays about family business he uses as a teaching tool for the center.
"What I have found is that there is life after the sale of a business because people get to do stuff they never thought they'd do," said.
said he believes many children are in a constant state of anxiety about what their parents will do with the business. And they have reason to be. With people living 20 and 30 years after retirement these days, family business owners may wish to sell the business to preserve their wealth and lifestyle. pointed out.
Moreover, the two generations may clash over the business philosophy, with the older ones opposing changes to their formulas that might include bringing new technologies and greater risks into the mix, he said.
Further complicating relationships, roles become blurred, and conversations quickly transform to parent and child rather than owner and employee.
"Many times the owners do not feel they could share or sell to their chil-dren whom they see as employees," said.
Like , Shapiro eventually found his own path. In 1995, months after his father's business was sold and at that point legally blind and hearing impaired after being diagnosed with Usher's Syndrome -- said he was at an emotional down and forced to go on Social Security disability.
"I went through an identity crisis because I felt my life was defined through my dad's business," Shapiro said.
But his life took a turn for the better, when, through his father, he joined the Foundation for Fighting Blindness. He became a public orator on its behalf, speaking at civic events and schools throughout Long Island. In 1996, he began a fundraiser, "Blind Wine Tasting Gala," which, in an ironic twist of fate, was held at the Swan Club. It raised $41,000 to help combat the causes of blindness. Last year, the gala raised $70,000.
Shapiro was profiled in The New York Times in 1998, and his events received, coverage in numerous other magazines including Distinction, a Long Island magazine. "I found a new cause in my life, and that was to fight Usher's syndrome," Shapiro said.
"I'm fortunate that I have a family who supports me, and we didn't let the sale of the business spoil our relationship. I created my own identity, and I think that's the key to life after the family business is sold."
More daughters take lead role in family businesses
By Joan Axelrod-Contrada, Boston Globe Correspondent
from Boston Globe "BostonWorks" section, May 4, 2003
Old-timers might see her as ''daddy's little girl,'' but increasingly, the daughter is taking over the family business. High-profile female heirs like the late Katharine Graham, publisher of The Washington Post until she died in 2001, inspired many women when she took over her family's business after her husband died.Her success underscored that family businesses need not be run by a son or son-in-law to be prosperous. Many daughters, in turn, flock to family businesses for the lack of glass ceilings. Moreover, entrepreneurial specialists say, female successors excel at the team building and communications skills highly valued by more businesses.
In a nationwide survey conducted last year by Babson College and cosponsored by MassMutual Life Insurance Co. and the Raymond Family Business Institute, some 30 percent of businesses indicated they would consider a female successor, up from 10 percent in 1998 and 12 percent in 2000, according to Len Green, adjunct professor at Babson and trustee of the Raymond Institute.
Green said that more daughters are coming into family companies with business degrees and other impressive credentials. Half of the students in his family business course at Babson are female, he said, whereas a decade ago the figure might have been more like 10 percent.
Daughters also can be less intimidating than sons to the boss, who is typically the father, entrepreneurial specialists say. ''With a son, there's the question of 'Are you man enough to fill my shoes?' '' said IRA , director of the University of Massachusetts Family Business Center in Amherst. ''If a 70-year-old man thinks he has another 30 years to go, and his son wants to step into his shoes, it can be like he's trying to kill him. Daughters come in, and it's more like, 'Dad I want to help you and make your life more comfortable.' ''
Dinah Daniels of Wellesley made sure her father had lunch every day and a parking space close to the office, steps her brothers wouldn't have taken, she said. Her parents brought her in to head up her father's management consulting firm, Praendex Inc., after tensions developed between him and her two older brothers. ''It was hard for my father to hear suggestions from my brothers,'' said Daniels, 56. ''There's a natural-born competitiveness that men feel with each other.''
Like many children of entrepreneurs, Daniels grew up in the family business. At the age of 8, she began earning a penny for every Predictive Index test she scored for her father, who had developed the landmark psychological measurement. Linda Skole, president of Chez Josef, a banquet facility and off-site caterer in Agawam, also grew up in the family business, setting tables from the age of 12.
''My father groomed and mentored me from an early age,'' said Skole, 42. ''For my father, my being female was not an issue. He never put any limitations on what I could do.''
When Chez Josef founder Allan Skole decided to retire eight years ago, he turned over the business to his two children, making Linda responsible for operations and her brother, Ron, in charge of sales. Sometimes, though, the two areas overlapped, and conflicts erupted.
''I would be lying if I said it didn't happen to us,'' said Skole, whose brother died of cancer three years ago. Skole keeps her father's office sacred for his periodic visits, knowing that she is in control of the company. ''It was his pleasure to turn over the reins,'' she said.
Many other founders are more ambivalent. Kristin White said she decided to leave White's Pastry Shop after her father decided to step back in. Although she had grown up with the small chain of bakeries on the South Shore, the 28-year-old holds an MBA and is now exploring career possibilities in financial operations.
''I love my father, and felt myself becoming an employee first and a daughter second when it should be the other way around,'' White said. ''It wasn't worth it to me to hurt the relationship.''
Indeed, the role of second- and third-generation CEOs is often a dicey one, with squabbling among the owners' children sometimes threatening the company's survival. Only 40 percent of family companies survive to the second generation, 12 percent to the third, and just 3 percent to the fourth, according to research cited by the Family Firm Institute in Boston. ''What's the biggest nightmare of the second generation?'' asked Daniels. ''It's that you'll screw it up. To be successful, the second generation has to view it as a privilege to be able to continue what the founder started.''
And, while succession might be difficult for sons, too, specialists say that daughters often face special challenges because, as much as companies might embrace a kinder, gentler form of leadership, many people still carry with them old notions of how men and women should behave. ''If a man has certain traits, he's a leader, but if a woman has them, she's a shrew,'' said.
Then there are the problems the daughter's leadership might cause within the family. The mother might want a son to head up the business and resent the new closeness between father and daughter, as she, the wife, was used to being her husband's sole business confidante.
Daniels found that her relationship with her mother suffered after she took over the company. Maybe if she had paid closer attention, she said in retrospect, some of the problems might have been resolved. ''What happens instead is the relationship breaks down, and you don't have one,'' she said.
The business, on the other hand, has blossomed, growing from $4 million to $18 million in revenues under her leadership. She gained the early support of employees by showing her clear respect for her father even though their leadership styles differed. Daniels, the daughter, opened up decision-making to employees and implemented family-friendly work policies. ''My father's view was that people should just come to work,'' Daniels said. ''He didn't like anything that took the person out of work.''
At Chez Josef, Skole earned the trust of employees by working alongside them, doing whatever was needed in the kitchen or dining room. She'd carry trays and help prepare food. But, as much as Skole believes in hard work by family members, she also found it helpful to hire an outside management consultant. She recommends that second-generation heirs seek advice from neutral sources outside the family, including the board of directors, and, if possible, get management experience in other companies before taking over the business.
After her brother died, Skole decided to cut back on her hours so she could have more balance in her life. Working 16-hour-days, seven days a week had taken a toll.
Female heirs say that the top post can be all consuming. ''You get a new child,' said Kate Putnam, 50, who heads up Package Machinery in West Springfield, which was started by her great-grandfather. As the mother of three children, ages 24, 18, and 10, she speaks from experience. ''You eat, drink, and sleep it. It wakes you up at 2 a.m.''
For Putnam, as for many female heirs, the rewards of running a family business outweigh the problems. ''I don't have a glass ceiling,'' Putnam said. ''I think I make a lousy employee. I don't have a lot of respect for hierarchy.'' Daughters vary in how much emphasis they put on keeping the business in the family. While Putnam is unconcerned that her 24-year-old daughter, a funds manager, show no interest in taking over the business, Skole is already grooming the next generation for succession. Her brother's three oldest children, ages 14, 13, and 10, have taken over her old job: setting tables. Skole believes that Chez Josef must stay in the family. ''That's what's made it so successful,'' she said. ''The family is very rooted in the community and gives a lot back to the community. Corporations don't have that level of commitment.'' So, even though her nieces and nephews are busy with sports and other activities, Skole works hard to get them involved in the family business.
''It's a different environment than it was 20 or 30 years ago,'' said Skole. ''There's a higher percentage of women executives. It's a lot easier than it was when I started out.''
Business Express: Experts say closely held companies have advantages
By Analisa Nazareno, San Antonio Express-News
Web Posted: April 25, 2003, 3:15 p.m.
Amy Atkinson Voltz's grandfather, B.E. Atkinson, founded Atkinson Candies in Lufkin in 1932.
And for various reasons, she hesitated to get involved in the family business until 20 years ago - when she and her siblings bought their cousins out of the business, effectively cutting them out of any decision-making power.
"Some of those things, where money was being spent on personal things that had nothing to do with the family business, that can happen and did happen," said Atkinson Voltz, who is vice president of Judson-Atkinson Candies Inc. in San Antonio. "We took care of that by buying them out. That was it. And that took care of it." Atkinson Voltz said one of her company's top priorities was acting ethically. The Atkinson family name - and the Atkinson Candies and Judson-Atkinson Candies label - can't afford to get mixed up in unethical business practices.
"The candy industry tends to be a close-knit, competitive industry. And everybody knows what's going on everywhere," she said. "And it would reflect badly if I were to do something unethical. It would reflect badly not just on the company, but it would reflect badly on my dad because he's been in the business so long."
As customers and investors continue to second-guess the ethical fortitude of CEOs at publicly traded corporations, researchers say the heads of family businesses face less pressure to act unethically and have more incentives to be ethical in their business practices.
While family business owners aren't immune from temptations and human failures, ethics and family business consultants say the inherent structure of family-owned enterprises encourages them to act more ethically than big publicly traded companies. "It may be difficult to say that they are more ethical, but you can say that they pay more attention to ethics," said John R. Boatright, executive director of the Society for Business Ethics. "With family-owned businesses, there's more of an overt concern about the values of the businesses. And plus, they tend to be more conservative in the sense that they are less risk-taking than publicly held firms."
Many stockholders - including the CEOs - of publicly held corporations rely on the volatility of a company's stock to create opportunities for increasing shareholder value.
"Typically, from the company point of view, the management of a company wants to reduce volatility so they can plan out their budgets and make long-term plans," Boatright said. "And a well-diversified shareholder prefers more risk than managers would deem in their interest.
"But in a family business, the shareholders are the managers, so they tend to have a lower risk preference."
Because family business CEOs face less shareholder pressure, Boatright said, they tend to stay in their positions longer, enabling the company to focus on long-term planning. He said SC Johnson is a good example of such a family business. Samuel C. Johnson, the great-grandson of the company's founder, retired as chairman in 2000 after 34 years in that position. He passed the helm to his son, H. Fisk Johnson, but stays active in the family business.
The business has ranked as one of the 100 best places to work for several years, has never laid off employees, has had a profit-sharing plan since 1917, and has instituted charitable giving as one of its corporate values.
The average CEO at publicly traded companies of similar size hold their positions for an average of three years, according to a study by Drake Beam Morin-Canada, a global human resources consulting group.
"Family members are still in control (at SC Johnson), and they've created a divisional structure so that each family member is in charge of a different division and they have overlapping boards," Boatright said. "And employees are clear about the values of the family members.
"Employees say it's a comfortable place to work because the values are clear. And when push comes to shove, the company has turned away business if they felt it was incompatible with their values."
Because family businesses aren't tracked by outside shareholders, IRA , the director for the University of Massachusetts Family Business Center, said they tend to have fewer layoffs during recessions.
"I know of family business owners who've said, 'Times are tough but we can't afford a layoff because we'll lose our people and not get them back,' so they've given themselves a pay cut or not taken a salary," said.
But while family businesses do have advantages, said they often face ethical dilemmas.
"There are rivalries and jealousies in some families, and often there's unclarity about what the rules of the family are," he said. "And when families go into business, the businesses don't function any better than families."
said one ethical dilemma unique to family businesses is the pressure to retain and promote incompetent relatives.
"Many family businesses go out of business because of warring family members," he said.
said a successful family business promotes family members who have learned the business, gained qualifications through education and on-the-job experience, and have proven their competence.
"People would have faith in the leader of a family business if they knew that this person was given the management position with due diligence," said. "A family business cannot be run sloppily with the confidence of suppliers and customers."
Tom Guido, president of Guido Brothers Construction, said his father, Cosmo Guido, tested his commitment to the company before giving him a share in the business in the early 1980s.
"My father always taught me that because I was the boss' son, I had to work harder than anyone else," Guido said.
His wife, Maryanne Guido - vice president for the company - said she has told her children, nieces and nephews to work outside of the company and to get an education before they consider getting involved in the family business.
"All of the employees here are valued, and you have to bring something to the table," she said. "I just think they need to realize what business is like and what it's like to work outside and bring another perspective."
Like the Atkinson family, the Guido family business has grown from one generation to the next by expanding and by buying out relatives.
Because the company is growing, the Guidos started attending family business consulting seminars, where they learned to establish a mission and vision statement.
A family business often fails at the hands of succeeding generations of leaders, said Nancy Upton, professor of management and entrepreneurship at Baylor University, because leaders fail to communicate a clear vision and ethical code for the company.
"Most families have a rule where you treat everybody equally and then they divide ownership of the company equally whether people work in the business or not," she said. "And someone working in a business will often have a different idea of what to do with the business than another who doesn't.
"If one wants to maximize dividends because that's what they want from the family business, and others want to maximize the value because they want the business to grow, then that can create conflict."
Joseph Astrachan, director of the Cox Family Enterprise Center at Kennesaw State University in Georgia, said family business owners should establish regular family shareholder meetings to discuss business matters outside of family gatherings.
"Most parents develop individual relationships with their children and don't impose togetherness," Astrachan said. "And if you don't do that, then they compete with each other. Most people don't think about that until it's way too late."
He said parents should discuss mission, vision and goals of the business with their children and put the results of the meetings down on paper. Then, he said, they should establish criteria for everything - from promoting family members to what constitutes ethical business practices.
"The anecdotal evidence is that a family business that can clarify what their values are and can competently instill those values in the business can make those values official through the building of a corporate culture based on those family values," said. email@example.com
Swatch's Hayek Jr. Left Movie Industry for CEO Role
BLOOMBERG NEWS, Biel, Switzerland,
August 21, 2002
Nick Hayek Jr. used to be a film director, coaching actors such as Peter Fonda. A decade later, he's rehearsing for the role of chief executive officer at Swatch Group AG, the world's biggest watchmaker.
The 47-year-old, who dropped out of business school to study movie making, started preparing two years ago to succeed his father, Swatch founder Nicholas Hayek Sr. After leaving the film industry in 1994, he now oversees 70 percent of the business and is slated to replace his 74-year-old father as CEO on Jan. 1. "He still has to prove himself as CEO,'' said Scilla Huang Sun, who manages about 60 million euros ($59 million) in luxury- goods shares at Clariden Bank, including Swatch. "The company was dominated by his father.''
Swatch, with a market value of about $5 billion, was created by Hayek Sr. in the 1980's by merging two Swiss watchmakers that were verging on bankruptcy. He introduced the plastic timepieces that made the company famous. After handing over the chief executive position, Hayek Sr. will be watching over his son as chairman. The succession has weighed on the stock, analysts said.
Biel, Switzerland-based Swatch trades at 13.02 estimated earnings for 2002, compared with 14.70 for Swiss rival Cie Financiere Richemont AG, and 28.17 for LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury-goods company.
The company's shares have lost 13 percent of their value in the past 12 months and 29 percent since the company confirmed on May 7 that Hayek Jr. would become chief executive officer.
The pending shift in command comes as demand wanes for some of Swatch's more expensive timepieces such as the Omega brand, which costs more than $1,200 for some models compared with less than $50 for some Swatch watches. Swatch said today that first-half net income fell 13 percent to 206 million Swiss francs ($138 million), hurt by an increase in the value of the franc. Sales declined 3.9 percent to 1.94 billion francs. Swatch shares rose 3.25 francs, or 3 percent, to 113.25 francs at 1:42 p.m. in Zurich.
Hayek Jr.'s main task will be to develop the luxury business. Swatch Group generates three-quarters of sales with timepieces in all price ranges, and the remainder with watch parts, batteries and crystals. Analysts said the focus on cheaper watches has held back the company's market value.
His father added jewelry and expanded the luxury watch business through acquisitions such as Glashuette, Breguet and Jaquet Droz. Top-end watches have wider margins and greater growth potential as economies rebound, according to analysts.
Hayek Sr. is one of Switzerland's best-known businessmen, credited for helping revive its watch industry, analysts said. He bought a majority stake in Swatch with a group of Swiss investors in 1985 and became chairman and chief executive in 1986. Since the business was formed, sales surged to $2.8 billion in 2001 from $1.1 billion in 1983.
``It will be hard for the son to fill his father's footsteps,'' said Christian Wagner, a money manager at Wagner Consulting, who doesn't own the stock. In the best case, children who take over the family business may instill trust among employees, customers and stakeholders and preserve the family vision, according to IRA , director of the University of Massachusetts Family Business Center.
Two-thirds of these businesses fail to survive the second generation, though, because of a lack of leadership skills, poor preparation and family conflict, said.
In his youth, Hayek Jr. chose Hollywood over Wall Street. He dropped out of the University of St. Gallen, one of Switzerland's top business schools, after two years.
"Nobody I met there said: `I have a passion','' Hayek Jr. said in an interview at the company's annual general meeting in June. "It was not my environment'' at the business school.He moved to Paris to attend film school and formed his own production company, Sesame Films. He produced and directed two feature movies including Family Express starring Peter Fonda.
The son worked occasionally for Swatch, including helping audit the U.S. Swatch unit. In 1994, he returned to the company's headquarters to evaluate advertising costs.
He stayed on and became vice president of marketing at the Swatch watch unit that year, a position he held until April 1998, when he became the division's president. Hayek Jr. gave up that post in September 2000 and became a delegate of the board of directors a month later.
Since then, Hayek Sr. has been grooming him as his successor. That preparation and a "very experienced'' management team will help the son in his new job, analysts said. Analysts don't expect "big'' changes because the strategy is set and his father will remain ``very active'' as chairman and the biggest single shareholder.
"He did a good job in the past and I'm convinced he'll do a good job in the future too,'' said Christian Arnold, a Bank Vontobel analyst with a "buy'' rating. "Hayek Sr. will be a very active chairman and will support his son when he needs it.''
Catherine McLean in the Zurich newsroom (41-1) 224 4100
with reporting by Chantal Pfenniger, or firstname.lastname@example.org.
Editor: G. Hall
Loaning money to a family member
By Dana Dratch‚ Bankrate.com
Posted: July 24, 2002
Shakespeare wrote that loaning money to a friend is a good way to lose both friend and money. So what do you do when a relative hits you up for a quick cash infusion? Tread carefully.
Often, the First Bank of Dad (or Mom) is the first place people turn when they have financial trouble, and many do have a need. A recent survey by Fidelity Investments found that 41 percent of U.S. households did not have emergency funds sufficient to cover three to six months of living expenses.
The first choice for cash during an economic catastrophe? Family and friends.
So if Uncle Bob puts the bite on you at the next family barbecue, here are some things to consider:
Do you really have the money? "It's the same rule as gambling: Don't loan what you can't afford to lose," says IRA , director of the University of Massachusetts Family Business Center in Amherst. Even if you're driving a Mercedes and living in a good neighborhood, if you haven't got ready cash lying around, a loan might not be feasible.
What's the money for? Are you loaning your daughter $500 to put groceries on the table while your son-in-law is out of a job? Or does Cousin Ed want $15,000 to start a mink farm? And if you're loaning money for a small business, is the venture stable enough that you're comfortable with the risk?
Is the borrower likely to repay you? Look at the person's past behavior. If someone consistently borrows money and never pays it back, chances are he has no intention of repaying you.
Could the loan cause a rift in the family? This comes up a lot with siblings who borrow from parents, says . The one who doesn't get the loan thinks the parents are playing favorites. Or the siblings accuse the borrower of draining the inheritance. Bottom line: If you're the lender, it's your money to spend. But be discreet if you want peace in the family.
How much will the loan cost you, and is it going toward something that you value? If your nest egg earns 7 percent annually, and a family member wants to sideline $20,000 for five years, the real cost is $28,052. But you might feel it's a smart move if the cash helps Dad hang on to the house or enables your nephew to finish medical school.
Does the relative have other options? If the kids are in the habit of going to the Bank of Dad because the rates are so good, it might be time to introduce them to your local loan officer or credit union. Conversely, if their credit is so poor that they can't qualify, you need to know why.
Can you easily live without the money for the term of the loan? What will you have to do without if you give up the money? Even if you're "only" taking it from savings, will the loan rob you of a much-needed cushion if you're the next one in the unemployment line?
Saying yes For larger amounts, put the agreement in writing.
"The worst thing you want to do is ruin the relationship," says David Bendix, a certified financial planner and president of The Bendix Financial Group, based in Garden City, N.Y. "Problems usually occur when there's nothing in writing. Seven, eight years down the line, [people's memories] get fuzzy."
Include the amount being loaned, the interest rate and the payback schedule. The borrower and lender should collaborate on the terms so it becomes a true partnership and each side buys into the agreement. And avoid balloon payments in favor of regular amounts that coincide with the borrower's pay schedule. The lender should run it by a lawyer or accountant. Then both parties need to sign it.
"It's always good to have a witness and have it notarized, to make it as official as possible," Bendix says.
But asking for a written loan contract from a family member is like asking your intended to sign a pre-nup. The implication is "sure, I love you -- but ..." If you've decided the person is a good risk, and you want to make the loan, treat this as just another part of the deal.
And remember, your relative came to you for money, not the other way around. Here are four ways to approach the topic:
Blame the professionals. Your accountant or financial adviser absolutely insists on it. "It's not easy," Bendix admits. "Say, 'This is the way my adviser wants us to do the agreement.'" Hopefully, he adds, the borrower will be grateful for the loan, and eager to demonstrate he or she is a good risk.
Blame the media. Mention that news report, online article or episode of People's Court that illustrated the damage interpersonal loans can inflict on relationships, and that the best way to prevent problems is with a written agreement.
Blame the IRS. "I'd love to loan you the money, but I've got to get something in writing in case I'm audited."
And last but not least effective, allude to a prior bad experience. Say something like, "Since I've had a problem in the past, (keep it purposefully vague), I learned that it really helps everyone to put a little something in writing."
And make sure the terms include a fair interest rate. If you have to pull the money from savings, you're losing that interest for the duration of the loan. Bendix recommends a market-based interest rate.
"Otherwise, it could be considered a gift," he says.
Keep a record of every payment, so there is never a question of how much of the loan has been repaid. Accept payments by check and give the borrower a signed receipt each time.
If you have the money but aren't sold on the way it will be spent, offer a loan to help with a different financial burden, says .
"If I can say 'I'm helping my grandchildren with their college education,' that might sit better than, 'I can't believe my 45-year-old son-in-law can't make the mortgage.'"
The tax man
The IRS assumes that a loan earns interest, and expects you to declare that income on your taxes.
The IRS even calculates a minimum interest rate it requires you to receive. Known as the applicable federal rate, the figures are published monthly in the agency's Internal Revenue Bulletin
If the IRS believes the loan is really a gift in disguise, it will require the donor to file a special tax form at the end of the year. While the IRS permits a certain amount of tax-free gifts over a lifetime, once the giver has exceeded the limit, he or she will be liable for taxes on the gift.
But there are some general exceptions to the federal gift ta, according to the IRS, including: an annually exempted gift amount; tuition or medical expenses paid for someone else and (for the most part) gifts to a spouse.
In addition to federal regulation, "different states have different rules," says Rudy D'Agostino, partner in the Longmeadow, Mass.-based CPA firm of Meyers Brothers PC. "You want to check the rules locally."
Best bet: if the transaction is a real loan, charge an interest rate and make sure there is an ongoing paper trail, including a loan agreement, proof of repayment and plenty of receipts.
In spite of the extra paperwork and mandatory interest, borrowers -- especially those with less than perfect credit -- stand to get a better deal with a friend or family member than on the open market, says Bendix.
"It can be a tremendous benefit," he says. "The reasonable rate is going to be so much better than for any other non-secured loan."
Just because someone asks for money doesn't mean you have to give it. But it's more difficult saying no to family because, chances are, you want to preserve the relationship. If you don't have the cash, or if the loan would strain you financially, tell the potential borrower that you just don't have the money.
If you have it, but don't want to make the loan -- or suspect the person really wants a gift -- you can invoke a variety of reasons: the stock market's hit you pretty hard, kids or grandkids in college, family medical bills etc. If you run your own business, it's probably not much of a stretch to say that most of your cash is tied up there. Having money is one thing, says , being liquid is another.
When you say no, steel yourself. Sometimes a family member will take your "explanation" as an opening to negotiations. "I'm sorry, I just can't right now," is all you really need to say.
Family businesses also present their own lending problems, says . Sometimes, relatives see the company as a personal cash cow.
"But one of the cardinal rules of a family business is to treat it like a business, and not a family bank," he said.
Keeping the peace
Often, maintaining family harmony relies more on what you don't say. Remember to keep any loan request strictly between you and the potential borrower. The family doesn't need to know that Uncle Ned's business is going south unless he wants to announce it himself.
And if you haven't got cash for a loan to your oldest daughter because your youngest already borrowed $10,000, omit that detail when you refuse the request.
If you do make a loan to a relative, resist the urge to meddle. A parent with a ready checkbook might think "that they have some say in the person's lifestyle decisions," says . But that attitude is counterproductive.
"It sort of drags the borrower back into a childlike state."
Dana Dratch is a freelance writer based in Atlanta.
Back to the Fold: From Dot-Com to Dad and Mom
By Abby Ellin, New York Times Business Section
Sunday, December 30, 2001
[A]s a teenager growing up in Salem, Va., John Reynolds spent his summers working at Reynolds Siding, a remodeling company his parents have owned for more than three decades. He returned to work there after college, but he soon grew restless.
"I wanted to do something different, to live in a different town and not work with my parents," said Mr. Reynolds, who is now 27. "I didn't understand how the working world worked, the demands, that people are expected to do work and have responsibilities. Also, having my parents as my bosses &emdash; I didn't like that. They treated me like a kid."
In 1997, Mr. Reynolds left the family business to pursue a doctorate in theology at Duke University; he hoped to teach some day. But a year later, he changed his mind again and decided to work as a clerk for a law firm in Richmond, Va.
Still unhappy, he returned to the family business in the summer of 2000. He is now a vice president for sales and marketing, and he is enjoying his work. "Once I worked for the attorneys I realized it doesn't matter who your bosses are, you're not always going to like them," Mr. Reynolds said.
He said his parents welcomed his return. "They hadn't realized that I was an asset to them, and now they do," he said.
Mr. Reynolds is among many young people who have decided to work at family-owned businesses. Some have grown disenchanted with the outside business world. Others have been forced to return after receiving pink slips or watching their new- economy dreams disintegrate, experts on family companies say.
Nearly 90 percent of American businesses are family owned or controlled, according to the Institute for Family-Owned Business at the University of Southern Maine. (Among them are big-name companies like Cargill, Anheuser-Busch, Levi Strauss, Gap and Hallmark Cards.) Yet only 30 percent of the family-owned businesses in the country survive into the second generation, 13 percent into the second and fewer than 3 percent into the third, the institute said.
Whether the influx of adult children to family businesses will have a long-lasting effect on the companies remains to be seen. "I don't know where it's going to come out, but it's an interesting time," said Fredda Herz Brown, managing partner of the Metropolitan Group, a consulting firm in Tenafly, N.J., that works with family businesses. "It's so dependent on the economy and what's happening in particular industries. There's such tremendous, rapid change."
Many young people who come from families that own businesses return to the fold after a few years in the outside world, said Ann Dugan, founder and executive director of the Family Enterprise Center at the Katz Graduate School of Business at the University of Pittsburgh.
"Even though what they say is one thing, when they see what the reality is in the outside world in terms of salaries and status and perks, they usually reconsider," she said. "Also, as they get older, people understand that they really do want to make a contribution to the family business &emdash; that usually the family name is somehow affiliated with it, if not on the name of the business itself. And there is sort of a pride and ego that kicks in at that point as well."
Although many adult children, like Mr. Reynolds, had once said they would never work for the family &emdash; fearing that it would be nepotistic or a sign of personal weakness &emdash; they are finding it necessary to return to the nest. Still others wish that their parents had a nest they could return to.
Bill Shapiro, the founding editor in chief of MBA Jungle, a magazine for aspiring young executives, said he thought that nepotism was slowly losing its stigma. In fact, he included a favorable article about nepotism in the magazine's September issue. "Nepotism makes good business sense; you probably feel more pressure to perform if Dad is signing your paycheck and your family name is on the company stationery," he said in an interview. "Also, relatives are often more efficient in their daily dealings. Relatives perceive one another's thoughts and emotions so viscerally and so quickly that an arched eyebrow or nervous tapping of the pen can take the place of a three-page memo."
Company loyalty is also a factor for those joining the family business. "Everybody at the company &emdash; from the board of directors to management to the line employees &emdash; knows that you're not going to leave the firm and go to the competition for a fatter paycheck," Mr. Shapiro added.
Joining the family business is also a chance to reconnect with family members, as Patrick Amori is learning. In March 2000, Mr. Amori, 29, left his job as an advertising account executive to help his father run Il Covo Dell'Est, an Italian restaurant in the East Village in Manhattan. Although he had earned a decent salary as an account executive and had many people working for him, "it wasn't what I wanted to do," said Mr. Amori, who is now the restaurant manager.
"I wanted to see what my father does every day; I wanted to see a side that was different from what I saw as a kid, when he would work all day and come home at night tired," he said. "Now I'm able to be part of his life and try to do good for the family."
Others have also found their experience rewarding. Melissa Wilson, 24, had never imagined working at Tito's Tacos, the taco stand started 43 years ago by her great- grandfather in Culver City, Calif. It now employs 70 people. "My family is a bunch of entrepreneurs, and I felt like it would be the easy way out if I worked for them," she said of her initial hesitation to join the company. "Plus, the business has caused lots of problems in the family because it was so successful &emdash; people fighting about who's going to inherit it."
Two years ago, during the Internet boom, she graduated from the University of San Francisco with a degree in international relations and took a position as a Bay Area office manager at Icon Medialab, a Swedish company that helps businesses develop Internet marketing strategies. She said she received incentives including a high salary, overseas training classes, four-week vacations and promises of a promotion.
But as the months unfolded, it became clear that she was not going to be promoted as quickly as she had hoped. Her peers were being laid off, she said, and she felt she was in a dead-end job. So she quit and looked for new work, living off credit cards and saddling herself with $10,000 in debt. The only available jobs were other office-manager positions, which she did not want. Finally, she began working as a manager at the taco stand last April. Much to her surprise, she said, she is happy.
"I have the freedom to do things here I wanted to do at my dot-com and didn't realize I could do at a restaurant," she said. "I'm in a management position at the most famous taco stand in Southern California, making more money than I could ever have dreamed."
Having relatives as bosses can be difficult, she conceded, because it can be hard to separate business from family. But mostly, she added, "it's a blessing in disguise."
IRA , director of the University of Massachusetts Family Business Center in Amherst, Mass., cautions family businesses not to hire newly unemployed relatives just because they worry about their futures. "A family business that's going to grow has to make sure it's hiring based on the needs of the business," said Mr. , whose own family owned a children's wear store, Barasch's Kidstore, for four generations.
"The proper thing for the family business to do is a need assessment and say, `Despite the fact that this person is in need, does our business need that member?' " he said. "Family business is not just a place to hide out &emdash; it's a place to make contributions, to add your skills and talents. It's important for family members to say: `You're going to have to commit to this company as you would to any company. You're not here to hide out until the economy heals itself.' " Mr. predicted that family businesses in general would undergo many changes in the next 20 years, particularly as family- business owners of the baby boom generation retire. Some will be looking to expand by buying other businesses, and others will be looking to sell. "So there is an opportunity for family members to help grow the business," he said.
Many young people say that is exactly what they plan to do. "I want to franchise the company all over the country," Ms. Wilson said of the taco stand. "Then I want to retire."
By Karen E. Klein, Business Week Online
November 7, 2000, Copyright 2001 The New York Times Company
Theories of Relativity Family businesses usually reflect the strengths—and weaknesses—of the clans who run them
Q: I'd like some information on the advantages and disadvantages of family-owned businesses. If you have any information, or if you could tell me where I could find it, I would greatly appreciate it.
A: In terms of statistics, quantifying general business success rates is difficult and controversial. The same is true for family businesses. Several statistics have been quoted so often that they have become gospel in family-biz circles, but their origins are murky, and many business experts now doubt their value. The most commonly quoted numbers say that one-third of family-owned businesses survive into the second generation and 15% make it into a third generation.
But here's the rub: Since 90% of American companies are family-owned, the same basic numbers apply to all businesses, says IRA , director of the University of Massachusetts Family Business Center in Amherst, Mass. "It was documented in a study done by Shell Oil when they hit their 100th birthday that only a fraction of the businesses in the world lived longer than 40 years," says.
Putting aside the data, experts cite many advantages to family ownership, both for the company and society in general, whose family owned a children's clothing store in New York through four generations over 90 years, points out that family businesses often keep jobs in their communities, especially important in this age of corporate consolidation. Family businesses are good at being effective niche players in their markets and can spread family values as their legacy, oftentimes sharing their success through endowment funds and giving back time and energy to their neighborhoods.
Family members working together in a well-functioning enterprise enjoy a relationship-oriented, noncorporate environment, a high degree of family unity, a sense of purpose and tradition, and an often increased opportunity to express their creativity, says Annika Sieler, associate director of the University of Southern California Family Business Program. Family businesses also tend to generate a tremendous sense of loyalty from both employees and customers, and a family name on a business inspires trust while giving the business a built-in competitive advantage, says Dan Rottenberg, a business consultant and author. "A family business has a sense of stability about it that is obvious to customers, vendors, and potential investors," he says.
FEUDING FIEFDOMS. Of course, there are corresponding negatives to almost all the pluses associated with family businesses. The factor that seems to tip the balance one way or the other is whether family members get along at work and are able to keep contentious issues out of the company culture. "The most pressing disadvantage is that a family business can create an attractive gilded cage for family members who can't resist the compensation, and so spend many unhappy hours with people with whom they do not have good relationships," says . "That puts the business at a competitive disadvantage when they're up against companies functioning with communication and trust."
Family-business owners are sometimes so insulated they set up fiefdoms that turn off outsiders, who know they will never get a chance to rise to the top, Rottenberg notes. "It's often difficult to raise capital if a family-business owner is not willing to sell stock to outsiders and potentially lose control of the company," he adds. And then there is the nagging problem of family members who expect lifetime jobs despite incompetence and/or a lack of commitment, says Quentin J. Fleming, author of Keep the Family Baggage Out of the Family Business. "If you think it's hard to fire a civil servant, try firing a family member," he says.
The most crucial time for a family business seems to come during the transition from founder to second generation. Psychological baggage, family rivalries, succession battles, and a fear of facing business weaknesses often derail successions. "There is no commandment that a family business needs to be passed on," notes. "There should be an honest viability study done before the transition that looks at whether this company will be an enjoyable thing for the younger generation to be involved in. If they have shared value systems, high risk tolerance, and they get joy out of investing together and having an all-for-one, one-for-all attitude, it'll be in their best interest to go ahead."
He recommends that the second generation write a thorough business plan that faces up to threats that could undermine the business' future and establishes an exit plan that deals honestly with the potential end of the business. Although there is a great deal of emotional attachment to a family firm, it must be a profitable and enjoyable enterprise if it's going to outlive the average company.
For more information, visit your nearest family-business center. A map listing all the universities that host family-business centers is available at AllBusiness.com.