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Operations Generation Next
Operations Generation Next | Generation Next |
| Written by Max Berry | |
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A clear, detailed succession plan can help you transition your family
business into the future in a way that suits the family as well as the
business Joyce Welken needed a plan. In 2006, the owner and operator of Bixler's Jewelers, an Easton, Pennsylvania institution since her great-great-great grandfather opened its doors in 1785, found her family business threatened by a flagging economy and an invasion of corporate chain stores. And with no children of her own to take the helm, Welken—and America's oldest jewelry store—faced an uncertain future. So Welken bolstered her ranks. By teaming up with her old friend and fellow jeweler Mark Maurer, president of Avalon, Maurer & Bash Jewelers, she found an ally in the fight to keep the family business alive in a big box world. The partnership made sense. In addition to combining distinct product lines and customer bases, Mark's 27-year-old daughter Lisa was already preparing to lead Avalon, Maurer & Bash into the next generation. Now she could do the same for Bixler's. 
"Our families had been friends for years and we learned by talking to each other that we had the same perseverance to survive in a difficult economy," says Welken. "We decided to join our forces." Non-traditional families are now tradition in America, and as the shadows of big corporations continue to threaten mom and pop's view, the nontraditional family business has become a mode of survival for America's entrepreneurial families. Gone are the days when a son simply took the keys from his father and trusted that members of a new generation would keep clanging the bell on the front door of the family shop. As families and businesses continue to splinter and re-form in unpredictable ways, careful, creative planning is more important than ever. With the entrepreneurial baby boom generation fast approaching retirement, a new generation of small business owners is poised to step up. A 2007 survey by financial consulting firm Laird Norton Tyee found that nearly 60% of majority shareholders in family business are 55 or older. Nearly 30% are 65 or older. Yet less than 30% of those surveyed had developed a succession plan. In an era when barely 30% of family businesses survive to the second generation and fewer than 15% of them make it to a third, family business consultant Tom Hubler endorses formal, detailed succession planning.  "It's important for a family business to be vision-driven as opposed to problem-focused," says Hubler, owner of the Minneapolis-based Hubler Family Business Consultants. While every business, family-owned or otherwise, would do well to adopt this credo, the delicate—often treacherous— task of balancing business and blood demands even greater perspective and planning. It is never too soon to begin developing a formal plan for when and how a business will be passed on. Many advisors recommend that entrepreneurs build an exit strategy right into their business plan. If for no other reason than to ensure a company is never without a leader, some guidelines for succession should be drawn early.Hubler, whose firm specializes in succession planning, makes it a point to involve the entire family in the process. "We unite the family around a common vision," he says. "Each [family member] has a vision of their own and we use these to write a common vision for the family." Hubler conducts individual and group interviews to determine each family member's ideas about where the business should go and how it should be handed down. His firm deals with everything from forming a clear picture of what each individual's role in the company should be to ensuring that any outside shareholders are satisfied and in line with the family's wishes to managing the transfer of revenue and navigating complex tax laws. The more voices there are in the conversation, the greater the chance of conflicting viewpoints, especially if some family members are expecting more control of the company than they'll ultimately receive, or if others want far less. But Hubler maintains that communicating early and honestly will spare both the business and the family a whole lot of grief. "The business and the family are parallel," he says. "Love for family is all the more reason to have a formal business plan. The more family members involved, the more formal the plan should be." There was very little formal planning involved when Ira Langlois took over for his father, Tom, as owner and operator of Langlois Pianos. The Bremerton, Washington-based business had been in the Langlois family for four generations and there was no need to plan for what was already foregone. "In those days it was just kind of understood that you'd take over for your father," the 56-year-old Langlois says. "You didn't argue." Langlois recalls running through the store as a child, when his father would point to him and say to customers, "There goes the next generation." But it wasn't so simple for the boy whose childhood photos show him standing on a piano bench and who has known how to tune a piano since the age of 12. When asked about his early reluctance to take over the family business, Langlois pauses before giving an answer that might sound cryptic under circumstances other than these, where it sounds instead like a kind of universal shorthand for a son's apprehension towards a father's expectations: "It was too close." Parents' legacies can loom large, especially during the days before a son or daughter has had the chance to define themselves on their own terms, which is why Hubler recommends that members of a succeeding generation gain business experience outside the family before taking over their parents' business. College and a few years of professional experience elsewhere can be a proving ground for the sons and daughters of many entrepreneurs, giving them a chance to get a feel for their own shoes before they step into someone else's. It was by gaining this kind of distance from his own father that Ira Langlois began to grow into his business. The year before he started college, Langlois worked as an apprentice to a piano tuner in Denver who happened to be blind. "This blind man taught me how to look with my fingers," recalls Langlois. "It was huge for me. It brought me into another dimension. I was able to see [the business] from a different perspective." After his grandfather and namesake passed away while Ira was in college (he was pre-law), Langlois got the chance to put his newfound perspective to some use. While tuning pianos for his late grandfather's clients in Sequim, Washington, away from the watchful eye of the elder Langlois, Ira discovered that he could carry on his family's vision without sacrificing his own. He began doing things his way. "I was probably doing some things [my father] wasn't aware of," says Langlois. "I was more exacting than he was." A taste of this kind of freedom, along with what he describes as "a built-in career at 22," may be why Langlois has no regrets today about taking over the business. Langlois' three sisters pursued careers outside the family business, however, so when the torch was passed, he had no one to share it with. For all the negotiating he had to do with himself before he was ready to take over Langlois Pianos, the transition process can be much more complicated when multiple siblings are involved. Defaulting to the eldest child presumes a level of business competence and genuine interest in the company that he or she may or may not actually possess. On the other hand, dividing power equally among a group could turn every business decision into a contest of opinions. Ownership may be divided, but for management to remain smooth and focused, someone's say needs to be final. To ensure both family and business continue to thrive, Hubler again recommends a realistic, communicative approach to succession. "Most people want to do the right thing," he says. "It's a matter of sitting down with your family and sorting things out." That method worked fine for Joyce Welken, who ran Bixler's Jewelers with her brother Philip before he left to focus on a career in local politics. "When we had a problem, we sat down and talked about our disagreements," she says. "It was really pretty simple." However it's handled, succession should never be abrupt. A year or two of on-the-job training, even for those who grew up in the family business, will help your successor master the trade without having to take on the legacy all at once. Have frequent meetings with your successor about how the transition is going and include other members of your staff in the discussion. Key employees outside the family lineage are invaluable to the smooth transition of a business. They have an objective, hands-on knowledge of how the company runs and their take on what it needs in order to thrive will be as valid as anyone's. Involving employees in the transition process is also a good way to retain them, which is vital to the success of any transition plan. As a successor gains confidence and experience, the predecessor can finish his or her time with the company by easing into a more advisory role, providing counsel when asked or when circumstances call for it. But it is vital that the final say in any major decision be left to the successor. Welken and Langlois both recall having this kind of dynamic with their father. "Dad was a consultant," Welken says. "He didn't just walk away. He offered his opinion, but he didn't force it." Not forcing it will allow your successor to gain confidence in his or her own abilities as a leader or, in the worst case, learn from a mistake. Maintaining this connection to the leaders and philosophies of a successful company's past is essential to understanding the kind of vision that turns a business into an institution. But, as Joyce Welken and Ira Langlois will tell you, the business landscape of 1785 bears little resemblance to what independent entrepreneurs see before them today. Maintaining a vision is essential, but adapting the way it's applied is a task to be carried out far more regularly than once a generation. "You've got reset your vision daily," says consultant Hubler. "Everybody has to own what's happened historically and then adapt it to today's environment." Ira Langlois agrees. "People have to keep reinventing things in any industry," he says. "But I look back on the gamut of forty years and I feel good about what I've done with my craft." What Langlois has done is begin designing his own pianos for sale in the store, a fresh concept for a business that used to be solely retail and service-based. "It's something new," he says, "and it's been great." Langlois will be spending much of his time looking for something new in the coming years. While retirement is not on his mind just yet, Langlois has four grown daughters who, like his sisters, have pursued interests outside the family business. Like Joyce Welken two years ago, Langlois finds himself without an heir. And like Welken, he is not opposed to bringing members of someone else's family into his business. "I've trained apprentices," he says. "I know there will be someone to take over." Still, he is not ready to surrender just yet. "I'm hoping there will be a niece or a nephew or a grandchild who comes along." He pauses the way he did when describing the uncertain days at the very start of his career, when that family connection was still too close. "I'd like that kind of bonding through blood," he continues, "that trustworthiness." As stressful as it can be transitioning a family business from one generation to the next, as easy as it is to disappoint when loved ones' expectations are high, it is also a reminder that there are people in the world we care about enough that the thought of disappointing them bothers us. One way or another, a son like Langlois finds a way to overcome the vague, too-close feeling he gets when he imagines himself walking his father's line. It takes time to learn that the hardest feeling of all may be that there is no one close enough. |
