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Preparation is vital to keep a family business flourishing
What can help a family-owned business avoid fulfilling the proverb of “Shirtsleeves to Shirtsleeves in three generations,” and instead keep growing into the fourth and fifth generations of the business? We don’t have to look very hard to see many successful second- and third-generation family businesses in our community. Some statistics say that only a […]
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What can help a family-owned business avoid fulfilling the proverb of “Shirtsleeves to Shirtsleeves in three generations,” and instead keep growing into the fourth and fifth generations of the business? We don’t have to look very hard to see many successful second- and third-generation family businesses in our community. Some statistics say that only a small percentage will make it to the fourth generation. So is it really going to be a matter of blind luck to get them there?
On the contrary, most experts state that preparation for the continuity of a family-owned business must start at an early stage. As founders of a business with young children, there are steps you can take to begin this preparation.
Start with assuming your business will evolve into the next generation(s). As a parent, promoting partnership, communication, and conflict-resolving skills at an early age will encourage teamwork between siblings. Giving them team projects, problem-solving events, or even planning the family vacation together, can create some great teamwork skills.
Something to avoid might be telling the oldest child, “this all might be yours some day,” or putting the oldest in charge of the team-building projects, or being negative about the business at the dinner table or family events.
Eric Allyn, fourth generation of Welch Allyn, shares that preparing the next generation early through education and building trust in each other is essential from the start. The Allyn family focuses a lot of activity on educating the next generation, who range in age from newborn to 21 years old.
Eric says, “We don’t provide training on how to best manage the company, or our product lines, or our financial performance. Instead, we focus our efforts on building trust among the 31 members of the fifth generation. We have annual team-building activities — ranging from three generations playing hockey together, to a swim across Skaneateles Lake.
“Having strong, trusting relationships with one another, coupled with a sense of responsibility in ownership, are our primary goals of next-generation development. Our intent is to ensure that the next generation becomes great stewards of our business, so that they can keep it family-owned into the next generation.”
Each stage of a family business is different from the previous one, and there is no one model to follow. As the ownership moves into the sibling and cousin stage, a framework will be needed. A structure will need to be in place for decision-making, leadership, planning, and goal setting. Meetings will need to be more formalized. Eric states that outside of the basic steps necessary to address ownership/estate tax challenges, he emphasizes the importance of considering governance changes when moving from one generation to the next.
“The truth is, the way my generation oversees this business — keeping in mind there are 11 in my generation — is very different from how Bill and Lew Allyn managed the company in the 1970s and 1980s. The governance model needs to adapt as the number of owners increases. And, keep in mind, the fifth generation has 31 people in it (so far!). One imagines that they will have to re-shape our governance in the future as well.”
Your family business could still be a few years away from transition, but preparation can begin early. To learn more about the sibling/cousin transition, the New York Family Business Center will have Drew Mendoza, from the Family Business Consulting Group, as its keynote speaker on Feb. 9, 2012. Visit the New York Family Business Center at www.NYFBC.org for more information.
Donna Herlihy is the executive director of the New York Family Business Center in Syracuse. Contact her at DHerlihy@NYFBC.org.
“Is anybody there? Does anybody care?”
Come with me on a short trip. We’ll travel from a North Syracuse repair shop to a tent in the Revolutionary War, and then to a Connecticut hotel. Donna Curtin from Syracuse sends a simple plea to me. It brings to mind George Washington, as well as national politician George McGovern. In her letter, she
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Come with me on a short trip. We’ll travel from a North Syracuse repair shop to a tent in the Revolutionary War, and then to a Connecticut hotel.
Donna Curtin from Syracuse sends a simple plea to me. It brings to mind George Washington, as well as national politician George McGovern.
In her letter, she explains that she owns Grace Body and Paint in North Syracuse, a collision-repair shop. She writes after she reads my column about how out of touch our politicians are and how they inflict uncertainty and difficulties upon business operators.
“Talk about laws we have to follow!” Donna writes. “It is mind blowing how lawmakers, supposedly intelligent folks, cannot see the horrible impact their decisions have on people, especially business owners. As one of my neighbors pointed out to a local official: If he were to go up and down the road we are on, he would see that most of these small businesses (like mine) employ under 10 people, not 50.
“Small-business laws have huge impacts on businesses our size. They create expenses that will eventually bury us. (The official never went down the road to talk to anyone, by the way.)”
Her words echo those of George Washington. When he leads the revolutionary army against the British, he writes 15 times to the Continental Congress meeting in Philadelphia. He gets no replies. Finally he asks, “Is anybody there? Does anybody care?”
That Congress is filled with men who do not listen to what Washington writes. Because of that, they nearly bungle the war for independence.
Our politicians do not listen today to the thoughts of Donna Curtin in Syracuse. Nor to the laments of hundreds of thousands of business owners. At every level of government they burden businesses with more taxes. And more regulations. And more rules and conditions. Business owners complain endlessly about this burden. In one way or another, they ask of the legislatures that rule them, “Is anybody there? Does anybody care?”
I write this in the present tense for a simple reason: The problems of George Washington’s times exist as much today as then. You realize this when you know he writes also of the burdens government lays unnecessarily upon men and women. He marvels that they have the patience to put up with them.
He also describes government as force. “Like fire, it is a dangerous servant and a fearful master.”
I suspect that today he might drive up and down that road in North Syracuse. And he might listen to a few of its business operators.
One of the most eloquent descriptions of the mess politicians create comes from the pen of George McGovern. He was a liberal, Democratic senator from South Dakota. He ran for the presidency in 1972 and lost in a landslide.
In 1992, he writes a piece for the Wall Street Journal. It is about his experiences — after his years in politics — in owning and running a small hotel in Connecticut. He has gone bankrupt. McGovern writes how his business was nibbled to death by needless regulations. Federal, state, and local rules.
McGovern writes about how expensive it is to deal with frivolous lawsuits. The sort of lawsuits politicians can put a stop to with tort reform, but never do. I urge you to Google the article.
He might be having a drink with the woman from Syracuse when he writes: “I wish that during the years I was in public office I had had firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. Senator and a more understanding presidential contender.”
If every politician had to work in the private sector before running for office, our government would improve beyond recognition. And, Donna Curtin from Syracuse would rarely have to ask, “Is anybody there?”
From Tom…as in Morgan.
Tom Morgan writes about financial and other subjects from his home near Oneonta, in addition to his radio shows and new TV show. For more information about him, visit his website at www.tomasinmorgan.com
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Stay up-to-date on the companies, people and issues that impact businesses in Syracuse, Central New York and beyond.