Runnning a Multi-Family Business
It's tough enough for one family to keep a business going from one generation to another. What happens when the founding partnership was between two families? Will the future generations of each partner be as in tune with each other as their parents or grandparents were?
Probably not. So when the second generations find themselves in the position of managing or owning the business started by their parents, they need to ask themselves: "Do we agree on the business mission and goals? Do we want the ownership as our parents conceived it to stay intact?"Prepare yourself before the big handover by reading "Bad Blood"
"There's nothing wrong with changing the ownership structure," says Craig Aronoff, family business advisor and director of Kennesaw State University's Family Enterprise Center in Kennesaw, Georgia. In fact, these days-when so many people want to buy (or buy into) a business-selling the business to the other family or to an outsider makes sense "if the two families don't have the same dedication as their parents, or if they have trouble getting along," says Aronoff.
But sometimes, two-family businesses want to remain that way so they can continue their journeys from generation to generation. What can family members with very different ideas do to ensure success? For starters, suggests Aronoff, "you have to measure with a straight measuring stick-the way you would in any family business." Although there are more players when two families are involved, "the issues are similar to any family business and can be anticipated," he says. The important issues include:
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Succession And Leadership
Your child or mine? That can cause quite a rift in the organization when the time comes to decide who will head the business. For New England Coffee in Malden, Massachusetts, that decision was reached rather uniquely. When the third generation was ready to take over, there were three third-generation individuals qualified to assume leadership of the company-which was founded in 1916 by two brothers and a cousin. "We knew our parents were having a difficult time making a decision," says Jim Kaloyanides, now president of the company. "So the three of us got together and decided I would be president. When we presented our plan, they were thrilled they didn't have to make the choice."
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Kaloyanides now runs the business in a team-oriented style, which isn't that unusual. "Team management at the top is now normal at most organizations," says Aronoff. It's especially helpful in a two-family firm because it allows room at the top for both families. Aronoff points to a 1997 survey of nearly 4,000 family businesses done by Kennesaw State and Loyola University in Chicago (and sponsored by Mass Mutual and Arthur Andersen), which indicated that 40 percent were contemplating co-leadership among successors (although only 10 percent actually operated that way at the time).
Responsibilities And Accountability
For key members of both families. When Tip Top Poultry, a Marietta, Georgia, poultry processor, launched operations a generation ago, the two owners, Al Burruss and Chet Austin, were friends with different yet complementary talents and interests. Burruss enjoyed the operational side, Austin the financial side. Their sons, Robin Burruss and David Austin, who now run Tip Top Poultry, have each followed in their respective father's footsteps. That kind of labor division keeps the bond strong.
Having separate responsibilities and different areas to manage helps ensure that every member gets the respect and sense of personal achievement they need. Although most two-family firms eventually develop a system of accountability, the ones that survive with joint ownership do so because the owners have committed to the company's mission. "When we have disagreements, we talk about fairness-not equality," says Kaloyanides. "[No one] involved with this company sees this as an entitlement. It's an opportunity earned every day through hard work and commitment."
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Decision-Making And Conflict Resolution
"When it comes to making major decisions or implementing new ideas at New England Coffee, our executive team-five of us are members of the [owning] families, and two are nonfamily members-talks it through. We look at the issues as a team, decide what's best for the company and then reach a consensus," says Kaloyanides.Make it a plan to communicate-check out "Survival Training" to strategize your family business.
Although each two-family business has its own unique and often idiosyncratic way of making decisions and resolving conflicts, Aronoff recommends that two-family businesses establish a board of outside advisors. "It can be extremely helpful in clarifying positions and giving guidance on potentially divisive issues," he says. "And it can weigh in when there's a stalemate." Retreats and forum meetings, which encourage the participation of members from both families, provide the opportunity to develop good business policies, enhance communication and foster goodwill.
Trust And Respect
Kaloyanides talks fondly about growing up with his cousins. Burruss considers his father's partner as his second father, and his partner, David, as the brother he never had. But it's more than affection that keeps the second and third generations connected in multifamily businesses. As Burruss puts it, "It works because of the respect and appreciation we have for each other."