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Seated, Mike C. Wells, Sue Wells Sargeant. Stand-ing, from left, Greg A. Wells, Gary M. Wells, Michael J. Wells and Doug J. Wells.
Last May, the U.S. Census Bureau reported that married couples represented only 48% of U.S. households in 2010, the first time the percentage had dropped below half of all American households. In 1950, by comparison, 78% of all American households consisted of married couples. What’s more, only one-fifth of households in the 2010
census consisted of married couples with children, compared with 25% in 2000. Some people view these statistics as a sign that “the family” as an institution
is disappearing. Others say “the family” is as important now as it always was, although there are now more ways in which families are formed.
In this issue, attorney Joe Goodman discusses the estate planning implications of today’s demographic realities. Language that once was boilerplate in a will, such as “natural-born children” or “born in wedlock,” may have consequences you didn’t intend, Goodman cautions.
As a family business is transferred to the third generation and beyond, many families develop ownership policies. Most (72.6%) of the U.S. family business owners who responded to our 2011 Family Business Survey said they have a formal shareholder agreement. Of those who had such an agreement, 78.4% said it covered “who is permitted to own shares” and 62.4% said it stipulated “who can inherit shares.”
Family business advisers say a shareholder agreement is important for those who don’t want stock to fall into the hands of anyone outside the family. But who should be included in “the family”? What are the ramifications of limiting that definition to blood relatives? And, conversely, at what point does inclusiveness become unwise?
Consider this recent, high-profile case: Susan Gore, a daughter of the founder of Gore-Tex maker W.L. Gore & Associates, adopted her ex-husband so her children could receive more from a family trust. She had spent too much of her own inheritance and wanted her kids to have a larger share. As the children of a “grandchild” (Susan Gore’s “adopted” ex-spouse), her children would be entitled to more than they would have received without the legal maneuver.
At our Transitions East 2012 conference, to be held April 25-27 in Orlando, Fla., a panel of family business members will discuss “Ownership Strategies for Multi-Generational Family Enterprises.” Panelists will describe how they arrived at their definition of “family” and how they decided who may own business stock.
Establishing such policies is one of the important roles of a family council. (Of course, this also raises the question of who is eligible to serve on a family council!) No matter who is considered a part of your family, and how they joined the clan, it is essential that they openly discuss ownership and estate planning issues.
www.familybusinessmagazine.com �
What is a family?
Barbara [email protected]
from the editor
Photo: RichaRd Wuest
COVER PHOTO: WElls EnTERPRisEs, inC./MElissa siEja� Family Business • March/April 2012
contents
March/april 2012 Vol. �3, No. �
44 Blue Bunny’s opportunities multiplyWells Enterprises, maker of Blue Bunny ice cream, has ambitious plans to grow way beyond $1 billion in sales. To help the company achieve that goal, family members restructured management and the board, putting the needs of the business first. — Deanne Stone
49 Survival through adaptationConnolly Brothers Inc., a construction management company in Beverly, Mass., has endured hard times by reshaping its mission. — Dave Donelson
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OW = out of wedlockA = adoptedDS = donor spermIV = in vitro
1 = First marriage2 = Second marriage3 = Third marriage
52 Passing on the torch without blowing up the familyThe author’s succession process began without a formal plan. He eventually realized that the do-it-yourself approach had lost traction on both the business and family fronts. — Jack MacBean
59 A dramatic transitionHorst Engineering of Connecticut successfully passed to the third generation, but not without some deep soul-searching. — Dave Donelson
56 Multiple marriage planningThe family tree has lots of new branches. Because we’re building our families in so many different ways, estate planning is a lot more complicated than it used to be. — Joe M. Goodman Contents continues on page 4
CoVer Story
4 Family Business • March/April 2012
DepArtMents
1 From the Editor What is a family? — Barbara Spector
6 publisher’s page Sharing the story. — Caro U. Rock
8 Openers Family enterprise stars in The Descendants. At the Helm: Chris Koch, CEO of New Era Cap Company Inc.
63 Toolbox Family business apps for the iPad and iPhone. — Barbara Spector
64 Directory Advisers for family companies.
79 profile A 116-year-old product is now trendy. — Sally M. Snell
80 profile Robert Is Here, along with his family. — Carol Brzozowski
ADvisers ForuM
20 andreas raharso: There are risks involved in professionalizing family businesses.
22 Matthew F. Erskine: Risk assessment should include estate plans.
24 Tish Squillaro: The unkind cut: Firing a family member.
28 Frederick D. lipman and linsey B. Bosselli: A family constitution is a tool to preserve a family’s legacy.
30 Jeffrey a. Markowitz and christopher a. Davis: ‘Drop and freeze’ transactions minimize estate taxes.
contents cont inued
80
79
8
14
Caro U. [email protected]
Photo: RichaRd Wuest
Several months ago, an interesting promotion for Ancestry.com crossed my screen, so I decided to sign up and see what more I could learn about my family’s history. My first cousin Robert had been anointed the “family scribe” and for years had been gathering stories and official documents tracing our family’s history in America. However, I wanted
to delve even further into our family’s business heritage, so I consulted my 91-year-old father. I knew my father’s father came to the U.S. at the turn of the century to join his uncle in
Chicago in the grain business. The family had been in the hops business, which included grain trading, in Fuerth, Germany. A few years later, my grandfather, Paul Uhlmann, moved to Kansas City, where he and his son Pat established their own grain business. My grandfather, uncle and, later, my father, expanded the business to include flour milling and food products. All three related colorful stories of growing the business, keeping up with cousins around the globe and life in Kansas City.
Family gatherings provided a perfect forum for these narratives, and they had quite an impact on me. One such story involved my grandfather’s personally signing affadavits for almost 400 refugees to come to America to escape the Holocaust. Our family received thank-you letters for decades, and my grandfather was recognized with the Eleanor Roosevelt Humanitarian Award.
Over the years, I have passed on several of these family stories to our sons Bill, who joined our family business after completing his J.D./MBA,
and Tom, a physician. There are many reasons to hand these stories down. According to Kathryn Levy Feldman, a freelance contributor to Family Business who has also written family business history books, “The tie that binds stories together is the process itself of assembling archives and gathering people to tell the family as well as the company history.”
Feldman wrote a cover story for Family Business Magazine (Spring 2006) that profiled the Rubenstein family of New Orleans, who quickly got their clothing store back in operation after Hurricane Katrina. The family was proud that they were able to track down their employees and offer them their jobs back.
Quite often, such family stories involve life lessons. Future generations of a family in business can receive valuable insights into what drives family executives, what shaped family dynamics, what outside forces intervened and
what lessons can be learned from their experiences. Not all narratives are written down and published as books; many are oral
anecdotes and stories that probably become more colorful with each passing generation! Make sure someone in your family is charged with chronicling your family history.
Sharing the story
publiSher'S page
� Family business • March/april 2012
� Family Business • March/April 2012
When I went to see The Descendants, I hadn’t read much about the film. I knew only that
the performance by the star, George Clooney, had been highly praised by critics and that the director was Alexander Payne, who previous cred-its include Election, Sideways and About Schmidt. As I sat in the theater, riveted to my seat, I was surprised that the film addressed so many of the issues I encounter each day
in my professional life (although, alas, my workdays involve neither Mr. Clooney nor Hawaii, where the action takes place).
In mid-December, I called some family business advisers who also had seen the film to share our thoughts on the issues of wealth and inheritance confronted by the characters.
(Warning: This article contains spoilers. If you haven’t yet seen the film—and I highly recommend that
you do—stop reading now if you’d prefer not to learn key plot details.)
Many cousinsThe film, shot on loca-tion, is based on the novel by Kaui Hart Hemmings, who grew up in Hawaii. George Clooney’s charac-ter, Matt King, is one of many cousins in a promi-nent family descended from the marriage of a Hawaiian princess to a white banker generations ago. Matt, an attorney, is the sole trustee of 25,000 acres of unspoiled land on Kaua’i held in a family trust. Because of the com-mon law rule against per-petuities, the trust is due to expire in seven years.
Matt has lived frugally (too frugally, his father-in-
The guide for faMily CoMpanies
ediTor-in-Chief & assoCiaTe publisher
Barbara [email protected]
arT direCTor
Bill Cooke Bill Cooke & Company
ediTorial advisory board
Ross J. Born • Just Born Inc. Philip A. Clemens
The Clemens Family CorporationLansing Crane • Crane & Co. Inc.
Anne Eiting Klamar, M.D. Midmark Corporation
Charlotte Lamp, Ph.D. Port Blakely Companies
Sylvia Shepard • Menasha CorporationEdouard Thijssen
TrustedFamily.net, Aliaxis
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Caro U. [email protected]
publishing direCTor
David Shaw • GRID Media [email protected]
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ediTorial & business offiCes1845 Walnut Street, Suite 900
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Family Business (ISSN 1047-255X) is published quarterly. Copyright ©2012 by Family Business Publishing Co. All rights reserved. No part of this publication may be reproduced in any form, including photocopy, without permission.
Family enterprise stars in ‘The Descendants’The film, starring George Clooney, shows what can happen when a family of wealth has not passed its values to succeeding generations. by barbara speCTor
OPENERS
The Descendants star George Clooney poses with Shailene Woodley, who plays his eldest daughter, at the film’s Beverly Hills, Calif., premiere.
© ErIk JordAN/rEtNA ltd/CorBIS
10 Family Business • March/April 2012
law complains), saving all his income from the trust and living solely off his earnings as a lawyer. Some of his cousins, however, have spent all their trust income. evidently, few of them work. (“All I have is time,” says one cousin who offers to give Matt and his family a ride on Kaua’i.) Most of the cousins want to sell the family’s land quickly.
A subset of the group of cousins has been meeting regularly in Matt’s law office to discuss offers for the property. They have rejected the highest bid, from a Chicago group seeking to build big-box stores on the property. Instead, they favor an offer from a Kaua’i man, Don Holitzer, who plans to turn the land into a golf course and residences (though two of the King cousins oppose any sale of the property). A shareholder vote has been scheduled to confirm the family’s decision.
At the same time that Matt is pon-dering the sale of his ancestral prop-erty, he is dealing with a devastating
situation in his nuclear family. His wife, elizabeth, lies in a coma after having been injured in an accident on a rented boat. Doctors have told him that she will not recover, and under the terms of her living will she must be taken off life support. By his own admission, Matt up until now has focused primarily on his work and has assumed the role of “back-up parent,” but because of elizabeth’s accident is now serving as single dad to his two daughters: substance-abus-ing 17-year-old Alexandra and ten-year-old Scottie, who has been acting out at school.
That’s a lot for Matt to deal with, but there’s more. Matt learns that elizabeth had been having an affair and at the time of her accident hoped to run off with her paramour. Midway through the movie, Matt learns that the man his wife had been seeing is a real estate agent who is Holitzer’s brother-in-law and would stand to profit considerably if the deal the King family favors is closed.
Trustee faces pressure“The movie portrayed [Matt’s] con-flict very effectively,” says Allison Shipley, a principal at PwC. “The role of a trustee is really a hard thing to take on.” The responsibili-ties are especially challenging for a sole trustee acting on behalf of an extended family, Shipley notes. “It’s an unbelievable job for that one per-son,” she says. “There’s an incredible amount of pressure.”
“[Matt] was a trustee in so many ways,” observes Justin Zamparelli, a partner at Withers Bergman LLP. “He was even entrusted to protect people’s feelings.” for example, Zamparelli notes, elizabeth’s father blames her accident on Matt (specu-lating that she wouldn’t have injured himself if Matt had bought her a boat of her own) and calls her a faithful wife, an assertion that Matt doesn’t contradict. In another scene, Matt hosts a gathering for all elizabeth’s friends (notably, no King cousins are present) and invites them to go to the hospital to say goodbye to her—without mentioning her affair and its effect on him. He enlists Alexandra’s help in protecting her younger sis-ter’s memories of her mother.
I was struck by the portrayal of the extended King family as a group that lives near each other yet is not close-knit. Matt and his daughters run into several King cousins at vari-ous points in the movie, but these relatives express only a perfunctory interest in elizabeth’s condition—and none of them offers much in the way of consolation to the young girls whose mother is dying.
obviously, the King cousins could have benefited from family gover-nance and education efforts. “There doesn’t seem to have been any real effort by the family to cement the relationship between the family and the asset,” comments David Lansky, a principal consultant with the family Business Consulting Group.
The King ancestors, PwC’s Shipley observes, had created a trust to pre-serve their land, but had taken no measures to preserve the family val-
OPENERS
W.D. Cowls Inc. of North Amherst, Mass., profiled in the Winter 2012 issue of Family Business (“Reinvention of an 18th-century family enter-prise,” by Jayne A. Pearl) , has entered into a partnership to protect 3,486 acres of working forest land. According to Massachusetts Energy and Environmental Affairs Secretary Richard K. Sullivan Jr., the conserva-tion restriction is the largest on a contiguous block of privately owned land in Massachusetts’ history.
The conserved forest has been named the Paul C. Jones Working Forest in memory of W.D. Cowls’ eighth-generation owner, who died suddenly on Nov. 24, 2011. His daughter, W.D. Cowls president Cinda Jones, says the conservation deal was five years in the making.
According to Sullivan’s office, approximately $3 million of the $8.8
million deal came from state fund-ing. Another $5 million was con-tributed by the U.S. Department of Agriculture Forest Service’s Forest Legacy Program, and $839,600 was secured from the Open Space Institute. The remainder was raised by the Kestrel Land Trust of Amherst, Mass., and the Franklin Land Trust of Shelburne Falls, Mass. W.D. Cowls will continue to own and manage the woodland and conduct sustain-able forestry operations under a state-approved plan.
The Family Business article erro-neously reported the size of W.D. Cowls’ land holdings. The com-pany, which is the largest private landowner in Massachusetts, owns tree farms in 28 towns. According to Cinda Jones, the total is several thousands of acres; the company does not release the exact figure.
updaTe
W.d. Cowls protects nearly 3,500 acres
12 Family Business • March/April 2012
OPENERS
ues. “Clearly,” she says, “that family hadn’t done anything to reinforce, or even establish, the cultural impor-tance of the land.” even though the family hadn’t inherited a governance structure, Matt could have worked with his relatives to institute one, Lansky points out. “He was the trust-ee, but he really didn’t see himself as the family leader,” Lansky says.
a community’s concernsThroughout the film, local residents whom Matt encounters urge him not to sell the property, and after those conversations an internal conflict registers on Clooney’s face. “The whole state of Hawaii had an invest-ment in keeping the land pristine,” fBCG’s Lansky notes. “Should [the King family] do anything about that? What does it mean to be a steward?”
The f i lm’s dual p lot l ines—elizabeth King’s marital infidelity and the King cousin consortium’s planned infidelity to their legacy—intertwine as Matt takes his daugh-ters (and Sid, a slacker friend of older daughter Alexandra) on a trip to Kaua’i to visit the land and get a look at the man who has been sleep-ing with his wife.
As the family gazes at the pris-tine property, Alexandra remi-nisces about her experiences camping on the land with her moth-er. (Interestingly, it was her moth-er—not her father, the parent with the ancestral tie—who instilled in Alexandra a connection to the land.) Younger daughter Scottie plaintively asks, “What about me?”
To PwC’s Shipley, that question is a pivotal turning point in the film. Revisiting the family’s land, she says, gives Matt “the perspective of
the ancestors, and of the daughters.” I agree. Though one can think of several alternative titles for the film, The Descendants is the most appro-priate, and that scene demonstrates why this is so.
The family gathersAs Matt prepares the ancestral home for the arrival of his cousins who will gather to vote on the sale, the camera lingers on portraits of his ancestors and other family memen-tos. The family stakeholders cast their votes and, unsurprisingly, they overwhelmingly favor a sale to Holitzer. In the end, however, Matt refuses to sign the papers. His cous-in Hugh (played by Beau Bridges) warns Matt that the family would sue him. “Then I might see more of you,” Matt responds.
The King family, Zamparelli says, “basically were fortunate members of a DnA pool that owned this prop-erty; they hadn’t earned it. And at the end of the day, I think that was
part of [Matt’s] decision.”of course, there are more alter-
natives available to the family than just selling or not selling the land. The Kings could work with advis-ers to find a way to generate some
cash from the property while preserving a sig-nificant portion as open space. A family council or family office could pro-vide a forum for them to explore such options in the seven years before the trust expires—if, after the contentious vote, the cous-ins could possibly agree to establish such structures.
Matt never tells his cous-ins that someone connect-ed with the Holitzer bid had had an affair with his wife. His failure to disclose the relationship would not necessarily help his cous-ins prevail in a suit against
him, attorney Zamparelli says, because Matt did not benefit in a pecuniary way from his decision not to sell—and it would be difficult to prove that the situation was a factor in his decision.
In the film’s penultimate scene, Matt and his daughters scatter elizabeth’s ashes at sea. Zamparelli says he was taken by the camera’s focus on the serene coastline, fol-lowed quickly by a view of unsightly developed land off the coast.
Matt’s refusal to sign the papers feels like a victory to the audience in the theater. Whether or not the fictional family ever could come to terms with his action, they certain-ly would always view it as a pivotal point in their shared history. nFB
“Small and medium-sized
companies [traditionally] were
bigger risk-takers in many ways.
In today’s environment, they’re
not taking risks to the same
extent—like anticipatory hiring
—and it’s stifling growth.”— Manpower Group CEO
Jeff Joerres (Financial Times, Sept. 15, 2011).
quoTable
The article “The rapid rise of a glob-al hotel group” (FB, Winter 2012) incorrectly stated where members of the Ueberroth family are based. John and Gail Ueberroth split their time between Paris and Newport
Beach, Calif.; their daughter, Lindsey, is based in Chicago; and their son, Casey, operates f rom Newport Beach.
The article “E. Ritter & Co.’s gover-nance journey” (FB, Winter 2012) contained several errors. Ronda
Ritter Ray is the second president of the Ritter family council, and Ritter Arnold is a fourth-generation fam-ily member. Also, two non-family employees sought to succeed Dan Hatzenbuehler as CEO; there were no candidates for the job within the family.
CorreCTIonS
First job at this company: I did a little of everything. I packed caps, swept the floor, worked in shipping and receiving, did some artwork and worked on mechanical projects. I even worked on the line making caps. It takes 22 steps to make a fit-ted cap—I’ve done all 22.
Most memorable thing I learned from my father: Your word is your bond. If you tell someone you’ll do something, you’d better make sure you do it.
Most memorable thing I learned from my mother: The art of perfec-tionism. Do it right or don’t do it at all.
Best thing about this job: I get to see our products on the greatest ath-letes and entertainers in the world.
Worst th ing about th i s job : Making tough decisions about staff. Sometimes the best people don’t work out.
one of our greatest successes: our long relationship with Major League Baseball. We’ve been the supplier of headwear to the teams since the 1930s. If you have a prod-uct that hasn’t been tried before and you believe in it, I believe any of the leagues—baseball, or the nfL or any of the leagues—will give you an opportunity. But you need a good product and a good business plan,
and you must be able to show them how you can generate revenue for them.
Best advice I ever got: Surround yourself with great people and learn how to listen.
Quote from our company’s mission statement: We believe in self-expres-sion. We do mass customization for our customers, which gives our end-consumers the ability to buy some-thing that reflects their affinity to a team or their personal style, for example.
on my office desk: My 2009 Yankees world championship ring. My father always got a ring from George Steinbrenner when they won, and the franchise carried on the tradition with me.
one of my greatest accomplish-ments: Taking a small family man-ufacturing company and turning it into a global brand. To go global, be prepared to spend a lot of time in the markets you want to develop.
Advice I’d give someone wishing to enter this business: It might look fun, but you better be pre-pared for long hours. We go up against the likes of brands like nike, Reebok and others.
on a day off I like to…. spend time with family and golf or ski.
Philanthropic causes our family supports: Cancer research. My father died of cancer, so it’s a cause that’s close to us.
Book(s) I think every fam-ily business leader should read: Why Me? Wealth: Creating, Receiving, and Passing It On, by Denise Kenyon-Rouvinez, Thierry Lombard, Matthieu Ricard
and John Ward.
I realized I had emerged from my parents’ shadow when… my father came to my office door and asked if I had a few minutes to talk. for years, on Saturdays, I’d try to get the cour-age to go to his office and ask him about the business.
Future succession plans: My two older children have chosen different paths. We have executives and pro-fessional managers in place and are preparing to move forward without another family member. But I’m only 51; I have a long way to go.
Words I live by: Don’t ever assume. Get the facts and make educated decisions.
— As told to Patricia Olsen
AT THE HELM
Chris KochCEO, New Era Cap Company Inc., Buffalo, N.Y.
14 Family Business • March/April 2012
Generation of family owner-ship: fourth.
Annual revenues: More than $500 million in 2011.
number of employees: 2,000 globally.
Years with the company: 35.
Transitions East 2012, from Family Business Magazine and Stetson University, offers powerful sessions focused on delivering ideas you can put to work now to sustain and build your multi-generational family company. This conference is for family companies and enterprises of all sizes and ages.
Transitions East 2012 focuses on three key touchpoints that can make a significant difference in the long-term sustainability of your family business:
• Family Employment Policies: Landmarks and Landmines• Ownership Strategies for Multi-Generational Family Enterprises:
Who Can and Should Own What?• The Family Enterprise and the Extended Family: Fostering Cooperation
and Resolving Conflict Among Siblings, Cousins and Married-Ins
FEaTuring: • Speakers from family companies: As always, our focus is on speakers from
family enterprises, sharing real-life problems and solutions.• Collaborative workshops: Opportunities to work through family issues
via case studies.• intimate, open environment: Limited attendance, and a private environment
in which to share challenges and opportunities with other families.• ask the Experts: A special discussion session with key family business advisers.• Special content and sessions for next-generation
and married-in family members• networking with families like yours: Hosted networking, an opening
reception, meals, breaks and workshops are all designed to allow you to meet many family enterprise attendees.
• Family focus: Brought to you by family-owned Family Business Magazine, held at a family-owned hotel, with a group dinner at a family-owned restaurant.
SuStaining and Building the Multi-generational FaMily CoMpany
April 25-27 • grand Bohemian hotel • orlando, FloridaRegister Online: www.familybusinessmagazine.com/transitions
the conference created for family companies by family companies
platinuM SponSor gold SponSorS
Bronze SponSorSSilver SponSorS
FeAtuRed FAmily SpeAkeRS(For complete speaker biographies, visit www.familybusinessmagazine.com/transitions)
Harold l. yoh iii Ben Grossman david Grossman Felix Grucci Jr. Jamie Richardson Day&Zimmermann Grossman Grossman FireworksbyGrucci WhiteCastle MarketingGroup MarketingGroup
Chris Herschend Jack mitchell eric Allyn paul C. darley preston Root HerschendFamily MitchellsFamily WelchAllyn W.S.Darley&Co. RootFamily Entertainment ofStores BoardofDirectors
tim Schultz Jill lundberg Charlotte lamp, ph.d. Julie Appling Sylvia Shepard Lundberg Lundberg PortBlakely EddyFamilyCouncil SmithFamilyCouncil FamilyFarms FamilyCouncil Companies MenashaCorporation
Steve landaal Joan mcVaugh terry kohler torri Hawley Henry k. Brown LandaalPackaging LaboratoryTestingInc. WindwayCapitalCorp. StetsonU.student MillerElectric Systems Company
Richard C. kessler mark kessler laura kessler Van til TheKesslerCollection TheKesslerCollection TheKesslerCollection
plus these industry experts and session leaders:timothy O’Hara—Partner,PwC
mark t. Nash —Partner,PersonalFinancialServices,PwC
Bryant W. Seaman iii—ManagingDirectorandHeadofPrivateAssetAdvisoryServices,BessemerTrust
Arne Boudewyn —SeniorVicePresidentandDirectorofFamilyDynamics,WellsFargoFamilyWealth
Justin m. Zamparelli —Partner,WithersBergmanLLP
dirk Jungé —ChairmanandCEO,Pitcairn
Ann m. dugan —Founder,InstituteforEntrepreneurialExcellence,JosephM.KatzGraduateSchoolofBusiness,UniversityofPittsburgh
Nancy drozdow —Principal,CFAR
F. douglas Raymond iii —Partner,DrinkerBiddle&ReathLLP
thomas J. pauloski —NationalManagingDirector,WealthManagementGroup,BensteinGlobalWealthManagement
Barbara Spector—Editor-in-Chief&AssociatePublisher,Family BusinessMagazine
Caro u. Rock—Publisher,Family BusinessMagazine
Greg mcCann—Professor,StetsonUniversity
peter Begalla—ProgramManager,StetsonUniversityFamilyEnterpriseCenter
your hosts:
CONFeReNCe AGeNdA(Subject to change as speakers are added.)
Wednesday, April 25, 20123-6 p.m.: Conference Registration
6-6:45 p.m.:Welcome
Speakers:WendyLibby,StetsonUniversity;CaroRock, Family BusinessMagazine;PeterBegalla,StetsonUniversity
Opening discussion
“Generational Transition and Sibling Cooperation in the Kessler Family”
Moderator: TimO’Hara,PwC
Speakers: RichardC.Kessler,LauraKesslerVanTilandMarkKessler,TheKesslerCollection(owneroftheGrandBohemianHotel)
Hosted Networking
6:45-9 p.m.:Reception
thursday, April 26, 20127-7:45 a.m.:Group Breakfast
7:45-8 a.m.:Welcome
8-8:45 a.m.:keynote Address
“Transitions, Ownership and Governance: The Day & Zimmermann Approach”
Speaker: HaroldL.YohIII,Day&Zimmermann
8:45-10:15 a.m.:pANel: Family employment policies: landmarks and landmines
How are family members hired? How are they fired? How much should they be paid? Who manages them? And do you compensate non-employee family members who contribute significantly to the family?
Moderator: NancyDrozdow,CFAR
Speakers: JackMitchell,MitchellsFamilyofStores;JoanMcVaugh,LaboratoryTestingInc.;SteveLandaal,LandaalPackagingSystems
10:15-10:45 a.m.:Networking Break
10:45-11:30 a.m.: WORkSHOp: Family employment policies
Workshop leader: DennisJaffe,SaybrookUniversity
11:30 a.m.-1 p.m.:pANel: Ownership Strategies for multi-Generational Family enterprises: Who Can and Should Own What?
How, exactly, do you define “family”? Who can own stock? How is stock acquired? Who can inherit it? How does marriage, divorce or
adoption fit in? How do you prune the family (company) tree?
Moderator: JustinZamparelli,WithersBergmanLLP
Speakers: JulieAppling,EddyFamilyCouncil;PrestonRoot,RootFamilyBoardofDirectors;ChrisHerschend,HerschendFamilyEntertainment
1-2 p.m.:Group lunch
2-2:45 p.m.: WORkSHOp: Ownership policies for the Family enterprise
Workshop leader: F.DouglasRaymondIII,DrinkerBiddle&ReathLLP
2:45-3:15 p.m.:Networking Break
3:15-4:15 p.m.:pANel: Ask the experts
Top family business advisers discuss critical legal and financial issues related to shareholder agreements, sale/liquidity policies, family offices, structures for dividends and reinvestment and more. Panelists will answer audience questions.
Moderator: ScottChase,Family BusinessMagazine
Speakers: BryantW.SeamanIII,BessemerTrust;ArneBoudewyn,WellsFargoFamilyWealth;MarkT.Nash,PwC;ThomasJ.Pauloski,BernsteinGlobalWealthManagement
4:15-5 p.m.:keynote Address
“Alignment of Interests: Creating Harmony and Engagement in the Family Company”
Speakers: BenandDavidGrossman,GrossmanMarketingGroup
5-5:15 p.m.:Session Wrap-up
Speaker: BarbaraSpector,Family BusinessMagazine
5:15-6:15 p.m.: Adviser & Family Roundtable discussions/Networking
Attendees meet in small groups with select advisers to discuss family issues. Special roundtables for Next-Generation and Married-In attendees.
7:15-9:30 p.m.:Group dinner
AtCeviche,afamily-ownedrestaurant.
Speaker:JoeOrsino,Ceviche
Friday, April 27, 2012
7-8 a.m.:Breakfast and Networking
8-9:30 a.m.:pANel: the Family enterprise and the extended Family: Fostering Cooperation and Resolving
Conflict Among Siblings, Cousins and married-ins
Focused on helping siblings, cousins, family branches and married-ins to work together. Includes discussion of family codes of conduct, systems for breaking family deadlocks, conflict resolution and communications among the various branches of a multi-generational family enterprise.
Moderator: DirkJungé,Pitcairn
Speakers:PaulC.Darley,W.S.Darley&Co;JillLundberg,LundbergFamilyCouncil;JamieRichardson,WhiteCastle;EricAllyn,WelchAllyn
9:30-10:15 a.m.WORkSHOp: dealing with dissent
Workshop leader:AnnM.Dugan,InstituteforEntrepreneurialExcellence,UniversityofPittsburgh
10:15-10:45 a.m.: Networking Break
10:45-11:45 a.m.:pANel: Successful Strategies for engaging married-ins
Best practices for engaging married-ins and welcoming them into the family and the family company.
Moderator: SylviaShepard,SmithFamilyCouncil,MenashaCorporation
Speakers: TimSchultz,LundbergFamilyFarms;CharlotteLamp,Ph.D.,PortBlakelyCompanies;KarenBichin,ABCRecycling
10:45-11:45 a.m.: Next-Gen Breakout Session
Next-generation members are invited to a special guided workshop.
Workshop leader: PeterBegalla,StetsonUniversity
11:45 a.m.-1 p.m.: pANel: Next-Generation engagement
How can the next generation work to foster family cooperation with the older generation and their siblings/cousins? This session focuses on strategies for engagement with the family enterprise.
Moderator:GregMcCann,StetsonUniversity
Speakers: TerryKohler,WindwayCapitalCorp.;TorriHawley,student,StetsonUniversity;HenryK.Brown,MillerElectricCompany
1-2:30 p.m.:Closing keynote and lunch
Speaker: FelixGrucciJr.,FireworksbyGrucci
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Registration price includes all conference materials, as well as breakfast, lunch and dinner on April 26; breakfast and lunch on April 27; and a welcome reception and buffet dinner on April 25, as well as refreshment breaks.
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Cancellation policy: all conference cancellations must be made in writing and sent to Justine Wood, Transitions Program manager, 13631 maidstone lane, Potomac, md 20854; faxed to (301) 987-0476 or emailed to [email protected]. registrants who cancel more than four weeks prior to the program date are entitled to a full refund of the registration fee; if canceled within four weeks, but more than one week prior to the conference date, 50% of the conference registration fee will be refunded; within one week of the conference date and no shows, no refund is possible. Family Business magazine and stetson Family enterprise Center may cancel the program if attendance does not meet required levels; in case of cancellation or reschedul-ing, full refunds of registration fees will be made. Travel fares and hotel deposits cannot be reimbursed.
Please fax your registration form to Justine Wood at: (301) 987-0476, or mail to:
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20 Family Business • March/April 2012
The first generation builds the business, the second expands it and the third destroys it.” It is a universally acknowledged phenom-enon that few family-owned businesses sur-vive beyond the third generation. While most
business owners are highly successful in building and managing their companies, they are often less successful when it comes to transitioning their enterprises from one generation to the next.
In the typical evolution of a family business, it moves from the controlling owner stage to the sibling partnership stage and then to the cousin consortium stage. Professionalizing the busi-ness is generally considered to be a necessary step in its evolution, as expansion and survival would naturally require companies to bench-mark industry best practices and tap into the external labor market for access to a higher quantity and quality of human resources. The best practices and experts in the corresponding fields can contribute sig-nificantly to a family firm’s expansion and success poten-tial. They also in turn inject more professionalism into the firm, enabling the family company to achieve rapid financial growth within a short time span.
While conventional wisdom dictates that higher levels of professionalism within family businesses will trans-late into better firm performance, there is, however, a
limit to the amount of pro-fessionalism that a family firm should adopt.
Let us examine Yeo’s, a well-known food and bever-age brand in Asia that was
started as a family business in 1901. Today, none of the owners belong to the Yeo family that gives the brand its name. By the 1990s, squabbles over investment and busi-ness management decisions had caused tensions among the third generation of the Yeo family and led to an acri-monious dissolution of the business.
Yeo’s history illustrates that the initial success attained through professionalizing family businesses is often off-set by problems, squabbles or even family feuds. The rea-son why many family companies fail to survive beyond the third generation actually lies in the process of profes-sionalizing itself. How so?
a. Professionalism cannot sufficiently address the complexity associated with family ties. The involvement of the family in family businesses creates complexity and may undermine the business structure and theoretical methodologies commonly employed in non-family enterprises. For instance, professionalism requires all organizational processes to be intrinsically involved in delivering shareholder value. However, in the
case of a family business, organizational processes must factor in not only the business, but also the family dimension, which encompasses both human and emotional aspects of the family. Enforcing pro-fessionalism could mean ignoring the family dimen-sion, thus resulting in fam-
ily conflicts that threaten survival of the business.b. Professionalism causes family businesses to
lose their inherent competitive edge over non-family businesses. It has been widely established that family businesses have a competitive advantage over non-family businesses. For instance, family firms have a unique working environment that fosters a family-orient-ed workplace and inspires greater employee care and loy-alty. In fact, family businesses have reportedly seen better performance than non-family businesses, with an annu-al return on assets that is 6.65% higher than the return on assets of non-family firms (David Thayne Leibell, “Succession planning,” Trusts & Estates, March 2011).
However, as the level of professionalism rises, the tra-ditional business structure and family relationships in the family business are gradually eroded. These conse-quences, coupled with the inherent complexity of the family business, may cause the organization to lose its competitive edge and eventually fail to survive.
Family capital as the cornerstone of successDespite well-known headlines that captured the public’s attention, such as “Rum on the rocks: Bacardi’s family secrets are spilling into a court fight” and “Hot dog joint made famous on M*A*S*H [Tony Packo’s] threatened
Advisers ForuM
The initial success attained through professionalizing family firms is often offset by problems, squabbles or even feuds.
Andreas Raharso (andreas.raharso@ haygroup.com) is the director of Hay Group’s Global r&d Center for strategy execution, based in singapore.
“
Professionalism can entail risks in family firmsBy AndreAs rAhArso
www.familybusinessmagazine.com 21
by family feud,” many family businesses have success-fully bypassed the cold, harsh track to transcend beyond their third generation. In fact, the world’s oldest hotel, Hoshi Ryokan in Japan, is a family business that has successfully run for 1,300 years and transcended across 46 generations. In the West, we have Lyman Orchards in Conneticut (managed by its eighth generation), Heineken in the Netherlands (managed by its fourth generation), etc.
Indeed, successful family businesses today have engaged in some form of professionalization before they arrive at their current market standing and yet have managed to transcend beyond their third generation. Hence the question: Why them, and not the rest?
What most successful family com-panies have done to achieve their current performance goes beyond professionalizing their businesses. While it is important to profession-alize to attain strong financial capi-tal, it is even more crucial to secure a high level of family capital. This is achieved through building a strong, gratifying and supportive relation-ship among family members.
Family capital enables the firm to move forward as a unified body with-out strife and dissension, thereby ensuring its sustainability. Healthy relationships among family members aid in bonding the family together in tumultuous times and are a good form of defense in warding off hos-tile takeovers.
A strategy that overemphasizes professionalism and neglects the family will lead to a deteriorating family business. Even though the business might thrive initially, the family, which forms the basis of the enterprise, will start to fall apart, ultimately causing the business to fail. The study “Correlates of Success in Family Business Transitions,” by Michael H. Morris and associ-ates (Journal of Business Venturing, September 1997) found that 60% of succession plans failed because of problems in the relationships among family members.
Kikkoman Corporation, a family company that was founded in 1630 and is still thriving today, demon-strates the importance of focusing on family as well as financials. A creed
the company adopted in 1926 formalized numerous habits and traditions typically found in families, includ-ing “make strong morals your foundation, and focus on money last,” “strive for harmony in your family” and “have a family reunion twice a year. At these reunions, don’t judge your family members based on their income but rather on their character.” These core values were designed to support internal family harmony, and have worked well in sustaining the business.
What defines family capital?Family capital is a unique form of social capital that is
Continued on page 26
22 Family Business • March/April 2012
in family-owned businesses, what constitutes a risk management plan? Astute executive teams plan a response to disasters that might impede business continuity. Yet interestingly, most risk management plans fail to incorporate one issue that can have dire
consequences for any family-owned business: the estate plans of the family owners themselves.
Issues involving succession, tax planning and owner-ship are among the many challenges family businesses face if the corporate plan does not align with the estate plans of the family owners. Failing to proactively manage these issues can create a domino effect that may perma-nently cripple a company.
The advantages of proactive risk management became evident to me when I advised a privately held telecom-munications company. The company was considering a unique opportunity to quickly expand its regional foot-print.
My clients were seeking ways to recapitalize their business so they could bid for assets being divested by a national wireless carrier following the government’s antitrust ruling requiring that company to sell assets in the region.
As they weighed financing options, it became clear that the executive team would need to reorganize the busi-ness to accommodate potential investors, and their own-
ership desires. I sat down with the attorney who had been doing the family’s estate planning for many
years and asked whether any buy-sell or stockholders’ agreements existed. From the back room of his office he pulled out a photocopy of a 25-year-old stock buy-sell agreement that dated back to when the company was a very small, family-owned, rural telecom business.
The existence of this document was news to everybody on the financing team—and to half of the family mem-bers still involved in the business.
When I read the buy-sell agreement, I realized that this document could potentially derail the company’s efforts to recapitalize and expand. Unbeknownst to everyone in the room, the agreement essentially gave all the signato-ries a perpetual right to buy corporate shares if the stock was ever offered for sale or otherwise transferred to any-one other than a family member. To complicate matters, the agreement provided for a new price calculation if the existing shareholders exercised their option to buy based on the book value of the stock, disregarding any third-party offer or fair market value appraisals.
In other words, if stock were offered to these non-fam-ily private equity investors, under the terms of the agree-ment family members could buy those shares at book value and without the investors’ consent. Bottom line: This meant the company couldn’t bring in a private equi-ty partner to fund the acquisition of new assets.
Why did this clause exist? First, it was an attempt to artificially depress the value of the stock. The reduced stock price applied to anyone who tried to transfer shares outside the family and would therefore penalize family members who tried to sell shares that had been given to them by their grandfather. The reduced value of the stock was also an effort to lower taxes—a failed attempt, in fact, since the valuation in the buy-sell agreement was not binding on the IRS. The agreement was also designed to keep ownership in the family, since transfers outside the family were effectively prohibited by the way the agree-ment was structured.
In most family businesses, the discovery of such an agreement could spark a crisis that at best would cause a severe delay in business planning, and at worst per-manently throw the business plan off course. In this telecommunications company, however, we had already gone through the exercise of creating a risk management program that analyzed a series of “what-if” scenarios. One of those scenarios involved the steps we might take
if we needed to extinguish the rights of family minority shareholders who were hostile to family members man-aging the business. While the scenar-io we had worked through centered on the death of a key shareholder, our potential solutions were appli-cable to this situation.
Because we had the risk manage-ment plan in place, we were able to reorganize the company and bring
risk assessment should include estate plansBy MAtthew F. erskine
Advisers ForuM
Matthew F. Erskine is principal of The erskine Company LLC, a strategic advisory firm located in Worcester, Mass., that counsels clients on the management of unique family assets, including multimillion-dollar family businesses, numismatics collections, fine art and Americana collections, commercial and residential real estate holdings, and family compounds (www.erskineco.com).
www.familybusinessmagazine.com 23
on private equity investors within six weeks, allowing us to meet the deadline for bidding on the divested proper-ties. Without the plan, everything would have collapsed.
Scenario planningWhen developing a risk management program for a family-owned business, it’s important to create two out-lines. The first takes a more linear, traditional approach to business continuity planning; it plots out options for events that can be forecast, or rea-sonably predicted. For example, you can project economic growth at dif-ferent percentages and analyze the impact on the company, and the risk of taking on certain operating expen-ditures in each growth scenario.
The second outline, however, is the one that’s unique to each family business because it involves issues that are not linear in nature, and are often rooted in questions of ownership and control. To plot out this path, you need to brainstorm trends, and scenarios within each trend. Instead of one linear path, you will have branches of potential paths that link back to the core.
Often these trends link back to the family’s estate plan and what will happen when that plan is executed. Will the family wealth be broken up and disbursed, or main-tained? Will the family keep the business or sell it? Has
the estate plan effectively accounted for potential tax consequences, and how will those tax payments affect the business? Does the plan set out steps for succession that are in keeping with the business plan?
In the case of the telecommunications company, the scenarios we had initially developed were based on the estate plan of the grandfather, a second-generation owner of the business. The company managers had discovered that a clause in the grandfather’s estate plan that froze
the value of his stock for his own estate tax planning purposes had the undesirable effect of significant-ly increasing the income tax, and required distributions of cash from the company to the grandfather. Further analysis of the estate plan uncovered additional conflicts for the business that would have made it difficult to obtain the capital needed
for future growth initiatives.So we stepped back and looked at the trends affecting
the family and the business. What’s happening in the telecommunications industry? How is Grandpa’s health? Who is going to be the next generation of corporate man-agers? Where is the money coming from? Do we want to keep the minority stockholders and, if not, how do we buy them out fairly? What if the IRS blows up a creative
Buy-sell agreements and other clauses must align with the corporate plan. A proactive review will uncover discrepancies.
Continued on page 26
24 Family Business • March/April 2012
You know it and, even worse, your staff knew it first. One of your family members is just not making the grade in your company. Other relatives had touted your brother-in-law’s daughter as the ideal candidate for an open-
ing in the firm. And she had always seemed like a bright and capable young woman.
Relatives can work out well in key positions when they’re placed in roles that suit their skills. But when a family member is not cutting it, senior management may have to make a sensitive decision.
Where did this go wrong?The hiring process is a key factor in whether a relative will thrive in a family company. As with any candidate, three things must be considered: qualifications, experi-ence and fit for the role.
Unfortunately, when assessing relatives, family busi-ness leaders often ignore hiring guidelines; they may feel compelled to give a family member special consideration. Many have an unspoken two-org-chart structure: one chart for family, another for the rest of the workforce. For family members, desirable roles are assumed, promo-tions expected and job security assured. That rarely sits well with the rest of the staff, whose ascension is usually merit-based.
To avoid having to dismiss an underperforming relative, establish a hiring process of equals, no exceptions. A one-size-fits-all policy elimi-nates assumptions that the right last name guarantees a plum job. That means enforcing hiring systems that everyone must adhere to. If there’s a spot to fill,
résumés should be submitted, credentials evaluated and requirements fulfilled. And should a family member then be hired on the basis of merit, have a plan in place to measure success. Offer training and mentoring, making it clear that there are consequences for non-compliance.
Determining the right placement The neophyte niece in the marketing director’s spot is doomed from the start. More effective—and fair—is adher-ence to a requirement that family members have experi-ence and education that are relevant to the position.
A technique that we have found works well is to assign new family hires multiple “quick hit” projects with mea-surable metrics before considering them for high-profile positions. These smaller assignments allow them to learn and gain confidence, while establishing their credibility. After some time has passed, you may ask them to spear-head the rollout of a new policy or procedure to assess their interpersonal skills.
Finally, consider projects that make relatives a part of the crowd so that they can build their network and gain support inside the company.
Can this hire be redeemed? When a relative underperforms, often the issue is not the role itself; it’s that the family member was brought in at a level above his or her capabilities. A good way to save the situation is to restructure the position and create a devel-opment plan to build skills and foster growth.
So that the reassignment is not perceived as a demo-tion, always focus on the business need, and not the person. Explain to the family member, “The business is growing rapidly, so I’m appointing a senior director for this department.” Make certain, of course, that whoever is named to oversee your relative is a capable manager and has real authority.
Sometimes the family member is a better fit for a dif-ferent role. If so, begin a transition process that includes coaching and mentoring, allowing the person to move into a new opportunity with support. And, as you would with any other employee, revisit the move in 90 days to evaluate progress.
If the problem is the result of a bad attitude, and you believe the relative is incapable of change, don’t prolong the pain. Let the person go as soon as possible. There’s never a “best time” to pull the plug, but there are ways to minimize the agony afterward.
Handling a difficult task Let’s be honest. There is no comfortable way to fire a relative. There are, however, steps you can take to make it easier on the person you’re letting go, and to ensure you’re handling the situation properly.
• Gain early buy-in from other family members. As early as possible, begin discussing your impressions with other family members. Give substantive reasons why
Advisers ForuM
Tish Squillaro is manag-ing partner and Ceo of Candor Consulting (www.candor-consulting.com).
the unkind cut: how to dismiss a family memberBy tish squillAro
www.familybusinessmagazine.com 25
you feel that dismissal is the only option. You may learn that others share your point of view. Your goal is to gain buy-in and support for your decision, even if you’re alone in your impressions. Expect that some will not share your opinion, particularly if different branches of the family are involved. Explain that company must operate like a business, and that everyone who works there must add value and contribute. Clarify why what’s in the company’s best interests serves everyone.
You might also establish a “Chief Relationship Officer,” a family member who is responsible for providing business-focused information to relatives. Establish a policy of frequent com-munication with family members.
• Communicate clearly with the person in question. As soon as you sense that you may have to let a family member go, begin a dialogue. Outline the poor performance in detail. Often family members’ behavior improves when they realize that hav-ing relatives in high places does not mean lifelong job security. If the situation is beyond repair, reiterate why dismissal is needed.
It may be best to give the person the opportunity to resign. If so, suggest that he be the one to inform the family, and present the resignation as his decision. Later, you could tell your staff that “Jim has elected to leave the company to purse other opportunities.”
• Include the person’s supervisor. From the begin-
ning and throughout the process, include the family member’s immediate supervisor, who likely will offer you valuable support and added ammunition. But don’t be surprised if the failing relative plays “the family card.” We’ve found it beneficial to have a senior family member and the person’s immediate supervisor join forces to pre-
sent the business case for dismissal. In that instance, make sure the manager is a credible, respected employ-ee, whose observations will be valued. Obviously, managers must have the power to make decisions, and other family members should respect that.
• Stand your ground. It takes a cool head to make the right decision when reversing a family hire. And it takes a thick skin to back up your decision in the face of requests that you recon-sider. The key is to stick to your message. Reiterate the points you established in your early communications with the other family members and the person’s superior. Don’t waiver or equivocate. Hold firm to what you know is right for the business.
Even if a family fight ensues, emphasize that this was a business decision, and that you are responsible to people outside the family as well. No one, family member or not, benefits from prolonging a bad situation. Share concrete
Explain that company must operate like a business, and that everyone who works there must add value and contribute.
26 Family Business • March/April 2012
estate plan? Where does Grandpa’s life insurance go? For each of these questions we plotted out a half-dozen
different scenarios, possible actions and potential impact. Some were good, some bad. Some were based on the out-come we wanted; others were based on what we feared.
Our outline allowed us to prepare for a potentially dev-astating circumstance that would have been difficult to predict: the existence of a buy-sell agreement that would have blocked our ability to recapitalize the company.
Proactive risk management is a process that at the out-set may feel like chasing shadows. During this process
family members need to envision many different events and scenarios. Most—and possibly none—of these will ever occur. Thinking about these scenarios can easily take you past your comfort zone. But if a crisis hits, it quickly becomes evident that investing the time in con-ducting these exercises returns major dividends to family business owners and managers.
Once a crisis is upon you, it is difficult to tap the cre-ative resources of the business owners and managers because they are so focused on attending to the added burdens imposed by the crisis. With scenario plans in place, family members can move forward because they have already thought through potential actions and their consequences. A crisis is going to be hard no matter what, but with some thoughtful risk management planning, the family will be well positioned to manage it. nFB
Advisers ForuM
examples of what happened. “Bill mismanaged a few situ-ations on the same account, and as a result, we lost a cli-ent. We can’t afford to let that happen again.” Let your family know you tried repeatedly, but there just was not a good fit.
Family life after a firing Family gatherings can be strained after a relative leaves the family enterprise. But as much as possible, it’s best to put a wall between “church and state.” Leave this situation at the office, and encourage everyone else to do the same. Chances are that your relatives are feeling uncomfortable,
too. It’s best to normalize family relations as soon as pos-sible by demonstrating that you would like to maintain all your relationships as they were. Continue going to family functions, and model with your behavior that life outside of the office should proceed as it always has.
Don’t expect healing or understanding on the first go-round. Try at least three times to connect with a family member who may be angered by the firing. Just remem-ber, it’s more about ego and emotion at this point. Expect to listen and console at first, before you start explaining. Show that you are sincere in your concern and convictions, and make it clear you believe you did the right thing. nFB
an asset to family enterprises. It comes in three critical forms.
1. The business connections and knowledge networks established by previous generations of family managers.
Implication: The next generation of family members can tap into these connections and networks, thereby fast-forwarding business success and ensuring business continuity. The new generations avoid making major mistakes by learning from their forefathers’ experiences.
2. Family rights and obligations. “Rights” refers to the power to make business decisions. “Obligations” refers to the responsibility of ensuring both the financial and the emotional well-being of other family members.
Implication: Meeting one’s family obligations maintains the fabric of familial relations and allows objective busi-ness decisions to be made with minimal opposition or ill feelings from family members that can threaten continu-ity of the business.
3. Family values and family governance (the set of
processes and policies affecting how a family business is managed).
Implication: Teaching family values and professional ethics to the next generation equips future leaders with a sense of responsibility and the ability to differentiate right from wrong. The next generation of leaders will then act in a manner consistent with the preferred work-place behaviors and will integrate family values with other desired management practices.
Attaining deep pockets and warm heartsIt is important to maintain high levels of family capital to encourage further accumulation of financial capital. The current perception that professionalism is the key to long-term success in family businesses is misguided. Without accounting for family capital, professionalizing a family business will be equivalent to playing Russian roulette.
As the preceding case examples have demonstrated, family business success of depends on achieving balance between strong financials (deep pockets) and family capi-tal (warm hearts). By monitoring the level of family capi-tal on top of financial performance, family businesses can keep the hearts of their family members warm and the pockets deep, thereby ensuring long-term continuity. nFB
Professionalism can entail risks in family firmsContinued from page 21
Risk assessment should include estate plansContinued from page 23
28 Family Business • March/April 2012
As families and their businesses grow over multiple generations, the number of indi-viduals involved in a family business naturally increases, family members’ expec-tations regarding the business may diverge
and related conflicts may arise. An important way to manage and deal with these types of contingencies is by creating a document commonly called a Family Business Constitution.
Although constitutions are often written about and discussed by family business advisers, few family busi-ness owners have taken advantage of this useful tool. However, those families who have created and imple-mented a constitution have found the document to be instrumental in preserving the legacy of the business and helping to sustain the enterprise for future generations.
Professor John Ward, co-director of the Center for Family Enterprises at the Kellogg School of Management and author of several leading books on continuity in fam-ily businesses, describes a family business constitution as “a comprehensive articulation of philosophy, princi-ples and policies for the future that balances and syn-thesizes the welfare of family, owners and the business, [and] is among the most important steps a business-own-ing family can take to secure and strengthen its business and, most preciously, its family” (Daniela Montemerlo and John L. Ward, The Family Constitution: Agreements
to Secure and Perpetuate Your Family and Your Business, 2005). A constitution also engenders pride in the family and its business by connecting past, present and future generations with each other.
Purpose and formDepending on the particular family, its business, its stage of development and the family members’ desires, a con-stitution can take many forms. It can be either a short document or a very long and complex one. Traditionally, a constitution serves the following main purposes:
1. It documents the mission, values, philosophy and principles that govern the family and its business, includ-ing the struggles of past generations.
2. It outlines the business’s strategy and its long- and short-term goals.
3. It defines dispute resolution processes to deal with potential conflicts affecting the business and the family.
4. It defines the roles, composition and powers of key governing and other constituencies of the business, including key management, directors, shareholders and family members.
A constitution is typically a formal, written document (or set of documents) that is reviewed, acknowledged and signed by all family members involved in the business. However, it is generally not a legally binding agreement. Rather, it is a statement of principles and guidelines for the business and the family members’ relationship with the business. In effect, a constitution creates a moral obligation among the family as relates to the business. Being morally bound in this way signifies the commit-ment of each family member to preserve the family’s legacy and grow the family business for the benefit of future generations.
Despite not being legally binding itself, the constitu-tion could include or refer to other legally binding docu-ments. For example, the constitution may suggest that each family member be a party to (if applicable) premar-ital agreements, employment contracts, shareholders’ and buy-sell agreements and estate planning documents. The constitution is not intended to alter the provisions of existing governing documents that provide for the legal structure and governance of the company (e.g., certifi-cate or articles of incorporation and bylaws)—and this should be noted in the text of the constitution.
The process of creating a constitution is a helpful exer-cise for a family business. It forces the involved fam-ily members to discuss and define their shared vision and come to a common understanding as to how to document this vision, as well as any other matters addressed in the constitu-tion. Again, depending on
A constitution is a tool to preserve a family’s legacyBy Frederick d. LipmAn And Linsey B. BozzeLLi
Advisers ForuM
Frederick D. Lipman and Linsey B. Bozzelli are partners in the Philadelphia office of Blank rome LLP. Lipman is also the author of The Family Business Guide (Palgrave Macmillan, 2010).
www.familybusinessmagazine.com 29
the family, its business and the management and gov-ernance structure, this process may be very simple or very complex. For this reason, most families choose to engage an objective outside adviser with experience in creating family business constitutions to lead and drive the process and, in some instances, to serve as a refer-ee. Regardless, in most instances, it takes a family several months to cre-ate a workable business constitution that all involved parties are willing to sign.
Specific provisionsThe specific provisions of a consti-tution are unique to the family and the business, but a constitution usu-ally begins with a statement or preamble relating to the mission, values, strategy and philosophy of the business as well as statements describing applicable history, life experiences and traditions. The remainder of the consti-tution then lays out rules and regulations to be used to govern how future generations should run the business and treat each other. These rules and regulations can cover any number of matters, including the following:
1. Composition and rules of conduct for the governing bodies of the business (which commonly include a tra-ditional board of directors as well as a separate advisory council made up of only family members).
2. Leadership and succession plans.3. The hiring, compensation, evaluation and termina-
tion of employees who are family members.4. The identification, development, training, appoint-
ment, evaluation and termination of management and members of governing bodies.
5. Policies relating to communications and disclosures between the business and family members.
6. Processes and procedures relating to the resolution of disputes among family members.
7. The rights and obligations of shareholders and provi-sions relating to stock ownership, including benefits avail-able to family shareholders not active in the business.
8. Guidelines relating to retirement, including retire-ment age and other matters.
9. Stock buy-sell processes and policies (including detail as to certain triggers, such as death, disability and termination of a shareholder).
10. Guidelines relating to the sale of the business or other exit strategies.
11. Policies relating to premarital agreements and estate-planning matters.
12. Policies regarding the provision of family financial support.
13. Policies regarding ownership and management by non-family members.
14. Procedures for amendment of the constitution.As is likely evident, any of these matters could be
addressed very simply or with much complexity. It is important that any constitution be considered a
working, flexible document capable of moving with the times. It should be regularly reviewed and updated to ensure that it remains relevant and to reflect any changes that time and circumstances necessitate. However,
the constitution should also make clear that any changes made to the document should be consistent with the intent and goals set out in the constitution.
A family business priorityA family constitution has been shown to be an important tool in pre-serving and honoring the legacy of a
family business for future generations while also defin-ing the strategies and goals of the business. It also serves to engender pride and engagement in the strengths, tal-ents and sacrifices involved in the formation and growth of the business. While a constitution may not prevent conflicts, it can establish a way to manage and resolve them, as well as a way to define the roles of individuals involved in the business. Each family business should treat the creation and implementation of a constitution as a high priority. nFB
A family business constitution creates a moral obligation among the family as relates to the business.
30 Family Business • March/April 2012
Estate tax “freeze” techniques offer great flex-ibility for the senior generation to protect and oversee business operations as the younger gen-eration eases into operational control. The owner of a successful family business can use
these techniques to transfer appreciating assets to the next generation or to key employees.
The goal is to maintain the value of the busi-ness while avoiding a double level of corporate taxation and minimizing gift and estate taxes. There are a variety of ways to structure an estate freeze, such as recapitalizing the busi-ness, setting up a grantor-retained annuity trust or making an installment sale to a trust or family member. Although the adoption of any transfer technique must depend on the specific circumstance of the transferring busi-ness, one variation of a recapitalization, often called a “drop and freeze” transaction, is designed for owners of closely held businesses, especially those organized as C corporations.
The C corporation conundrum Many small and family-owned businesses are organized as C corporations, but there are more tax and non-tax advantages to being a limited liability company (LLC) or partnership. Consequently, according to Internal
Revenue Service data, the number of businesses filing tax returns as C corporations has declined almost 16% over the past three decades, while the number of busi-nesses organized as partnerships or LLCs has increased more than 55% over the same period.
As the owners of older family-owned C corporations begin to contemplate various exit strategies, such as a sale or transition to the next generation of owners, the corporate form poses several problems:
• A sale of the corporation’s assets will create a double level of tax on capital gains—once at the corporate level and again when the assets are distributed to the shareholders in a liquidation of the corporation or as a dividend.
• Gifts of valuable corporate stock are subject to federal gift tax at rates as high as 35%.
• The owners of a rapidly appreciating asset, such as a successful small business in any form of entity, face
an ever-increasing estate tax liability as the value of their estate increases.
The drop and freeze solutionMany small businesses use the drop and freeze trans-action to solve these prob-lems. In this transaction, an existing C corporation contributes its operating assets to an LLC or part-
nership in return for a “frozen” partnership interest. As part of the transaction, two classes of equity are created in the partnership: (1) a preferred interest that is “frozen” in value and pays a fixed and certain rate of return, with little participation in equity growth; and (2) a common interest that enjoys all of the income, growth and appre-ciation above and beyond the preferred return.
For estate tax purposes, this technique can effective-ly “freeze” the current value of the preferred business interest within the owners’ estate. The common interest transfers the desired portion of the appreciation in the business to family members and employees at a reduced tax cost. The common interest is generally structured
without voting rights and with restrictions on its transferability. As a result, the common interests have valuation discounts for lack of control and market-ability, allowing them to be sold or transferred at a lower value.
Step-by-step While the procedures in
A tax-efficient way to transfer your businessBy Jeffrey A. MArkowitz And Christopher A. dAvis
AdvisErs ForuM
Jeffrey A. Markowitz (left) is a principal and Christopher A. Davis is an associate in the Tax and Wealth Management group at Miles & stockbridge P.C. They are based in the law firm’s Baltimore office (www.milesstockbridge.com).
A ‘drop and freeze’ transaction maintains the value of the business while avoiding a double level of taxation and minimizing gift and estate taxes.
www.familybusinessmagazine.com 31
any specific case must be tailored to the facts of the busi-ness and the needs of the transferor, here are the steps in implementing the technique:
1. Transfer assets to the LLC. The existing C corporation contributes all of its operating assets to a wholly owned LLC in exchange for 100% of the mem-bership interests in the LLC. Initially there are no tax consequences, because the LLC is wholly owned by the corporation. The LLC now owns all of the assets necessary to conduct the corporation’s business. Owners may consider a Subchapter S election for the corporation as part of this restructuring.
2. Assess the asset value. After the cor-poration’s assets are transferred to the LLC, the value of the assets is assessed to determine the potential gift tax consequences of a gift or sale of the LLC interests to family members. The LLC will be treated as a partnership for tax purposes when the interests are later trans-ferred to family members and employees.
3. Structure the preferred and common interests. After the assets are valued, the two LLC equity classes—the preferred, or “frozen,” interest and the common interest—are set up. The preferred interest must generally carry a preferred return that entitles the holder to a priority payment of the LLC’s cash flow. The preferred return would have priority over other distributions and would be paid to the corporation first. One disadvantage of the drop and freeze is that this preferred return is subject to the corporate double level of tax. As a result, many LLCs make the preferred return as low as possible without its being commercially unreasonable.
4. Begin buying down the corporation. The own-ers begin a gradual buy-down of the corporation’s equity through allocations of the LLC’s cash flow. This process attempts to “freeze” the taxable value of a business with-in a taxpayer’s estate so that future appreciation is trans-ferred to family members and employees free of tax. Using the asset value established when the corporation’s assets were transferred to the LLC, this “invested capital” amount would be paid down over time as the stockhold-ers of the corporation are gradually bought out.
5. Complete the asset transfer. During the buy-down, the corporation continues to receive a preferred return as described above. However, as payments in excess of the preferred return are made to the corpora-tion over time, its invested capital is bought down until reaching zero (or some other minimal level desired by the owners), and the corporation is bought out of the
LLC at a nominal amount. The result is an effective and tax-efficient transfer of wealth to younger generations or key employees.
Gift tax issuesAny succession planning strategy, including the drop and freeze, must comply with Chapter 14 of the Internal Revenue Code, which provides that the transaction must meet certain tests in order to be considered a bona fide
business transaction and not a taxable gift. That is especially so when family members receive interests in the LLC, regardless of whether the LLC common interests are purchased for fair market value or given for no consideration.
In general, the value of the common interests must be at least 10% of the total value of “frozen” or preferred interest. Thus, if the value of the preferred interests in the LLC is $10 million, then the common
interests must be valued (for gift tax purposes) at a min-imum of $1 million. Chapter 14 also requires that the common interest transfer:
• Is a bona fide business arrangement.• Does not transfer the assets for less than full and ade-
quate consideration.• Compares with similar arrangements that would not
involve family members. All three of these tests are presumed to be met if the
agreement is only between unrelated individuals, such as non-family key employees. If common interests are issued or sold to key employees at the same time as they are issued to family members, and if each interest transfer is commensurate with the recipient’s role in the LLC, there is less likely to be gift tax liability. However, if family members receive preferential treatment, it is more likely that at least a portion of the equity grants would be considered a gift.
Looking toward the futureThe partnership drop and freeze must be carefully struc-tured to comply with the relevant laws and regulations in order to avoid adverse gift tax consequences. It should be done in consultation with a competent legal adviser. However, if done correctly, the estate freeze transfer can be accomplished while minimizing gift tax on the asset appreciation. The drop and freeze can thus be an effective strategy to preserve hard-earned financial assets and ensure that the family business is well posi-tioned for the future. nFB
If common interests are issued or sold to key employees at the same time as they are issued to family members, and if each interest transfer is commensurate with the recipient’s role in the LLC, there is less likely to be gift tax liability.
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Wealth management incorporates a range of services,
including investment management, trust management,
estate planning, private banking, taxation advice, phil-
anthropic planning and family office services.
Advisers who understand the concerns of business families can
help you establish a plan that meets your objectives for the distri-
bution and preservation of your wealth while maintaining harmony
among your heirs. They know that emotions play a role and can offer
a knowledgeable outside perspective.
An experienced wealth management adviser can help guide you
through the thought processes that will enable you to arrive at a plan
that incorporates your family’s values — and can help educate your
next-generation members on proper stewardship.
When significant life-cycle events occur in your family — a birth,
marriage, divorce, disability or death, for example — your adviser
will recommend appropriate adjustments to the plan.
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Given today’s persistent market volatility and econom-ic uncertainty, many families are focused on how to do the best job of investing. Of course, setting the right strategy and choosing the best managers are critical to
family success. But that is not enough. More than eight decades of working with families has taught us that the investments you make in preparing your family to work together are of paramount importance to your family’s success across generations.
Families who sustain their wealth over long periods of time have a way of working together that evolves to accommodate
an expanding group of decision-makers and the increasing com-plexity of their wealth. These successful families invest time and human capital with the goal of:
• Developing leaders who have the capacity to share power• Defining a suitable decision-making process• Creating strategic plans that anticipate and embrace change• Communicating as openly as possible• Educating family members through an intentional process• Attracting active engagement from family members• Fostering collaboration among family advisors to get the
best advice
There is a well-known cycle that families experience as they transition from the generation of the wealth creators to the generations of wealth inheritors. Wealth is created by the first generation, which sets the groundwork for how the family oper-ates. This single leader has literally earned the right to define the operating principals for the family. He or she is comfortable making decisions, is future focused, has learned by doing over time, is very engaged, and has developed a personal style for working with advisors. The next generation will typically have to operate very differently in order for multiple decision-makers to effectively manage an enterprise (business, foundation, or liquid wealth) that they didn’t create. They not only need to share lead-ership, but also need to have the opportunity to gain the experi-ence and skills required to be good decision-makers.
Of course, this is easier said than done. The chart lays out seven family operating principles. Many wealth creators natu-rally function on the left side of the chart. In our experience, families flourish when the wealth creator, in concert with the next generation, evolves to operate mostly on the right side.
What investment do we recommend to help you achieve this goal? Find ways to use family resources so that the next gen-eration can take small but meaningful risks, learn financial skills, develop as decision-makers and leaders, and gain experience working across generations. The return on this investment might be difficult to quantify in the short run, but it has a high probabil-ity of paying off over time.
So why don’t more families make this investment? There are three main reasons:
The only investment opportunity that succeeds in every market environment
How we work together matters: 7 Family Operating PrinciplesIn our experience, families flourish when the wealth creator, in concert with the next generations, evolves to operate mostly on the right side.1. Leadership Single decision-maker Shared power
2. Decision-making Loosely defined Well-defined
3. Strategic planning Static Dynamic
4. Communication Need-to-know Open
5. Education Reactive Intentional
6. Engagement Limited Active
7. Advice Isolated Collaborative
Source: Pitcairn
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1. The wealth creator enjoys running things2. The next generation does not understand that their
engagement is critical to family success3. Shifting family operating principles takes patience
and hard workMaybe your family is ready to get started, or maybe you are
ready to take some steps on your own. If so, here are some ways to get going:
1. Begin a conversation. Use the “7 Family Operating Principles” chart to figure out where you think your family is today. Challenge yourself to think of examples that both confirm and refute your initial ratings. This may make it easier to engage in a conversa-tion and be open to hearing ratings that differ slightly or significantly from your own. Then, share this chart with other members of your family; ask what they think.
2. Read. There are many helpful books and articles that provide insight and advice to families about how to work together to sustain wealth across gen-erations. Here are four classics we turn to again and again:
• Family Wealth by Jay Hughes• The Compact Among Generations
by Jay Hughes• Wealth in Families by
Charles Collier• Family Legacy and Leadership by
Mark Daniell and Sara Hamilton
3. Engage a resource. Get in touch with us! Pitcairn has a deep bench of resourc-es, both internal and from our network of family advisors, who can help you and your family set and achieve some spe-cific goals.
Even in the best of times, the chal-lenge of sustaining family wealth across generations can be trying. A period of prolonged economic stress can multi-ply the challenges many times over. But there is a time-tested way to increase success: Investing in your family. We challenge you to start this new year by considering how your family operates today. Are you satisfied with the prepa-rations you and your family have made to enable the next generations to work together effectively? If not, now is the
time to sit down with your family and your advisors and work toward achieving that success. Don’t wait. And don’t worry; we are here to help you start the conversation.
About PitcairnPitcairn works with multi-generational families, single family offic-es, and their advisors filling one need or providing comprehensive solutions. Since its founding as a family office in 1923, the firm has successfully transitioned wealth across multiple generations of families through a combination of effective planning, thoughtful governance, a commitment to education and strong investment results. For more information, contact Rebecca Meyer, Managing Director at 800-211-1745 or email [email protected].
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Our FirmHawthorn, one of the country’s largest and most successful multifamily offices, offers truly integrated wealth management services by combining investment management with tax, financial planning and estate administration, as well as personal administrative services.* We know that at its heart, multigenerational wealth management is about matching strategies with aspirations, and that making sound investment decisions is key to meeting your financial goals and securing your legacy for future generations. Our unbiased and independent advocacy is dedicated to safeguarding wealth and aligning assets with family values, lifestyles and aspirations. We are committed to exceeding expectations, building trusting relationships and acting as experienced guides for the next generation.
Our StrengthsHonesty, objectivity, expertise, execution and a comprehensive, yet scalable approach are all crucial factors and the hallmark of Hawthorn. With the discipline to adhere to our investment philosophy and the flexibility to keep pace with evolving objectives, we emphasize building a relationship with you and your family that will deepen over time. From investment consulting and estate planning, to family foundations and multi-generational trusts, our family office services span a broad portfolio of financial interests.
Client TeamEstablishing a lasting legacy requires a well-conceived plan. You need someone to help navigate the myriad of financial, estate and tax planning issues that will impact the ultimate success of your plan. We help preserve wealth by providing some of the most talented and experienced advisors in the business. As a Hawthorn client, you have access to a team of professionals dedicated to helping build, maintain and protect your wealth. Your Hawthorn team works with you and your other advisors to craft a wealth plan and execute on all facets of the plan. The client service team is dedicated to constructing customized plans; providing transparent and comprehensive reports; and offering a robust technology platform to leverage both regional and national resources. With a diligent focus on service and
execution, Hawthorn is committed to handling the complex financial responsibilities of your wealth so you and your family can spend more time enjoying it.
Our Investment PhilosophyHawthorn believes that the growth and protection of capital is best achieved through a fully integrated, diversified, valuation based and tax-aware approach. Hawthorn’s proprietary asset allocation and risk modeling enables us to build portfolios of non-correlated assets. This helps minimize volatility while increasing the probability of achieving long-term portfolio objectives. Our wealth strategy and fiduciary services also ensure that tax, financial, estate planning, insurance and philanthropic issues are identified and articulated so that portfolio management decisions are optimized to meet personal goals. This approach gives us the insight to help maximize financial performance today and the foresight to help preserve wealth for generations to come.
*Bloomberg Markets, September 2011
**Information as of December 31, 2011
AT A GLANCEHighlights: Hawthorn is a member of The PNC Financial Services Group, Inc. (NYSE: PNC), and one of the largest and most successful multifamily offices in the United States.*
Year Founded: 1991
Clients Served: Over 500 Relationships
Client/Advisors Ratio: 15:1
Assets Under Management: $21.3 Billion**
Trust Assets Under Administration: $33.3 Billion**
Primary Services: Wealth Strategy, Fiduciary Services, Investment Management & Consulting, Private Banking, Custody & Custom Reporting, Personal Administrative Services
Hawthorn is a registered service mark of The PNC Financial Services Group, Inc. (“PNC”). Hawthorn provides investment consulting, wealth management and fiduciary services, certain FDIC-insured banking products and services and lending of funds through the PNC subsidiary, PNC Bank, National Association, which is a Member FDIC, and provides certain fiduciary and agency services through the PNC subsidiary, PNC Delaware Trust Company. Insurance products and advice may be provided by PNC Insurance Services, LLC, licensed insurance agency affiliates of PNC, or by licensed insurance agencies that are not affiliated with PNC; in either case a licensed insurance affiliate will receive compensation if you choose to purchase insurance through these programs. A decision to purchase insurance will not affect the cost or availability of other products or services from PNC or its affiliates. Hawthorn and PNC do not provide legal or accounting advice and neither provides tax advice in the absence of a specific written engagement for Hawthorn to do so.
Investments and Insurance: Not FDIC Insured. No Bank or Federal Government Guarantee. May Lose Value. ©2012 The PNC Financial Services Group, Inc. All rights reserved.
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We are proud to be a sponsor of the upcoming Family Business Transitions East Conference in Orlando. We salute those of you making the commitment to address the issues business
families face when dealing with transition planning. We were introduced to Family Business Magazine by a client, a second generation business with 24,000 employees. They think our ser-
vice may be of interest to others. We work solely with owners of large family enterprises—
ranging from the very dynamic first generation facing transfer issues for the first time, to a fourth generation global enter-prise dealing with a different set of family and business issues. Our experience gives us an understanding of family issues that shape transition planning.
Prowell Financial Management 25 Years of Serving Large Family Businesses
We know you have to deal with:
Technical Issues:
• transfer of ownership
• voting control
• trustee selection
• trust location
• buy-out agreements
• wills and gifts
• estate and GST tax issues
• complexities of life insurance
• valuations
• how to take advantage of the 2012 increased tax-free gifting limit
• weighing traditional estate tax advice
versus good family business planning
Family Issues:
• How do we maintain control and trans-fer assets? Who gets what? Do we treat heirs fairly or equally? Is “equal” fair to the kids in the business?
• How will the expectations and conflicts of our inactive and active kids play out when we’re gone? How do I protect the business from a child’s divorce or legal problems?
• I’m wealthy, but do I have enough if I transfer the business?
• How do I overcome the estate tax
problem, keep the business, give my non-active kids something other than the business, and leave something to charity?
• Tax advice suggests I leave my assets to my spouse, which would include control of the company; does this make family sense? Does it make business sense? Is it fair to burden my spouse with this responsibility or role?
Our Role:To understand what your plan is today, what you want for the future and help you close the gap.
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Wells Enterprises Inc. turns 99 this year, and it has plenty to celebrate. Beyond surviving for nearly a century, the com-pany has achieved an enviable record of
growth. Wells is the U.S.’s largest family-owned and -man-aged ice cream producer. In 2006 its sales passed the $1 billion mark, placing it in a select group of family firms with revenues of that size.
Located in Le Mars, Iowa, Wells manufactures more than 500 ice cream flavors and frozen novelty products under
its brand name, Blue Bunny, as well as licensed ice cream products for major U.S companies. The Wells family’s com-mitment to preserving and growing its business, which included making bold changes in family management and the board of directors, has allowed it to gain a strong foot-hold in the hugely competitive ice cream industry.
The U.S. market for ice cream and related frozen desserts reached $25 billion in 2009, and the giant multinational companies Nestlé and Unilever control half of all sales. Wells is a distant third with about a 5% market share, yet
over the past three decades it has man-aged to double its revenues every ten years. Mike C. Wells, the company’s third-generation CEO and president, says Wells intends to double its size again in the next decade, although he admits that jumping from $1 billion to $2 billion in sales will be more dif-ficult than going from $500 million to $1 billion.
“Our goal is to be the No. 1 ice cream company,” says Mike. “We may not be able to beat Nestlé and Unilever in market share, but we can be No. 1 in quality and customer service.”
Two generations of partnersFred H. Wells founded the family en-terprise in Le Mars in 1913. He started
44 Family Business • March/April 2012
Wells Enterprises, maker of the Blue Bunny ice cream brand, has ambitious plans to grow way beyond $1 billion in sales. To help the
company achieve that goal, family members restructured management and the board, putting the needs of the business first.
By Deanne Stone
Blue Bunny’s opportunities multiply
Fred H. Wells founded Wells’ Dairy in 1913 in Le Mars, Iowa. He started by deliv-ering milk from a horse-drawn carriage; later, he produced ice cream.
www.familybusinessmagazine.com 45
off delivering milk from his horse-drawn carriage and later began producing ice cream with his four sons. The popu-larity of their product encouraged Fred and his brother, Harry C. Wells, to set up a partnership in 1927 to distribute their ice cream in Sioux City, about 25 miles from Le Mars. Harry’s son, Fred D. Wells, also joined the company.
One year later, the company sold its Sioux City distribu-torship to a competitor, along with the right to use the Wells name. When the brothers decided to resume selling ice cream in Sioux City in 1935, they had to create a new brand name. The winning entry in their “Name That Ice Cream Contest” was Blue Bunny, inspired by a local department store’s Easter window display featuring colorful rabbits.
The post-World War II economic boom triggered a new era for Wells’ Dairy. Recognizing an opportunity to take its business to the next level, it made two major investments. In the 1950s, it built a new facility in Le Mars for manufac-turing ice cream products; in 1963, it constructed a fluid
milk processing plant. The first generation had established the partnership
model of leadership, and when the second generation took over in 1954, it followed suit. The new partners were Fred D. Wells, the son of Harry C. Wells, and his four cousins, Harold R., Roy F., Harry L. and Fay R., the sons of Fred H. Wells. In 1977, the company incorporated under Iowa law as Wells’ Dairy Inc. With the death of one second-genera-tion partner and the retirement of another, the ownership and management of the company fell to brothers Roy and Fay and their cousin, Fred D. Wells.
The partnership succeeded, says Fay Wells’ son Doug J. Wells, because his father and uncles were willing to work six and a half days a week to grow the business. “They had a lot of respect for one another and recognized each other’s talents,” he says, “They could fight like cats and dogs, but they always found a way to reach consensus.” Also working in their favor, he says, was their knowledge of both the fi-
photo: Wells enterprises, inc./Melissa sieja
From left: Doug J. Wells, Sue Wells Sargeant, Mike C. Wells, Greg A. Wells, Gary M. Wells, Michael J. Wells
46 Family Business • March/April 2012
nancial side of the business and the food science. “They knew how to develop formulas and flavors,” says Doug, “and had a lot of fun coming up with the different combinations that made their ice cream so popular.”
Expanding horizonsWells’ Dairy entered a second pe-riod of ambitious expansion in the 1980s. It built a new facility for its growing fleet of trucks used to deliv-er milk around Iowa and added new corporate offices. In 1983 it made its first reach out of state when it bought a facility in Omaha, Neb., and remodeled it as a processing plant for milk, yogurt and fruit juice. At the same time, it undertook a major project to enlarge its plant in Le Mars. The increased square footage allowed Wells to double its production capabilities. Then, in 1992, it built a second facility on the south side of town—a 900,000-square-foot plant with a freezer 12 stories tall. With the completion of the second plant, Wells’ Dairy claimed the title of the world’s largest manufacturer of ice cream in one location. The Iowa State Legislature dubbed Le Mars the “Ice Cream Capital of the World” in 1994.
Wells had succeeded in making Blue Bunny a regional brand. Now with its large and sophisticated new facili-ties up and running, the company launched an aggressive campaign to expand its brand nationally.
Lansing Crane, the former chair and CEO of venerable paper com-pany Crane & Co. Inc., joined Wells’ board in 2010. Reflecting on the company’s growth, Crane says, “The public thinks of ice cream as a consumer product, but the heart of the business is superior manu-facturing, innovation and a high de-gree of technology, and Wells excels in each of those areas.”
The third generation started learning about the family business by working summer jobs as high school and college students. Mike Wells began running routes for the dairy in 1977. After graduating from college in 1981, he worked in sales in Omaha before return-ing to Le Mars, where he was named director of retail sales and transportation and, later, executive vice president of that department.
Doug Wells has fond memories of his first summer job making ice cream sandwiches. After graduating from col-lege, he began working in quality control and production.
Later, he was promoted to an ex-ecutive management position in the supply side of the busi-ness. Doug’s brothers Gary M. and Dan W., and Mike’s brother,
Greg A., also followed similar tra-jectories in the company.
In 2001, the second generation stepped aside, passing the reins to the next generation. Gary was CEO, Dan was president of the procure-ment group and Greg worked in sales. Mike and Doug continued focusing on their areas of respon-sibilities, and in 2005 they were named co-presidents. Mike was in charge of demand, sales and mar-
keting; Doug oversaw the supply side.The third generation continued the expansion of Blue
Bunny into western markets. In 2003 it built an ice cream manufacturing plant in St. George, Utah, with the capac-ity to run two production lines of packaged ice cream of different sizes. With three ice cream manufacturing facili-ties in operation, Wells had the capacity to significantly increase production of its Blue Bunny brand and to become a licensee, manufacturing ice cream for other companies under their brand names.
In 1988, Mike and his father, Fred, started shipping milk and ice cream from its facility in Omaha to a Wal-Mart
store in Topeka, Kan., starting a business relationship between the two companies that continues today. “We built our business with Wal-Mart one store at a time,” says Mike. “We manufacture their store brand ice cream, Great Value, and they carry our Blue Bunny brand. That’s part of our business model. We manufacture the store brands of other companies and, in exchange, they carry Blue Bunny in their stores.” As one of Wal-Mart’s top 100 suppliers, Wells had to develop new technology to comply with the
giant retailer’s mandates for inventory, safety and quality controls. “Wal-Mart is a demanding partner,” says Mike, “but it’s fair.”
Wells has also built a profitable partnership with Weight Watchers. In 2004, the weight-loss company approached Wells about developing new products under the Weight Watchers label. Wells’ research and development depart-ment designed and manufactured new frozen products that doubled Weight Watchers’ business in six years. “Weight Watchers and Wells are examples of good licensing part-
Board chair Deborah Hylton says
the restructuring reflects ‘the family’s strength in embracing change and
innovation.’
Wells’ Dairy founder Fred H. Wells (left) and his brother, Harry C. Wells.
www.familybusinessmagazine.com 47
ners,” says Mike. “The combination of our manufacturing capabilities and its strong brand name allowed Weight Watchers to build a much larger capital market.”
A new leadership structureThe partnership model of leadership that had served the company well through most of its history came into question in the third generation. By 2006, Wells had become a billion-dol-lar company with a national reach. Family and non-family management engaged in long discussions about how Wells could best position itself to grow and thrive in an increasingly competi-tive industry.
“We knew the weaknesses of inbred family management,” says Doug. “We spent a lot of time identifying opportuni-ties to improve and the additional professional expertise we’d need to do it.” Wells’ family owners brought in several outside consultants to hear their perspectives and, along with the company’s professional managers, considered the mix of judgments and opinions. The final proposal to change the management structure and reconstitute the board won shareholder approval. Under the new plan, Wells would have a CEO/president in charge of the busi-ness, hire more outside talent and add three outside direc-tors to the board.
In 2007, Mike was named CEO and president of Wells’ Dairy Inc. Gary, Doug, Greg and Dan Wells stepped down from their positions. Gary, Doug and Greg, who had been, respectively, CEO, co-president, and senior vice president of operations before they stepped down, still serve on the company’s board of directors.
“It was a difficult but necessary decision,” says Mike. “Given the challenges facing the company, we realized that our business’s needs were greater than the family’s. We had to streamline our structure, and we started at the family management level. Now Wells has the structure and disci-pline of a publicly traded company and the advantages of being privately held.”
Mike says that the transition was handled amicably but also acknowl-edges the sacrifices family executives made in stepping down. Doug, like all of the third generation, had spent his adult years working in the family business, and he says it was difficult to walk away. “It wasn’t my goal to retire at 55,” he says, “but sometimes you have to look at yourself in the mirror and ask what you want to do and what’s the right thing to do. It was a critical time for the business. We couldn’t only think of the family; we have responsibilities to our employ-ees and to our town. We’re the biggest employer here.”
Adding outside directors to the board was another critical building block in navigating the transition. The three new directors had either run family businesses or sat on family boards, and each brought experiences, con-nections and new perspectives that would enrich Wells’ thinking in mov-
Harry C. Wells (right) presents a $25 check to the winner of the ‘Name That Ice Cream Contest,’ George Vanden Brink, for his winning entry, Blue Bunny.
From left: Second-generation partners Fay R. Wells, Harold R. Wells, Harry L. Wells, Roy F. Wells (sons of Fred H.) and Fred D. Wells (son of Harry C.).
48 Family Business • March/April 2012
ing forward. Deborah Hylton, president of
Hylton Consulting in Chapel Hill, N.C., was invited to join the Wells board in 2008 and is now the board chair. “The restructuring of man-agement and board was not a reflec-tion on the leadership of the other family members,” she says, “but rather a reflection on the family’s strength in embracing change and innovation. Mike has a real passion for the business and its role in the industry, and the right combination of talents to lead the company.”
Shareholders’ councilIn August 2008 the board proposed setting up a shareholders’ council to facilitate communication among the board, managers and sharehold-ers. The council would provide op-portunities for shareholders to raise questions, learn more about the business and how it func-tions, and nurture pride in the family legacy.
A group of shareholders sprang into action, forming a task force under the guidance of Jennifer Pendergast, se-nior consultant at the Family Business Consulting Group. Within a few months it had developed a charter and re-solved the question of eligibility. Spouses and trust benefi-ciaries would have the same status as other shareholders. After getting approval from the shareholders, the council approved the slate of four candidates, representing two family branches and two generations, at its January 2010 meeting.
Sue Wells Sargeant, the older sister of Mike and Greg Wells, is the council’s chair. A retired nurse who lives on the East Coast, she had never worked in the busi-ness. “I feel blessed to be the beneficiary of the hard work of family members who’ve been active in the business,” she says. “Now I have a chance to give some-thing back.”
Sargeant works closely with Deborah Hylton, the board chair, to respond to share-holders’ requests. A survey showed that their immediate interest was in learning how to interpret financial statements. Sargeant and Hylton worked
with the Family Business Center at Loyola University in Chicago, which had developed a webinar on reading financial reports.
In just two years, the sharehold-ers’ council has accomplished what the board had hoped, Hylton says. There’s more family participa-tion and a greater sense of family identity. But, Hylton notes, “It’s not once and done. The council helped us understand what share-holders want, but their concerns will change as the business chang-es. Now we have a mechanism for staying in touch.”
“As the only daughter in the fam-ily, I wasn’t expected to work in the business and I hadn’t served on the board, so it’s gratifying to be part of it now,” Sargeant says. “I’m really proud of being a Wells, and I love our ice cream.”
Targeted effortsIn 2008, Wells sold its Le Mars milk plant to the Dean Foods Company and its dairy yogurt plant in Omaha to a Mexican company, Grupo LALA. In 2010, Wells changed its name to Wells Enterprises Inc. The new name recognized the family ownership of the company while ending customers’ con-fusion about whether the company still distributed milk. The divestitures also marked Wells’ new focus on expand-ing nationwide sales of its core businesses, ice cream and frozen novelty products.
Over the past four years, Wells Enterprises has flour-ished under Mike’s leadership. The company has set a new sales record and reduced its debt. (Mike declines to disclose
current revenues but says they exceed $1 billion.) Mike’s son, Michael J. Wells, is associate marketing manager of Wells’ retail brand. “We are a great example of a
family business that protected the family by putting the busi-ness first,” CEO Mike Wells says. “Shareholders are enjoying great-er benefits because the company has accomplished great things. We made tough decisions in 2007, and we’ve been proven right.” nFB
Deanne Stone is a business writer based in Berkeley, Calif.
By 2006, Wells had become a billion-dollar
company with a national reach. Family
and non-family management engaged in long discussions about how Wells could best position itself to grow in an increasingly
competitive industry.
www.familybusinessmagazine.com 49
Connolly Brothers Inc., a fourth-generation construction management company noted at one time for the quality of its masonry work,
has endured like one of the stone walls that track across the countryside near its headquarters in Beverly, Mass. What has kept the company in business for more than a century and a quarter?
“The secret is the struggle against adversity,” says 91-year-old Stephen Connolly III, father of the current owner and grandson of one of the company’s founding brothers.
Each of the four generations that have owned and man-aged the firm responded to adversity—world wars, de-pressions and collapsing real estate markets—not only by working harder, but also by changing direction as often as necessary to keep the company afloat. “Real estate and construction has provided a good livelihood for us, but it’s tough,” says Stephen J. Connolly IV, 63—known as Steve —who is the company’s CEO and current owner. “It’s cycli-cal, and a lot of people can find themselves overleveraged. You wake up and you’re gone.”
At one time, Connolly Brothers had 500 workers sling-ing sledgehammers and shaping land with steam-driven graders all over the Eastern seaboard. Today it employs 35 people, who use computers to design sleek office interiors and manage dozens of specialized subcontractors work-ing on commercial projects close to home. The business certainly isn’t risk-free, but it made it through the recent financial crisis and the subsequent freeze on new construc-tion. That was just another period of adversity that has marked the company’s history.
The Gilded Age … and then a tarnished economy In 1848, 20-year-old Stephen Connelly sailed from Ireland to Boston and landed a job as a gardener on the estate of the Lyman family, where his brother, Thomas, tutored the owner’s children. Stephen married and eventually moved his wife and five children to Beverly, where he became superintendent of one Massachusetts Bay’s North Shore estates. Two of his sons, Stephen J. and Greg, landed a contract for road building near their home in 1884. Their
Survival through adaptationConnolly Brothers Inc., a construction management company in Beverly, Mass.,
has endured hard times by reshaping its mission. With a fifth-generation member
aboard, the evolution is expected to continue. By Dave Donelson
The founding brothers in the late 1800s. From left: Gregory P., Thomas D., Michael J. and Stephen J. Connolly.
50 Family Business • March/April 2012
eldest brother, Thomas, joined the firm two years later. The fourth brother, Michael, and their sister, Mary, weren’t active in the business. All three men worked at other jobs on the side as they got their company started at the turn of the century.
Although they tackled a range of projects, the brothers specialized in masonry work. As time passed, they became contractors of choice for the elite families of America’s Gilded Age, working on grand mansions from Kennebunk-
port, Maine, to New York’s Hudson Valley, Long Island, and even as far south as Virginia. Top architects of the day like Frederick Law Olmsted, the designer of New York’s Central Park, prepared the plans for projects the Connolly boys undertook. They did stonework at the restoration of Colonial Williamsburg, a project backed by another of their clients, John D. Rockefeller Jr.
“They had a pretty good company most of the time,” Steve Connolly says, “although they almost bankrupted themselves a couple of times, too.”
By the end of their first year in business, the brothers had begun buying land, an activity that would continue throughout the company’s history. One particularly lucra-tive acquisition was 400 acres of farmland in Topsfield, Mass., which eventually became the source of gravel for railroad track ballast—much of it going to build Boston’s North Station. When the gravel and stone ran out, the prop-erty was sold.
From the World War I through the Great Depression and into World War II, the company struggled to survive. Its interests—and management attention—were scattered among hard-to-find construction jobs, heavy equipment sales and rental, quarrying and property management. As the economy floundered, the owners looked for opportu-nities throughout the Northeast. Leadership fell to Greg Connolly, Stephen J. Connolly’s eldest son and a World War I veteran.
“When my grandfather came back from the war and joined the company,” Steve Connolly explains, “there was [company] stock scattered all over the place and a bunch of family members supposedly working for the company and getting a paycheck every week, but they weren’t doing much of anything. My grandfather spent most of his life buying out these little bits and pieces of stock.” He consoli-dated ownership through a series of incorporations, buy-outs and swapping of assets until the current company was
formed. At that point, it was owned solely by his branch of the family.
Greg’s son, Stephen Connolly III, first worked for the company as a summer laborer in 1937, earning five cents an hour less than the lowest-paid hired hand. He remembers the tough times they faced. “At one point, in a matter of a few days,” he says, “a tremendous number of con-tracts were canceled due to the economy. During the war, it didn’t get better because the company was entirely a residential contractor and they weren’t building new homes. Also, no labor or materials were available.” While he served in World War II, the company survived primarily by doing work for General Electric and Eastman Gelatin (a division of Eastman Kodak).
Stephen Connolly III and his brother, Peter, bought out their sister when their father died. Later, Stephen III bought out Peter. “When it later became apparent that my uncle’s son wasn’t interested in the business,” Steve Connolly ex-plains, “my father bought out his brother to be-
come the first person to be sole owner of the company.”
A streamlined companySteve Connolly, who had spent three summers working for the company, began a full-time job there in 1967. He worked in the office for six months before going into the Navy, where he served until 1971. “It took me two days to drive home from South Carolina,” he recalls, “but the next morning, my dad woke me up early and said, ‘You’ve been screwing around long enough. It’s time to go to work.’” Steve bought the company from his father in 1989 and began making changes almost immediately in response to conditions in the marketplace.
“We stopped doing residential work and also stopped bid-ding work on the open market,” Steve says. “A few years before that, I had started doing more in-house design-build construction management business.”
At the time of the transition, the company had about 175 employees, most of them laborers and tradesmen. “Now we have some equipment and have superintendents on the jobs, but we use subcontractors mostly,” Steve explains. There are about 35 employees today, with more people in the office than in the field. Annual revenues vary greatly; the company expects to generate $30 million this year.
These days, Connolly Brothers typically has ten to 12 projects of various sizes under way at any given time. They’re commercial and industrial projects with a bit of
Stephen J. Connolly at a groundbreaking ceremony at Beverly Hospital. Nurses watch him from a balcony in the background.
www.familybusinessmagazine.com 51
institutional work, but nothing for the public sector. “With the public bid laws, the mentality of the project
managers, estimators and superintendents is contrary to the way we want to run our business,” Steve explains. “You can have 25 bidders on a project with extensive plans, but the only way to make money on the job is through chang-es and change orders and fighting and scraping your way through the whole thing.”
All of the firm’s work is done in the Boston suburbs (work in the city usually requires union crews) for a limited num-ber of clients who bring the company back again and again. On a dollar volume basis, Steve estimates that 70% of rev-enue comes from repeat customers. IRA Motor Group, a chain of auto dealerships, has contracted for some 25 proj-ects ranging from completely new facilities to major reno-vations over the years. One recently announced project is construction of a 32,000-sq. ft. manor house re-sembling a mansion originally belonging to Wil-liam Loeb that burned down in 1987. The new building will contain offices for a Boston-based holding company, Affiliated Managers Group. Connolly Brothers worked on the original build-ing when it was erected in the 1920s.
In 2008, Connolly Brothers completed a 12-phase interior renovation for MITRE Corpo-ration. Connolly was able to completely gut a 130,000-sq.-ft. building; replace all mechanical, electrical, and fire protection systems; and refin-ish all interiors including dry wall, flooring, cabi-netry, ceiling, and painting without disrupting the client’s personnel—who continued to work in the building during the construction.
“The nature of the business has changed quite a lot,” Steve says. “When the economy was lousy, my dad would go back to the basics. Today, with the way the world has changed, that’s a fatal strategy. You have to be changing all the time.”
The rate of change seems to be accelerating, too. “In 2009, our business was way off—we did a third of what we’d done the year before,” Steve says. “We did a little bit more than that in 2010. But things picked up significantly and we did as much work in the first four months of 2011 as we did all of [2010]. The economy hasn’t picked up that much, but many of our clients had put off projects until they got to the point to where they needed to move. It’s still not as robust as it was in 2007-08.”
Planning for transitionOne of the next priorities for Connolly Brothers involves training the fifth generation. Steve’s son, Jay, 27, is a proj-ect manager at the company with responsibility for several multimillion-dollar projects. (Steve’s daughter, Page, 31, is a property manager in Washington, D.C., and is not expected to join the family company.)
“I grew up in and around the business visiting job sites every weekend with my dad,” says Jay. “Hopping into ex-cavators and backhoes is quite a thrill for a little kid. I still
slip into the driver’s seat for a few minutes sometimes when visiting a project site.”
“I knew my son wanted to go to work for me, but I en-couraged him to do something else every summer,” Steve explains. “When he was in his senior year, I suggested he talk to various companies to see what he might want to do. He came to me in the late spring and said he wanted to work for me.”
An office building the company constructed for its own real estate portfolio was in the final stages of planning when Jay graduated from Boston College. “It was a good opportunity for me to get into a project from start to finish,” he recalls. He attended permitting meetings and worked in the field as an assistant superintendent. He also worked in the office, shadowing the project manager. “I was hir-ing laborers that summer,” Jay says. “Hiring construction
laborers isn’t exactly like interviewing investment bank-ers, but you’re dealing with someone’s career. At the same time, when the economy went south, I had to lay people off, too. That’s definitely the hardest thing I’ve had to do. I think my dad had me do some of those things so I would gain the experience.”
The Connolly family has made many such difficult deci-sions over the last century and a quarter, managing through boom and bust economies by continually redefining their company’s mission. nFB
Dave Donelson is a business journalist and the author of the Dynamic Manager Guides and Handbooks.
Three generations: From left, Jay Connolly, Stephen J. Connolly III and Stephen J. Connolly IV at a recent groundbreaking.
52 Family Business • March/April 2012
I often refer to myself as the “illegitimate” third genera-tion of Ostbye & Anderson, the Minneapolis jewelry manufacturer founded by my wife’s family in 1920. My father-in-law never liked being a part of the company and discouraged me from joining. Yet after 12 years in other jobs and industries, I brought my experience
and skills into the family business in 1978. As an only child, I naturally became self-sufficient, which
developed into independent thinking and a do-it-yourself (DIY) attitude in business. These character traits contin-ued to serve me well as I became company president and majority stockholder in 1988. I built a new factory, made a significant acquisition in 1993 and grew the company from a regional to national player.
But in 2001, our business and industry took a major hit and I wasn’t sure where I saw myself in the future. I wanted the company to recover but was unsure if I had the energy or the passion to build it back up. My independent streak had hit a roadblock.
Unbeknownst to me, a DIY succession process started in the fall of 2002 as I neared my 60th birthday. I had no exit plan at that time and no clue that things were about to start happening on their own. After learning a series of lessons—the hard way—I realized the DIY approach was no longer useful. Ultimately, pleasant surprises occurred in the process of passing the torch, but only after I opened myself up to professional help and peer guidance.
Lesson #1: Those privileged to be part of a family business can’t ignore the family.My initial mistake was not recognizing the business as part of our family, whether or not anyone in the family was ac-tive in the company. In retrospect, I did not know how to incorporate the business into our family without sending a message of entitlement or expectation. I wanted my chil-dren to work elsewhere. It was important to me that both my sons had freedom to find their own careers, passions and independence. Because both my sons had developed highly successful and financially rewarding careers with multinational corporations, I assumed that neither would want to come into the business, which effectively cut off
the possibility of a family succession plan. Too bad I never asked!
Advice to other family business owners: Do not assume you know what your children think about the business. You have to ask. Engage family members in direct conversation or have an outsider conduct interviews.
All family members must understand that discussing the family business does not guarantee any specific out-come for either the children or the business. I believe very strongly that it can be stifling for children to come into a family business immediately after school, before they have some “real world” experience and have gained a degree of confidence and independence. That background also allows them to bring some skills and knowledge into the family business. Equally important, this helps raise the problematic child/parent/boss relationship up a notch to the still challenging adult/parent/boss relationship.
Surprise #1: A successful son says, ‘Make me an offer.’In the fall of 2002, as I started having concerns about what to do with the business—sell it or work until age 90—I had a fateful lunch with my son Craig, then 34. He had recently been named U.S. Salesman of the Year at his com-pany (among a sales force of 1,100) and was considering new opportunities. We met to talk over his résumé. As I reviewed it, I said something like, “Our business needs a sales manager with your qualifications.” His response: “Make me an offer.”
I was taken aback, flabbergasted and totally shocked that Craig had considered working in our family business. (Again, I never asked!) This lunch was a pivotal moment for me. I was excited, but terrified, about bringing him into the business. I wrestled with this emotional conflict and internalized the decision. I didn’t discuss it with my wife—a major mistake! I never reached out for help and didn’t consider the effect of the decision on our company, its management team or our family, especially Craig’s younger brother, David. Only much later did I learn that David had always hoped that he would ultimately take over the family business.
Passing on the torch without blowing up the familyOur succession processs began without a formal plan. I eventually realized that the do-it-yourself approach had lost traction on both the business and family fronts. Was it too late to create a proactive succession plan?
By JAck MAcBeAn
www.familybusinessmagazine.com 53
Advice to other family business owners: Before you decide to bring a family member into the business, create a family council—even if you don’t think you need one yet. A fam-ily council provides a framework for educating the family about the business and addressing and resolving conflicts. It also offers an open forum to discuss opportunities, quali-fications and desires. The goal is to prevent unintended consequences that, most likely, will have negative ramifi-cations for other family members. It also can be a way of creating some fun family events.
Lesson #2: Family members and company managers get upset when owners make sig-nificant operating decisions independently.A few months after my lunch with Craig and before the announcement of his new role as national sales manager, I came face-to-face with the guardian of our family’s rela-tionships—my wife, Lynne—and knew I was in trouble. My son David and his wife were visiting for Christmas on the day that Craig and I had reached our agreement. I casu-ally mentioned to Lynne that I was “thinking” of bringing Craig into the business. She was astonished and quickly
asked, “What about David?” She was loud, stong and clear: “You may be responsible for the company, but don’t blow up the family.”
David did not take the news well. He was highly quali-fied, but the reality was that his strengths mirrored his brother’s in sales and marketing. Within our small com-pany, there wasn’t another opportunity for him. David was hurt, disappointed and angry. Simply put, David was devastated not to have even been asked. I have very few regrets in my life, but this one tops the list. I could have —and should have—handled this decision so much better. It’s a lesson I leaned the hard way, and I share the story often with family business owners as a way to help make amends.
I also agonized over announcing Craig’s appointment to our top managers. They had assumed my two sons were not coming into the business. During a managers’ meeting, I said I had hired a new national sales manager whom I felt was well qualified for the job. I passed out Craig’s ré-sumé with the name removed. As managers were reading the résumé, one of them said, “Wow! Is this Craig?” The general reaction was favorable; however, one individual,
Photo: DaviD CarriCk
Jack MacBean, left, with his son Craig, who succeeded him at Minneapolis jewelry manufacturer Ostbye & Anderson.
54 Family Business • March/April 2012
who might have been a candidate to take over my position as president, felt threatened and was visibly upset. That individual never adapted to Craig’s being in the company and left within a year.
Advice to other family business owners: Whether succes-sion is a DIY or a planned process, it will be an uncomfort-able time for everyone. Lack of communication and trust will further erode family and company harmony. Once the family’s plans are in place, simply announce this to key managers and employees.
Since 2002, David has moved from telecommunications to GE Healthcare, where he has worked for the past six years. He is very proud of his success with GE and is well recognized within the company for his accomplishments. Although they live in different states and have very busy professional and active family lives, David and Craig have maintained a good relationship, including a shared interest in running marathons.
Surprise #2: My son’s leadership helped the business meet economic and industry challenges.Our industry was going through challenging times in the post-9/11 era, but our struggles had started before that. People buy jewelry when they feel good and optimistic. We saw a 30% revenue decline in 2001 due to fear and uncertainty. What’s more, intensifying competition from global companies had eroded profitability, and the impact of the Internet was growing each year.
I was delighted to see that Craig contributed not only leadership skills, but also big-picture thinking to guide the business to perform at a higher level. One of his first action steps was to develop a long-range strategic plan, which the company had never had before. This replaced my DIY ap-
proach, which had landed us squarely in survival mode. Steve Coleman of Platinum Group, a business consult-
ing firm, helped Craig and me to work more effectively together and map out a strategic plan for long-term growth and profitability. This process identified a need for expe-rienced managers in finance and manufacturing, and we decided to engage a search for “A” players.
To address rising competitive forces, we opted to nar-row the company’s focus to strengths in mature markets. This strategy, in addition to investment in new technology and distribution channel resources, became the driver for change that would generate profitable new growth.
Advice to other family business owners: The DIY approach saves money in the short term but will cost you in the long run. Ask for help before it’s too late, especially if you are at the point in life where your focus is on conservation and comfort in your own lifestyle, rather than investment and risk-taking for the company’s sake.
Lesson #3: Transition is a natural, healthy event that can be good for the company and its leadership.During this strategic planning period, Craig became in-volved in aspects of the company beyond sales, and I be-came aware that he was capable of running the business. A conflict developed between the two of us based on his high-er expectations for the company vs. my comfort level.
I wanted to suppport Craig’s efforts but quickly realized that I didn’t want to take on more work at this stage of my life. Although I still had not planned an exit strategy, I started to attend a business transition group out of curios-ity—not thinking it would affect me. Other owners shared their transition experiences openly. It took me a year to go from spectator to player as I gave myself permission to
“What’s next for me?” It’s a com-mon question among today’s Boomer business owners and leaders. The key to mapping a productive experience in any transition is to know where you’re going—to identify the next stage in your life and work.
Based on the experiences of many leaders in transition, Platinum Group has identified six dimensions of life that can help point the way.
1. Family. Involve your family in the transition decision, and consider their needs. Action steps: Form a fam-ily council, hold family meetings and engage in long-range planning.
2. Finances. Balance wealth man-
agement with succession planning to meet family lifestyle needs going for-ward. Action steps: Obtain a business valuation, develop a buy-sell agree-ment, get tax-planning assistance and plan your charitable giving.
3. Business. Assess your business’s readiness for transition by evaluating its stability and predictable cash flow. Action steps: Develop business plans with timing and budgets.
4. Successor. Evaluate internal can-didates and/or conduct an external search. Action steps: Plan to transfer leadership and inform key stakehold-ers of your decision.
5. Lifestyle. When planning how
to spend your time and energy after the transition, focus on your passions. Action step: Start by planning a sab-batical. This will also enable you to test internal candidates’ readiness for lead-ership roles.
6. community. Give back to leave a legacy. Action steps: Consider vari-ous ways to support the charities and causes you are most passionate about, through financial contributions and volunteer opportunities.
Steve Coleman is a partner in Platinum Group, a business consult-ing firm based in Minneapolis ([email protected]).
Mapping out a productive transitionThere are six dimensions to the journey. By Steve coleman
www.familybusinessmagazine.com 55
consider a transition. At some point I realized that transi-tion is not a weakness and does not signal the end of life; it’s a natural progression that’s necessary for a company to survive into the next generation. Once I started, I never looked back.
Advice to other family business owners: Be open to resourc-es and suggestions from experts in the field. You don’t have to go through transition alone. Find a peer group where there is open, honest discussion about taking the next step. It can bring clarity to your succession planning, as well as encouragement.
Surprise #3: Planning a sabbatical can be a helpful tool to test your manage-ment team’s readiness to ‘step up’ in the organization. It also can be a positive step in a business owner’s succession plan.I initially decided to take a five-month sabbatical from the business in 2007 and return as an active chairman in the business. But I struggled with what to do on my sabbatical. I found myself building a long list of things I “should do” that became overwhelming. A peer suggested I instead think about what I “could do,” which took a lot of the pressure off and helped me become comfortable with enjoying myself.
As I prepared to leave, I became more committed to not returning to the business. I was now getting more and more excited about the best transition for the company. It became apparent that my sabbatical was the blueprint for elevating Craig to president and moving him into my office. I would not come back in a formal role or have an office in the building.
Craig had earned the respect of our employees, custom-ers and suppliers; it was important to me that everyone see him as in charge. We called a company meeting (includ-ing local family members) on a Thursday and announced Craig’s promotion to president, effective the next day. The short transition period was painless and could not have been more successful. There was no time for staff to specu-late or question “who was in charge.” In fact, there was enthusiastic support immediately. The company moved forward and never missed a beat.
Advice to other family business owners: A sabbatical can help your management team to “step up” to new responsi-bilities. At the same time, the senior leader who “steps out” of the company can get a new perspective and can plan new opportunities beyond the family business.
Also, remember that business owners’ decisions have a huge impact on the employees. When announcing a tran-sition, be sure to send a strong message about the sustain-
ability of the business and ensure that everyone knows who is in charge.
Surprises continue: Moving from daily op-erations to ownership presents new options.The sabbatical provided a runway for my next stage of life. In fact, my life had come full circle: I began work in 1965 with American Airlines at O’Hare and now I volunteer at
the Minneapolis/St. Paul airport with the Travelers’ Assis-tance Program. I am also exploring other ways to give back to the community. In addition, I still enjoy consulting with Craig on business issues as needed and attending periodic company meetings as well as traveling, gardening, reading and spending time with our five grandchildren.
After a 40-year career, I’m enjoying being an owner with-out the concerns of daily operations. The business, now led by the fourth generation, is well positioned for success in the years to come, and we eagerly anticipate the company’s 100th birthday in 2020. The recent recession has been dev-astating for some businesses, but Craig’s energy, focus and leadership have resulted in revenue growth, product diver-sification and continued profitability for our company.
While I proudly celebrate my accomplishments in the family business, I am grateful for the freedom and flexibility I now have to pursue other passions and opportunities. nFB
Jack MacBean ([email protected]) is the owner of Ostbye & Anderson, a family-owned manufacturer of bridal and related jewelry serving independent jewelers throughout the U.S. and Canada.
‘My initial mistake was not recognizing the business as part of our family’: Jack MacBean with his wife, Lynne, and sons David (left) and Craig.
56 Family Business • March/April 2012
The family tree today looks much different than it did 50 years ago. Divorce and remar-riage have caused new branches to take root and extend in different directions. Stepchil-dren are everywhere!
There have been other changes, as well. Consider the increased prevalence of medi-
cally assisted procreation, and of acknowledgment of chil-dren born out of wedlock. There are also more “dynamic adoptions” (grandparents raising their grandchildren owing to unstable family circumstances). Gay family members are coming out of the closet in increased numbers, and many of them are forming family units complete with children. Compounding these changes is the fact that people are living longer than they did 100 years ago.
The two family trees shown here demonstrate the changes in the in-stitution of “family” over the last half-century. This new paradigm has dramatically affected estate planning concepts. Many family business own-ers are concerned about the effect of estate taxes, but tax considerations are not the only complicating factor. The “simple will” is going the way of the dinosaur. It is unrealistic to expect a form-driven document to be anything but a disaster.
Estate planning implicationsEstate planning today means giving at-tention to three or more generations of the family on a simultaneous basis. Today’s family is more like a “group” than a “unit.”
Multiple marriages tend to create multiple “sets of children.” Complexity increases when both spouses have shared children with more than one partner—which may, or may not, in-clude the current spouse. Stepparents and step-children are now typically part of the estate planning equation. Children living in the home often have labels such as “his,” “hers,” “ours” or “somebody’s else’s.” Medically assisted pro-creation, of course, could have a wide range of ramifications. Families and their estate planning professionals must evaluate such situations on a case-by-case basis.
Common misperceptionsEstate planning professionals often hear the following statements from their clients. Comments like these raise a red flag.
• “We have agreed to leave everything outright to each other. The surviving spouse will leave it equally to all of our combined children.”
• “I love my wife’s [husband’s] children like my own.”• “My children are already well-provided for by the half
of my assets I had to give to their mother [father] in our divorce.”
• “His [her] ex-wife’s [ex-husband’s] family is wealthy and will take good care of those children.”
Multiple marriage planning
OW
DSAAIV
1
1 2(2005)
2
12 323
Age
70-80
50-60
30-40
10-20
Age
85-100
50-75
30-50
1-25
= Female
= Male
= Deceased
= Female
= Male
= Deceased
OW = out of wedlockA = adoptedDS = donor spermIV = in vitro
1 = First marriage2 = Second marriage3 = Third marriage
The family tree has lots of new branches. Because we’re building our families in so many different ways, estate planning is a lot more complicated than it used to be. By JoE M. GoodMan
Typical U.S. family tree, circa 1660 – 1960
www.familybusinessmagazine.com 57
• “I am scared to give [or leave] assets to my children from my prior marriage because my ex-wife [ex-husband] will talk them out of their money.”
• “I want to keep my assets in the bloodline because my father/grandfather would want it that way.”
• “I don’t want to include adopted children in my estate plan unless I have a chance to know them.”
• “Stepchildren aren’t my grandchil-dren.”
• “… born in wedlock.”• “…natural-born children.”
The ‘evil stepmother’ mythThe “evil stepmother” immortalized by the Grimm brothers and, later, by Walt Disney infected many genera-tions with unnecessary prejudice. Family psychologists and therapists have begun to recognize the prevalence of stepfamily situations. Several excellent books have been written on this topic, including Stepfamilies, by James H. Bray and John Kelly (Random House, 1999) and Becoming a Stepfamily, by Patricia L. Papernow (Jossey-Bass, 1993).
Relationships within a stepfamily are very subjective, qualitative, delicate, ambiguous and changing in nature. They include forced relationships, as well as relationships filled with genuine love and affection.
Age differentials between stepparents and stepchildren
can be important factors. A combination of stepchildren and “our” children can have serious repercussions within the relationship matrix. The death, incapacity or divorce of the biological parent will likely have serious repercussions in the ongoing stepparent-stepchild relationship.
The standard will and trust phrase, “If any child of mine is not survived by children or other issue …,” will automati-
cally disenfranchise stepchildren, regardless of the nature and quality of the relationship. This is often undesirable —and it’s often unintentional. In any event, it is worthy of discussion.
The trust trapTrusts are frequently used to preserve and protect financial resources for the surviving spouse before substantial distri-butions are made among the children. Increased longevity, however, suggests that this typical pattern may be inap-propriate. Rich widows tend to live to a ripe old age. This
Multiple marriage planning
OW
DSAAIV
1
1 2(2005)
2
12 323
Age
70-80
50-60
30-40
10-20
Age
85-100
50-75
30-50
1-25
= Female
= Male
= Deceased
= Female
= Male
= Deceased
OW = out of wedlockA = adoptedDS = donor spermIV = in vitro
1 = First marriage2 = Second marriage3 = Third marriage
Typical U.S. family tree, circa 2012
Estate planning today means giving attention to three or more generations of the family on a simultaneous basis. Today’s family is more like a ‘group’ than a ‘unit.’
58 Family Business • March/April 2012
can postpone financial benefits for children until they are much too old to appreciate the financial windfall. This is an especially glaring problem when substantial financial resources are available for shared enjoyment among two or more generations of the family simultaneously. Estate planners are often guilty of allowing estate tax consider-ations to drive the plan.
Consider the planning complexities associated with step-parents and stepchildren. In many cases, financial resourc-es are preserved for a surviving spouse, and assets are not distributed to children from a prior marriage until after that spouse has died. This may not make sense, however, if the surviving spouse is not substantially older than such children. In addition, there is an inherent conflict of inter-est between the surviving spouse as lifetime income ben-eficiary and the children of a prior marriage as remainder beneficiaries. Estate planners and clients should consider better alternatives.
• Life insurance policies can provide “excess funds” that can be distributed to children of a prior marriage so they will not have to wait for a stepparent’s death.
• Making children of a prior marriage beneficiaries of a portion of qualified retirement plans might be an attrac-tive alternative.
Go ahead and face the tough decision of dividing finan-cial assets between and among the surviving spouse and the children from a prior marriage or relationship. Do not
be tempted to allow estate tax issues to derail an otherwise perfectly logical plan of action. Don’t be so sensitive about equal sharing with children of the current marriage—it can’t be done.
The timing and value of different assets will thwart plans of this nature. Control over asset distributions will change over time. Priorities will also change. Relationships be-tween a surviving stepparent and stepchildren will likely change after death of the common denominator spouse-parent.
advisers’ changing rolesIncreasingly, estate planners are called upon to exercise multidisciplinary skill sets associated with sociology, be-havioral science and psychology. Trusted advisers must be sensitive to family relationships and have an appreciation for family system dynamics.
Estate planning should be holistic and should encompass a process of communication within the family group. As-sessment, evaluation and interviews with appropriate fam-ily members must be a part of the overall planning process. There is no excuse for the intentional, or unintentional,
focus on mechanical and technical aspects of wills, trusts and document drafting. This often leads to the subliminal avoidance of the real issues, hidden agendas and future disasters.
Teamwork with qualified sociologists, behavioral scien-tists and psychologists is recommended in many cases. The existence of important “soft-side issues” cannot be denied in cases of multiple marriages, multiple sets of children and other special family dynamics.
Dealing with these issues will bring the estate planner into the den, kitchen, bedroom and closet. But that is where important decision-making is done.
Points to considerThere are many species of family trees. The definition of a nurturing and healthy family has been broadly expanded. Estate planning must have broader parameters to include a wide variety of circumstances and possibilities.
• Standard document provisions do not fit dynamic fam-ily circumstances. This is now the norm rather than the exception.
• In the most cases, family relationships are more im-portant than estate tax considerations.
• Inherent and natural conflicts of interest associated with multiple marriage situations must be identified and discussed.
• The “all to spouse in trust or outright” will form is often a poor choice.
• Extra life insurance can be a rela-tively inexpensive planning option that can have remarkable benefits for the family.
• Unique and complex planning tools, such as charitable trusts and asset protection trusts, can provide differing financial benefits for various
members of a family. • Equal money does not define equal love. • Stepchildren are people, too. • No, the surviving spouse is not automatically entitled
to receive everything. • Special planning is required in the case of gay families
(or gay family members).• Longevity is an important factor in the estate planning
process.• Mental incompetence and undue influence are signifi-
cant dangers to consider.
Estate planning for the dynamic family is a craft, an art, an expertise and a necessity. Sharing family wealth cannot be addressed with canned documents. Issues associated with death and relationships require a focus that goes be-yond tax planning. nFB
Joe M. Goodman is an attorney, a CPA with Personal Financial Specialist designation and a family business consultant with the Nashville office of law firm Adams and Reese LLP ([email protected]).
Rich widows tend to live to a ripe old age. This can postpone financial benefits for children until they are much too old to appreciate the financial windfall.
www.familybusinessmagazine.com 59
Ownership transitions send many family businesses sailing into rough waters, but Horst Engineering of East Hartford, Conn., has successfully navigated two such events in its 65-year history. The first was simple,
the second more complex. Horst Engineering, a maker of precision-machined compo-
nents for aerospace, medical and other high-tech industries, is now headed by third-generation member Scott Livingston, who holds the titles of president and CEO. Scott’s father, Stanley, and Stanley’s brother Steve bought the company from their father in 1979, then sold it to Scott in 2001. The first transition wasn’t flawless, but it wasn’t accompanied by the soul-searching drama that came along with Scott’s purchase of the company at age 29.
“I was the change agent that initiated the transition to the third generation,” says Scott, now 39. “I had great en-ergy and was an idealist. Nothing was impossible. There was a little bit of tension and stress over the changes, but my father and uncle recognized that I had management skills.” Those skills, plus the company’s strong reputation in the markets it serves, have helped Horst grow. Today, it is a 120-employee operation with plants in the U.S. and Mexico and annual sales of $12 million.
The company was founded in 1946 by Horst Rolf Lieben-stein, who changed his name to Harry Livingston when he emigrated from Germany in 1938. Harry Livingston’s par-ents died in the Holocaust; his two brothers fled to Africa. Harry, who held a master’s degree in mechanical engineer-ing from Germany’s Technische Universität Ilmenau, found
A drAmAtic trAnsitionHorst Engineering of Connecticut successfully passed to
the third generation, but not without some deep soul-searching.
By Dave DOnelsOn
From left: Stanley, Scott, Adeline and Steven Livingston. Scott says his father and uncle ‘put me through some tests.’
60 Family Business • March/April 2012
work in New England’s tool and die shops, which benefited from wartime demand. When he had saved enough money, he started his own shop in the second story of a barn in Hartford, serving customers in the typewriter, firearms, hardware and aircraft industries. Harry and his wife, Sylvia, had three sons, Stanley, Steve and Bert, who all worked in the shop growing up.
“When I came out of the service in 1964,” says Stanley, now 68, “my mother said to me that Dad was going to lose the business unless I came to work for him.” Steve, two years younger, joined the company in 1971. Steve was the engineer, and Stanley was the businessman. “We worked together very well as a team,” Stanley reflects.
Youngest brother Bert, now 58, didn’t fit in quite as seam-lessly. “When I came back home from the university with a degree in marketing,” he says, “they put me back in the shop on a machine.” After a year, Bert returned to Jack-sonville, Fla., where he had gone to school, and entered the insurance and financial planning business. He stayed close to his family, however, and would play a key role in the transition to the third generation.
Market shifts challenge companyWhen Harry was ready to sell the company to his sons in 1979, his original plan was for each of the three second-gen-eration members to have a one-third share. But Stanley and Steve, who were both working in the business, “wouldn’t go for it,” Scott says. Bert would eventually acquire a 9% stake; his brothers split the rest equally.
The transaction was fairly simple and straightforward, accomplished with the assistance of a single attorney. Stan-ley assumed the role of president and concentrated on sales and supply chain management, while Steve was VP of engineering. Their father, Harry, continued to come to work until his death in 1998.
Stanley and Steve made a series of small acquisitions and
focused on contract manufacturing for the commercial and military aerospace industries. They invested in state-of-the-art machining technologies and cautiously expanded the plant. Stanley’s wife, Adeline, served as office and HR manager.
Scott joined the company in 1992 after deciding to take a hiatus from college. “When I told my parents I was quitting school, they told me I had to get a job,” he says. He worked in various positions at Horst for a year. “Up until that point, I had had no interest in working at the company,” Scott recalls, “but once I was exposed to it, I changed my mind.” He finished his degree in 1995 at Boston College and came back to Horst the Monday after graduation.
Scott says his father and uncle “put me through some tests.” He was put in charge of a new Horst subsidiary, Thread Rolling Inc., which at the time was a five-person operation. “I did all the functions from estimating to sales to purchasing, HR and operations management,” Scott says. “It was a great learning experience.” He went on to handle other projects for the main company after that and ulti-mately became Horst’s general manager.
Meanwhile, the company was facing challenges. After the Cold War ended, defense budgets were slashed and the aerospace industry underwent a sea change, putting the family’s business under pressure. “Change needed to take place operationally, and strategy needed to be looked at,” Scott explains. “It was time for more systems to be introduced and outside management to be developed. I wanted to do all this.”
But his father and uncle resisted his suggestions, Scott
When the family’s consultants presented a transition plan, the second-
generation business leaders’ attitude was, ‘no, that’s not what our company
does and we don’t need all that high-falutin’ stuff,’ their brother recalls.
Harry Livingston—born Horst Rolf Liebenstein in Germany— started the business in this Hartford, Conn., barn.
The company has been in its current location since 1950. It launched a Mexico manufacturing operation in 2006.
www.familybusinessmagazine.com 61
recalls. “These guys had been doing it a certain way, and they had been successful,” he says. “But they knew the handwriting was on the wall. The world was changing and customers were becoming more demanding.”
succession catalystsIn 1999, the University of Connecticut Family Business Program gave Horst its Nozko Award for medium-sized businesses, one of its Connecticut Family Business of the Year honors. According to Bert, that drew the attention of numerous family business consultants who began talking to the company about transition planning. He and Scott talked to several firms and eventually engaged one to help them.
Why was the succession process initiated by a next-gen-eration member and a minority owner who did not work in the business? “I was hungry for greater responsibility, and Bert was interested in monetizing his interest in the company,” Scott explains. “Steve and Stanley were nose-to-the-grindstone and not interested in that kind of stuff. I was the instigator, and Bert and I kind of partnered. My mother was an ally for me as well.”
Adeline, Scott’s mother, says there were two reasons she backed the idea: “In addition to needing help in managing a larger and more complex company, Steven and Stanley had some personal health [issues] that needed to be dealt with. We had to plan.”
Scott persuaded Stan-ley and Steve to look at hiring the consultants the same way they would buy a production ma-chine, as an investment in the company’s future. The consultants present-ed a transition plan after working with the Living-stons for a year. Getting the plan implemented was no easy feat, family members recall.
Stanley and Steve “were all going, ‘No, that’s not what our company does and we don’t need all that high-falutin’ stuff,’” Bert says. “My brother Steve didn’t see the need for it.”
“I may not have got where it was going at the beginning, but I didn’t buck it,” Steve replies. “Stanley had a harder time than me giving up control. He sort of banged heads with the consultants a little bit.”
Stanley doesn’t deny either account, but says, “As a fam-ily, we did it right. My brothers and I understood that we were not the people to take the business any further—Scott was.”
That realization didn’t come easily, although several fac-tors pushed them toward it. Scott was the logical heir if they wanted to keep the company in the family. Steve had no children; Bert’s daughter was an infant at the time; and Scott’s sister, Stacie, had never gravitated toward the busi-ness. The decision was also fueled by the health problems the second-generation brothers were dealing with. Even though they were relatively young men, they didn’t want to be forced to concoct an ownership transition in a time of stress.
Still, implementation of the plan didn’t go forward smoothly. “The process was intense,” Scott says. “There were a lot of informal conversations among key employees outside the family, too. There were a lot of folks pushing for changes.”
a spontaneous trip to FloridaAt one point, Scott became so frustrated he simply walked away, leaving town one day without a word to anyone. “That demonstrated that if I couldn’t get their commit-ment, I wasn’t going to put my energy into it,” he explains. “I literally didn’t tell them where I was going, but I ended up on Bert’s doorstep in Florida.”
at one point, scott became so frustrated he simply
walked away, leaving town one day without a word to anyone.
He ended up on his uncle Bert’s doorstep in Florida.
From left: Steve, Bert, Harry and Stanley Livingston in a May 1977 photo. Harry sold the business to his sons in 1979. Bert acquired a small share; his brothers split the rest.
Founder Harry Livingston lost his parents in the Holocaust.
62 Family Business • March/April 2012
Bert had no advance warning. He recalls, “When I got home, there was his pickup truck in my driveway. That was the start of it.” The first thing he told Scott to do was call home and let his parents know where he was. “That week, he got a lot of exercise,” Bert says. “He bonded with my daughter and wife. We hung around and talked about things. It was more of a decompression period.” While Scott was there, Bert talked to his brothers about the significance of Scott’s move. “I asked them if they wanted to sell the com-pany to somebody else, or did they want Scott to have it?”
Scott says, “It was an important step in the process. When I came back, we had a better conversation.”
The tipping point finally came at a meeting with the consultants where every-one’s true feelings came out, according to Bert. “It was all just the family dy-namic that they couldn’t talk about and didn’t under-stand,” he says. “I brokered it.” Bert says he could play the role of neutral observer since his share of the com-pany was fairly small and he could be straight with everyone involved because they were family. “They were my brothers and I could say whatever I want,” he says. “I wasn’t a consultant, but I was never afraid to express my opinion.” After an emotional discussion, they accepted the plan and agreed to hire the consultants to help move the company forward.
The result was a 15-year buyout agreement—funded by the company’s growth—that put the firm completely in Scott’s hands. “The idea was to grow the business to fund the transition,” Scott says. “It satisfied [the elders’] estate planning needs and provided me with operating control so I could put it on a growth track.”
One key point Scott makes when talking about the transi-tion process: “It was a happy family at the beginning, and it still is.”
Significantly, Stanley and Steve didn’t retire. “They are officially VPs, but titles don’t mean anything to them,” Scott says. Stanley works in sales and customer service, and Steve does engineering projects. Scott’s mother still works part-time in accounting. “Their compensation was adjusted to reflect different responsibilities but to maintain their connection to the business,” Scott points out. “They benefited from the sale of the business, too.”
Having both men on staff full time is a big plus, accord-ing to Bert: “You need them. You can’t take my brother
Stanley, who knows every part number at Boeing, out of the picture. You can’t get 35 years’ worth of knowledge from new people.”
Steve adds, “We had confidence that, if Scott failed, we were both there to bail him out.”
That has not been necessary. When Scott took over on June 1, 2001, of course, no one anticipated the tragedy of 9/11 and how it would affect the aerospace industry. The company weathered the resultant recession, however, and Scott says, “by 2003 through 2009, things were fantastic.” The company has suffered a bit during the recent down-
turn but is still on track, Scott says.
As soon as he assumed control, Scott created a management team, gave them authority to make de-cisions, and put in systems he felt necessary to com-pete. In 2006, the company launched a manufacturing operation in Mexico to take advantage of substantially lower labor costs. A long-term strategic plan and capacity expansion for the East Hartford operation was initiated that year as well.
In 2009, Horst Medical was formed to produce components for multiple medical needs, including orthopedics, endos-copy, laparoscopy and spinal and trauma treatments.
Scott is an avid athlete and high-level competitor in en-durance-based team sports, especially cycling, a pursuit that he says adds to his energy and endurance as a man-ager. He’s also a runner, as is his wife, Deb, and the two of-ten run races with their five-year-old-son and two-year-old daughter in tow. The company sponsors Team Horst Sports, a road cycling team that competes around the world. In ad-dition, Horst Engineering is the title sponsor of the Horst-Benidorm-PRC Masters Cycling Team.
The company had a board of advisers at one time, but currently operates without one, according to Scott. He is very active in the Young Presidents’ Organization and con-siders many of his fellow members as advisers. His father and uncles are available to offer suggestions, too.
“My father was my mentor,” Scott says. “From him and my uncle, I learned the cultural values necessary to be an upstanding businessman.” nFB
Dave Donelson is a business journalist in West Harrison, N.Y., and the author of the Dynamic Manager guides and handbooks.
Bert, who owned only a small portion of the company and
didn’t work there, played the role of neutral observer.
Scott in a cycling race. The company sponsors a cycling team.
www.familybusinessmagazine.com 63
Do you spend too much time engrossed in Angry Birds, Words with Friends and other popular time-wasting iPad and iPhone apps? Two new family business-oriented apps, available free of
charge, offer an educational alternative.The Business Families Foundation—a Montreal-based
non-profit organization that develops and produces edu-cational programs for family business stake-holders worldwide—has made its collection of video and audio clips available on mobile devices via its free “BFF Videos for iPad” and “BFF Videos for iPhone” apps. The videos are also available on the foundation’s website, www.businessfamilies.org.
Among the BFF videos are conver-sations, most between three and six minutes long, with members of busi-ness families. In the professionally produced segments, the family mem-bers discuss topics such as succession, community service and the role of the next generation.
In a series of short films, for example, members of the Woodman family—own-ers of seafood restaurants in Essex, Mass., and Litchfield, N.H., under the third gen-eration of family leadership—describe the challenges they faced upon the death of the second-generation leader, who did not have an adequate succession plan, and how the fourth generation has been brought into the business. Another video stars the Basile family, owners of Catania-Spagna Corp. in Ayer, Mass., producers of olive and vegetable oils. Members of the family’s third and fourth generations discuss how each generation has leveraged what their predecessors have created. And in one of a series of clips featuring the Kotelko family—owners of Highland Feeders, cattlefeed lots in Alberta, Canada—Donna Kotelko, wife of co-owner Bern Kotelko, discusses her role as the family leader.
Other BFF videos available via the app feature inter-views with Harvard MBA students from family busi-nesses, insights from family business advisers, and information from the foundation’s affiliate centers at higher education institutions. The foundation plans to add new videos on a regular basis.
A family business gameAnother free BFF app—available for the iPad only—is a game designed for teenagers. Called “Journey, the Family Business Game,” the app uses photos from the National Geographic collection to get young people thinking about family business issues.
The initial version of the game—featuring multiple-choice questions and a segment in which players rearrange photos by dragging them across a screen—has some flaws. Some questions are too easy, and others focus on what the photos depict rather than on what a family stakeholder needs to know. A series of multiple-choice questions requires players to interpret the activities of family members shown in photos that could be considered ambiguous. (For example, is an
Icelandic family seated around a dining table “trying food samples from their farm” or “spending time together at a family lunch reunion”?)
BFF promises that a future ver-sion of the game will include more questions and enable teams and schools to compete against each other.
Multimedia venturesBFF was founded in 1990 by Philippe and Nan-b de Gaspé Beaubien, who perceived a need for more family business resources
and more venues for family business owners to discuss their concerns. Philippe de Gaspé Beaubien founded Telemedia, a Canadian company with holdings in radio, television and magazine publishing. The foundation also offers online courses and other educational programs.
At least at this stage of development, the videos are more effective than the game in achieving BFF’s objec-tive of sparking conversations among family members or between family business stakeholders and their peers in other companies. It will be interesting to see how the game evolves.
To find the apps, search for “Business Families Foundation” in the App Store or on iTunes. nFB
Family business apps for iPad, iPhone
toolbox
By BArBArA Spector
64 Family Business • March/April 2012
Directory oF ADvisers
Advisers for Family CompaniesFamily business centers, professional firms and financial institutions
serving family-owned businesses around the world. visit the Directory of Advisers page at www.familybusinessmagazine.com for these listings and website links.
ACADEMIC PROGRAMS/FAMIly BuSInESS CEntERS
Austin Family Business Program at Oregon State UniversityCollege of Business201 Bexell Hall Corvallis, OR 97331-2603p: 800-859-7609 f: 541-737-5388Dr. Sherri Noxel, Directorsherri.noxel@bus.oregonstate.eduwww.familybusinessonline.org
The Capital Region Family Business CenterA non-profit organization devoted to helping family businesses meet their unique needs through special educational workshops, round-table discussion groups and relationship building social events.
2443 Fair Oaks Boulevard #509Sacramento, CA 95825p: 916-481-0886Jim Sabraw, Executive [email protected]
Centenary College of Louisiana Frost School of Business2911 Centenary BoulevardShreveport, LA 71104p: 318-869-5149 f: 318-869-5139Dr. Chris Martin, Founder, [email protected]/family
Cox Family Enterprise Center Coles College of Business Kennesaw State University1000 Chastain Road, MD4900Kennesaw, GA 30144p: 770-423-6045 f: 770-423-6721Dr. Joseph H. Astrachan, Exec. Directorcfec@kennesaw.edufamilybusiness.kennesaw.edufamilybusinessmba.com
Delaware Valley Family Business Center, Telford, PASee listing under “Family Business Consultants.”
EMC Business Forum at San Diego State UniversityDriving the growth and development of closely-held and family businesses by offering one-on-one advising services, entrepreneurial coaching, workshops, retreats, resources and peer support.
5250 Campanile DriveSan Diego, CA 92182p: 619-594-4949 f: 619-594-8879Carmen Bianchi, [email protected]/emc
Family Business Alliance401 West Fulton Street274C DeVosGrand Rapids, MI 49504p: 616-331-6827Ellie Frey, [email protected]
Family Business Center of Loyola University Chicago820 North Michigan AvenueChicago, IL 60611p: 312-915-6490 f: 312-915-6495Andrew D. Keyt, Executive Director Anne Smart, Membership Director Erin Kuhn-Krueger Marketing & Programs Directorwww.luc.edu/fbc
Family Business Center University of St. ThomasSee listing under “Family Business Centers.”
Family Business Forum at King's CollegeThe William G. McGowan School of Business 133 North River StreetWilkes-Barre, PA 18711p: 570-208-5972 f: 570-208-5989Patrice R. Persico, [email protected]/fbf
Family Business Network USA (FBN-USA)820 North Michigan AvenueChicago, IL 60611p: 312-915-6490 f: 312-915-6495Andrew D. Keyt, Executive Director Anne Smart, Membership Director Erin Kuhn-Krueger Marketing & Programs Directorwww.luc.edu/fbc
Family Solutions GroupSee listing under “Family Business Consultants.”
www.familybusinessmagazine.com 65
Directory oF ADvisers
Families in Business: From Generation to GenerationTeaching best practices and principles of successful family companies
Harvard Business SchoolExecutive EducationSoldiers FieldBoston, MA 02163-9986p: 1-800-427-5577 or + 1-617-495-6555f: +1-617-495-6999Jacqueline Baugher, [email protected]
IEFB - Instituto de Empresas Familiares do Brasil & Family Business School®Sao Paulo, Brasilp: 0800 707 5887Hernan [email protected] www.familybusinessschool.com.br www.familybusinessmagazine.com.br
IMD Family Business Center, est. 1988 Family businesses from around the world come to IMD’s Global Family Business Center for the most relevant and up-to-date knowledge on how to deal with the highly specific and unique challenges they are facing. Leading the Family Business, the cornerstone of IMD’s family business programs, was launched in 1988, and it has since become world-renowned for providing advanced fundamentals and practice driven solutions for family businesses. It is a “must” for all members of business-owning families.
Ch. de Bellerive 23P.O. Box 915CH-1001 Lausanne, Switzerlandp: +41 21 6180329 f: +41 21 6180707Lise Moeller, Family Business [email protected]/gfbc
The Institute for Entrepreneurial Excellence University of Pittsburgh 1800 Wesley Posvar HallPittsburgh, PA 15260p: 412-648-1544 f: 412-648-1636Ann Dugan, Founder/Assistant [email protected]
Kellogg School of Management Center for Family EnterprisesExecutive Programs: “Governing Family Enterprises” March 4-8, 2012 October 7-11, 2012 “Leading Family Enterprises” May 6-10, 2012
2001 Sheridan Road, Room 5228Evanston, IL 60208p: 847-467-7855 f: 847-491-5747Professors John L. Ward, Lloyd E. Shefsky and Ivan Lansbergwww.familybusiness.kellogg.northwest-ern.edu
Northeastern University Center for Family Business101 Hayden HallBoston, MA 02115-5000p: 617-373-7031 f: 617-373-2056Ted Clark, Executive [email protected]
The S. Dale High Center for Family Business at Elizabethtown CollegeOne Alpha DriveElizabethtown, PA 17022-2298p: 717-361-1275Mike McGrann, Executive [email protected] http://sdalehighcenter.blogspot.com
Sauder School of Business Business Families Centre University of British Columbiap: 604-822-8611Angela Nielsen Marketing [email protected]/bfc
Stetson University Family Enterprise Center421 N. Woodland Blvd., Unit 8398Deland, FL 32723p: 386-822-7565 f: 386-822-7426Dr. Greg McCann, Program [email protected]/family
Tulane University Family Business CenterA.B. Freeman School of BusinessNew Orleans, LA 70118-5669p: 504-862-8482 f: 504-862-8902Rosalind G. Butler, Assistant [email protected]/fbc
UMass Family Business CenterContinuing & Professional Education100 Venture Way, Suite 201Hadley, MA 01035p: 413-545-4545 f: 413-545-3351Ira Bryck, [email protected]
The University of Chicago Booth School of Business450 N. Cityfront Plaza Drive, Suite 514Chicago, IL 60611p: 312-464-8732 f: 312-464-8731Mark Lewis, Associate [email protected]
The University of Illinois at Chicago Family Business Council815 West Van Buren Street, Suite 400Chicago, IL 60607p: 312-413-5433 f: 312-996-9988Judy Hogel, [email protected]
66 Family Business • March/April 2012
Directory oF ADvisers
University of San Diego Family Business Forum5998 Alcala ParkSan Diego, CA 92110-2492p: 619-260-4231 f: 619-260-5988Jodi Waterhouse, [email protected]/fbf
The University of Toledo Center for Family BusinessMS 103 ST-N 2200B2801 West Bancroft StreetToledo, OH 43606-3390p: 419-530-4058 f: 419-530-8497Debbe Skutch, [email protected]
University of Wisconsin-Madison Family Business Center601 University AvenueFluno CenterMadison, WI 53715-1035 p: 608-441-7338 f: 608-441-7337 Deb Houden, Ph.D., [email protected]://fbc.wisc.edu
Wake Forest University Family Business CenterOffice of Personal and Career Development
1834 Wake Forest Road Reynold Hall, Room 250CWinston-Salem, NC 27106p: 336-758-3568Kathy Baker, [email protected]://familybusiness.opcd.wfu.edu
Private Wealth Management Wharton Executive Education The Wharton SchoolAugust 15-20, 2010Steinberg Conference Center255 South 38th StreetPhiladelphia, PA 19104p: 215-573-0864 f: 215-386-4304Jen Gers, Director, Financial [email protected]://executiveeducation.wharton.upenn .edu/open-enrollment/finance-programs/private-wealth-management- program.cfm
Wisconsin Family Business Forum University of Wisconsin - Oshkosh800 Algoma BoulevardOshkosh, WI 54901p: 920-424-1541 f: 920-424-7413Donna Nelson, Assistant [email protected]
ACCOuntAntS
BBD, LLP1835 Market Street, 26th FloorPhiladelphia, PA 19103p: 215-567-7770 f: 215-567-6081Charles J. Bramley, CPA, Partner
Kreischer Miller100 Witmer Road, Suite 350Horsham, PA 19044p: 215-441-4600 (ext. 144)f: 215-672-8224Mario O. Vicari, Jr., CPA, [email protected]
Rothstein KassSee listing under “Family Business Consultants.”
APPRAISAl & VAluAtIOn FIRMS
American Fortune Mergers & AcquisitionsSee listing under “Mergers & Acquisitions.”
The Baker-Meekins Company, Inc.1404 Front AvenueLutherville, MD 21093p: 410-823-2600 f: 410-823-8455Ross Adams, CFA - [email protected]
Higgins, Marcus & Lovett, Inc.800 South Figueroa Street, Suite 710Los Angeles, CA 90017p: 213-617-7775 f: 213-617-8372Mark C. Higgins, [email protected]
Valuation Advisors, LLC2495 Kensington AvenueBuffalo, NY 14226p: 716-839-5290Brian Pearson, CPA/ABV/CFF/PFS, ASA [email protected]
AttORnEyS
Adams and Reese LLPFamily Business Succession Planning
424 Church Street, Suite 2700Nashville, TN 37219p: 615-259-1011 f: 615-780-4497Joe M. Goodman, [email protected]
Barnes & Thornburg LLP600 1st Source Bank Center 100 North Michigan Street South Bend, IN 46601p: 574-233-1171 f: 574-237-1125Nelson J. [email protected]
ACADEMIC PROGRAMS/ FAMILy BUSINESS CENTERS
CONTINuED FROM PREVIOuS PAGE
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Directory oF ADvisers
Emens & Wolper Law Firm, LPAOne Easton Oval, Suite 550Columbus, OH 43219p: 614-414-0888 f: 614-414-0898Bea Wolper [email protected] Dick [email protected]
Gould & Ratner LLP222 N. LaSalle Street, Suite 800Chicago, IL 60601p: 312-236-3003 f: 312-236-3241Steven Gustafson, [email protected]
Hemenway & Barnes LLP60 State Street, 8th FloorBoston, MA 02109p: 617-557-9771Susan P. MunafoBusiness Development [email protected]
Levin Schreder & Carey Ltd.Practice devoted to tax and charitable planning, trusts and estates, and related dispute resolution.
120 North LaSalle Street, 38th FloorChicago, IL 60602p: 312-332-6300 f: 312-332-6393www.levinschreder.comScott Bieber, [email protected] R. Carey, [email protected] M. Levin, [email protected] E. Lieberman, [email protected] Drey [email protected] J. Schneider, [email protected] L. Schreder, [email protected] Lee Turk, [email protected]
Locke Lord Bissell & Liddell111 South Wacker Drive Chicago, IL 60606-4410p: 312-443-0693 f: 312-896-6693David L. Kendall, [email protected]
Meltzer, Lippe, Goldstein & Breitstone, LLP190 Willis AvenueMineola, NY 11501p: 516-747-0300 x232 f: 516-747-2956Jeffrey A. [email protected]
Pierce Atwood LLPOne New Hampshire Avenue, Suite 350Portsmouth, NH 03801p: 603-433-6300 f: 603-433-6372Wilfred L. “Jack” Sanders, Jr., [email protected]
Reed Smith LLP2500 One Liberty Place1650 Market StreetPhiladelphia, PA 19103p: 215-851-8132 f: 215-851-1420Joseph M. Sedlack, [email protected]
Withers Bergman LLP430 Park AvenueNew York, NY 10022p: 212-848-9800 f: 212-848-9888Justin M. Zamparelli, Esq., [email protected]
BIOGRAPhERS & hIStORIAnS
Heritage Publishers, Inc.3217 E. Shea Boulevard, Suite 420Phoenix, AZ 85028p: 800-972-8507 f: 602-277-1659Lorrie Myers Maddux, President & OwnerJohn Myers, [email protected]
Memoirs Productions5553 Queen Mary, #17Montreal, QC Canada H3X 1W1p: 866-481-9303 f: Call firstIris Wagner, Founder & [email protected]
Reel TributesPhiladelphia, PAp: 267-217-3355David Adelman, [email protected]
BuSInESS & EStAtEPlAnnInG COnSultAntS
Coyote Financial, Inc.28039 North 95th StreetScottsdale, AZ 85262p: 480-905-3260 f: 480-998-6925John A. House, President and Chief Executive [email protected]
Hemenway & Barnes LLPSee listing under “Attorneys.”
Educate your clients and market your services with reprints of Family Business Magazine articles.
Contact Barbara Wenger at [email protected]
or (215) 405-6072.
68 Family Business • March/April 2012
Directory oF ADvisers
Predictable Futures Inc. - The Business Family CenterSee listing under “Family Business Consultants.”
Rothstein KassSee listing under “Family Business Consultants.”
BuSInESS DEVElOPMEnt ADVISORS
Industrial VisionsBusiness development advisors to small-to-medium sized, closely-held and family-owned firms.
200 East Big Beaver RoadTroy, MI 48083p: 248-457-4505 f: 248-524-4914Gary M. Giallonardo, [email protected]
BuSInESS ExIt PlAnnInG
American Fortune Mergers & AcquisitionsSee listing under “Mergers & Acquisitions.”
Brandywine Mergers & Acquisitions, LLCSee listing under “Mergers & Acquisitions.”
The DAK GroupSee listing under “Investment Banking Firms.”
Hemenway & Barnes LLPSee listing under “Attorneys.”
Kreischer MillerSee listing under “Accountants.”
Predictable Futures Inc. - The Business Family CenterSee listing under “Family Business Consultants.”
Rothstein KassSee listing under “Family Business Consultants.”
BuSInESS PERFORMAnCE
CFAR, Inc.See listing under “Family Business Consultants.”
Continuity Family Business ConsultingSee listing under “Family Business Consultants.”
ReGENERATION Partners LLCSee listing under “Family Business Consultants.”
CEO PEER GROuPS
Family Business Center of Loyola University ChicagoSee listing under “Academic Programs/ Family Business Centers.”
Family Business Network USA (FBN-USA)See listing under “Academic Programs/ Family Business Centers.”
The University of Illinois at Chicago Family Business CouncilSee listing under “Academic Programs/ Family Business Centers.”
COMMunICAtIOnS AnD PuBlIC RElAtIOnS
The Dilenschneider Group200 Park Avenue26th FloorNew York, NY 10166p: 212-922-0900 f: 212-922-0971Robert L. Dilenschneiderwww.dilenschneider.com
COnFlICt MAnAGEMEnt
Continuity Family Business ConsultingSee listing under “Family Business Consultants.”
The Family Business Consulting Group, Inc.See listing under “Family Business Consultants.”
John G. Wofford, Esq.See listing under “Mediation.”
CROSS-GEnERAtIOnAl lEGACy PlAnnInG
Hemenway & Barnes LLPSee listing under “Attorneys.”
DVD lEGACIES
Memoirs ProductionsSee listing under “Biographers & Historians.”
ExECutIVE COAChInG
Executive AdvisorsSee listing under “Family Business Consultants.”
FamilyBusinessCoach.TV4144 N. 44th Street, Suite FPhoenix, AZ 85018p: 602-952-9015 f: 602-955-1989Pete Walsh, Master Certified [email protected]
Predictable Futures Inc.- The Business Family CenterSee listing under “Family Business Consultants.”
Unifi CoachingProfessional Life and Leadership Coaching for individuals, teams, and businesses.
Philadelphia, PAp: 610-324-0985Christin Cardone McClave
ExECutIVE REtAInED SEARCh
The Rankin Group Ltd.See listing under “Family Office Management & Search Consultants.”
S.E. Weinstein Company1830 Second Avenue, Suite 240Rock Island, IL 61201p: 800-258-1701/309-794-1992f: 309-794-1993Denise Winston Director Corporate [email protected]
BUSINESS & ESTATE PLANNING CONSULTANTS
CONTINuED FROM PREVIOuS PAGE
www.familybusinessmagazine.com 69
Directory oF ADvisers
FAMIly & BuSInESS PhIlAnthROPy
Family Solutions GroupSee listing under “Family Business Consultants.”
Fitzpatrick & Francis Family Business Continuity FoundationP.O. Box 4815Topeka, KS 66604-0815p: 785-273-8500 f: 785-273-8768Jack Fitzpatrick, PresidentJackFitz@FamilyBizFoundation.orgwww.familybizfoundation.org
Hemenway & Barnes LLPSee listing under “Attorneys.”
Predictable Futures Inc. - The Business Family CenterSee listing under “Family Business Consultants.”
FAMIly BuSInESS & WEAlth MEDIAtIOn
Continuity Family Business ConsultingSee listing under “Family Business Consultants.”
Relative Solutions, LLCSee listing under “Family Business Consultants.”
Upchurch Watson White & Max Family Business & Wealth Mediation GroupOffices in Daytona Beach, Orlando, Miami and Birminghamp: 800-863-1462Gerald Le Van, Chair Michelle Jernigan, Richard Lord, Co-Chairswww.uww-adr.com
FAMIly BuSInESS CEntERS
The Capital Region Family Business CenterSee listing under “Academic Programs/ Family Business Centers.”
Conway Center for Family Business Ohio Dominican University1216 Sunbury RoadColumbus, OH 43219p: 614-253-4820Deana Gordon, Associate [email protected] Emens, Executive [email protected]
EMC Business Forum at San Diego State UniversitySee listing under “Academic Programs/ Family Business Centers.”
Family Business Center of Loyola University ChicagoSee listing under “Academic Programs/ Family Business Centers.”
Family Business Center University of St. Thomas1000 LaSalle Ave SCH435Minneapolis, MN 55403-2005p: 651-962-4252 f: 651-962-4180Dr. Ritch Sorenson, Opus Endowed Chair in Family [email protected]
Family Business Network USA (FBN-USA)See listing under “Academic Programs/ Family Business Centers.”
Predictable Futures Inc.- The Business Family CenterSee listing under “Family Business Consultants.”
FAMIly BuSInESS COnSultAntS
Adams and Reese LLPSee listing under “Attorneys.”
Allomet Partners, LLCBetter decisions create opportunity. Assisting families, management and directors to raise capital, develop strategy, plan for growth, facilitate transitions.
330 Madison Avenue, 6th FloorNew York, NY 10017p: 212-580-2489 f: 212-505-6339Gary Brooks, [email protected] Solomon, [email protected]
Aspen Family Business Group, LLCLeslie Dashew, M.S.W. Joe Paul, M.S. Bill Roberts, CLu, ChFC Terri L. Bennink, Psy.D.
David Bork, Founder Emeritus
Fort Worth, TX 76107p: 866-442-7736 f: 817-735-4142info@aspenfamilybusiness.comwww.aspenfamilybusiness.com
William E. Roberts, Jr. Auctoris5350 S. Roslyn Street, Suite 310Greenwood Village, CO 80111p: [email protected]
James E. BarrettManaging Director, Cresheim, Inc. Business planning, management development, organization and selection, and “people problems.”
8315 Flourtown AvenueWyndmoor, PA 19038p: [email protected]
Terri L. Bennink, Psy.D. Bennink Consulting7410 SW Oleson RoadPortland, OR 97223p: [email protected]
70 Family Business • March/April 2012
Directory oF ADvisers
Carmen Bianchi Family Business Associates14758 Caminito Punta ArenasDel Mar, CA 92014p: 858-793-2445 or 858-922-3155Carmen Bianchi, Principalcbianchi@familybizconsulting.comwww.familybizconsulting.com
David BorkP.O. Box 4300Basalt, CO 81621p: [email protected]
Business Consulting Resources, Inc.Working with Hawaii Family Businesses since 1981
116 South Hotel Street, Suite 204Honolulu, HI 96813p: 808-545-4111 f: 808-522-8935Ken Gilbert, Senior Consultant/[email protected]
Center for Family Business DynamicsFamily businesses in transition, succession-conflict solutions.
105 E. De La Guerra Street, #2Santa Barbara, CA 93101p: 805-892-2357Ralph M. Daniel, Ph.D., Family Business [email protected]
CFAR, Inc.CFAR knows family businesses. For 25 years, we’ve helped clients meet their future with innovative plans for strategy, succession, governance and organizational development, keeping the best of their culture intact.
Four Penn Center1600 John F. Kennedy Boulevard, Suite 600Philadelphia, PA 19103p: 215-320-3200 f: 215-320-3204Ms. Nancy Drozdow, [email protected] Massachusetts Avenue, Suite 330Cambridge, MA 02138p: 617-576-1166 f: 617-576-3015Ms. Debbie Bing, [email protected]
Continuity Family Business ConsultingHelping business and family benefit through wealth creation, personal and professional growth, and family harmony. Specialists in managing conflict when continuing relationships matter.
900 Cummings Center, Suite 413TBeverly, MA 01915p: 1-978-925-5149 f: 978-964-0541Doug Baumoel, [email protected]
Leslie Dashew Human side of enterprise21839 North 98th StreetScottsdale, AZ 85255p: 480-419-4243ldashew@gmail.comwww.aspenfamilybusiness.comwww.lesliedashew.com
Thomas D. Davidow & Associates183 Gardner RoadBrookline, MA 02445p: 617-739-2868 f: 617-739-7221Thomas Davidow, Ed.D., PrincipalCynthia Adams, Ed.D., LICSW, [email protected]
de Visscher & Co.de Visscher & Co. is a fully integrated financial consulting, investment banking and private equity firm serving the capital and liquidity needs of closely-
held and family owned companies. The company identifies, analyzes and implements financial solutions and shareholder value creation strategies for business owning families and family offices. Family Capital Partners was established by de Visscher & Co. as a conduit for long-term equity capital from Family Offices and patient capital investors, and growing Family Owned Companies looking for trustworthy, value-added and like-minded capital partners. “Families Investing in Families”.
Two Greenwich Office ParkGreenwich, CT 06831p: 203-629-6500 f: 203-629-6547Francois de Visscher; James A. [email protected] [email protected]
Delaware Valley Family Business Center
Our unique approach, The Lasting Legacy Process™, provides the direction, confidence, and tools to business
families as they prepare for generations of success. We nurture competent, committed next generation leaders, build robust companies, grow healthy adult family relationships, and develop appropriate governance structures. Ask about our Leadership Labs, peer groups which provide guidance, accountability, and outside perspectives to presidents and next generation family leaders.
340 N. Main Street Telford, PA 18969p: 215-723-8413 f: 215-723-8351Sally Derstine, Managing [email protected]
Dohr Family Business Consulting“Building Value and Harmony to Family Businesses in Transition.”
11324 47th Street Court EastEdgewood, WA 98372p: 253-863-9147 f: 253-987-7098Dr. Ronald M. [email protected]
FAMILy BUSINESS CONSULTANTSCONTINuED FROM PREVIOuS PAGE
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Directory oF ADvisers
EisnerAmper LLP750 Third AvenueNew York, NY 10017p: 212-891-4087Timothy Speiss, [email protected]
executiveadvisors
Executive Advisors301 North Canon Drive, Suite 313Beverly Hills, CA 90210p: 310-553-0442 f: 310-553-3009Lilli Friedland, Ph.D. President
Beth, Executive [email protected]
The Family Business Consulting Group, Inc.We help family businesses explore solutions to family business issues, decide on the best course of action, and implement plans that will help the family business succeed for generations. Our team of more than twenty consultants includes specialists in all areas of family business, including succession planning, family meetings, governance issues, psychology, team building, communications, finance, conflict resolution, strategic planning and family business education.
2835 N. Sheffield Avenue, Suite 237Chicago, IL 60657p: 888-421-0110Drew Mendoza, Managing [email protected]
The Family Business Institute, Inc.4700 Homewood Court, Suite 340Raleigh, NC 27609p: 877-326-2493 f: 919-783-1892Wayne Rivers, Presidentinfo@familybusinessinstitute.comwww.familybusinessinstitute.com
Family Solutions GroupA unique firm focusing on the emotional complexities of family businesses and significant wealth.
255 South 17th Street, Suite 2710Philadelphia, PA 19103p: 215-985-9881 f: 215-985-9805Edward P. Monte, Ph.D., Principalemonte@familysolutionsgroup.netwww.familysolutionsgroup.net
Fitzpatrick & Francis Family Business Continuity FoundationSee listing under “Family & Business Philanthropy.”
Dean Fowler Associates, Inc.200 S. Executive Drive, Suite 101Brookfield, WI 53005p: 262-271-5979Dean R. Fowler, Ph.D., [email protected]
The Frankenberg Group800 Compton Road, Suite 27Cincinnati, OH 45231p: 513-729-1511Ellen Frankenberg, Ph.D., Managing [email protected]
Henning Family Business Center1006 North Pembroke Court Effingham, IL 62401p: 217-342-3728Mike Henning, [email protected]
Jane Hilburt-Davis, President Key Resources, LLC75 Cambridge Parkway #E808Cambridge, MA 02142p: 617-577-0044j.hilburtdavis@comcast.netwww.familybusinessconsulting.com
Dennis T. Jaffe, Ph.D.764 Ashbury StreetSan Francisco, CA 94117p: 415-665-8699Dennis T. Jaffe, [email protected]
Lansberg, Gersick & Associates100 Whitney Avenue, Suite 1New Haven, CT 06510p: 203-497-8855 f: [email protected]
The Legacy Associates, LLC700 Twelve Oaks Center Drive, Suite 262 Wayzata, MN 55391p: 763-475-9353Allen Bettis, Principalallen.bettis@legacyassociates.comwww.legacyassociates.com
Legasus Group, LC121 N. Mead, Suite 109Wichita, KS 67202p: 316-681-0444 f: 316-681-0589Clemens H. [email protected] Simmering
McNabb AdvisorsInnovative approach advising Affluent Families and their Businesses. Enhancing communication and decision-making (governance); designing architecture for future generations (succession and leadership); continuing family legacy; resolving family relationship issues; Mentor in preparation of next generation and advisor to family offices.
3333 Lee Parkway, Suite 600Dallas, TX 75219p: 214-665-9494 f: 214-665-9493Jerry McNabb, [email protected]
Joe Paul, MS J. Paul Consulting4025 SW 6th Avenue DrivePortland, OR 97239p: [email protected]
Pervin Family Business Advisors Inc.The Canadian leader in the resolution of complex family enterprise and ownership situations and business family relationships — for business families and accidental partnerships™ who demand results, not recommendations.®
94 Cumberland Street, Suite 604Toronto, Ontario M5R 1A3 Canadap: +1-416-360-0177 m: +1-416-801-3200 skype: aron.pervin
Aron Pervin, CMC, ICD.D, [email protected]
72 Family Business • March/April 2012
Directory oF ADvisers
Predictable Futures Inc.- The Business Family Center10104 103rd Avenue, Suite 1211Edmonton, AB T5J 0H8, Canadap: 780-702-2499 f: 780-428-1410Gordon Wusyk, Presidentsolutions@predictablefutures.comwww.predictablefutures.com
Reece & Associates, PA800 East Washington Street, Suite CGreenville, SC 29601p: 864-233-6648 f: 864-233-3706Ronald C. Reece, [email protected]
ReGENERATION Partners LLCOffices in Dallas,TX Raleigh, NC and Scottsdale, AZ
3811 Turtle Creek BoulevardSuite 300Dallas, TX 75219p: 800-406-1112James Olan Hutchesonjim@regeneration-partners.comwww.regeneration-partners.com
Relative Solutions, LLCWe collaborate with multi-generational families and their businesses to: • Create systems to facilitate shared governance • Design and implement succession plans • Design and implement transition plans • Empower next generation leadership
p: 201-385-5104 f: 201-385-5017Fredda Herz Brown, Ph.D. Fran Lotery, Ph.D. Carolyn D. Greenspon, MSW, Associate Kathryn D. Linden, MSW, Associate Ilene Weingarten, MA, MFT, [email protected]
Edward Rosenfeld, Family Business Consultant
Guiding Family Business, From now to nextTakes collaborative approach and pairs up as a team with other key advisors who have complementary skills and knowledge. This assures that best practices are used and ensures quality and perspective is always maintained.
2578 Broadway, Suite 116New York, NY 10025p: [email protected]
Rothstein Kass1350 Avenue of the AmericasNew York, NY 10019p: 212-997-0500 f: 212-730-6892Paul H. Rich, CPA, CM&AA, Principal [email protected]
Transition Consulting Group, Ltd17 Gryzboska CircleFramingham, MA 01702p: 508-875-7751Paul I. Karofsky, Founder & CEODavid M. Karofsky, [email protected]
Transition Dynamics Inc.101 Venice Avenue WestSuite 22Venice, FL 34285p: 941-480-1119 f: 941-488-8465Bonnie B. Hartley, [email protected]
Working Systems, Inc.4545 42nd Street, Suite 201Washington, DC 20016p: 202-244-6481 f: 202-812-1449Kathy Wiseman, [email protected] L. Rubinfeld, [email protected]
FAMIly BuSInESS DynAMICS
Family Business Center of Loyola University ChicagoSee listing under “Academic Programs/ Family Business Centers.”
Family Business Network USA (FBN-USA)See listing under “Academic Programs/ Family Business Centers.”
Family Solutions GroupSee listing under “Family Business Consultants.”
thE FAMIly BuSInESS nEtWORk
The Family Business Network23 chemin de Bellerive - P.O. Box 915Lausanne 1001 Switzerlandp: +41 21 618 0605 f: +41 21 560 42 25Olivier de Richoufftz, Executive [email protected]
FAMIly BuSInESS SPECIAlIStS
Hemenway & Barnes LLPSee listing under “Attorneys.”
Relative Solutions, LLCSee listing under “Family Business Consultants.”
FAMIly OFFICE MAnAGEMEnt & SEARCh COnSultAntS
The Rankin Group Ltd.A national executive search and organizational development firm for Wealth Management organizations, Single/Multi-Family Offices, Family Businesses. Focus on family office assessment and management; talent evaluation and management team development; and executive search.
P.O. Box 1120Lake Geneva, WI 53147p: 262-248-5005 f: 262-248-6035M.J. Rankin, [email protected]
FAMIly WEBSItES & IntRAnEtS
TrustedFamilyTrustedFamily provides secure family websites & intranets.
Rue Provinciale 621301 Wavre, Belgiump: +32 473 378 323Edouard Thijssen, [email protected]
FInAnCIAl SERVICES
Coyote Financial, Inc.See listing under “Business & Estate Planning Consultants.”
FAMILy BUSINESS CONSULTANTSCONTINuED FROM PREVIOuS PAGE
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Directory oF ADvisers
The Haverford Trust CompanySee listing under “Wealth Management.”
Wilmington TrustWilmington Trust provides comprehensive financial services including commercial banking, investment management, fidu-ciary & planning, private banking services to family-owned business owners and other professionals.
Wilmington Trust CompanyRodney Square North1100 N. Market StreetWilmington, DE 19890-0001p: 302-651-1204Brian D. Bailey, Vice President and Delaware Market [email protected]
Wilmington Trust FSB, Pennsylvania797 E. Lancaster AvenueVillanova, PA 19085-1598p: 610-520-1458Jeffrey J. Culp, [email protected]
Wilmington Trust FSB, MarylandHarborplace Tower111 South Calvert Street, Suite 2620Baltimore, MD 21202-6120p: 410-468-3071Jack E. Steil, [email protected]
Wilmington Trust FSB, New Jersey902 Carnegie Center, Suite 460Princeton, NJ 08540-6530p: 609-395-9052Sean S. Murray, [email protected]
GOVERnAnCE
Continuity Family Business ConsultingSee listing under “Family Business Consultants.”
The Family Business Consulting Group, Inc.See listing under “Family Business Consultants.”
Hemenway & Barnes LLPSee listing under “Attorneys.”
The Legacy Associates, LLCSee listing under “Family Business Consultants.”
InSuRAnCE SERVICES
Coyote Financial, Inc.See listing under “Business & Estate Planning Consultants.”
InVEStMEnt BAnkInG FIRMS
The DAK Group195 Route 17 SouthRochelle Park, NJ 07662p: 201-712-9555 f: 201-712-9557Alan J. Scharfstein, [email protected]
de Visscher & Co.See listing under “Family Business Consultants.”
Dresner PartnersMergers & Acquisitions, Financings, Corporate Finance Advisory and Valuations
20 North Clark Street, Suite 3550Chicago, IL 60602p: 312-726-3600 f: 312-726-7448Stephen Mullin, Director of Information & New Business [email protected]
MidMarket Capital Advisors, LLCGood advice based on current market knowledge and depth of resources.
1629 Locust StreetSuite 400Philadelphia, PA 19103p: 215-875-8201 f: 215-875-8186Patrick Hurley, Managing [email protected]
lEADERShIP DEVElOPMEnt
Executive AdvisorsSee listing under “Family Business Consultants.”
Family Business Center of Loyola University ChicagoSee listing under “Academic Programs/ Family Business Centers.”
FamilyBusinessCoach.TVSee listing under “Executive Coaching.”
About this Service DirectoryA basic listing in this service Directory costs $350 (same ad copy for five
issues). subscribers to Family Business Magazine receive the discounted
rate of $250. Firms wishing to supplement their basic listing pay an
additional charge of $20 per word for the enhanced portion of their
listing. changes to a firm’s directory listing prior to the annual renewal
date cost $25 per item changed.
readers can view the websites of firms listed here by accessing
their listings on the Directory of Advisers page of the Family Business
website: www.familybusinessmagazine.com. Family Business makes no
independent evaluation of the firms or their services.
Add your logo to your listing! cost is $100 for color; $50 for black
and white.
For information, contact Barbara A. Wenger at (800) 637-4464, ext.
6072 or [email protected].
74 Family Business • March/April 2012
Directory oF ADvisers
Family Business Network USA (FBN-USA)See listing under “Academic Programs/ Family Business Centers.”
Bruce Johnsen & Associates824 Munras Avenue, Suite GMonterey, CA 93940p: 831-373-5969 f: 831-373-4604Bruce [email protected]
Predictable Futures Inc.- The Business Family CenterSee listing under “Family Business Consultants.”
Relative Solutions, LLCSee listing under “Family Business Consultants.”
The University of Illinois at Chicago Family Business CouncilSee listing under “Academic Programs/ Family Business Centers.”
MAnAGEMEnt COnSultInG
Executive AdvisorsSee listing under “Family Business Consultants.”
MEDIAtIOn
John G. Wofford, Esq.13 Cottage StreetCambridge, MA 02139p: 617-661-3200 f: 617-661-3201John Wofford, Sole [email protected]
MERGERS & ACQuISItIOnS
American Fortune Mergers & AcquisitionsMaximizing Business Value — Transferring Business Success
505 Third Street, Suite 301Louisville, KY 40202p: 502-244-0480 x24 f: 502-244-6360Brian Mazar, [email protected]
Brandywine Mergers & Acquisitions, LLC645 Swedesford RoadMalvern, PA 19355p: 610-408-0554Frank Michel, [email protected]
The DAK GroupSee listing under “Investment Banking Firms.”
Dresner PartnersSee listing under “Mergers & Acquisitions.”
Kreischer MillerSee listing under “Accountants.”
MidMarket Capital Advisors, LLCSee listing under “Investment Banking Firms.”
Rothstein KassSee listing under “Family Business Consultants.”
MultI-FAMIly OFFICE
Century Wealth Management1770 Kirby Parkway, Suite 117Memphis, TN 38138p: 901-850-5532 f: 901-682-1822Jay Healy, [email protected]
Private Counsel Group1170 Peel Street, Suite 300Montreal Quebec H9W 5S2 Canadap: 514-985-4052 f: 514-985-1853Mark W. AugerVice-President, Managing Partnermark.auger@gcp.desjardins.comwww.gestionpriveedesjardins.com/index.jsp?langue=en
Family Wealth Collective200 East Randolph St., Suite 2400Chicago, IL 60601p: 312-540-9840 f: 312-269-2895Teresa Cherry, CFP, CM&AA, Principaltcherry@familywealthcollective.comwww.familywealthcollective.com
Asset Management & Family OfficeOne Tower Bridge100 Front Street, Suite 1111West Conshohocken, PA 19428p: 610-341-3900 f: 610-341-9455Stephen Kitching, Managing [email protected]
Hemenway & Barnes LLPSee listing under “Attorneys.”
Laird Norton Tyee801 Second Avenue, Suite 1600Seattle, WA 98104p: 206-464-5265 f: 206-464-5268Patti Dill, Director of Wealth [email protected]
PitcairnA leader in the multi-family office serving multi-generational families and single family offices. Providing investments, comprehensive planning, fiduciary, wealth administration and customized education services and administration services, filling one need or providing a customized suite of solutions.
One Pitcairn Place, Suite 3000165 Township Line RoadJenkintown, PA 19046-3593p: 800-211-1745 f: 215-881-6092Rebecca Meyer, Managing [email protected] www.pitcairn.com
LEADERSHIP DEVELOPMENT CONTINuED FROM PREVIOuS PAGE
www.familybusinessmagazine.com 75
Directory oF ADvisers
Threshold Group3025 Harborview DriveP.O. Box 2358Gig Harbor, WA 98335Two Liberty Place50 South 16th Street, Suite 3525Philadelphia, PA 19102Christopher J. Phillips, Managing Director Marketing & Communicationsp: [email protected]
Wilmington Family OfficeWilmington Family Office provides sophisticated interdisciplinary advice and customized family office services to preserve the lifestyles and legacies of ultra-affluent families.
Rodney Square North1100 North Market StreetWilmington, DE 19890-2800p: 302-651-8151Jack P. Garniewski, CPA/PFS, CFPManaging Partner, Wilm. Family Officejgarniewski@wilmingtonfamilyoffice.comwww.wilmingtonfamilyoffice.com
ORGAnIzAtIOnS
Center City Proprietors Association1528 Walnut Street, Suite 910Philadelphia, PA 19102p: 215-545-7766 f: 215-545-3634Shannon Fulforth, Membership Coordinatorccpa@centercityproprietors.orgwww.centercityproprietors.org
Family Business Center of Loyola University ChicagoSee listing under “Academic Programs/ Family Business Centers.”
Family Business Network USA (FBN-USA)See listing under “Academic Programs/ Family Business Centers.”
National Funeral Directors AssociationNFDA is the worldwide resource and advocate dedicated to high ethical standards and helping members provide meaningful service to families.
13625 Bishop’s DriveBrookfield, WI 53005p: 800-228-6332 f: 262-789-6977Barbara Gamez, Marketing [email protected]
PRIVAtE EQuIty CAPItAl
Gen Cap America40 Burton Hills Blvd., Suite 420Nashville, TN 37215p: 615-256-0231 f: 615-256-2487Chris Godwin, Senior Vice [email protected]
High Street Capital11 South LaSalle, 5th FloorChicago, IL 60603p: 312-423-2650 f: 312-423-2655Joe Katcha, [email protected]
River Associates Investments, LLC633 Chestnut Street, Suite 1640Chattanooga, TN 37450p: 423-755-0888 f: 423-755-0870Mark Jones, [email protected]
SuCCESSIOn PlAnnInG
Capital Advisors Ltd.See listing under “Wealth Management.”
Continuity Family Business ConsultingSee listing under “Family Business Consultants.”
Coyote Financial, Inc.See listing under “Business & Estate Planning Consultants.”
Executive AdvisorsSee listing under “Family Business Consultants.”
Family Business Center of Loyola University ChicagoSee listing under “Academic Programs/ Family Business Centers.”
The Family Business Consulting Group, Inc.See listing under “Family Business Consultants.”
Family Business Network USA (FBN-USA)See listing under “Academic Programs/ Family Business Centers.”
Don’t miss the opportunity to place your listing in our next
Directory of Advisers. Deadline is March 6, 2012
for the May/June issue (Mails April 2012).
E-MAIl: [email protected] OR call (215) 405-6072
76 Family Business • March/April 2012
Directory oF ADvisers
Hemenway & Barnes LLPSee listing under “Attorneys.”
Kreischer MillerSee listing under “Accountants.”
McNabb AdvisorsSee listing under “Family Business Consultants.”
Predictable Futures Inc. - The Business Family CenterSee listing under “Family Business Consultants.”
ReGENERATION Partners LLCSee listing under “Family Business Consultants.”
WEAlth MAnAGEMEnt
Capital Advisors Ltd.Worth Magazine’s “Nation’s Most Exclusive Wealth Advisors” - Six Consecutive Years.
1115 Tower East20600 Chagrin BoulevardShaker Heights, OH 44122p: 888-295-7908 toll free; p: 216-295-7900 f: 216-295-8300Neil R. Waxman, Managing [email protected]
Coyote Financial, Inc.See listing under “Business & Estate Planning Consultants.”
EisnerAmper LLPSee listing under “Family Business Consultants.”
The Haverford Trust CompanyThree Radnor Corporate Center, Suite 450Radnor, PA 19087p: 888-995-5995 f: 610-995-8796Joseph J. McLaughlin, Jr., Chairman & [email protected]
Laird Norton TyeeSee listing under “Multi-Family Office.”
PitcairnSee listing under “Multi-Family Office.”
Spruce Private Investors, LLC2970 Peachtree Road, N.W. Suite 265Atlanta, GA 30305p: 404-961-0006 f: 203-428-2628Courtlandt B. Ault, [email protected]
Threshold GroupSee listing under “Multi-Family Office.”
Wilmington TrustWilmington Trust provides comprehensive financial services including commercial banking, investment management, fidu-ciary & planning, private banking services to family-owned business owners and other professionals.
Wilmington Trust CompanyRodney Square North1100 N. Market StreetWilmington, DE 19890-0001p: 302-651-1204Brian D. Bailey, Vice President and Delaware Market [email protected]
Wilmington Trust FSB, Pennsylvania797 E. Lancaster AvenueVillanova, PA 19085-1598p: 610-520-1458Jeffrey J. Culp, [email protected]
Wilmington Trust FSB, MarylandHarborplace Tower111 South Calvert Street, Suite 2620Baltimore, MD 21202-6120p: 410-468-3071Jack E. Steil, [email protected]
Wilmington Trust FSB, New Jersey902 Carnegie Center, Suite 460Princeton, NJ 08540-6530p: 609-395-9052Sean S. Murray, [email protected]
SUCCESSION PLANNINGCONTINuED FROM PREVIOuS PAGE
Benchmark Email. . . . . . . . . . . . . page 13 www.Benchmarkemail.com
Bessemer Trust . . . . . . . . . . . . . . . . .page 3 www.bessemertrust.com
David Bork. . . . . . . . . . . . . . . . . page wm10 www.davidbork.com
DrinkerBiddle . . . . . . . . . . . . . . . . page 21 www.drinkerbiddle.com
EisnerAmper . . . . . . . . . . . . . . . page wm8 www.eisneramper.com
Family Business Consulting Group . . . . . . . . . . . . InsIde front cover www.efamilybusiness.com
Family Firm Institute . . . . . . . . . page 27 www.ffi.org
Family Office Wealth Management Forum. . . . . . . page 15 www.iifamilyofficeforum.com
Foundation Fighting Blindness page 43 www.blindness.org
GKFO LLC . . . . . . . . . . . . . . . . . . . page wm6 [email protected]
Glenmede . . . . . . . . . . . . . . . . . . page wm7 www.glenmede.com
Harris myCFO. . . . . . . . . . . . . . . . . . .page 9 www.harrismycfo.com
Harris Private Bank. . InsIde back cover www.harrisprivatebank.com
Hawthorn . . . . . . . . . . . . pages wm4-wm5 www.hawthorn.pnc.com
Hemenway & Barnes LLP . . . . . .page 7 www.hembar.com
Heritage Publishers . . . . . . . . . . page 29 www.HeritagePublishers.com
Pitcairn . . . . . . . . . . . . . . . pages wm2-wm3 www.pitcairn.com
Prowell Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . page wm9 www.prowell-financial.com
PwC . . . . . . . . . . . . . . . . . . . . . . . . back cover www.pwc.com/us/private
Saul Ewing LLP . . . . . . . . . . . . . . . page 11 www.saul.com
Stetson university . . . . . . . . . . . . .page 5 www.stetson.edu/fec
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More than a century ago, New England pharma-cist James P. Whitters invented a nasal irri-
gant to treat colds, allergies and sinus problems. Today James (Jim) Whitters III, who kept the small family business alive to honor his grandfather, is sniffing out new dis-tribution outlets in response to a spike in demand. The nasal rinse, called Alkalol, has been sold at CVS stores (in the pharmacy department) since 2010. It is also available online at CVS.com, Amazon.com, Drugstore.com and Walgreens.com, and at regional chains such as Bartell Drugs, Harmon Stores and USA Drug.
In 1896 the first James Whitters developed Alkalol in the attic of the Taunton, Mass., drugstore where he worked. “He encountered doctors who complained that all the nasal irrigation products on the market at that time had too much alcohol or glycerin,” says Jim, a retired lawyer.
Nasal irrigation has been used for centuries to flush mucus and irritants out of the sinus cavity. But ingredi-ents used in irrigation products in the 1890s caused the nasal passages to dry out and become susceptible to bacteria, explains Jim, 72. James P.’s product is a formulation of essential oils, extracts and salts with antiseptic and antifungal properties and only a trace amount of alcohol. Jim’s son, James Whitters IV, describes it as “saline rinse 2.0.”
Interest in sinus rinses has skyrock-eted since 2007, when medical com-mentator Dr. Mehmet Oz discussed the benefits of neti pots and nasal rinses on an Oprah appearance.
While The Alkalol Company has benefited from the publicity, it has had to compete with larger compa-nies. “Five or six years ago you would go into a [chain drugstore] and their
sinus rinse category would be maybe one product or two products,” says James, 40, the company’s vice presi-dent. “It’s now six feet long.”
“It frustrates me that Alkalol isn’t up there,” says Jim’s daughter Katie Vaughn, “but it’s because we’re com-peting with these huge [pharmaceu-tical] companies, and they can get shelf space much more easily than
we can.” Jim and his son and daugh-ter are The Alkalol Company’s only employees.
James Whitters II, who took over the company in 1937, took “a 19th-century approach” to marketing, says Jim. James II, who died in 2005, focused on medical professionals rather than consumers.
“We inherited a company that had a great product,” James says, “but I would liken it to a house that needed to be taken down to the studs and rebuilt.”
Today James, a former journal-ist for the Boston Globe, uses social media to discuss sinus health. Katie helped build the company’s website.
“I get calls all the time on our con-sumer telephone line where people say it’s the only thing that’s ever worked for them,” says Jim.
S ince 1977, the product has been manufactured and distrib-uted by Denison Pharmaceuticals in Pawtucket, R.I. In 2010, Alkalol introduced packaging that included a nasal wash cup, so consumers need
not purchase a neti pot.The company’s revenues for 2010
were $1.5 million, up from $1.1 million in 2009, according to the Whitters family. They say they are in discussions with national retailers and project sales to grow to $5 mil-lion in five years.
“My seven-year-old daughter has said to me, ‘Mom, someday I would love to run The Alkalol Company,’” says Katie. “I think that would be really cool if someday our kids are still part of the company and it’s still in the Whitters family.” nFB
Sally M. Snell is a writer based in Lawrence, Kan.
A 116-year-old product is now trendy
www.familybusinessmagazine.com 79
profile
By Sally M. Snell
James Whitters III with his son, James IV; his daughter, Katie Vaughn; and grand-children. They use social media to discuss Alkalol’s benefits with consumers.
At an intersection near Everglades National Park in Florida City, Fla., a large sign atop a farm stand pro-
claims, “Robert Is Here.”F i f ty - two years ago , Rober t
Moehling, age six, was instructed by his father to sell the family farm’s cucumbers at a roadside stand. No one stopped.
His father figured drivers couldn’t see the young boy, so he painted a
sign with “Robert Is Here” in large red letters. The next day, the young-ster sold all of the cucumbers.
Robert’s school bus picked him up and dropped him off at the fruit stand. At age nine, he hired a neigh-bor to work while he was in school. At 14, he bought 10 acres and planted avocadoes. He now owns 40 acres.
Today, Robert Is Here Fruit Stand and Farm is a South Florida land-mark that attracts locals and tourists from around the world. The farm ships fruit all over North America.
“We’ve always grown tropical fruit. Our place is a mecca for tomatoes, lettuce and fresh vegetables, so it’s inevitable we’re going to surprise
you with something you’ve never seen before,” says Moehling.
The stand sells citrus, mangoes and produce with exotic names such as Monstera Deliciosa. Milkshakes are made to order. Also for sale: pre-serves featuring Moehling’s mother’s recipes, honey infused with fruit flavors, pies, flowers and firewood. There’s a petting zoo, and musicians perform on weekends.
The fruit stand was born of neces-
sity. “It was a business the family had to have to keep their head above water,” Moehling says.
Moehling and his wife, Tracey, have four children: Brandon, 29; Victoria, 27; Robert, 26; and Savannah, 22. They started working the farm at age 11. At 14, each was given an avocado grove to tend. After college, they all returned to the farm to work.
Even the third generation is involved: Moehling’s three-year-old grandson works on the farm and punches a time card.
Moehling has pushed through chal-lenges, such as zoning issues and crop freezes. The most devastating year was 1992. His mother was mur-
dered by an intruder. (The murderer was never caught.) Then, a few days later, Hurricane Andrew struck.
“My house was gone, the barns were gone,” Moehling says. “The fruit stand was severely damaged. Mom was gone. The kids weren’t old enough to help me out.”
After the 1992 tragedies, Moehling planned to move to Oregon. His neighbors convinced him otherwise.He and his family “grew our roots back,” he says.
Moehling says he capitalizes on everyone’s strengths. “There are so many facets to what we do,” he says. “I can’t do any of this myself. They can’t do it without me.”
The farm’s marketing efforts have moved beyond a hand-lettered road sign. A few family members created a website, www.robertishere.com. Moehling, who doesn’t use comput-ers, has never seen it.
Moehling knows his business is unusual: Many South Florida fam-ily farmers have sold their land for development. What’s more, all four of his children work in the business. “It’s up to them to make it go another 50 [years],” he says.
Brandon Moehling says can’t envi-sion working for anyone else.
“I love the freedom of our own business. I love the farming,” he says. “We’re custodians for the next generation. I hope all of my sons pick it up.”
The 100-hour work weeks are dif-ficult on the spouses and children, Brandon concedes.
“We get through it,” he says. “We’re a very strong and proud family. Very cocky sometimes. We know we [sell] a good product. We work hard and we party hard.” nFB
Carol Brzozowski is a freelance writer based in Coral Springs, Fla.
Robert Is Here, along with his family
profile
By Carol Brzozowski
Robert Moehling, in center, with his wife, children and grandchildren. He started as a six-year-old boy selling fruit by the side of the road.
80 family Business • March/April 2012 photo: kayla kelley
