Keeping business all in the family
Successfully continuing a family business into the second or third generation and beyond means a lot more than having children and grandchildren interested in joining and running the business.
Family-owned businesses have many of their own challenges and issues that require special policies and practices. That's one reason executives at Appliance Associates of Buffalo Inc. requires all family members to first complete college and get some experience somewhere else before joining the business.
"We've tried to make sure that the family members that do become involved in the business are a good fit for the position they fill, and not just assume that a place in the business is a birthright or that the oldest family member or longest working was going to be the successor," said Kevin Telaak, vice president.
Telaak is among four members of his generation to join the business founded by their grandfather in 1922. There are several members of the fourth generation now in their 20s, but none who have yet joined the business.
Learning how to deal with family members as co-workers and how to plan for succession didn't come naturally. It's been a process the family has worked through with consultants and through educational programs at the University at Buffalo's Center for Entrepreneurial Leadership, as well as by working with the Small Business Development Center at Buffalo State College and adviser at the Service Corps for Retired Executives.
"There's help out there. You don't have to feel like you're on an island and you're alone," Telaak said. "Those programs have been worthwhile."
Going back to school
Area colleges have played a major role in helping ensure the continued success of family businesses in Western New York. In fact, several have offered some kind of official training program for family-owned businesses at one time or another, including Canisius College, the University at Buffalo and Alfred University. Niagara University is the latest to enter the market by forming a Family Business Center last spring. The center began offering breakfast programs this fall and continues with a program April 20 at the Buffalo Club. Vincent Agnello, director of the center, said the program has not begun offering counseling or consulting, instead focusing on breakfast presentations, networking and a quarterly newsletter, at least to start.
"We did a lot of research before we started ours," he said.
The center has a few main goals, including serving as a resource to area businesses and assisting with faculty research through a collaborative research project with family businesses with the University of Padua in Italy. The project is designed to help identify why most family businesses don't succeed longterm in this country. "(Ours) don't last generation to generation," he said. "From the founder to the next generation, it's a 33 percent survival rate. The second transfer is 11 percent survival rate in this country. It's horrendous. We're looking at why that is and what we can do to turn that around."
The April 20 breakfast will focus on succession planning with Joe Basil, formerly of the Basil auto family and now a consultant with Success Care Group. Basil says though some family businesses do all right on their own, many need the outside, impartial view of a consultant to help them get through succession planning and other issues, says
Companies who make it on their own -- without any help from outside advisers, are usually the exception to the rule. "Usually there's a crisis. We say they have been submerged for some time and they need to come up for air," he said. "That's typically how we get involved."
Establishing a program that works
The training field for family businesses only began 10 to 15 years ago, said Judy Green, executive director of Family Business Magazine.com, published by the Family Firm Institute in Boston. There were relatively few family business centers at educational sites 10 years ago, while today there are at least 150 worldwide, including 100 in the U.S.
Those centers that have been successful have offered a variety of relevant programming to all the different constituents and affinity groups in a family business, including founders and the senior generation, siblings and in-laws. Appealing to affinity groups builds loyalty, Green said.
"It's a way to get in a safe place and meet with other colleagues, peers and talk about the you may want to talk to a consultant about later on," she said. "This opens up a safe place to have these discussions."
Paul Karofsky has been executive director of the Northeastern University Center for Family Business in Boston for 13 years. He said the key to establishing an education center that will last is to put a full-time director in place who can devote the time and energy necessary to developing programs, sponsors and relationships. That person should also be connected to the community and someone who is formerly from a family business who has lived the experience. "No. 1, in my experience, is that those centers that have a great chance of survival are those with a full-time director," he said. "When it isn't full time, it just doesn't seem to work. Those are, to me, critical success factors."
Lessons from the past
Alan Weinstein was director of the Canisius College Family Business Institute for several years in the mid-1990s. The program closed not long after he left largely because the college just didn't provide enough resources, he said. "I just think it takes a lot of effort and one-on-one time with companies," said Weinstein, a professor of management and entrepreneurship at Canisius who also still does consulting work with family businesses. "People often underestimate what it takes.
"Truthfully, the University at Buffalo made the same mistake that Canisius did: It did not put enough resources into making it successful," he said. Having someone in the lead role who has experience running a family business is the other key, he said.
"Most family businesses are private and it's a big leap of faith for them to come and talk about their issues," Weinstein said. "You need to be very sensitive to that and it helps to have a background in family business."
Weinstein is hopeful the center at Niagara will do what it takes to survive because the region needs a program dedicated totally to family business.
"We need one in this community," he said. "Ninety percent of the businesses are family businesses and are always going through changes and always managing conflict."
Carol Wittmeyer joined Medaille College as vice president of institutional advancement in 2003 after running the Raymond Family Business Institute at Alfred University for two years. The Raymond Institute focused on research and published several major studies in conjunction with MassMutual Insurance and Babson College. Regardless of who offers it, if family business programs exist, and they're quality programs, the family businesses will come.
"They (family businesses) pay thousands of dollars for training and consultants to build their companies if the centers put together networks where the people can almost help themselves and establish affinity groups to talk about common problems," she said.
Medaille may at some point offer family business programs as well. Wittmeyer is looking into teaching a course in family business at Medaille and hopes to begin a research project with Marianne Sullivan, a faculty member who previously worked at Canisius and ran UB's Center for Entrepreneurial Leadership.
"We were both working on this before we came to Medaille," she said. "A lot of the national family business centers tend to be wrapped around certain key individuals and when that individual makes a move, it can be hard for the program to be sustained. There aren't a lot of people in the world who love this topic and it's an expertise of theirs. It's not like an accounting program where someone just takes over." Written by Tracey Drury Published on April 18, 2004 by Business First of Buffalo