Inside the Mind of a 23 Year Old Indian NextGen

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Kanishka Arumugam

Kanishka Arumugam is the perfect example of the kind of NextGen this blog is all about. Young entrepreneurial people with a can do aptitude; an authentic leader that knows what he wants from life and goes for it. In this interview, this young NextGen surprised me with his maturity and wisdom. Kanishka Arumugam shares his family story and hopes for the future. Please, enjoy it!

1. Kanishka Arumugam tell me about you and your family business, Deccan Pumps Group, in India

I am from Coimbatore, an industrial and entrepreneurial city in south India, dubbed as pump city of Asia, known for its world class Pump Manufacturers, Textile Industries, International Educational Institutions, and also an emerging IT hub.

I am fortunate to be a second generation member of the Deccan Pumps Group. I grew up around the business and decided to be an entrepreneur from a very young age and this passion drove me to learn from organizations around the globe. Thanks to my prestigious alma maters of Sheffield, Leeds and Stanford Universities, that groomed me in many ways.

My father P. Arumugam and his uncle K.K. Veluchamy founded Deccan Pumps 32 years ago with a mission to make the life of farmers better by manufacturing superior reliability pumps. Today Deccan is a closely held conservative group with an annual turnover of around Rs 100 core focused on pumps also with its presence on Fluid Handling Distribution, Real Estate and Education. The brand is one among the Top 5 manufacturers of submersible pumps in the country and it remains Asia’s largest producer of vertical open well submersible pumps.

My father is a keen philanthropist. He runs a home for elders, has a desire to turn his ancestry farm into a model agricultural unit, and spends time in upgrading the basic infrastructure of his home village.

He believes not in chasing numbers but in giving back to society in as many ways as possible. Recently, he undertook a not-for-profit initiative and incepted the Info Institute of Engineering, along with his friends, mainly for the first generation learners of the country.

One can have simple living and be content but when it comes to business I believe one should never think twice about making it bigger. And this is what my dad and I often argue about. However such arguments help me evolve and I get to know the perceptions of the previous generation and absorb whatever is suitable in the current scenario.

Last year, after my graduation, I spent time with a few European family owned manufacturers and also had a short stint at Xylem, a non-family owned American company, the world’s largest producer of pumps and systems. Its major competitor was a Danish family owned company.

I was awestruck to learn how a family tradition could bloom into an industry that gives its competitors a tough time.

2. What’s your thoughts on building a Socially Responsible Company?

As mentioned earlier, a few years ago I often wondered why my father started a not- for- profit engineering college, a home for the elderly, rural development programs and similar activities instead of just growing the business. But now I realize that companies which are long lasting have a broader outlook and contribute to society in crucial fields such as education, healthcare, women empowerment and for a lot of other important social causes. The Forbes, Godrej, TATAs, Thermax and Wadias, are all living examples of this in India.

Last month when I was in Germany I visited my friend’s family owned company VIEGA, a fifth generation company which is into pipes and systems. It was interesting to learn how the family and business have involved the small town of Anttendorn in a larger way and how the feeling of goodness has been spread across from the taxi drivers of the company. Also the spirit of entrepreneurship and drive for growth is clearly seen in the fifth generation more than in the previous generations.

It is very essential for all the next generation family members to involve the society and community at large, in which they operate, and also to help the underprivileged and make the world a better place. A company’s purpose is just not to acquire wealth and markets but also to contribute to the society in which they live. This is an important value in creating long lasting organizations.

What do you think about Value system in a family operated company?

Care for the members (employees), humility, simple living with high thinking, involving the society, respect and care for the underprivileged, professional management with family members on board and taking part in participative management are important to the company.

The role of family business leadership can no longer be authoritative; only an all inclusive leadership model with the best value system works in today’s business organization. To put it in a nutshell, the secret behind a successful business is long term thinking, highly ethical practices strong values of family spirit, integrity, value delivery to customers and developing an entrepreneurship attitude in every employee. Keeping the company financially stable and risk-proof, safeguarding and adding value to the business: these must be the goal of a Next Gen member who wishes to grow his company in leaps and bounds.

Kanishka brief me about your opinion on Ownership, Management and Family.

Ownership, Management and Family should be viewed differently among the next generation members.

Your father might have been a great product designer who helped the company grow, but that doesn’t mean the next generation could follow or repeat the same. There is no point in just holding positions, adding value to the business is more important.  Perform else take a back seat.

Family involvement in a company definitely helps it grow at a much faster pace since the outputs are going to benefit their whole generation. More than money, emotions and attachments drive individuals towards better growth.

I believe family owned companies and the next generation should clearly differentiate between ownership, management and families. When these collide it gets complicated outside of the office too. It is simple when said, but I’m sure it is difficult to practice. My father and I might have a disagreement inside the office room, but that should not hinder the father-son relationship. My style of working is different from my dad’s. It doesn’t mean one is right and the other is wrong; we have to find our own strengths and contribute.

Is there any family structure in Deccan Pumps Group? Your group recently announced a Spin off.

Its sad we had to do this, we tried our best but was too late. Also the chief emotional officer my grandfather was no longer there . There was no issues for money or business.

In India sometimes families grow faster than businesses and so we are forced to draw agreements for securing the future of the business and the brand value of what our previous generations have created. We, at the Deccan Pumps Group, are currently working on ownership and brand sharing methods with the next generation members. The ultimate goal is to secure the business, brand value and at the same time allow every member of the family to pursue their interests.

Every next generation family member should be on a stewardship / trustee role. I find myself not as a maverick, but as a star in my own way. Gen-next entrepreneurs are fortunate to be born in privileged families and should be thankful for their education and resources that not many are fortunate to have in a country like India. So we should add value to what the previous generations have created, protect it and pass it on to the next generation.

Brilliant. What’s your future Goals?

I’m just 23 years old and have a long way to go and I am sure my thought process and learning will evolve as I observe, learn and grow. I strongly believe that every next generation member should spend time in at least two companies briefly before joining their family business. It gives one a great learning curve of how business families work across the globe, which elevates the thought processes and enhances entrepreneurial skills.

I’m looking forward to creating a great family owned company with strong values and best practices that I have seen and learnt in the last few years across the globe and act as a trustee to the future generations. One thing I have learnt from the west is that family companies are held by Foundations and work on the model of investing all profits back into the company where the family is allowed only a small percentage of profit. I shall try working out a similar model.

The next ten years is very crucial for the country. I’m sure there can be a lot of globally competitive family owned companies from India across all sectors, if family companies practice the best processes and systems. I hope to put myself to work and add value to what my father has created. I’m sure every next gen member is talented, unique and can contribute in their own way – be it CSR, Marketing or Research.

The internships I went through, systems I worked in, diverse cultures I experienced and talented individuals I met, have left an indelible mark in my life.

I’m currently working on a project setting up a state-of-the-art new plant with the experiences and processes I have seen across the globe. Though not a mega plant, I aim to make it a very efficient one. I found the brand Deccan Pumps strong only in certain segments. So my new Brand extension line would help create a new perception among customers and drive towards growth.

The products are being designed and upgraded to world-class standards with a great emphasis on manufacturing systems and process technology. The new plant is a small test that I’m putting myself to. It will also increase our productivity in one product line up to five times.

My Professors in Stanford and Sheffield have always been good mentors and when I shared this idea they felt that this startup would help me learn quickly all aspects of business and if I perform well I will be ready for a bigger role.

Perform and Preserve, else Perish. Also, if one fails to safeguard the business and grow, it’s a crime. With a strong support of the previous generations and the wide global exposure that we have access to, it’s time we next gens create history!

Kanishka Arumugam

Deccan Pumps Private Limited

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What Dr. Kirby Rosplock Has to Say About Family Business, Women and Wealth

I met Dr. Kirby Rosplock at the Transitions West Conference in San Francisco a couple of years ago, when she joined me and another colleague in a very interesting conversation about family companies. She was humble, open, easy going and the way she talked about family business, and especially about women in family business, showed her passion and commitment to making a difference for them.

This is no surprise when you learn that Dr. Rosplock is also a 4th generation member and owner of a 130+ year old family business (www.BabcockLumber.com), a board member at the company and a co-trustee on her family’s foundation.

Her experiences in her own traditionally male-oriented family company filled her with an immense curiosity about how other people, especially women, experience their involvement in the family business world. This led Dr. Rosplock to write her dissertation paper: “Women’s Interest, Attitudes and Involvement with their Wealth” and she subsequently dedicated part of her successful career as a writer, researcher and lecturer to women’s empowerment around wealth.

In the following interview, Dr. Rosplock shares with us what is behind her passion for helping women, what interesting findings she has discovered in her research and details of her new project, which involves writing a handbook on the family office for Wiley & Sons.

How Strong Family Values Can Keep your Family Company Successful Over Generations

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It is a windy Friday afternoon at the lovely Marina del Rey. I’m meeting Gilbert Devlyn to learn about the keys behind the success of his family business, Devlyn Optical, which is now in the 3rd generation.

The Devlyn family is from Mexico, and they are the owners of  a 77-year-old company that first started as the only optical service in the town of Ciudad Juarez in Mexico. When it first opened, it had just two employees: Mr. Frank Devlyn and his wife Nelva Mortensen. Today, it has more than four thousand employees, 829 branches in Mexico, which makes it the largest optical chain in the country, and the brand has even expanded to Guatemala, El Salvador, the Dominican Republic and the USA. The company has also expanded its services into ophthalmology clinics.

What I find really interesting about this company is that, unlike most third-generation companies, which tend to keep the family out of management and focused on ownership, the Devlyns have managed to retain 11 family members working in the company and they are the 3rd generation in charge of operations.

There is definitely no sense of entitlement here, as Gilbert explains. When he was a little boy he asked his father to buy him a toy car. His father offered him the opportunity to work in the family company and earn the money he needed to buy the toy for himself instead. Gilbert was very disappointed when, after a week, he got paid just 140 pesos (the standard salary for the work he did at the time). He learned a lesson about how hard it is to earn enough money to buy what you want and that his family was not just going to hand him everything on a plate.

Gilbert is down to earth, kind, polite and oozes love and admiration for his family. He is also well educated, intelligent, ambitious and driven. After working for a few years outside the family company and completed an International MBA, he has recently joined Devlyn Optical. His desire to contribute, make a difference and find his place in the organization for himself is evident. With people like him in the family, there is definitely no need to look for talent elsewhere.

This is what Gilbert has to say about values, emotions, family business and making a difference.

Written by Carmen Lence, Executive Coach at NextGen Consulting & Coaching LLC. Contact Carmen  at carmen@nextgenfamilybusiness.com

About Transitions West Conference and Changed Lives

I just got back from the Transitions West conference at Marina del Rey, which was organized by The Family Business Magazine and Stetson University’s Family Enterprise center. This is a conference “created for family companies by family companies!” and, once again, we enjoyed some great, honest presentations by some outstanding family business members, non-family executives and family business experts.

Among my favorites were the opening keynote by Jim Ethier, Chairman of the Board of the Bush Brothers & Company, during which he described the experiences his family company had as they built their family governance. Also, the panel of non-family executives made up of James B. Wood, Senior Vice President and Chief Strategy Officer of The Clemens Family Corporation, Robert J. Underbrink, President/CEO of King Ranch, Inc., David Yale, President, Just Born, Inc. and Ross Born, Co-CEO of Just Born, Inc., where I realized how difficult it is to find the right non-family CEO and the time and effort involved in the process; and the panel about how family councils foster engagement among family members, where Ashley Levi, Board Member at H.G. Hill Company, and Meghan Juday, Family Council Chair and Director at IDEAL INDUSTRIES, shared their experiences about how useful their families council has been for them. And finally the presentation from Mark Peters, CEO of Butterball Farms Inc., who underlined the risks involved in not having succession planning in place. Thanks to all for sharing their experiences and being so inspiring!

This was my second year at the conference and I was happy to see that many families came back and brought along quite a few more family members. I would say that the number of participants doubled from last year. Congratulations to the organizers!

I also meet Peter Begalla, Adjunct Professor and Program Manager at Stetson University’s Family Enterprise program, who I interviewed last year about the unique Family Enterprise program that Stetson University offers (Read interview here http://wp.me/p1tGmG-2n) and Professor Greg McCann, founder and Director of Stetson University’s Family Enterprise Center. I was interested in gaining the perspective of one of its students and when I meet Emily Dudley, senior at the Stetson University’s Family Enterprise program and second-generation partial owner of Dudley’s Auction Inc., at the Transitions West conference, I couldn’t miss the opportunity to interview her.

Please check what Emily has to say about how Stetson University’s Family Enterprise program has “changed her life.”

Written by Carmen Lence, Executive Coach at NextGen Consulting & Coaching LLC. Contact Carmen  at carmen@nextgenfamilybusiness.com

What Happened to What Was Once the West’s Greatest Industrial Power? Dr. Henry M. Kaiser shares his family story and what he learned from it

It is a cloudy Tuesday afternoon in San Francisco. I’m having lunch at the Embarcadero with Dr. Henry M. Kaiser. I met Dr. Kaiser a couple of years ago when I joined his lead in creating the FFI Northern California Chapter. Our shared passion for family business has made for a few interesting conversations in the past. Today is not an exception.

I’m listening to Dr. Kaiser’s explanation about what motivated him to write his book “Inheritance Lost, Heritage Transformed,” where he relates his life and the events that lead a Fortune 500 family-owned company to enter voluntary liquidation just seven years after the passing of its founder and his grandfather, iconic industrialist Henry J. Kaiser.

While I’m listening to Dr. Kaiser’s story, I cannot help but notice his candor, strong curiosity, drive to be better and his fight to be relevant and make a difference. I can almost feel his passion about helping others to avoid the pain, powerlessness and disappointment that he experienced when the family empire dissipated in front of his eyes. Within Dr. Kaiser’s story there are certainly some important lessons to share that may inspire others to take the actions needed to achieve a more positive outcome with their own family companies.

In this short interview, Dr. Henry M. Kaiser, former director of Kaiser Hospitals and Health Plans, explains the events that led to the voluntary liquidation of the family business and shares some words of wisdom about what he believes he, and those around him, could have been done better.

Written by Carmen Lence, Executive Coach at NextGen Consulting & Coaching LLC. Contact Carmen  at carmen@nextgenfamilybusiness.com

How Coaching Enables you to CHANGE

We all know that change is difficult. In fact, change is so difficult that our brain is actually wired in a way that provokes sensations of physiological discomfort as soon as we face the slightest threat of change. As such, many of us do whatever it takes to avoid it.

Neuroscience (the study of the anatomy and physiology of the brain) has, in conjunction with magnetic resonance imaging, provided insights into why change is so difficult. When we want to make a conscious change, we use an area of the brain called the prefrontal cortex, which is where our working memory is placed. This area of the brain uses up a lot of energy and its use quickly generates a sense of discomfort, or even anger, because is linked to the amygdale, which controls our fight-or-flight response.

In order to avoid this discomfort and stress, our brains favor the use of the basal ganglia, which is the part of the brain that controls habit-based behavior. Have you ever locked your front door and then completely forgotten that you have done so? Such events are the result of your use of the basal ganglia, which can complete any familiar activity without conscious thought, all the while using much less energy than the prefrontal cortex.

On top of this, many people seriously resist being told what to do because this fires the prefrontal cortex’s connection to the amygdale. This provokes a defensive reaction and an inclination to find as many reasons as possible not to obey the instruction. This is especially true when the emotional aspects of new plans for change have not been explicitly addressed.

Finally, because the brain is programmed by experiences that are unique to each individual, everybody thinks in a different way. As a result of this, solutions provided by others are not as meaningful to us as the solutions that we reached by ourselves, using our own experiences and opinions.

Coaching your way through change

Coaching involves helping clients to think about possibilities, encourages them to arrive at their own answers and solutions, energizes them and motivates them to take action. Coaching is an ideal tool for bypassing the prefrontal cortex’s defenses and driving people to implement changes.

Research has shown that when we find our own answers to problems, our brains undergo high levels of activity as they build new connections. Studies into neuroplasticity (the ability of the brain to change structurally and functionally) show that if we focus our attention on positive things that is where we are going to be making and reinforcing connections. As an example, a study of brain patterns in Buddhist monks revealed that the part of their brain associated with happiness (left prefrontal cortex) was highly developed. This indicates that, they do possess the capacity to educate themselves to be happy!

The coaching process reinforces the motivation to implement changes by making the client design their own solutions and actively plan the steps that need to be taken. This entails that they devise their own action plan and retain accountability for its implementation. David Rock and Jeffery Schwazrt in their article “The Neuroscience of Leadership,” point out that those reinforcing moments of insight can make changes in the brain that can lead to new behaviors.

Coaching is a process that releases people’s potential and both accelerates change and keeps it sustainable, long after the coaching engagement is complete.

By Carmen Lence Coach and Consultant at NextGen Consulting & Coaching LLC

If you want to learn more about coaching and coaching for Family Business, I’ll be presenting “Coaching, Next Generation and Sustainable Change in Family Business” together with Christin McClave and Dennis Jaffe at the FFI international congress in Brussels on October 19th. I’m looking forward to seeing you there!

 

How to Make It Cool to Work for a Family Business

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Let’s face it, working for a family business isn’t considered by most professional managers to be a great career move. Many managers believe the career prospects will be limited, as the top jobs will most likely go to family members. Also, many picture themselves in the middle of a medieval court full of intrigues and fights between rival heirs, struggling to keep themselves impartial. So, no wonder family businesses have a tough time attracting talent!

So, how to make it cool to work for a family business?

Outstanding company values, great leaders, a challenging job, attractive performance-based compensation and a culture of empowering and developing people, these are the keys to attracting and retaining talent for any company including a family business.

Take, for example, Roche. The Swiss Pharmaceutical giant employees more than 60,000 people; yet it is still controlled by the founding family. “There is a culture at Roche that nurtures talent,” says Alexander Zehnder, at the moment seconded to Genentech in the US, a member of the Roche Group. “This culture gives employees the opportunity to develop knowledge and skills, on- and off-the-job, and to gain international experience.”

Another example is the Bonnier Group, a Scandinavian media conglomerate of over 200 privately owned companies and currently in the sixth and seventh generation. Here, to make it more attractive for non-family managers, the governance structure is shared with non-family executives, with a non-family member either holding the chairmanship or the presidency.

Some of you may be thinking- these are huge companies you are talking about, they can afford to have all these systems in place and they will attract good people anyway. Well, this is a bit like the question “What comes first, the chicken or the egg? I believe that these are big, successful companies because they have put these systems to work in the first place.

So, let me sum up the must dos for making your company attractive to talented executives independent of its size:

– Great Values
People want to work for a company that cares about its people and that has a mission that motivates them.

– Great Leadership
People choose companies for their leaders. Great leaders do treat people with trust and respect. They build the capacity to achieve results, knowing that they do this by unleashing the talents of their people

– Performance-based culture
The combination of a strong performance ethic and an open and trusting environment achieves great job satisfaction.

– Attractive Compensation and promotion policies
Your company will get the best from your family and non-family executives if key management positions are open to non-family members, assigned based on competence, and utilize performance-based compensation.

I suggest making the promotions criteria a bit harder for family members, the reason being that as family members they will be in the spotlight. If they are clearly better no one will object.

– Family employment policy

While having members of the family working in the company is in the company’s interest, because they have stronger commitment and loyalty to the company (after all they own it), having family members that are not up to the job is dangerous and irresponsible.

A transparent family employment policy, which establishes the criteria for family members to join the company, will help you to avoid a tough time with your sister desperately wanting to get his dropout son into the business. Also, it will show non-family executives that jobs are not awarded on family merits, but on actual capabilities and performance.

If you link the points above with the flair of working for an innovative entrepreneurial company, able to adapt and respond quickly, with long-term vision and strong commitment to their customers and employees, all characteristics of family business, Wooow! It really sounds cool to work for a family business!

Written by Carmen Lence coach and Consultant at NextGen LLC

Dennis Jaffe on How to “Make it Happen” for the Next Generation Owners of Family Business

For 40 years, Dennis has helped families manage the personal and organizational issues that lead to successful and fulfilling transfer of businesses, wealth, values, commitments and legacies between generations. He is professor of Organizational Systems and Psychology at Saybrook University in San Francisco. Dennis received his BA in Philosophy, MA in Management and Ph.D. in Sociology from Yale University.

As both an organizational consultant and clinical psychologist, he is one of the architects of the emerging field of family enterprise consulting. As a founding member of the Family Firm Institute, he has presented at many of their annual conferences, served on their board, written frequently for their journal Family Business Review, and was awarded the Richard Beckhard Award for contributions to practice.

In this interview, Dennis Jaffe share his experience in helping next generation members of family business to create a future for themselves and the keys to succeed at succession.

Do you want to gain control of your family Business? Buy it!

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Jamie Calvetti, President of James Calvetti Meats in Chicago

After 32 years working in the family business and running it before his father’s passing, Jamie Calvetti found himself as an equal co-owner with two more siblings that were not involved in managing the business. The situation got to a point that he had to buy his own business to gain control. In this interview, Jamie Calvetti, President of James Calvetti Meats, one of the USA’s leading purveyor’s of prime quality meat products, shares how to go about buying your family business and what he learned from his father’s mistakes.

What were the main challenges that you faced working in your family business?

In family business, there is a lot of jockeying back and forth. My father was aggressive, charismatic and well known around the country. He slowly allowed me to manage some pieces of the business.

I had been gainfully working and managing in the business since I started. I learned everything that I could about the business. I bought computer into the business in 1982 for logistic and accounting functions. Email did not exist in 1982. I managed to processing, logistics, personnel, accounts receivable and payables and some purchases. I had my own sales, but of course there was many times that competition was a problem. I did everything an entrepreneur does in a business.  In 1986 I started up business in Japan (the country was too small for my father and myself to compete within). Shortly after that I started up sales in Europe. Between the time 1986 and 1991, I traveled, on business, to Japan and or Europe about 15 times.

In 1991 I was able to manage the large multinational business customers we had because of the change in technology. That was the advent of email.  Major customers starting using email to communicate, which I was very proficient. My father’s style of communication did not work for the new younger buyers/managers.

My father felt that I was taking him away from the business. There was a competition between my father and I and competition between the siblings.

Was there any succession planning?

There was no formal succession planning. My father’s accountants came to him and said he needed to move some of his shares to his children for tax purposes. He wanted to split it equally. The accountants, unbeknownst to him and me, gave me a tenth of 1% more than my other siblings.

Were you the only sibling working in the company?

One sibling was. He was in charge of the newspaper for the first 15 years and then in charge of Internet marketing the last 15 years.

Do you think that equal is not always fair?

It wasn’t. The accountants set it up. When my father passed away there was jockeying for position. At that point, my father was 89 years old, and I was running the business.

My dad was very good at running a business and did not melt the company. Because of that, the company was and is very well financed. We left quite a bit of cash in the business.

I had to buy both my siblings out over three years and both were major negotiations. There were bad feelings involved and it took a very aggressive attorney to take care of things on my side.

In the meantime, we had to run a business. I could see down the line that with all these buyouts I was going to need to start growing the company again. We were in the airline and food service business and we stopped growing after 9-11 and didn’t diversify. I tried to diversify a couple of times and it failed. Ultimately, I went back to my core business. I reduced my salary and reduced expenses where it was necessary to generate the cash for the buyouts.

What were the keys to raise capital to buy your siblings out?

You have to make a profit, have good cash flow, and show and prove that to the bank. Handle your personal finances properly and correctly. Be conservative with the money that you do have. I had my  broker contact the bank and give a referral. I come from a place where my dad wanted to pay everything in cash. We paid cash for a building, and in about 17 years the value of the building doubled and there are no loans against it.

You just have to play it right and you can’t be the guy that has a $1 million dollar house with an $800,000 mortgage. You will not get the financing even though that is your personal stuff they are going to look at it. They are going to see that you are too much of a risk taker or you don’t know how to run your money.

I also look at my cash position every day. I know what my accounts receivable, accounts payable, loan, and my cash positions are. I also know what my estimated payouts are for the following week. In the meat business, you have to pay your bills in seven days because we buy a perishable product. You should also follow the markets. When we made a lot of money, instead of taking it out, I loaned it back to the company. It was advantageous to me because I could pay myself interest more than market rates.

It also showed the way that you ran the company.

Right. I had stable employees. You bring the banks in show them the business-that is not normal. You show everything to them and show them you can make money in various economic conditions.

When your father passed away there was no real succession plan. What would you do differently for your children?

I don’t have any children but I do have a stepdaughter. I would never burden her with this. What I would do different than my father is I would determine who was most interested in the business and most capable. I would move those assets upon or before my passing to that person. Then, I would compensate the others.

How is your relationship with your siblings now?

We have a strained relationship.

Do you think that all this pain could have been avoided with proper planning?

Maybe. Entrepreneurs are a special type of group – they are very competitive at least my father was. He was competitive with his children. I can remember a couple times, that he wouldn’t be so happy  that I would bring in a huge order. It was a strange situation.

What advice would you give next generation members that are considering buying their Family Business?

  • You first have to know how to run the business profitably and conservatively. You should not take a $500,000 salary, take cash out the business, and expect the bank to finance the business.
  • Have to have your own money in the business too.
  • Have a great reputation in your industry, better reputation than everybody else.
  • Pay your bills on time or early. That gives you power to do the things you want to do or at least it helps you.
  • Then you have to run your personal life properly. Don’t have a $1 million house with $800,000 loan.
  • You have to be and work at the job. You can’t be on vacation all the time.
  • You have to have stable employees, be a good manager, and a good communicator.

What about you? Have you ever been in a similar situation? What other resources could have been used to take control of the company? Are banks the most likely founding source for family business buyouts? Please, share your experience, we can all learn from it!

Written by Carmen Lence, Coach and Consultant at NextGen Consulting and Coaching LLC. www.nextgenfamilybusiness.com


How Educational And Networking Events Can Improve Your Family Business.

Click on the picture above to learn the highlights of last Friday’s presentation by Peter M. Johnson on family business governance at the Institute for Family Business at University of the Pacific in Stockton, California.

Peter M. Johnson, Director of the Institute for Family Business at University of the Pacific in Stockton,  shares in this interview the value for Family Business to join networking and educational programs, like the ones offered by the Institution he leads, to learn what to do when you don’t know what to do in your family business. Ready to learn and mingle?

How does the Institute for Family Business support family businesses?

With all of our family business, wherever they are we support them through several different ways. First, we offer about five (and as many as ten a year) different programs in different locations. These programs are offered to family members and non-family members who are key employees. With the idea that attending this program with key non-family members or their consultant, everybody is on the same page. They hear the same message and it is easier to start creating a strategy around what a group heard in a program. They will get information for an expert in the field who will speak about challenges as a current or former family business owner, consultant, or a panel.

The other benefit of the program is that it allows family to talk to each other.  One of the biggest challenges that I have seen over the years is that families always think they are alone. They think that they have unique challenges and that they are a messed up family and other family businesses are much more professional than they are. So, it is an opportunity for families to get to know each other and learn from each other.

We also have a very large resource library of videos from previous programs, books, articles, consultant information, and a wide variety of family business resources that we can refer our members to.  For example if someone inquiries about non-family employee conversations, succession planning or would like a consultant, we have resources that we can refer them to.  We will also connect them with other members who for example may be thinking of starting an independent board of directors. They have not done it before, are not sure what the structure would look like, and want to know what the pros and cons are. They will want to know if there is another family who they can speak with that has been through this journey and can provide their experiences.

Is the Institute for Family Business at the University of the Pacific the only one of its kind in the Bay Area?

Yes.

Why do you think that there are not more institutions supporting family business in the Bay Area?

That is a great question and I think that there are a couple of reasons for it. First, with some families they don’t realize that they are a family business. Some think of a family business as a mom and pop out of their home or small grocery store on the corner. They don’t really think of big family business like Levi-Strauss, Ford, or Wal-Mart. So a lot of families don’t think of themselves as a family business.

The second problem is that many families don’t want to admit that they need help. Generally, the family has a patriarch in charge and they tend to think they don’t need help and there are no issues. They are blinder to some of the problems and will gloss over the issues.

The third problem is that you have to know where to find family businesses. We know that 80% – 90% of businesses in the United States are family owned or controlled.  But getting people to recognize that they are a family business and promoting the concept to them is difficult. One thing that I hear people say when they come to our programs is that they didn’t realize that this was available. It is kind of tough because until a family is in crisis, like a succession issue, family members tend to gloss over the resources that might be available to them.

Do you think this type of organization is important for next generation family members of family businesses?

Yes and actually what we see is that Next Generation is more likely to call. They recognize that their family is having issues and the senior generation is blind to the challenges and want to know what they can do. The Next Generation largely sees the value in these programs and is more likely to speak up and say that they are a family business. They recognize that the family is a part of the business and that they are having challenges that go beyond the traditional business challenges.  It is critical, especially if the goal is for the Next Generation to take over, for them to develop their leadership skills.

Do you offer leadership development programs for the next generation?

We do. As a matter of fact our programs are not just for one generation, type of business, or industry.  We offer informational programs that go into different topics that can be related to any business.  So the next generation and senior generation both get something out of the programs.

What is your typical member profile?

There is a wide range. For example, we may have a winery that has 4 or 5 family members and 10 full-time employees.  We also have some that have 80 or 100 full-time employees. Almost all of our members are multi-generational and occasionally we will get some from the same generation. They tend to be two –generation with the parents in the business.

Educational and Networking events are a great opportunity not only to learn from the presenter but also from  other participants. What is your experience with this kind of events?

 

Written by Carmen Lence of NextGen Consulting and Coaching LLC. www.nextgenfamilybusiness.com