A Tough, but Rewarding, Job

Long-term planning and resolving conflict are big issues at family firms, along with employee development and creating a sense of security

By Victoria Fraza Kickham, Managing Editor -- Industrial Distribution, 12/1/2005

As part of this special report on family business, Industrial Distribution asked four industry professionals to talk about their experiences working in their family's business. The four individuals each bring a different perspective to the table, and offer advice and insight for people involved at all levels of a family firm. The participants are:

PAT McCURDY, Kimball-Midwest, Inc. McCurdy is president of Kimball-Midwest, a distributor of fasteners and related MRO products headquartered in Columbus, Ohio. McCurdy and his three brothers run the company, which their father joined in 1954 and ultimately purchased. The brothers have grown the company considerably since taking over for their father in 1978, and today Kimball-Midwest employs 600 people and expects to reach $80 million in sales this year.

JACKIE BRITT, Rubber & Accessories, Inc. Britt is the financial officer for Rubber & Accessories, a two-location, 48-employee distributorship based in Lakeland, Fla. The company specializes in industrial rubber, hose and accessories. Britt joined the company in 1997, after first building a career in finance outside of the family business. She works alongside her father, company president Harry Robb, Jr., and her brother, Harry Robb, III, who is in outside sales.

JAY SMITH, University of Alabama at Birmingham. Recently retired, Smith had a long career in distribution education, most recently as director of the industrial distribution program at UAB. For the past 10 years, he's served on the boards of directors and the advisory boards of family-owned businesses—for two distributors, one national household goods carrier, and a warehouse and security firm. He also spent many years working in his family's transportation and distribution businesses.

TERRI DAVID, TIPCO Technologies, Inc. David is vice president and co-owner, with her brother Rob Lyons, of TIPCO, a hose and accessories distributorship with four locations covering Maryland, Virginia and Delaware. David and Lyons took over for their parents four-and-a-half years ago and divide their duties evenly—with David handling operations and finance, and Lyons handling sales and other external functions. David worked for another company for two years before joining TIPCO in 1989.

We asked each participant about the challenges of working in the family business and how they deal with those challenges on a daily basis. Here's what they had to say...

INDUSTRIAL DISTRIBUTION: As a family member, what are the best aspects of working in the family business?

PAT McCURDY: ...Initially, the best aspect of working the family business was to see the pride and joy experienced by my father having his sons involved in the company and seeing it prosper and grow the way it has. Because of his hard work and determination, our family has enjoyed the privilege of experiencing the American Dream first hand. Additionally, we have grown the company by relying on each family member. Most importantly, the trust that is built up among family members to execute on their specific area of responsibility has enabled our business to develop into a successful national MRO supplier.

JACKIE BRITT: [The best aspect is] being a part of something you know you'll be a part of forever. Also, it's quite an honor to come in behind someone like [my father]. You have this great employer that you work for, and then you realize, "He's my dad." My dad is very well known and has a great reputation in our industry. So when you think, the guy that everyone's talking so wonderfully about is your dad...from the family aspect, that's a wonderful benefit. As a child, you always think you're dad's great, but when you see him in the industry and see all the respect [there is] for him, you know he's great.

JAY SMITH: ...The best aspects are that there is usually a "sharing" of goals and values for the business and the family. I believe that over time, the possible "disjointed" aspects, such as controversial decisions and differences of opinion, are resolved—either by acceptance of common goals or values [for both the family life and the family business] or by separation of those individuals who cannot resolve fundamental differences.

Over the years, the family business generally becomes synonymous with good service, professionalism, and trust. The "family" business that runs on trust—between and with the family, its employees, suppliers, and customers—and caring will thrive. The close bonds among family members, and concerns that underlay business decisions, are strengthened by the principles that are the backbone of the firm.

ID: Conversely, what are the most difficult aspects?

TERRI DAVID: As a brother-sister management team, the most difficult part about working in the family business would be to make sure that our communications are up to date. The employees will play you as Mom and Dad, and they'll play you against each other, so [as managers] you've got to communicate with each other. As a brother and sister team, it's a lot more challenging to do that, because we both go home at night and we don't drag our spouses into it. We have our separate family life. So, making sure that you communicate, and managing your communication, is vital.

McCURDY: Two issues come to mind. First, dealing with shareholder family members not actively involved in the business and, second, treating each family member fairly—which, inherently, does not mean equally at all times.

BRITT: The hardest thing is keeping the line drawn between being a family and running a business. It's very easy to turn it into a father-daughter type of scenario. We try very hard to keep the line drawn in the sand. Keep the business business and the personal personal. Being the youngest [family member], and being female in an industrial business, are challenges as well.

SMITH: ...Many family businesses will list sales, personnel, finances, operations, etc. as the most difficult aspects of the family business. However, from all my experiences and observations, the most difficult aspect is the creation and operation of a successful successor plan. This is particularly true when the environment in which the firm operates dramatically changes—either improving or compressing. There is a "tension" amongst the family members as to who will succeed to head the organization, and how the resulting changes in that leadership will affect the individual family members—both those within the operations of the business, as well as those affected by ownership decisions (for example, spouses and children).

ID: What makes a family-owned business different from other kinds of companies—in terms of outlook, philosophy, opportunity?

McCURDY: We have had a vivid picture of distinctions between family-owned businesses and other publicly owned maintenance, repair and operations supply companies. First and foremost, our financial decisions are based on the good of the company and how they impact the company long term. We can never remember making decisions for a short-term gain, as compared to a public company's focus on a quarter-over-quarter gain.

Secondly, we genuinely care for the well-being of all our people. One example of this is when one of our 82-year-old sales representatives drove three hours to tell us that he was regretfully retiring because of family circumstances. He basically was in tears because he loved the business and didn't want to leave behind the relationships he'd built over the years. Fortunately, we were able to work out a part-time sales program in which another Kimball Mdwest sales representative would drive him to his accounts. Even today, several days per month, he rides along with other sales reps to help develop their business. This sales representative joined Kimball Midwest after he had a forced retirement from one of our public-owned competitors.

These are the biggest distinctions between our family business and our shareholder competitors. Another shortcoming of the public companies relates to when a new president assumes the position. [When this happens], there is usually a major shift in the direction or initiatives that the company is trying to execute, whereas with our company we have established our company culture by maintaining a consistent vision, mission, core values, and behavior.

BRITT: I would say that the biggest factor is knowing that it's yours. Knowing that everything you do, you're building your future...And you're not just focused on your goals and tasks, you're focused on the entire company. When you have a stake, and you're the one that's going to be one of the major players down the road, you realize that it's not about today, it's about the long term.

DAVID: [From an owner's perspective,] you go home and you don't exactly sleep as comfortably as you might otherwise. You're always making sure that everyone is happy—the customers, the vendors, the employees...So, you're always worried about everyone. It's like when you're a parent and you work all day and you worry about your child. When you go home at night, you worry about [the business].

ID: What is the best strategy for resolving conflict that may arise between family members in the workplace?

SMITH: The classic "textbook answer" is to have written agreements—well thought out and agreed to by all family members prior to those conflicts.

One tactic is to ensure the viability of the family leader and his or her abilities to successfully mediate the conflicts... [However], even if the conflict is resolved at one point in time, it usually arises later—perhaps in another form. And the interest/direction/desires/influences by spouses are far more significant...than most academic and professional folks are willing to publicly admit—because these effects are difficult to understand and prove.

McCURDY: There will always be issues between family members. We found the best way to resolve these issues is by dealing with business issues through our board of directors, and by dealing with family issues handled individually by each shareholder. We also recently established a Family Business Council to share with the next generation insight into the benefits, responsibilities and opportunities that may be available to them at Kimball Midwest.

BRITT: I actually think [conflict] is a good thing for the company, because the conflict forces you to think outside of your thoughts and think of someone else's. What we do is talk through it, and we come up with a decision that is beneficial to the company. Communication is key.

DAVID: The best strategy is to get at a round table, close the door—or go out to dinner— and then talk it out. Don't do it over the phone; you've got to do it face to face. The phone is way too powerful—you may say things or do things that you normally would not do if you were face to face. And you have to understand that there are going to be disagreements, and that eventually everyone will come around [to a decision]. You've got to disagree to agree.

ID: Experts say a succession plan is vital for all businesses. Does your company have one? Why or why not?

McCURDY: Our company does have a succession plan to ensure that there is continuity from one leader to the next and, hopefully, from one generation to another.

BRITT: Actually, we do. And I think it's absolutely critical. You have to have a plan—for the company and also for the employees involved.

SMITH: Yes, the succession plan is both valid and required—even more so in the family business because the relationships within the group extend beyond the business organizational relationships. More people, proportionally, are involved in the ownership questions and certainly in the survival of the family and the business... Long-term planning and accountability are primary needs of a family business.

DAVID: We're working on it. We know we need it. It's one of those things that, unfortunately, is easy [to put aside] because you've got so many other things you're working on. For us, we know [what the plan is], but actually putting it down on paper, locking it in—that's the next step.

ID: What does a family-owned business have to offer employees that other companies may not?

McCURDY: By being family owned, we feel that we can offer our employees a clear understanding of our vision for the future and opportunities for them to grow and prosper. We offer stability from an employment and responsibility standpoint, versus our public competitors who seem to be driven by decisions which allow them to be more profitable quarter-to-quarter. Consolidation has been part of our niche in the MRO distribution industry. When the public companies have acquired or merged with other companies, we have seen distribution centers and jobs consolidated in order to pay for the acquisition.

BRITT: One of the major differences between a family-owned business and a corporation, I find, is that a family-owned business cares more about the employees and what the employees' goals and objectives are. I've tried to figure out why that difference is there, because I've found that if employees are happy, the company is more successful.

SMITH: As long as the family business is successful, there is usually a more intimate relationship between employees [at all] levels of the organization, and in many instances, the environment that is created includes the employees as part of the family—although they may not achieve full status [as] a family member.

There is some literature on family businesses that uses the term, "front to rear (back door)" rather than from "top to bottom," mainly to express a more level or flat organizational functionality.

DAVID: A close family atmosphere. [At a family business], you're not in that corporate world wondering, "Who's going to be laid off today?" Or, "What company is going to buy us today?" You're not a social security number—you're a person. And in a small family business, you're all a family—you all become brothers and sisters.

ID: How do you hold on to your company's traditions while also keeping focused on moving the business forward? Is it easy to get stuck in the "we've always done it like that" mentality?

McCURDY: As I mentioned earlier, we have been able to maintain the same vision, mission, and core values for such a long period of time that we know that the basic business principles are ingrained in the company culture to ensure consistent daily practices. For example, we have an ongoing commitment to maintaining a continually improving environment, and we focus on both our sales force and our end users as equally important customers.

BRITT: I find that once you start to make changes and people see the benefits [of those changes], they move with you and they get excited about it and they want more. You lead them through it. You have to have the foresight to say, "We need this." And you deal with the challenges as they come along until everyone buys in.

DAVID: Since [my brother] Rob and I are both so young [having taken over the business just four-and-a-half years ago], we know we've got to keep up out there or else we're going to drown. We just go with the change. A tradition that we may not touch would be our annual Christmas party. But as far as the way we do numbers or sales, we're constantly changing all that. And we adapt to change very well. We've got to keep up with what's happening in the industry. We can't just sit in our chairs and think everyone's doing their job out there. We need to stay on top of it ourselves.

ID: What is the greatest challenge to running a family-owned business?

McCURDY: I think the greatest challenge that family businesses face is the succession issue. Our understanding is that about one-third of businesses make it to the second generation, and maybe less than 10 percent make it to the third generation. Being in the second generation, we hope to be one of the few who can successfully transition to the third.

BRITT: I think the greatest challenge is to constantly see how you can improve. When you're part of something that's successful to begin with, you're challenged to try and make it even better. As an employee, you can say, "Today is good," and not worry much more about it. As a principal or an owner of the company, today is good, yes, but we always have to be focused on tomorrow. And we have to constantly challenge ourselves.

DAVID: The challenge for me is to make sure that we're competitive in the market as far as employee benefits. That is so important. I'll ask people [outside the company], "What does your company do for your health insurance?" Because that's a huge benefit right there. Trying to keep up with that increase every year is a challenge.

SMITH: Basically, maintaining the balance between the family and business. Being able to resolve the conflicts arising from business decisions that affect the individual members of the family...

The functioning of a family and a business are difficult at best—and the success of building trust and respect with and for the family members generally predicts the success of both.