Junior takes the helm

Next generation family business leaders face a unique set of challenges

Story by Sean Fitzgerald

 FAMILY BUSINESSES MAY JUST HAPPEN to be more complex than a publicly traded company.

Even though Securities and Exchange Commission quarterly filings and reports to shareholders might seem like a tedious exercise in bureaucracy, at least there are guidelines and rules by which to abide.

In family business, the rules are more arbitrary. Economic and shareholder justice is vetted within the family. Who does what, who owns what, and who’s decision is the final word is entirely the governance of the family. And leadership transition often isn’t as simple as pulling out a roadmap and charting a course from Point A to Point B.

Younger generations who have recently moved into the controlling position of their family business as their parents step back and fade away from making day-to-day decisions  about the operation of the company are often faced with a unique set of challenges and opportunities. But with the right preparedness, the younger generation can transition into a leadership role in their family business that best accommodates the family, the business, the employees and the community in which they operate.

Carrying the family torch

IT USED TO BE THE CASE that if you grew up in a family business, you were expected to following in dad’s footsteps and work in the family business once you came of age.

That’s not necessarily the case anymore. 

Similar to a growing number of family businesses now, Kim Bassett-Heitzmann was given the opportunity to pursue other interests before ultimately changing her mind to pursue a career in her family’s business, Kaukauna-based Bassett Mechanical. Though she worked summer jobs during high school washing the contractor’s fleet of trucks and other tasks, she didn’t think a career at the company started in 1936 by her great uncle was the path she wanted to take. And she didn’t feel any pressure from her parents to go down that route.

“One of the things I always appreciated about my dad was that there was never an expectation that I would carry on the family business,” Bassett-Heitzmann, now president and chief operating officer of Bassett Mechanical, said in a recent interview with B2B.

Following high school, Bassett-Heitzmann attended the University of Wisconsin in Madison and earned a degree in speech pathology, a field in which she worked for three years after her graduation. Three years into her career, Bassett-Heitzmann found a desire to do more.

In doing so, she sought out career counseling to conduct some assessment of her goals to determine if, in fact, getting involved with the family business would truly help her to achieve her goals. Bassett-Heitzmann determined she wanted to come back to the family business, and spoke with her father, Bill, about the chance of doing just that. She decided to go back to school and earn a second masters degree, this one in management and technology with an emphasis in construction. By 1997, she came back to Bassett Mechanical fulltime with a 10-year plan to learn as much about the business as possible, with the intention of some day taking over for her father. All the while, she and her father had an understanding that if she determined a few years into her training that she no longer wanted to continue in the family business, she was welcome to walk away to pursue another career.

In her first job, Bassett-Heitzmann worked as part of the company’s sales team for more than two years, learning various aspects of the business from the perspective of its customers. It was a daunting, but valuable, learning experience at the outset, since she had no sales experience up to that point.

“I hadn’t sold anything prior to that. I hadn’t even sold a Girl Scout cookie,” she said. 

She then went out into the field for a few years to learn first hand how Bassett conducted its service work with its clients. After that she spent a stint on the shop floor. During this period, Bassett-Heitzmann said she absorbed as much information from co-workers and supervisors as she could. She also always reported directly to a supervisor or other vice president during this time, helping to minimize any perception of nepotism among other employees and help to build credibility for her own actions and decision.

“I was always one step away from my father. I never reported to him,” Bassett-Heitzmann said.

Making the commitment to stay 

LIKE BASSETT-HEITZMANN, Race Office Products President Rick Hoppe didn’t feel any pressure or expectation from his father, Howard, that he follow in his father’s footsteps.

Hoppe also spent his childhood riding his tricycle around inside the downtown Oshkosh retail store when his father – who was an employee at the time – and other staffers conducted the annual inventory audit. As soon as he learned how to count, Hoppe contributed to the inventory exercise as well.

It wasn’t until his junior year of high school when he investigated the co-op employment program through the school. Getting a job in his father’s office supply store seemed like a good idea, so he was put to work in receiving, recording new merchandise as it came in and cost labeling it for the store shelves. Following high school and the co-op program, his role transitioned into a fulltime job picking and packing orders for Race’s commercial clients. That was a department run by one of his father’s partners, Curt Jawort, meaning Hoppe would work directly for Jawort as opposed to working directly for his father.

“That was intentional, and it was a good thing,” said Hoppe. 

Later that year, as the company determined it would computerize much of its inventory management and other business operations, Hoppe was tapped to help the ownership group acquire, set up and train on the system. It was a management responsibility, and the owners would later make him a salaried employee.

By the mid-1990s, after another change in computer systems at Race, Hoppe was asked if he’d like to buy in as a shareholder in the company, alongside his father and two other partners. At the time, he worked as a salesman for Race and was paid primarily on commission.

“That sealed the deal for me,” Hoppe said, indicating he was still waffling about what he wanted to do long term until that moment. Making the commitment to buy in to race Office Products as an owner meant he intended to make it a career, the same way his father did.

Hurdles for the next generation

THERE’S A VARIETY OF UNIQUE CHALLENGES that face a next generation family business owner that don’t necessarily apply to non-family managers in other firms.

For one, a next-generation family business member may not necessarily have the leadership background or experiences to effectively lead a large organization, said Burk Tower, dean of the College of Business Administration at the University of Wisconsin-Oshkosh and an advisor for the school’s Wisconsin Family Business Forum.

Sometimes, a family member is thrust into the leadership role in a sudden instance with little or no preparation whatsoever. They’re not ready to become an instant visionary for the future direction of the company. Along with lack of leadership preparedness, lack of ownership preparedness can be a challenging issue as well.

“The role of becoming an owner, and the responsibilities that come along with being an owner, are often overlooked,” Tower said, noting that internalizing the culture of the family business and internalizing the responsibility to employees and the community often comes with several years of direct involvement in the business.

Along with more personal direction from her father in the final years of her preparation to take over Bassett Mechanical, Bassett-Heitzmann also consulted with an executive coach to help fine tune her leadership and business ownership skills. She also said she found further assistance through the Wisconsin Family Business Forum, of which Bassett Mechanical had been a charter member.

There’s also the challenge of a younger generation business leader finding their own sense of identity, Tower added.

“People on the outside will have the perception that you’ve been given your position, to some degree,” Tower said.

Helping find identity has been one of the results of an offshoot affinity group within the Family Business Forum of younger generation family members who were poised to take over their own family firm someday. In fact, Bassett-Heitzmann was one of the founders of that group, and still returns on occasion as a speaker to share the lessons she learned during her 10-year preparation. This group meets separately – without the presence of their parents – to share with each other best practices for working through issues more pertinent to their situation, such as breaking free of their parent’s identity.

In some cases, holding on to dad’s identity in the business works just fine.

Brian Davis, the second generation owner of Jerry’s Barber Shop in downtown Oshkosh, kept his dad’s name on the red, white and blue spiraling sign post outside the 43-year-old business, which he purchased from his father in 2003. In fact, his father, Jerry, continued to work in the barbershop a few days a week until just last year.

“Until my father retired, it still never felt like it was mine,” Davis said, even though he had full ownership and decision-making authority for the previous five years. “There are still (customers) that are tied to this through my father that I feel a need to take care of and carry on.”

 Davis never really had any question that he’d go to work for his father and take over the shop someday. There was a brief period following high school when – because of a nearly two-year waiting list to get into barber school – that Davis went to work in an Oshkosh manufacturing facility and became enticed by the money he was making. But he ultimately came back to his father’s barbershop in the early 1980s, and worked side by side with him until last year.

“I worked with him for 25 years. I wouldn’t have traded a day in the world for it,” Davis said.

The amicable relationship between Davis and his father would appear to be more of a rarity in family business than the norm. Davis said the two agreed on nearly every business decision they made in the 25 years they worked together. He said there were only two disagreements – and noted that his father would concur – that were both resolved the next day after they occurred.

Letting go of the reigns

IN THE FIVE YEARS AFTER DAVIS acquired the business from his father in 2003, Davis said it took some time for his father to step back and completely give up control. His father, Jerry, continued to cut hair at the adjacent barber’s chair a few days each week until giving it up altogether in 2008.

That’s not uncommon. After years and years of dedication, imagination and sacrifice, a business is almost like another child to the entrepreneur who founded it. Letting go can feel like the greatest sacrifice of the entrepreneurial process.

“Sometimes the older generation wants to turn the business over, but doesn’t want to turn over the decision making,” said Tower of the Wisconsin Family Business Forum. “It’s not easy to walk away from something you’ve spent your life building – something you’ve created – to hand it over to some kid whose diapers you used to change.” 

Throughout 2007, Bassett-Heitzmann served as the executive vice president and reported directly to her father, Bill. She worked closely with him on crucial decisions made in the business, as well as meetings with key managers. By the end of 2007, he stepped aside and she became president.

Her father, Bill, is semi retired: he still works three days a week, and holds the title of CEO and chair of the board. But Bassett Mechanical is now his daughter’s company to run.

“He’s been very gracious in allowing me to change the way in which our company functions,” said Bassett-Heitzmann, who came into the president’s role and moved to more of a team approach to decision-making. It’s a diversion from the top-down culture of making decisions that drove Bassett Mechanical for more than 70 years since its founding.

Similarly, Hoppe made some big changes since coming into the president’s role at Race in 2005. Even in the previous 10 years, it had become apparent that the dynamic of selling office supplies in a retail setting had changed tremendously as Big Box names like Staples and Office Max entered the market. But even department stores, grocery stores and convenience stores sell many of the home office products like paper, pens, envelopes and staples that decades earlier could only be purchased in an office supply store.

After more than 75 years in business with the retail storefront serving as the face of its business, Hoppe encouraged his other partners in 2008 to shift gears and focus 100 percent of their efforts on the commercial side of the business. That meant closing down the storefront, and moving into a warehouse environment where orders from commercial clients are picked, packed and delivered.

It seemed like it had the ability to be a risky move at the time, but Hoppe said the numbers supported the decision.

“I didn’t think it would have a big impact with our customers, but I wasn’t certain,” he said.

Hoppe credits his father, Howard, for giving him the latitude to make changes of that magnitude and to accept and trust those changes. Howard, who still works part time until noon each day, said it was tough to turn responsibilities over to someone else. The decision to change Race’s business model so drastically did leave the elder Hoppe with some doubts, he acknowledged. But ultimately, he thinks it might be the most historic decision made in the company’s 75-year history.

“It was a change that’s allowed us to still be doing what we are here today,” Howard Hoppe said.