Growing Into Family Business

Youngest generation often wrestles with a variety of issues when joining older relatives in the family-run company

Story by Sean Fitzgerald, New North B2B publisher

Growing up in a family that owns a business might seem like it would lay out a magical Yellow Brick Road for a career path and future wealth.

Yet, the easy street of finishing high school and going right into a cushy job in a successful family business is perhaps more a storyline for the Ewings on “Dallas” than reality for most family-run companies who remain successful generation after generation.

That’s because high-performing, world-class companies closely held by family members can’t simply dole out entitlements to children, nieces, nephews and grandchildren and remain profitable for the long-term. They recognize management and leadership positions – whether held by family or non-family members – need to command the trust and respect of the company’s staff and customers. Those company’s have clear and open communication across the business, allowing all employees to know and understand their role and opportunities within the business.

“The good programs within a family business are those that are transparent and allow everyone to know where they stand,” said Cathy Huybers, executive director of the Wisconsin Family Business Forum, located at the University of Wisconsin Oshkosh.

The forum consists of 36 member family businesses across northeast Wisconsin who share experiences and develop plans to avoid many of the pitfalls that often allow family businesses to be extinguished after just one or two generations.

Perpetuating family business, however, means bringing the youngest generation into the company at some point and equipping them with the tools and skills to someday provide effective leadership that’s respected by others.

 

Getting into the business

As much as it might seem like a no-brainer, the decision of whether or not to even come into the family business is one clouded with various issues.

Children might not have seen their parents and grandparents much while growing up due to work commitments, or have memories about them returning home from the business frustrated because of challenges with employees or vendors.

A number of family-owned farms in Wisconsin are struggling pass along several decades of proud heritage to the next generation because the younger group recognizes the increasing struggle of operating the family farm without taking it to a significantly larger scale.

Other children of business owners simply have different aspirations, and are encouraged by their parents to pursue those dreams.

Mandi McConnell Hinrichs never thought she’d someday find her way back into her father’s nearly three decade-old trucking company when she graduated college with her marketing degree.

“At that time, I thought I was going to be one of those people who set the world on fire and moved to Chicago, LA or New York,” said McConnell Hinrichs, who went off to work in the pharmaceutical sales industry for four years after college.

The youngest of five children, McConnell Hinrichs eventually came to a point in her life where she wanted to move closer to family and pursue a different challenge in her career.

Flash Trucking in Green Lake was growing, and her father, Pat McConnell, believed she could use her education and work experience for the benefit of the company’s visibility. She came back to Green Lake five years ago to head up sales and marketing efforts for the company, which boasts more than 100 trucks and more than 200 employees mostly doing short haul transport of dry bulk commodities like sand, cement and plastic.

Now 31, she serves as the company’s vice president of sales and marketing, and is working to someday take over the reins of the company when her father retires.

Similarly, Jason Wuest wasn’t initially interested in a career working for Badger Mining Corp., the company that’s been in his family for four generations. Like many of his cousins, he’d worked for the Berlin-based company during summers in high school, but left upon graduation to work for a local construction firm.

“Back then, the company was in a different place, as was I,” Wuest said. “There really was no pressure to get into the family business at the time.”

After nearly 10 years of working for someone else, Wuest hung his own shingle and ventured into entrepreneurship with his own construction firm. Unfortunate timing with the advent of the recent recession left Wuest and his family searching for more stability, and he returned to work at Badger Mining three years ago as a third-shift floater, filling in for others at the company’s Fairwater plant as they took vacations or missed shifts due to illness.

Wuest, 33, is also looking to ascend into some aspect of management in the future. He’s a self-described “guinea pig” for a leadership mentoring program the company is implementing, though it’s only in its most formative phase at this point.

Opposite Wuest and McConnell Henrichs, Joe Luedtke always knew he’d someday join SCP Inc. in Hortonville, the skid, crate and pallet manufacturing firm his father started 19 years ago. Now 29, Luedtke was just 10 years old when his father started the company in a small Appleton industrial space building pallets by hand on nights and weekends while continuing to work his regular job with the former Fox River Paper Co.

After graduating college in 2005 with a bachelor’s degree in marketing, Luedtke enlisted in the U.S. Army where he served for five years, eventually achieving the rank of captain. He served two tours of duty in the Middle East, and always knew he’d return to the family business when he completed his military commitment. The military experience provided Luedtke training in logistics and supply chain management that’s proven critical to his role at SCP as a materials buyer and corporate sales manager.

 

Learning the ropes

The process by which family businesses expose younger generations to the numerous aspects of the company varies from family to family, according to Huybers. Those with a plan in place are typically more successful transitioning from one generation to the next, because all expectations are laid out in the plan.

“When there isn’t a plan in place, that’s when the younger generation can feel uncertain and not be exactly sure what their role is in the business,” Huybers noted.

Badger Mining recently developed a “learning opportunity” program which allows family members to go through an eight-week job shadowing program the summer after their sophomore or junior years in high school, said Vicky Wuest, a director for the company and a third-generation owner. She’s also Jason’s mother, and her husband, Tim, is the current president of Badger Mining. The branch of the family tree associated with the business has 13 people in the third generation – who represent much of the older management of the firm – and 29 members of the fourth generation, with ages ranging from 4 years old to 36. Jason’s children represent what could possibly be the fifth generation of the family business.

“We want to ensure their development in the company (both as owners and as an employee if they should choose that route),” Vicky Wuest said. “We want them to know the company’s history and the heritage of the family. But we don’t want to force them into a position that they don’t want.”

As mentioned previously, Jason is currently engaged in a mentoring program through which he attends all meetings across the company, learning the nuts and bolts of what’s occurring in each department of the 270-employee provider of industrial sand and complementary products. Jason is also working on a bachelor’s degree in business management through Marian University in Fond du Lac.

At Flash Trucking, McConnell Hinrichs is starting out on a transition plan her father, Pat, believes will take about three to five years until he’s ready to retire. While she’s fairly adept in managing the firm’s sales and getting to know its customers, there’s still a good deal to learn along the lines of safety, transportation regulations, logistics of the maintenance shop, and operations across the company’s four regional terminals and eight transload locations across the country.

“It’s a lot to learn,” Pat McConnell said, recalling that he and his wife, Lynn, started the business in 1984 with just three trucks and four employees. “We grew it to where it is today, but we did it on a daily basis, and my wife and I were able to make the changes as the business grew.”

Pat said he’s comfortable with the rate at which his daughter is learning the structure of the company and gaining the respect of the rest of the staff. He said Mandi has lured in new clients and helped bring more structure to the organization, which has helped earn the trust of a number of employees.

That’s critical in a family business, and certainly a different dynamic than a relatively-anonymous employee who works through the ranks to gain the respect of co-workers in any other employer.

“As children in family business, (other employees) know who you are. You walk through the plant, and you’re instantly recognized by the rest of the employees as the child of the owner,” said Huybers, noting there’s an automatic sense of being treated differently. That can hinder training and development, Huybers said, particularly if a respected, long-time non-family member of the management team is training the owner’s child with the knowledge that someday he may be subordinate to that individual. She emphasizes that’s where a well-defined and transparent training, development and transition plan can create a comfortable environment for all employees, family and non-family members alike.

 

Sibling rivalry

In many family businesses where siblings or cousins are relatively the same age and experience much of the same upbringing, issues can arise about who’s entitled to become the heir to the corner office if a solid succession plan isn’t implemented.

Fortunately, that hasn’t been the case with the firms B2B spoke with for this article.

At SCP in Hortonville, Luedtke’s older brother, Charlie, came into the family business fulltime immediately after graduating college 12 years ago and now serves as the company’s general manager, where he oversees financial, human resources and operations management. They have a sister who remains a minority owner in the company, but lives in Florida and has no management role with the firm.

Even though Charlie is tentatively slated to lead the company when their father eventually retires, Joe Luedtke explained there’s no issues between the two siblings.

“My brother and I are very different in who we are and how we do things,” Luedtke said. His older brother enjoys the numbers-crunching tasks and operations management of the company, while Joe describes himself as an extrovert who likes to get out and about among customers and vendors.

 

Preparing for leadership

There certainly is no manual for grooming one’s child to take over the family business. Much of it is trial and error, readjustment, and then more trial and error.

Bill Bassett was the second generation of Kaukauna-based Bassett Mechanical when he bought the company from his uncle in 1974. At the time, it had roughly 30 employees and primarily did service work for commercial and industrial refrigeration systems, such as those a cheese plant would have in place.

“I came in and I was president – unqualified and inexperienced,” said Bassett, now retired as president and CEO but still active as the chairman of the company’s board of directors. “Not the way to do it.”

When Bill’s daughter, Kim, was in search of a career change from her job in speech pathology during the fast-changing health care industry of the mid-1990s, she ultimately decided to get into the family business. Bill had Kim take an in-depth career assessment to gauge both her interests among the types of jobs at Bassett Mechanical as well as her capabilities. The assessment suggested Kim would benefit from more formal education in business management, Bill said, and she went back to school to earn a graduate management degree.

Bassett started his daughter in the sales and service department, where he knew she’d receive good training in a structured environment. He said it was important up front to ensure he and his daughter had a mutual understanding that working in the business might not necessarily prove to be the best path for Kim or for the business – and that if such a time came to pass – he’d continue to love her as his daughter.

“We had a discussion that if this didn’t work out, we’re still family,” Bassett said. “We’d have to get past (the issues that led to parting ways).”

Fortunately for both, that wasn’t the case. The two would eventually develop a transition plan for Kim to take over as president and CEO. Kim also worked in the field, in the firm’s engineering department, and would eventually lead the company’s lean initiative to cut back on waste and create efficiencies within the organization. She then held successive roles managing the service department and serving as chief operations officer. Altogether, Bassett said Kim spent about 12 years training to become CEO before the company’s board of directors elected her to that role in late 2009.

“She had to earn it and show the rest of the company that she was ready to lead,” Bassett said.

Bassett credits his human resource staff during the past decade and a half with helping to develop and implement a sound training and succession plan for Kim.

The succession plan at Bassett Mechanical is often discussed by other members of the Wisconsin Family Business Forum as a model worth emulating, though Huybers acknowledges each family business has different dynamics which will ultimately drive any transition among generations. Nonetheless, she stressed a definitive plan is worth the time and effort to put in place at a family business.

“Have a plan in place so that the younger generation knows what the expectations are and what needs to be done to achieve their goals within the company,” she said.