Governance

Our family business, E. Ritter & Company (ERC), was founded in the 1880s as a general merchandise store. ERC entered the communications business in 1906 when our founder, Ernest Ritter, installed a 10-line telephone switch in the back of his general merchandise store. Today Ritter Communications, a subsidiary of ERC, offers advanced internet, phone, video services and cloud solutions to wholesale, business and residential customers, primarily in Arkansas and Tennessee.

In August 2019, ERC entered into an agreement to sell a majority stake in Ritter Communications, a long-held family business. This difficult decision required over a year of business planning and family discussions, disagreements and feedback. Both family and business governance were leveraged to consider the sale from every angle.

Our governance structures helped our family grapple with this unprecedented sale. But it took years, and several variations on these structures, before we arrived at a system that would help us make such a big decision.
We are proud of our hard work and the progress we have made. We acknowledge, however, that during our governance journey we encountered some stumbling blocks. We’d like to share our experience to help others understand that the road to family governance often involves some bumps.

Trial and error: The evolution of Ritter family governance
The Ritter family culture is likely similar to many others in multigenerational businesses — patient, inquisitive and open to change but sometimes slow to execute. The Ritter Family Council, created almost 125 years after Ernest Ritter started his business, has served a number of functions. When it was formed, the family was converting ERC’s board of directors from an almost exclusively “family branch” board to a majority of independent directors. The family council offered a place and a voice for highly engaged family members who cared deeply about the business.

When the first non-family CEO was elected, the family wrestled with their identity, and the family council took on the responsibility for social and educational engagement. As it became apparent that the geographically dispersed fifth generation needed to be introduced to the business, the family council and management planned summits to build familiarity and unity for a group of somewhat disconnected cousins.

Since its inception over 10 years ago, the family council has achieved success in improving communication, leading structured family meetings and creating an engaged group of cousins who are educated and enthusiastic about our businesses. However, the family council struggled to deliver a clear message to the board of directors regarding owners’ expectations for the business. While the council excelled at the “business of the family” and management excelled at the “business of the business,” we lacked a very critical connection. As we confronted growth of the family, generational transition and changes in our industries, it was becoming increasingly difficult to maintain the status quo.

In 2011, the family council formed a task force to address this gap. This first iteration of an owners committee surveyed the family to create an owners’ plan, which would codify the family’s high-level vision and values for the enterprise. However, because of a lack of family consensus on topics including risk tolerance, return expectations and portfolio diversification, the plan failed to offer direction on any of these critical areas. Consequently, the requested response from the board of directors was limited.

With continued need for clearer shareholder financial expectations to drive enterprise strategy, the board pushed for more detail. In 2015-16, the family council again formed an owners committee to capture shareholder expectations. The committee again surveyed shareholders. This time, however, the questions were specific. Owners were asked about particular scenarios, such as reducing land holdings in order to invest in businesses with greater returns (but potentially more risk). The committee held webinars to answer questions and provide details prior to soliciting responses from each shareholder. Results again revealed significant diversity of personal financial needs and views on the future of the business.

While the results of the survey provided new insight on the family landscape, the absence of consensus stymied efforts to create a clarifying plan of action. Looking back on what was now five years of trying to solidify shareholder expectations, some were beginning to see the futility of seeking consensus among three generations with different financial needs and emotional expectations. Meanwhile, several related developments were under way.

First, family council members, board members and other family leaders were busy attending family business conferences, networking with other families and learning from family business experts and academics. Our mindset shifted as we explored new conceptualizations of varied family ownership landscapes. Ritter family members involved in family governance began to consider encouraging a continuum of engagement — inviting family members to assume roles that incorporated personal talents and accounted for time constraints and other life limitations.

Second, we began tacitly acknowledging that being a responsible business-owning family can require significant family time, even if the family is no longer working in operations, and that some form of compensation for that work is appropriate. In our case, direct compensation was instituted for those family members who contributed the most time and effort, and we began setting clearer, written expectations for leadership.

Third, the family and management were working toward portfolio diversification. We formed a task force made up of family members, independent and retired directors and non-family management focused on direct private investment in order to articulate goals for this new business. Although we relied heavily on management, this process served as a practice round for family leaders in articulating goals for growth, risk, profitability and liquidity, as well as other expectations for the business (see John L. Ward, and Craig E. Aronoff, Family Business Ownership: How to Be an Effective Shareholder, Family Enterprise Publishers, 2002, p. 28).

In 2018 the board of directors began to consider a big change for the long-held Ritter Communications company. In order to continue our successful growth trajectory, the board authorized management to seek out an infusion of growth capital from a minority equity partner. During the process, we received unsolicited interest in a majority or 100% sale opportunity at a notable premium. We needed a clear answer as to how such a transaction would be received by the family.

After years of mostly hypothetical discussion, we now had before us the most concrete and significant ownership question: Should we sell a business? Fortunately, the past decade of family education, relationship building, engagement and governance development would pay off: We finally had the capacity as a family to mount a timely and effective response.

Over several months, our family directors, family council leadership and non-family executives met over the phone and gathered in person to evaluate our options. From past family summits, we knew the family widely supported the fundamental goal of staying in business together as well as diversifying our businesses. Informed by these directives, our learnings at conferences and trainings, and our growing understanding of the family’s needs gleaned from past surveys and summits, the group established three broad ownership goals. Achieiving these goals would require bringing a majority partner into Ritter Communications to ensure the mutual success of both that business and our business-owning family enterprise.

In our largest family communication campaign to date, family leadership and management circulated the draft ownership goals to all family members and explained why we believed selling a majority of the communications business was in the best interest of both the family and the business. We followed this with individual calls by family board members to every shareholder. Based on those conversations, we distributed seven one-page “frequently asked questions” documents to all owners.

The transfer of control of a long-held, core business sparked mixed feelings from the family. There was broad support for the transaction, but also uncertainty, and we second-guessed ourselves along the way. Today we’re confident that the transaction will support the business and our employees’ future growth and will position us to remain a successful business-owning family for generations to come.

A key lesson learned from this experience was that active leadership by family members — even when the family does not work in the business — is required for success. In our case, this was provided primarily by family board members and family council leaders. Taking initiative and ownership over processes and outcomes is not unfamiliar to our family members — many of whom have had successful careers in other industries — but providing this level of leadership within the family was a new dynamic for many of us.

The sale process clarified that there would be an ongoing need for increased commitment. We considered assigning more responsibility to family board members or asking the family council to reinvigorate their work in this area. Our own experience and the advice of experts convinced us that a separate group would be best suited to tackle future ownership questions (see John A. Davis, Enduring Advantage: Collected Essays on Family Enterprise Success, Cambridge Institute for Family Enterprise, 2018, pp. 64-5).

Third time’s the charm: A stable owners committee emerges
The work required to address the question of selling our legacy communications business wiped away any remaining doubt that a new governance group was needed. Our newly formed, third-iteration owners committee is charged with leading family conversations around significant business decisions, articulating goals and policies around ownership topics (including dividends, risk tolerance and growth expectations) to discuss with the ERC board, and coordinating with the board and management to facilitate timely and appropriate business decisions aligned with owners’ goals.

Misunderstandings had to be overcome in establishing this new governance group. The most prevalent concern was that an “owners committee” would be duplicative of our existing “family council.” We were hesitant to create more bureaucracy and reduce efficiency. For some smaller families, a single family governance group might accomplish all that is necessary, but for us a separate group was appropriate. The interest level and skillsets for our owners committee are sufficiently different from those of the family council.

The second prevalent concern was that this group could subvert the authority of shareholders or the board. To address this, we set the composition of the committee to include a majority of family board members (a group elected by the shareholders) and made explicit in our charter that our work in no way supersedes the rights of shareholders and does not replace the authority and responsibility of the board of directors. The committee works closely with both groups to align goals. Giving the family council some oversight of the owners committee through periodic updates and reviews also helped create natural checks and balances.

A key difference in our current owners committee from previous iterations is the expectation for proactive leadership from the group. With five (approaching six) generations of adult shareholders, we cannot expect survey results to present clear guidance. We need a group of highly engaged and active owners to think critically about the family’s diverse needs and interests, the legacies of our family and our businesses and the needs of our communities and our world, and then to articulate an informed, fair and thoughtful set of guiding principles for our business enterprise. The results will not be perfect consensus, but will be needed, actionable directions for the board. Continual feedback from the family will help us to refine the guidelines over time.

The retrospective view
With each trial came important feedback for the Ritter Family Council. We saw how critically the business needs the voice of the owners, especially if family members do not work in the business. We explored the levels of education required for owners to provide an informed voice. Last, but not least, we expanded our understanding of the diverse spectrum of engagement levels and styles that is perfectly acceptable while acknowledging that the formal voice of the family is best articulated by a group of highly engaged family leaders.

We owe a huge debt of gratitude to the indispensable support and leadership of non-family board members and senior executives throughout our trials and errors, as well as to the larger community of business-owning families and family business experts. No family should struggle with family governance in a vacuum — there is a wealth of resources and many people available to help.

We gained new insights from our family governance evolution. We highlight several below and hope others will benefit from our case study in addressing ownership issues through family governance development.  

Second cousins Katy Wilder Schaaf and Erik B. Kesting are fifth-generation members of the Ritter family. Schaaf is chair of the Ritter Family Council. Kesting is a member of the E. Ritter & Company board of directors and chair of the Ritter Ownership Committee.

Lessons Learned

Here is some advice on developing a governance system that works best for your family business, based on the Ritter family’s experience.

Take responsibility. This isn’t about meddling in management of the business, it’s about taking responsibility as owners for your own needs and goals and articulating those in a useful way to the board. Active owners in family governance leadership positions must drive facilitation of the process.  

Get specific. In a diverse family group, specific questions and scenarios elicit the most specific and information-filled responses (even if they don’t directly answer the initial question). Survey your family members, asking them to state their specific personal financial goals and hopes for the business.

Involve your independent counterparts. Work groups that include both non-family management and family members are sometimes indicated — even when you’re working on a family culture issue. Find senior executives who are as committed as you are to perpetuating the family-held nature of the business and engage them anytime your family governance evolves.

Build trust in family leaders who represent the whole family. In a large family, don’t expect consensus. Most owners will need to make some compromises in their personal financial expectations or goals in order to remain owners. The trade-off is in emotional returns and community impact and the amazing relationships and opportunities that come with owning a family business. Help family members build wealth outside the family business. Other sources of capital can give family members the flexibility to weather modest changes in dividends or liquidity to meet the broader, long-term needs of the family enterprise.

Expect and acknowledge commitment. Maintaining cohesion in a business-owning family (in our case, with dozens of owners) requires time commitment and leadership. Invest in your family leaders and compensate them for their efforts.

Be patient and persistent. It took our family three tries and 10 years to establish what we now believe is a highly effective and resilient governance system. Family education, relationship building, leadership development and communication all work in parallel to create a robust family enterprise.

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Decisions at the J.M. Huber Corporation are made with the long view in mind: How should the business evolve so it can succeed for another 136 years? How can a family with hundreds of members sustain its ownership of a $2.3 billion manufacturing company with operations in 20 countries? And how can the company use the natural resources required to make its products in a sustainable way?

“One of the things that our family does really well is that we never stop evaluating our processes,” says Molly Heaney, 39, a fifth-generation family member who is a voting member of the Huber corporate board, serves on the family’s education and development committee and formerly served on the family council board. “There’s no complacency. Families are dynamic and need to change.”

Founder Joseph Maria Huber started the business after immigrating to New York from Germany in 1883. As the company grew from a single plant making pigment for ink in Brooklyn, N.Y., to an Edison, N.J.-based manufacturing company with 4,200 employees worldwide, the family also expanded. The current 242-member family encompasses the third through sixth generations.

Today, the Huber Corporation is a portfolio company that owns CP Kelco, which produces nature-based ingredients such as pectin and xanthan gum for consumer and industrial applications; Huber Engineered Materials, which makes specialty ingredients for industrial, agricultural and consumer applications; Huber Engineered Woods, which manufactures high-performance roof, wall and flooring products; and Huber Resources Corp., which offers sustainable, value-added forest management.

The company is owned almost entirely by family members, with no one individual or branch controlling a majority of the company. Only two family members currently work at the company, and the top executives are non-family members. The size of the family — along with the complex nature of the business — adds to the challenge of keeping the family engaged.

“It has never been a family business that’s easy to explain,” says Guy Cecala, 66, a fourth-generation Huber by marriage who has been active in family governance. “We don’t make widgets.”

The growth of the family and the business has led to highly developed governance systems on the corporate side and the family side. All along, the company’s decisions have been guided by the Huber Principles: environmental, health and safety sustainability; ethical behavior; respect for people; and excellence.

“The one constant and guidepost has been the Principles,” says Martha Huber, 64, a fourth-generation family member by marriage who is co-chair of the family nominating and evaluation committee and a former Huber corporate board member. The Principles were formally unveiled in 1987, though their roots go back to the company’s founding. “They really are fundamental, both for the Huber family and for the people at the company. It’s how we judge our success.”

A strong governance system
With members of the fifth generation taking on leadership positions in both corporate and family governance — and the sixth generation growing — the Huber family will reach “the distant cousin enterprise stage” within a few decades, notes Perry Premdas, an independent director on the Huber corporate board who is in charge of shareholder relations. Premdas is a retired CFO of a global chemical company.

Today’s corporate and family governance systems have their roots in the 1980s, when the son of the chairman at the time told him that the rising generation didn’t know much about the business they would inherit one day. The third-generation members who were then running the company took the matter seriously. They began work on a family education curriculum, including a director training program, and in 1986, fourth-generation family members Peter Francis, 67, and Martha Huber were among the first non-voting family directors. The family also began working with outside advisers, including John Ward of Northwestern University’s Kellogg School of Management.

During the 1990s, three fourth-generation members became voting directors on the Huber board: Francis, who had completed an MBA from Stanford University’s Graduate School of Business and had purchased a company in Seattle; Martha Huber, who had also recently earned an MBA; and Peter S. Brock. The board also added independent directors.

Francis joined the board’s governance committee and then became the committee chair. Right after he took on the role of chair, he had to create a process for selecting the next CEO. Huber’s sitting CEO, the first non-family member to hold the position, had announced his intention to retire within five years.

By that time, Francis was living in Seattle and running his business in addition to his work on the Huber board. But the trajectory of his career changed in late 1991 when, during the CEO search, the executive chairman of the board — Francis’ uncle — died suddenly. Another uncle, who had previously served as chairman, president and CEO, stepped back into the role of chairman and encouraged Francis to compete for the CEO post.

“I had an interesting decision to make: Would I pull up stakes and leave my company and home in Seattle and compete for a job for which there was no certainty of getting selected?” Francis says. “I had a real interest in manufacturing, and Huber was a much bigger company, so I could have a bigger impact.”

So for two years he commuted from the West Coast to the East every week, working for the soon-to-retire CEO as vice chairman of the board.

In April 1993, Francis became chairman of the board — and immediately confronted a crisis. A global electronics business that made up a large portion of Huber’s revenue had experienced significant losses. One of the outside directors asked Francis to focus on fixing the problem.

Working with a member of the finance team — while still a candidate for the CEO position — he identified that the critical issue was one of control rather than a market problem. He cut costs and shut some facilities to return the operation to profitability.

“That gave some confidence to board members that I knew what I was doing tactically,” Francis says. “I was younger than the other candidates, and my experience was different and somewhat unorthodox.”

One step in the CEO selection process was for each candidate to write a description of where they would take the company. Francis put a lot of work into his vision, even hiring a consulting firm to do some analytical work for him.

“The company had never sold any whole businesses,” Francis says. “I felt we needed to make changes. I said so and gave the reasons why — and ultimately the board made me CEO.” He became president and CEO on Jan. 1, 1994, in addition to his role as chair.

During his 15-year tenure as CEO, Francis led a transformation of the company. Huber sold 30 assets and acquired 120. The board shifted from having some independent directors to a having a majority of directors from outside the family.

Francis “really was a change agent,” says Martha Huber.

Francis also led Huber to adopt the portfolio management company structure. The three largest of the portfolio companies now have their own boards, which focus on business strategy. The Huber board, which evolved along with the company, now focuses on the portfolio strategy and how the company allocates resources among the businesses.

“The company had diversified from ink into some of the natural resources associated with production of ink, many of which were capital-intensive, commodity businesses,” Martha Huber says. “There was a real effort to look at how to position ourselves for continued long-term success.”

In addition to being majority-independent, the Huber board now has three voting family directors and two non-voting family directors. Each of the three portfolio company boards has slots for one voting and one non-voting family director.

“We value the independent voice and perspective of our board, and we have a phenomenal group of independent directors,” Heaney says. “But if you’re a family business, it’s important to have a family voice.”

Heaney calls the non-voting director positions “an unbelievable opportunity” for family members to learn about the business. It’s also a good way to see which family members could become good voting directors.

Before Francis left his role in 2009, he gave the board five years’ notice of his retirement. He also gave up the chairman title 18 months before retiring, so he could work with the new non-executive chairman before he left. Mike Marberry, a non-family member who had been president of Huber Engineered Materials, was appointed president and CEO.

“Leaders have a tendency to stay too long, and I wasn’t going to do that,” Francis says. “Organizations need change.”

Planning for the future
As the Huber family grew, they found they needed a stronger family governance structure, a realization common to later-generation business families. Family directors, who previously had represented each branch, now were selected based on their passion for governance. The transitions the company was undergoing also made it more important to have a formal process for communicating with the family and getting family input.

“Why does a five-generation family business decide it needs to overhaul its family governance system?” Cecala says. “One reason was the sheer number of family members. A lot of them felt disconnected from the company.”

Family governance gradually evolved into its current structure.

The Huber Family Council, composed of all family members ages 16 and older, elects the family council board and two other committees: the nominating and evaluation committee, which identifies and evaluates family members who want a role in corporate or family governance; and the education and development committee. The family also has other committees and establishes task forces as needed.

The result is a multitude of opportunities for family members to get involved.

For example, Heaney started hearing about family governance — “such a unique concept that as a child and teen I didn’t really understand what it meant” — when her mother got involved in committee work. She joined her first family committee at her mother’s suggestion, when she was in her mid-20s.

She joined the family council board in 2010 after having served on what was then called the family leadership and development committee.

Heaney also was a non-voting member on the corporate board and two of the portfolio company boards. In 2016, she was elected as a voting member of the corporate board. She is also the family communications adviser.

The family has created multiple ways for family members to engage, giving members of the younger generations a feeling of connection. One is the annual meeting, a family gathering that typically draws 80 to 100 people.

Evan Seely, 33, a fifth-generation family member who is co-chair of the family council board, grew up attending the meetings.

“I remember a meeting in Houston when the company was making products that went into the oil process,” Seely says. “We did a project with fish tanks, pebbles, Hershey’s chocolate and ketchup that taught us about the layers of the earth and where you can find oil.”

Since the mid-1990s, executives have traveled to visit with family members outside of the annual meeting. In January 2018, 85 family members provided input during the six-session “Director Road Show,” which included stops in New England, Denver and Los Angeles.

In 2014, the company established a family ambassador program. Family members attend milestone celebrations at company facilities and briefly address the employees, reinforcing the Huber Principles.

“It cements the bonds both ways: Employees get to know the owners, and the owners, particularly the younger ones, gain an affiliation with the business,” Premdas says. Last year 20 ambassadors attended 16 events.

In addition to the non-voting board member positions, the family offers internships to family members. The two full-time employees who are Huber family members began their tenure as interns.

The family also recently created the Owners’ Room, an in-person meeting that addresses topics from a shareholder’s perspective. Unlike the Huber Family Council, where each family member gets one vote, Owners’ Room votes are allocated by share.

The family council board also spearheads a number of ways for the family to communicate. One is the “NextGen Connection” newsletter, a 16-year-old quarterly publication featuring news from family members and the company.

The family and business have been honored for their governance, leadership and work at creating a sustainable business.

The National Association of Corporate Directors’ New Jersey Chapter named Huber’s board its Private Company Board of the Year for 2019. Also this year, Kennesaw State University’s Cox Family Enterprise Center honored the company in the sustainable business category at the Georgia Family Business of the Year Awards. In 2018, Huber received the 2018 Kellogg Family Enterprise Leadership Award. In 2013, it received the IMD-Lombard Odier Global Family Business Award, and in 2011, Huber was named one of the World’s Most Ethical Companies by the Ethisphere Institute.

In addition to sustaining the business and their connection to it, the family has focused on environmental sustainability.

“The shareholders want to make sure our employees are taken care of and that the company is not shortchanging any environmental or safety requirements or procedures,” Cecala says. “Just because you’re digging in the ground or having some sort of manufacturing operations doesn’t mean you can’t treat your employees well and be stewards of the environment. That’s what Huber has strived for and succeeded at.”

The changes started by the third generation and developed by the fourth generation are now being continued by the fifth.

“I felt — and still feel now — so much respect and appreciation for how the third generation responded to what was a very big change for them,” Martha Huber says. “They were really gracious and thoughtful about how they did it. They were living examples of the Huber Principles.”                                                                 

Margaret Steen is a frequent contributor to Family Business Magazine. She last wrote about MacLean-Fogg Company.

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

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Each business family has its own culture, strengths, idiosyncrasies, points of contention and shared history. That’s why each family must do its own work to develop policies and processes — a structure built on the foundation of someone else’s family values probably won’t work for your family.

Even so, there are certain essential principles that generally apply to multigenerational business families who aspire to be conscientious stewards of their entrepreneurial legacy.

Understanding these principles can help clarify several aspects of family business governance — why it’s needed and what practices tend to work well.

1. It’s easier to handle sticky situations in a high-trust culture. High trust — both within the family and between family stakeholders and non-family executives — increases the likelihood that business decisions will be made in the best interests of all shareholders. While some families are naturally trusting, others must work to build trust.

2. Family governance is hard work — but you need to do it. Few people look forward to discussing tough topics, but those issues must be put on the table at family meetings. If they aren’t, there’s little chance that they will be resolved. Many families have found professional facilitators to be helpful in starting these conversations and keeping them on track. Ultimately, however, it’s the family members who must work together to achieve a resolution. If the family doesn’t participate collectively, the results of the process are likely to be ignored.

3. “Best practices” may not be the best options for your family. Some structures or processes implemented by other families may not work well for yours. You might be able to modify a strategy to make it work within the context of your family culture. But sometimes your family might need to invent its own solution from scratch.

4. The process of working through issues is as important as the result. Merely sitting down together to discuss potential solutions is significant progress in itself. The shared experience of working together builds trust. Even if an issue is settled in a way that’s not to everyone’s liking, people will feel better about the result if they feel their voices were heard and the decision-making process was fair.

5. A good place to start is by focusing on what family members have in common. Many families begin their governance journey by creating a list of shared family values and family mission and vision statements. This exercise emphasizes unity and reinforces positive feelings about family membership. When disagreements bubble up in the future or questions arise about the right thing to do, reviewing the family values often provides clarity. Some families begin every family meeting by reviewing their family values.

6. Investing in governance and family member development pays long-term dividends. There are costs associated with governance. Expenses can include consultants’ fees, family members’ travel reimbursement, facilities rental for family gatherings, admission to educational programs and compensation for board members. Wise families consider their governance budget as an essential investment in their business — especially after weighing it against the cost of not doing this work.

7. Several family business challenges can be predicted. It’s best to get out in front of them. Family business disagreements generally are sparked by growth or change in the family or the business (for example, the increased number of stakeholders in later generations or the need to invest profits to expand or diversify the family firm). Proactive families anticipate such changes and create strategies to manage the associated challenges before they arise.

8. A consultant can help you resolve your issues — but make sure you hire the right one. Check references to determine how many family business clients at your generational stage the consultant has helped, and how familiar the person is with family business systems, governance structures and documents. It’s also important to assess whether the consultant understands your family values and is able to create an atmosphere where all family members feel comfortable speaking about difficult issues. Can the consultant relate well to all members of the family, regardless of age, gender, marital status, etc.? Is the consulting firm trying to sell you a product — and, if so, is it a product that can actually help you?

9. The third generation is generally a pivotal one in the evolution of a business family. In Generation 3, most family trees have sprouted branches. The households may be geographically dispersed, likely with different numbers of children and different income levels. They may not share the same political or religious beliefs. Since the family no longer sits at the same dinner table, those outside the family firm don’t get news about it on a nightly basis. At this stage, conscious effort may be required to unite family members in support of the family business — or even just to make sure the cousins, who are or will be business partners, get to know each other.

10. Unwritten rules and unenforced policies put pressure on the family. Many families first realize they need governance when their rising-generation members begin to come of age and express interest in entering the business. Creating a family employment policy will manage expectations about qualifications for joining the family firm and clarify that family members are not guaranteed jobs in the company. This tends to spark the family’s realization that other documented agreements are needed, as well.

11. Family governance documents should not just sit on a shelf. A family constitution (usually encompassing values and mission statements, policies and procedures, charters for family governance bodies, and job descriptions for key governance positions) should be considered a living document. In order to fulfill its purpose in guiding the family, the constitution should be referred to frequently. Although a family constitution is not legally binding, the goal is for family members to consider themselves morally bound to its provisions. The constitution and other key family documents, such as the shareholder agreement, should be reviewed periodically to see if they require alteration because of changes in family circumstances. During this review period, the family should also determine whether additional policies are needed.

12. Communication and transparency are essential in multigenerational business families. Putting a priority on “investor relations” builds trust between the family shareholders and the business leaders. Shareholders who are denied access to information about financial results or key business developments tend to be less committed than informed owners. There should, however, be an understanding that certain information must remain confidential. It’s also important for family members to feel free to express their concerns. Lines of communication should be established so that family members go through a liaison, such as the family council chair, rather than contacting management directly. Larger families also need a way to communicate family news, like a news­letter or family internet portal. That keeps family members connected and united.

13. Family members must be educated about the family’s business legacy. Educated family members become committed stewards of the family enterprise. Family education programs can be created by the family council or developed with the help of a consultant. The most comprehensive programs include curricula for children of all ages, young adults, and married-ins or significant others. Topics include a history of the family in business, the family values, philanthropy, financial basics such as how to read a balance sheet, and information related to the family business and its industry. Educational programming has another benefit, too — it brings cousins together in a business context.

14. There are many ways for family members to contribute and lead. Family business leadership opportunities aren’t limited to the C suite. Roles beyond the business could include family council members, meeting planners, newsletter writers, family education curriculum developers and organizers of philanthropic activities. Those who excel in such roles might be interested in a development path that could culminate in taking on a key position such as family council chair or family business board ­member.

15. The “benevolent dictator” model doesn’t work well in large families. In the founder and second generations, the founding patriarch or matriarch makes all the decisions. When family business ownership is spread among multiple households, family members generally begin to clamor for a more inclusive approach to decision making. Also at this stage, more work is required to keep family members educated and informed about the business. At this point, families often form a family council to coordinate tasks and give more people an opportunity to participate. In the fourth generation and beyond (depending on the size of the family), it might be expedient to create an additional governance body, often called an owners council, to deal exclusively with issues pertaining to shareholders of the business.

16. Income disparity among households is a reality in multigenerational families. At some point in the life cycle of a family firm — often at the outset, but sometimes not until the third generation — business leaders will realize that welcoming every family member into the business and paying them all the same salary isn’t practical. Families need to understand the difference between what is “fair” and what is “equal” and engage in frank discussions on this topic, if necessary. Establishing a dividend policy can provide needed liquidity for shareholders while preventing excessive strain on the business.

17. “Professionalizing the family business” doesn’t mean separating the family from the business. While it may be wise to hire non-­family executives to manage the business and independent directors to provide strategic oversight, the family must not remove itself entirely from the business. Family members must be developed as engaged, responsible owners and stewards of the business who serve as partners with the board and management. If the family does not step up to assume its role, the business will suffer.

18. The best way to find out what family members are thinking is to ask them. Consider surveying the family to identify areas of concern or get their views on recent programs or activities. Invite dissenters to comment before final decisions are made; better yet, welcome them into the group that makes the decision. Include next-generation family members on the com­mittee developing NextGen ­educational programs and social activities.

19. The need for formal succession planning should be obvious, but many family businesses neglect it. A succession plan should be documented — including a timeframe for developing the future leader and an emergency plan in case disaster strikes before the successor is ready. It’s important for the plan to be communicated in advance to the family and other key stakeholders. Multiple studies have found a significant percentage of family firms falling short in this area. Succession is a multi-stage process, so ample lead time must be built into the plan. An effective independent board will hold the CEO accountable for succession planning and make sure the process is on track.

20. The leadership needs of the business in the future will be different from its leadership needs today. In the next generation, the business will likely have grown. Technological advancements and changes in the competitive marketplace will have sparked new customer expectations. The family will also have expanded, with a different set of family dynamics. The next CEO must have the right skills and the right leadership style to guide the business in this future landscape. Succession planning should involve an assessment of future needs, not a search for someone whose strengths mirror those of the current leader.

21. The family must reach agreement on risk tolerance. Family business owners tend to have a conservative attitude toward debt, but borrowing can help a business capitalize on opportunities. The family must work together to determine how much risk they’re willing to assume and how they feel about taking on a partner (for example, a private equity investor or a family office investing directly in the company).

22. Solid family and business governance are essential prerequisites to hiring a non-family CEO. Talented executives seek assurance that they’ll be given the freedom and support they need to do the job. Family firms with an independent board, a high-functioning family council and strong family policies are more attractive to top candidates than family companies without this infrastructure in place. The family should be able to speak with one voice when communicating to the non-family executive, and boundaries must be respected.

23. Long-term continuity of a family enterprise often requires divestitures and creation of new businesses. Most families who have been in business together for 100 years or more have sold or closed underperforming business units and started new businesses. Research has found that the key to family enterprise sustainability is the family, not the business. The hallmarks of long-term viability are the ability to innovate, to adapt to changing markets and to make tough decisions in the best interest of the enterprise. Many family enterprises have been sustained long after the closure or sale of the legacy business.

24. An independent board with the right members is a tremendous asset to a family business. Independent members of a company’s board of directors or board of advisers bring an objective, third-party perspective and proven business experience to a family firm. They can take the heat off the CEO in family compensation decisions, assure the family that management is being held accountable and provide crucial feedback on strategy. The most effective independent board members are truly independent — not the CEO’s cronies or people who provide professional services to the company. They should have the right skills to provide strategic oversight and help the family business reach the next level of growth. And, importantly, they must understand and fit in with the family culture.

25. “Pruning the family tree” is a wise strategic move in some cases. Family shareholders who want to redeem their shares and exit the business should feel free to do so. Family governance will not function smoothly if a faction of the family doesn’t want to participate. An exit may result in fewer family disagreements and a smoother path to business growth. Having a buy-sell agreement that establishes a mechanism for the sale and purchase of shares will reduce the likelihood of conflict over the valuation.

26. Family dynamics play just as much of a role in philanthropy as they do in the family business. People often say it’s more fun to give money away than it is to earn it, but in reality, it can be just as challenging. Philosophical differences in a diverse multigenerational family can lead to heated discussions over which causes to support. Family members who aspire to jobs in the family foundation or seats on the foundation board must be qualified for those roles; problems will arise if the family views its foundation as a place to employ underperformers.

27. Family meetings must include opportunities for fun and bonding. If your family gatherings focus entirely on business and education, interest in attending will decline. Fun activities — a family softball or soccer game, group tours, trips to the lake — will enable cousins to get to know each other and create the “glue” that keeps the family together. Many families hold family assembly meetings (gatherings of the whole family) in fun locations. Some also build in time for the extended family to participate in a charitable activity together.

28. Some problems may need to be left for the next generation to resolve. Some controlling senior-generation members insist so strongly on maintaining the status quo (or continuing their family feud) that contentious issues must be tabled until the next generation takes the reins. Many families have had breakthroughs when a NextGen steps up with a strategy to escape from the dysfunctional dynamic.

29. Sharing your stories with other family business owners can be revelatory. Owners of private family companies are understandably reluctant to discuss family issues in public. While that strategy may keep their name out of the newspapers, it also leads to a feeling of isolation. It’s very likely that another family has confronted an issue similar to yours and found a resolution that might also work for you, perhaps with modifications. There are many opportunities for family business owners to get together in a confidential setting. Taking a risk may have a high payoff.

30. It’s possible to have a family business without any family members working in the business. If the next generation isn’t interested in spending their careers in the family firm but feel strongly connected to the business and are willing to put in the work to create solid family and business governance, the business could continue as a family-owned, professionally run enterprise.      

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.                        

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Lester and Vanola Wittwer opened the Wittwer Motel in Las Vegas in 1948. After several years, the couple moved their family back to Southwestern Utah, the area where they were both raised. In 1955, they opened the Wittwer Motor Lodge in St. George, Utah, where the family business is based today. The Wittwer Motor Lodge, now the Best Western Travel Inn, is still in the family’s portfolio.

Lester and Vanola’s four sons, Royden, Tony, Mel and Sheldon, joined the business and helped it grow. Wittwer Hospitality continues to develop hotels under its own ownership and provides management services to other hotel owners. All told, there are nine hotels, with others under development.

In 1974, the enterprise expanded by adding a furniture store company, Boulevard Home. Boulevard Home has three store locations, a clearance center and consignment and flooring stores. The family enterprise also has a property management side.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

 

Each of the second-generation brothers had six children. The G2 siblings had equal ownership and equal salaries. The 24 cousins in G3 have mostly equal ownership, although that is beginning to change. Nine of the cousins work in the family business.

The Wittwers have been taking steps to address the challenges that arise when a big family owns a small business. As of today, there are 75 G4s. No one in the fourth generation has ownership yet.

The need to update the family employment policy was a major impetus for the establishment of the Wittwer Family Council in 2005. Family members were asking questions about hiring decisions and salaries, and the younger G3s were concerned that they might not have an opportunity to work for the family business. At the same time, family members in leadership wanted to ensure they would have a qualified pool of family applicants; they also feared family members might expect positions they were not qualified to hold.

The family council borrowed copies of other family companies’ employment policies and determined the key points to be covered in the Wittwer policy. A family council member was assigned to draft the policy. The policy was added to the family constitution with board approval.

The family also created a policy governing compensation for family members who work in the business. Compensation is now based on job duties, fair market value and job performance.

The family employment and compensation policies have resulted in a substantial decrease in family employment concerns. Family members are seeking quality education and outside work experience, and those who return to the family business after gaining this experience are better qualified for their positions.

The Wittwer family constitution includes core values/guiding principles, family council bylaws and policies to cover a wide range of family and business situations.

The board consists of seven members: five family members and two independent members. Family directors are chosen through an application-and-interview process; non-family directors are chosen by a Nomination and Selection Committee.

In 2004, the family started paying annual dividends to family shareholders. The checks are distributed at the annual family assembly meeting, providing an incentive for family members to attend the meeting. Family members appreciate not only the checks but also the associated transparency. They are more interested in the company’s performance and recognize the benefits of business ownership. Because attendance at family assembly meetings has increased, the meetings are more meaningful.

The family introduced a stock buyback program in 2010. An amount to be offered is determined annually, with a discount applied. A policy was implemented to divide the amount fairly if more than one person wants to sell back shares. Stock buybacks have helped individual family members expand their own businesses, pay off student loans, reduce debt and buy homes.

A Compensation and Continuity Committee was created to oversee dividends, the family companies’ incentive plans and other complex, high-level issues. The incentive plan encompasses profit sharing and cash incentives and is open to family as well as non-family team members. A phantom stock plan, instituted in 2012, is open to family and non-family team leaders and executives. Partly because of the incentive plans, skilled family executives are choosing to remain in the family business or to return to it.

Recently added committees include Business Growth, Investment and Borrowing. An advisory board, consisting of the four second-generation brothers, has also been established. All of the G2s are retired from day-to-day operations, and only one still serves on the board of directors. The advisory board has provided the opportunity for the company’s founders to be involved and have a voice while enjoying retirement.

Programs and policies are in place to better develop family members of all ages. An education program is presented at the annual family assembly, with curricula for three age cohorts: 8-11, 12-18 and 19 and older. All have learned more about the company’s history, the family values, the company’s current operations and business basics. The older youth have opportunities for summer internships, mentorships and donations and have stock market investing competitions.             

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The company, founded in 1908, manufactures fire engines, pumps and related equipment for first responders and distributes tactical equipment to the Department of Defense. W.S. Darley is headquartered in Itasca, Ill., with manufacturing, engineering and R&D operations in Chippewa Falls, Wis., Janesville, Iowa and Grand Rapids, Mich.

The company is co-owned by three branches of the Darley family. Paul Darley serves as president, CEO and chairman. There are 13 family owners in the third generation, seven of whom work at W.S. Darley, plus seven of the 32 fourth-generation members. The family employment policy requires them to work elsewhere before joining the family business.

Paul’s father, Bill Darley, joined the family business in 1950. He became president in 1962 and held that title until 1997. He retired as CEO in January 2010 and stayed on as chairman until 2015.

Bill, who passed away in 2018, had sole authority when he ran the business under a voting trust. In the second generation, there were only four family shareholders and no pressing need to grow the company, which generated enough profit to support the four owners. Bill realized that situation would change when the business transitioned to a cousin consortium in the third generation.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

Wittwer Hospitality/Boulevard Home

 

Around 1980, Bill established a division structure in the company. That enabled family members coming into the business to have an area of their own to grow. The third generation grew and diversified the company. Division leaders make decisions independently, with major decisions made by consensus.

After Bill had emergency heart bypass surgery in 1989, he prioritized succession planning. In 1994, he formed an executive team consisting of three third-generation members and requested reports from each of them on how they would run the business. In 1997, after realizing he could not choose a successor, he left it up to the executive team to make the choice.

The team considered several options, including a co-presidency, rotating the president’s job among the three of them and choosing a president from outside the family. In the end they decided one president would be the best option for the company and selected Paul, the youngest of Bill’s five sons. The family empowered Paul and put their trust in him based largely on his communication, organizational and leadership skills.

The Darley family has had a family council since 1991. A family constitution, developed by the council early on, emphasizes that family members are a team, regardless of their individual positions in the company. The constitution outlines how the company would handle a serious family disagreement. The family revisits the constitution in annual meetings and makes revisions when warranted. Core values have been documented.

A family participation plan outlines the qualifications required to work in the family company and requires that family members be paid at market rate for their positions.

The family council emphasizes transparency and works on team-building among different generations and family branches.

Shareholders receive communications via email, webcasts and other means on matters such as dividends, strategic planning, new hires and forecasts. Family members have a chance to voice their opinions behind closed doors but present a united front to the board of directors.

The company began to professionalize its board in the early 2000s and has seen sales and profits increase ever since. The company bylaws require the board to include more family than non-family directors. Today the nine-member board has four family directors who work in the business (including Paul) plus one family director who represents shareholders who are inactive in the business and four independent directors.

The board has become increasingly involved in succession planning and in the hiring and onboarding of family members. The fourth-generation members working in the business present a report to the board at each board meeting.

W.S. Darley also has a seven-member defense advisory board, which meets once a year for two full days. The company views the defense advisory board as a training ground for potential independent directors.

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Vertex is the leading indirect tax software and services provider to U.S. and global businesses of all sizes. Vertex provides cloud-based and on-premise solutions that can be tailored to specific industries and business requirements for every major line of indirect tax, including sales and consumer use, value added and payroll.

Headquartered in King of Prussia, Pa., and with offices worldwide, Vertex is a privately held company co-owned by three second-generation siblings and employs over 1,000 professionals.

Ray Westphal founded Vertex in 1978. His wife, Antoinette, who passed away from breast cancer in 2004, was the first employee. In its early years, the company sold paper copies of sales tax directories and manuals, including information on the country’s many tax jurisdictions, rates and rules.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

 

The three sibling co-owners — Jeff Westphal, Stevie Westphal Thompson and Amanda Westphal Radcliffe — purchased their father’s interest in the company in 2000, when all were in their 30s. At the time of the purchase, their father was principally devoted to spending time with their mother, who helped to found breast­can­­cer.org, a non-profit that is still one of four supported by the Vertex Corporate Philanthropy Program.

The ownership may have shifted down a generation, but the commitment to build upon the strong values on which the company was founded and the desire to grow it exponentially remain. Ray and Antoinette continue to be the inspiration for the company’s ongoing spirit of devotion to its values, vision and mission.

Before 2000, the board consisted of Ray and Antoinette Westphal, their three children and the corporate attorney. After assuming ownership, the second-generation partners recruited independent directors with public, large-cap experience to their private, mid-cap company, offering market-value-based compensation. The Westphal siblings agree the independent board was vital to their successful transition to co-ownership of the company.

All three siblings have worked at Vertex in various roles, including sales, marketing, finance and customer service. Jeff, who joined the company in 1988, became president in 1996 and then CEO in 2000. During his tenure, Jeff oversaw tenfold growth of the company, creating new divisions and service offerings while expanding the business globally. He led the initiative to add cloud-based tax processing solutions for smaller corporations and helped lay the foundation for the company’s tax data management offering.

Having helped to establish Vertex as an industry leader, and realizing that 20 years at the helm was fast approaching, Jeff recognized that it was time for new leadership with the right skills and strengths to take the company to the next level and offer sustainable long-term industry domination as a fully globalized corporation.

While Stevie continued to guide the board in the role of chair, Amanda led the succession planning process, working closely with the original independent directors. A global executive search and consulting firm was selected to advise the board along a carefully staged five-year process to cultivate, select and support not only a successor, but also a thorough company leadership elevation and mentorship program.

David DeStefano, who joined Vertex as vice president of finance in 1999 and later became chief financial officer and executive vice president, was announced as Jeff’s successor in late 2015. After a year of gradual transition, he assumed full responsibility in the fall of 2016.

While the Westphals aren’t involved with the daily operations of the company, Vertex continues to be family-owned and professionally run. DeStefano’s commitment to the people-centered culture and emphasis on the core values of respect and fun were key factors in his selection, along with his strong financial acumen, leadership ability and competitive drive for performance.

Today, the Westphal siblings concentrate on corporate and family business governance, devoting much time to both. They serve together on the board along with four independent directors. The five non-family board members, including DeStefano, can outvote the three family directors on board decisions.

The siblings say the best thing they did for their partnership, company and family was to develop an independent board. The board meets five times a year and maintains public company fiduciary standards. It includes very active audit, compensation, and nominating and governance committees, chaired by independent directors. The directors played a key role in mentoring DeStefano, as well as over a dozen other senior executives at the company. And, most importantly, the independent board ensures that deliberations are objectively focused on the business.

In 2008, the three sibling families formed a family council, whimsically named KAFCA (Kick-Ass Family Council Assembly). KAFCA participation is voluntary and includes all willing family members. There are two assemblies per year, with other meetings conducted among various subcommittees, including a private call each month for third-generation members who share in ownership now through trusts. In addition to company and industry education, skill development and various family business governance projects, a formal family employment policy has been developed, and some members of the third generation are considering the possibility of applying to the firm for employment.

At 57, 56 and 51, the Westphal siblings continue to position the company for long-term industry leadership, while patiently supporting the development of the next generation as competent future stewards of the business. The partners are proud to sustain a company that serves their customers with mission-critical enabling technology and provides Vertex colleagues with an extraordinary workplace that supports communities, causes and families in fulfilling ways. 

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Founded in 1952 by Bob Sheetz as a single dairy store, Sheetz, based in 

Altoona, Pa., now operates more than 590 stores across six states and generates annual sales of over $7 billion. The company has more than 19,500 employees.

There were eight siblings in Bob’s generation, with 27 years separating the eldest and youngest. Today there are 107 family members, 12 of whom work for the family business or serve on the board.

Bob retired at age 48 in 1983, after the company had opened its 100th store. He turned the reins over to his brother Steve, who had joined him as a partner in 1961. Steve served as CEO until 1995, when he moved up to chairman to make room for Bob’s son Stan.

In honor of its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Port Blakely

 

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

 

The family worked with a consultant to make significant governance changes in 2013. That year, Stan’s cousin Joe became CEO, Stan took over as chairman of the company and Steve became chair of a newly formed family council.  In 2018, Joe’s brother, Travis, became the first COO in Sheetz history and also was named as the company’s new president.

The family council’s many roles include assisting with communications between the business and the family, developing and maintaining family unity and commitment, educating individuals about the role of family members and shareholders, formulating family policies, preventing or resolving conflicts within the family and building support across the family for the company’s direction and success.

Through the family council, family members have come together to participate in philanthropic activities that benefit Make-A-Wish, Special Olympics and other organizations.

Also in 2013, Sheetz revamped its board to include independent directors. The shareholder agreement was updated, and the bylaws were revised. The company recapitalized, and a voting trust was created to control most of the shares. In addition to the family shareholders, some former non-family executives own stock, and 7.5% of the shares are owned by employees through an ESOP.

The Sheetz family has created a family charter and a family employment policy. The family holds retreats and has developed a sophisticated family education program for family members from ages 5 to 25+, including those who have married into the family. Age-appropriate opportunities for learning and participation are offered in a variety of subject areas: entrepreneurship, investment and financial competence; interpersonal/family communication skills; the family; governance; the business; and community involvement.

Family values are emphasized in family retreats, family council meetings, family education sessions and everyday conversations. 

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Seattle-based Port Blakely grows and markets renewable forest products around the globe, owning and managing working forests in Washington state, Oregon and New Zealand. The company supplies customers in the United States and exports to international markets, largely in Asia. The business has been owned by the Eddy family since 1903. Today, the family consists of approximately 140 members, about 85 of whom are company shareholders. Port Blakely has a majority-inde­pendent board of directors.

In 2000, as the family approached a century owning the business, then-CEO James Warjone became concerned about the family’s decreased connection to and engagement in the company. Low attendance at the annual family meeting was an early warning sign, and he sought to rally the family. They responded, agreeing to bring in a family business consultant and convening a task force to explore family governance issues and opportunities. 

The task force evolved into a provisional family council and then was formally established as the Eddy Family Council in 2002. Fourth-generation family member René Ancinas was the first family council president. Ancinas then joined the company as an employee in 2005. He later became chief operating officer and is currently chairman and CEO.

As an early key step, the provisional council began developing a family constitution in 2001. This was a lengthy, intensive process that involved much discussion and debate. The constitution was finalized and adopted by the family in 2006. It contains the family’s statement of its mission, vision and values, and the policies and procedures that govern the family assembly (the full family) as well as the family council.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Midmark Corporation

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

Communication has been an important role of the Eddy Family Council from the beginning. One of the council’s initial goals was “de-mything the family myths.” The council’s efforts over the years have resulted in a smoother process of nominating and electing family directors, increased trust in company management among the family, and strengthened connections among family members and owners across branches and generations.

Family council members are elected to three-year terms and may serve a second term. Each year, three members rotate off the council and are replaced by three new members. The company’s director of human resources attends family council meetings to provide continuity, coaching and support.

A family education program was developed under the guidance of the family council and with the efforts of several members with professional backgrounds in education and family governance. Curriculum topics include lessons on the family — vision and values, history, innovation and success, etc. — and Port Blakely’s operations, as well as business finance and wealth management.

For younger family members, the Eddy Academy, an annual camp-like program geared toward children ages 14 and under, was developed. It introduces them to Port Blakely and what it means to be part of a family-owned company. Eddy Academy includes business lessons modeled after Junior Achievement activities as well as opportunities to get to know their cousins better. A “graduation” ceremony is held for family members when they turn 15. Members of the fifth generation are currently at this stage. Each graduate is matched with a family mentor, who helps further their Port Blakely education, accompanying the young person to family meetings.

College-age family members are invited to participate in a paid internship program that offers exposure to the business as well as work experience. Educational programming on financial topics and tours of company facilities are available to adult family members.

The company has been recognized for these efforts and hopes to be a model for other family-owned businesses. The family governance journey continues, as the work is never done. It simply evolves along with the family and the business.  

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John W. Eiting, along with three partners, founded the business in 1915 as the Cummings Machine Company in Minster, Ohio. It began as a manufacturer of concrete mixers, mining cars and locomotives. The company underwent several name changes and entered the medical equipment market via an acquisition in 1967. In 1969, third-generation leader James A. (Jim) Eiting moved the medical division to Versailles, Ohio, and renamed the company Midmark Corporation.

Today Midmark, controlled by the Eiting family, is a global manufacturer and supplier of healthcare products and equipment and diagnostic software. It’s now headquartered in Dayton, Ohio, but maintains production and administrative offices in Versailles, a town of about 2,600 people.

In the late 1990s, fourth-generation member Anne Eiting Klamar was a practicing physician in Urbana, Ohio, about an hour away from Versailles. She had served on Midmark’s board since 1993 and became the company’s part-time medical director in 1998. During this time, the company was confronting some challenges.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Menasha Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

A brother of Anne’s who had been expected to succeed their father had left the company; he later passed away. An outside president had been appointed after Jim Eiting retired in 1995, but the non-family executive didn’t meet the company’s needs, and Jim returned to the presidency in 1999. The board told him Midmark might have to be sold.

At a board meeting in 2000, the board asked Anne to leave the room. When she returned, she was informed — to her surprise — that the board had chosen her to be the next president. Although Anne had been involved with the company, she had no other business experience. The board mentored her and helped her grow into the role.

Anne was named CEO in 2003. Under her leadership, Midmark experienced significant growth and international expansion. Anne’s siblings also work at the company: Her brother, Mitch Eiting, is manager of global community relations and president of the Midmark Foundation, and her sister, Polly Grow, works in caseworker customer service.

When Anne decided to step down as CEO, she felt it was essential to find a successor who would perpetuate the family and company values. John Baumann, who had joined Midmark’s board in 2009 and was named board chair in 2013, became CEO in 2016. Anne assumed the role of board chair; she and Baumann switched roles.

While Anne was running the business, family governance was fairly straightforward. Because her siblings worked at the company, they were aware of key business developments, and they trusted Anne as Midmark’s leader.

Two years before Baumann took over as CEO, the Eitings engaged a consultant and began working to strengthen their governance. They formed a G4 family council and developed shared values, mission and vision statements — an effort that was more complex than they expected — as well as a family charter and shareholder agreement. The family also took a governance course together at the Kellogg School.

When Baumann took the reins, he asked the family for answers to questions they hadn’t considered before, such as how much debt they would be comfortable taking on. This required them to delve even more deeply into governance in order to create an Eiting family shareholder group statement of risk.

While the Eiting family holds the largest block of shares in Midmark, there are additional shareholders outside the family. In 2016, Midmark changed from a C corporation to an S corporation. The number of shareholders has been reduced from 144 to 66, and efforts are ongoing to repatriate shares held by non-family members.

The fifth-generation members are being raised to become successful and thoughtful shareholders and stewards of the company, with no expectation that any of them would run the business. An associate director program has been established to teach them about board service.

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Founder Elisha D. Smith acquired a small, struggling pail factory in Menasha, Wis., in 1852. Over time, he and his descendants transformed their woodenware offerings to keep up with changing markets. The company began producing corrugated boxes in 1927 and added plastic pallets in 1955. Today, Menasha Corporation, based in Neenah, Wis., is a corrugated- and plastic-packaging manufacturer and a supply-chain solutions provider with two operating companies.

Menasha Packaging manufactures corrugated packaging and retail merchandising packaging and displays. It also provides pack-out and fulfillment services. ORBIS Corporation manufactures reusable plastic containers and pallets. ORBIS also tracks, retrieves and cleans reusable packaging as it moves through customers’ supply chains.

The enterprise employs more than 6,000 people worldwide and generates annual revenues of more than $2 billion. There are about 135 shareholders in the fourth, fifth and sixth generations, and 265 family members.

To celebrate its 30th anniversary, Family Business honored 30 outstanding family businesses:

A. Duda & Sons Inc.

The Agnew Family Enterprise

The Biltmore Company

Bush Brothers & Company

The Clemens Family Corporation

Crescent Electric Supply Co. 

Day & Zimmermann

Dot Foods Inc.

The Duchossois Group

E. Ritter & Company

Elkay Manufacturing Company 

Flanagan Foodservice Inc.

Herschend Enterprises

Hussey Seating Company

IDEAL Industries Inc.

Kiolbassa Provision Company

Laird Norton Company

Lloyd Companies

Lundberg Family Farms

Lyles Family Enterprise

MacLean-Fogg Company

Mannington Mills Inc.

Midmark Corporation

Port Blakely

Sheetz Inc.

Vermeer Corporation

Vertex Inc.

W.S. Darley & Co.

Wittwer Hospitality/Boulevard Home

Beginning in the late 1990s, the business struggled to reverse its declining performance. Concerned shareholders had no organized forum for engaging with the company or connecting with one another, aside from the annual shareholder meeting and a cookout picnic.

In December 2001, a small group of fifth-generation family members met to discuss how to improve communication within their generation. Step by step, family members began to define a path forward — with a second, larger discussion session in May 2002 and, a few months later, a delegation of family members attending a family business governance program at Kellogg School of Management. In 2003, with the company’s support, the extended Smith family held its first family weekend. It featured an eye-opening presentation by a noted family business consultant.

At its second family gathering a year later, the Smith family endorsed the recommendation of a family task force to establish the Smith Family Council. The first members of the family council were elected on the spot.

One of the council’s first projects was to survey family shareholders about a broad range of topics. The survey, executed in cooperation with Menasha and guided by a consultant, provided a robust portrait of the family shareholders’ goals and concerns.

As the family implemented its governance system, the company’s board and management pared Menasha’s portfolio of businesses and worked to improve corporate governance. The board was trimmed in size, and it adopted governance principles to match best practices of larger, public companies. A long-time family director took over as board chair. With the family council now providing a structured voice for the family’s half-dozen branches, the number of family directors was halved to three.

The family council took on an advisory role in selecting the corporate CEO, family members serving on the corporate board, and the board of Menasha Corporation Foundation, which is funded by the family business.

In its early years the council had its hands full building a foundation for the long term. It drafted governing documents: the council’s statement of purpose, then bylaws and eventually core statements of the family’s vision, values and commitment to best practices in engagement, education, connection and governance.

The council has continued to plan and stage the annual family gathering, which today stretches over three days in June. In a typical year it includes a plant tour, dinners together, the annual shareholder meeting and the morning-long family assembly.

The assembly offers the council a chance to report on its work and the family a chance to present its suggestions and concerns. Often, another business-owning family is invited to tell its story. Some years Smith family members will break into discussion groups and report back ideas for how to strengthen the family enterprise.

Once inclined to cluster with their own branch in such a setting, family members today are connecting across those boundaries with second and third cousins who have become good friends.

The council has broadened the scope of its year-round work. It established private sites on social media platforms and built out an online family tree that traces family lines back into the 1500s. Twice a year the council publishes a colorful magazine-format newsletter that includes updates on family births, college graduations and recent marriages; articles about family and company history; and in-depth interviews with individual family members.

The council has encouraged family members to work as interns at Menasha and to join the company as full-time employees. Council service provides family members an opportunity to develop their leadership abilities. Two council chairs have gone on to serve as corporate directors.

The council connects the family’s baby-boomer fifth generation with emerging leaders in the sixth generation. From its inception, the council has included a sixth-generation family member, and several years ago the council had its first sixth-generation chair.

The sixth generation has stepped up in other ways, setting up its own philanthropic “NxG Fund.” Launched with seed money from the corporate foundation and supported today with contributions from family members, the fund seeks to help disadvantaged youth in communities where Smith family members reside.

Meanwhile, Menasha Corporation is prospering. Between 2011 and 2016, sales, profits and the value of the company’s stock ­doubled.

At age 15, the Smith Family Council faces a new set of challenges: How to recruit new talent to the council, and how to ensure the council’s work remains compelling. How to build a more collaborative relationship with Menasha’s board and business leaders — and gain the financial support to expand its impact. And how to help guide the transition of generational leadership from the fifth generation to the sixth so the legacy of the Smith family’s business enterprise remains intact for decades to come.

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