Succession: Taking Charge

New strategies from a new generation

When twin sisters Jenny Dinnen and Katie Rucker took over MacKenzie Corp., an analytics firm in Lake Forest, Calif., in 2013, they immediately realized that the business needed some new focus in order to remain competitive. Their father, Don Vivrette, had founded the company in 1985 and named it after his mother, Kathryn MacKenzie Vivrette.

Vivrette, now 69, got MacKenzie to the point where it could support his family. His daughters, now 40, are preparing to take it to the next level. They’ve shifted the business model from tactical market research to strategic consulting. They’ve also expanded the company’s client base beyond motorsports to new industries, including professional sports, charities and non-profits, and residential communities.

In a family business, change can be a source of friction between generations. Senior family members may be leery of tampering with a successful formula, while younger generations see new opportunities or shifting market realities their elders might be missing or ignoring.

Innovation is no longer a luxury — it’s a necessity, says Jenny Dinnen, president of sales and marketing at Mac­Kenzie Corp. “Because this company has been wildly successful for 30 years, there are people who say, ‘It’s worked, why change?’ The answer is the entire world is changing at a pace that’s mind-boggling.”

“For us, honoring the past is making sure this company is still here at least the next 30 years,” says Rucker, MacKenzie’s president of operations. “There’s so much happening in the customer and data analytics space. The industry is not what it was 30 years ago, and we had to adapt to a changing industry.”

Forging ahead

Digital Disruption Is Here. Are You Ready?

Jenny Dinnen and Katie Rucker will share their insights and experience around adopting advanced technology and refined processes to grow their family business in a webinar Tuesday, Oct. 29, 2019 at 2 p.m. ET. Register now...

The first step to successful innovation is losing the fear of failure, says Rucker. “Our dad was very calculated and risk-averse, and we were brought up and trained in that mentality,” she recalls.

As the sisters grew into leadership roles, they realized cautiousness was holding the company back. The two women, in their early to mid-30s at the time, stepped back and considered what would be the worst possible consequence of trying something new.

“The answer was, we completely bomb, go bankrupt and move on,” says Rucker. “That was a big revelation for us. We figured that if that happened, we just take the great skills we’ve learned and go get a new job. It was being OK with failure that allowed us to move forward.”

Failure didn’t even register in Marisa Sergi’s mind when she created the RedHead Wine brand as a college capstone project at age 19. Her goal back then was to present the project to the class and earn her degree.

Sergi’s parents launched L’Uva Bella Winery in Youngstown, Ohio, in 2005. Today, in addition to the wholesale wine division, the business includes an Italian bistro that also sells supplies for home winemakers. Sergi started feeding grapes into a hand crank press in her parents’ garage as a fifth-grader, so she naturally gravitated toward Cornell University’s viniculture program. The capstone project is a defining feature of the program and is required to graduate.

“You choose the topic, do research and present conclusions in what you’ve learned. Instead of doing research with yeast or microbes, I proposed something a little more creative, and was glad my professors let me lead with my passion for winemaking and creativity rather than something super-scientific,” Sergi says.

After Sergi graduated from college in 2015, her parents wanted her to work elsewhere before joining the family business. She landed a plum job at Ernest & Julio Gallo in Modesto, Calif., helping to create new products. So good was the position that her father, Frank Sergi, wanted her to stay there instead of working at L’Uva Bella.

Her mother was more receptive. “When she came up with the idea to launch RedHead, I said, ‘OK, Marisa, you’re single, you don’t have a family, you don’t have to worry about children, husband, or house; this is your time to do something like this,” says Ruth Sergi, 59. “My husband felt she should have stayed [at Gallo] a couple of years; one year was not enough.”

Suggestions from innovative NextGens


• Know your market. Identify how you can better serve customers’ needs or reach out to a new customer base. Brainstorm creative approaches.

• Overcome the fear of failure. In today’s rapidly changing marketplace, maintaining the status quo is usually riskier than innovating.

 Learn from other companies. Many NextGens seek jobs at major companies before joining the family business so they can get an insider’s view of a successful business plan. Also consider joining a peer networking organization like YPO and forming a board of directors or advisers.

 Earn buy-in from your family. Build a track record of success to establish credibility with your parents and other senior family members. Once you have proved yourself, they will be more inclined to support your innovation plan.

• Build a team that supports your strategy. Explain the strategic plan to employees, and make it clear that those who resist will need to exit.

• Approach challenges with passion. In order to succeed at breaking the mold, you must be fully committed.

Marisa Sergi knew the risks were high — “my reputation, my entire career! I resigned from a job that was very secure and something I really enjoyed, and, especially as a young female winemaker, I felt like I had the whole industry watching me. 

“People knew I was working for Gallo. They knew I was starting a label in a very crowded market, and I knew people would watch me burn or thrive. But I didn’t want to be 80 years old and one day look back on my life and have regrets that included not launching the brand.”

Now 25, Sergi is president of RedHead Wine. The brand can be found on the shelves at Walmart and Kroger stores in Ohio. In West Virginia, it’s available in Riesbeck’s Food Markets and some mom-and-pop stores. In Pennsylvania, consumers can find RedHead Wine in Sparkle markets and select mom-and-pop stores; it will also soon be available in Giant Eagle stores in the state.

Sergi knows she was fortunate to have an existing family business willing to provide seed money for the new brand’s grapes, bottles and caps. L’Uva Bella offered her the use of its winemaking equipment and sales staff. She used money she won in business incubator competitions for sales, marketing and legal expenses.

“It was definitely an adventure of a lifetime — small-town Ohio woman flies to Bentonville to pitch to the Fortune 1 company of the United States!” she recalls. “We didn’t have any experience with pitching to such a large company.”She landed her wine in Walmart by participating in the retail giant’s U.S. Manufacturing Open Call, held every June at its Bentonville, Ark., headquarters.

A business incubator organization in Youngstown, Ohio, helped Sergi plan her pitch. “I got a lot of help in preparing the presentation and to shape my expectation for the meeting,” she says. “I walked in with a very solid pitch, samples and a story, and got a yes from them to go into some of their Ohio stores.”

But with 100,000 or so new wine labels registered every year and about 5,000 wine brands readily available in the U.S. wine market, Sergi acknowledges that without her family’s network of sales reps and clients she might not have succeeded — and she’s acutely aware how quickly fortunes can change. “I don’t want Walmart being 80% of my business and then stress about them going away,” she says. “I’m making sure the business is very diverse, not overpowered by any retailer. Right now it’s under control, but that could change, and I’m very conscious of that.”

Breaking the mold
For Danny Govberg, third-generation CEO of Govberg Jewelers, innovation and disruption are synonymous. If a decades-old business needs to be flipped on its head in order to stand out, so be it.

Govberg Jewelers’ roots date back to 1916, when Albert and Samuel Govberg first opened a small jewelry store in Philadelphia. Albert alone later opened Govberg Jewelers in 1922, and his descendants, including Danny, 58, run the business today. It was a traditional family jewelry store until Danny and his brother, Jeffrey, formally entered the business the early 1980s. Like most children in jewelry families, they’d worked in the store informally all their lives. When, at age 27, Danny announced his intention to expand into luxury watches, his father, Irv, was horrified.

“There’s no money to be made in watches!” insisted Irv, who is now retired. Most jewelers shared Irv’s viewpoint; the advent of battery-powered quartz watches had put small watchmakers out of business, while global luxury brands like Rolex kept tight reins on distribution, pricing and margins.

Whether motivated by his father’s skepticism or the thrill of a challenge, Govberg embraced the category and made the store synonymous with luxury watches in Philadelphia. Today, Govberg Jewelers — which now has three brick-and-mortar locations — is so entrenched in watches that it’s making a concerted effort to add back more jewelry.

Overcoming objections
Dinnen and Rucker, Sergi and Govberg all were lucky in multiple respects: Market timing was right for their ideas, and if their parents were skeptical, they at least were not hostile.

“Mom always supported me,” Sergi says. “Dad also supported me, but he had some doubt. I received a lot of pushback from him, but here we are.”

MacKenzie’s Dinnen and Rucker faced more resistance from some longtime employees than from their father. Eventually, those employees — including a high-level manager — had to go. When the twins took over, the longest-tenured employee had been working there 30 years, and the newest had been with the company for 12 years.

“We tiptoed for a long time trying to honor them and their commitment, but that was hurting the company,” Dinnen says. “The changes we were making meant the company had evolved into something different. They were hired by Don for his company, and it’s everyone’s prerogative to say, ‘This is not what I signed up for.’ ”

The sisters worked with a transition consultant and presented the situation as a self-selecting process. “We said, ‘This is what we’re doing now, and that’s OK if it’s not for you,’ ” Dinnen says.

For Govberg, “no” means “detour.” After successfully challenging his father’s objection to watches, he came up against another wall: an industry as reluctant to enter digital commerce as Irv Govberg was to sell timepieces. Many jewelers still believe nobody will spend thousands of dollars without touching the product, but not Govberg.

“Today’s consumer is increasingly connected and empowered by social networks and digital devices, and they are no longer bound to a store’s hours of operation,” Govberg says. “They dictate how and when they want to interact with a brand.

“This is the future for luxury retail: supporting the consumer on their time, through their preferred style of communication, and with the support of a highly trained and knowledgeable guide.”

But luxury watch brands were so resistant to digital commerce that they forbade even authorized retailers like Govberg to sell online. Selling pre-owned watches was the only way around the restrictions. Luckily, the market was ripe and Govberg pounced.

Collectors often want to sell or trade in one watch to buy another. Govberg initially launched an online luxury watch resale site in 1999, but today the store’s website offers a robust selection of pre-owned luxury watches. His two G4 sons, Marc and Brian, are now in the business, along with their G4 cousin Robyn, Jeffrey’s daughter. Brian, 31, was instrumental in expanding the pre-owned watch business; Robyn, 32, is a client adviser and watch trader; and Marc, 30, is part of the company’s operations team. (Jeffrey retired in 2005.)

Meanwhile, Danny had bigger visions. He and a longtime friend who was a watch dealer in Asia both saw vast potential for a global online platform for pre-owned watches. Together with a private equity partner, they conceptualized and launched a separate global pre-owned watch site, called WatchBox, in 2017. With offices around the world, that site also offers loans against luxury watches in addition to buying and selling them.

Changing the culture
Innovation must happen inside to be successful outside. At MacKenzie Corp., Dinnen and Rucker’s ideas precipitated a shift in the company culture when they took over leadership.

“Our dad hired people very similar to himself,” says Rucker. “Jenny and I are very different from him. He’s more siloed, heads down, get the work done, but we’re more collaborative.” The twins permitted employees to work from home. They attended conferences in a variety of industries, partnered with other companies to penetrate areas that weren’t MacKenzie’s strength, expanded the client base, entered new industries and began to focus on consulting.

“Success to Dad was supporting his family and employees, and he was tremendously successful at both,” says Dinnen. “To us, it’s different. Of course, supporting family and employees is important, but how are we impactful on our client’s business? How are we helping them to succeed?”

“We’re passionate about really cool experiences,” says Rucker. “We’re thinking about how to collect information and insights to improve a customer’s experience with the [client’s] brand. That’s how our services now are in line with how things are changing. For instance, millennials are focusing on companies that are doing good in the world, and that’s something we’re authentically passionate about, so how can our services help companies focus on that and help them align with what the consumer wants from business today?”

At Govberg, innovation required blending the traditional functions of a high-end jeweler with the modern vibe of an online retailer. By necessity, its brick-and-mortar stores resemble other luxury jewelry stores, with carefully curated assortments in locked showcases. But the online division headquarters looks more like a Silicon Valley workspace, with an indoor putting green, a full kitchen and event space, TVs, and toys scattered about.

Danny Govberg may have proved that people will spend $20,000 online — but they still expect the same level of expertise and concierge treatment as they would get in a luxury jewelry store, and that had to be part of the online experience for both the Govberg and WatchBox sites.

“The decision to invest heavily in growing the online business was about addressing the interests and needs of customers with as little friction as possible,” Govberg says. “Luxury commerce is the intersection of brick-and-mortar retail and e-commerce.”

“There’s a real benefit of being a legacy company, but you don’t want to be stuck doing things the old way. Now we have the benefit of both,” says Dinnen. “Consumers’ expectations are changing, and we’re either going to get crashed underneath or we need to get going with it.”    

Hedda Schupak is a frequent contributor to Family Business. Her profile of Fee Brothers appears elsewhere in this issue.

 

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.

Dueling Perspectives: Christopher Martin and Cam Murphy

Friends Christopher Martin, 29, and Cam Murphy, 30, both succeeded entrepreneurial parents as leaders of growing businesses.

Martin is president of American Health Associates. The company, based in Davie, Fla., was founded by his mother, Debbie L. Martin, in 1990. He joined American Health in 2013 to help the company acquire MEDLAB from bankruptcy. Before joining American Health, he founded a software company with two college friends.

Murphy is managing director of FEAM.Aero, which provides line maintenance, repair and other services to commercial and cargo airlines. His father, Fred Murphy, founded the Miami-based company in 1992. Murphy grew up doing a variety of jobs at FEAM and then left to start a niche aviation staffing company, Global Inflight Services, with his mother, Rivien Murphy. He rejoined FEAM in 2011.

We asked the two friends, “What’s the key to earning respect when following in a founder’s footsteps?”

Christopher Martin:
“My path to where I am today was really almost as much one of emergency as one of planning. We were all very transparent about the needs of the business, and where I needed to be in the business.

“My mom needed help buying what at the time was the largest company in our industry, MEDLAB. We purchased that company out of bankruptcy in 2014. When we finished the transaction, I took the reins of that company. I was doing the job before it was given to me.

“My mom needed somebody that she trusted with the acumen to actually do the deal. She didn’t pull out my résumé and say, ‘He clearly has what it takes to do this deal.’ It was more like, ‘I trust my son, and he’ll figure this out or we won’t do the deal.’

“My mom is much more entrepreneurial than I am. For her to take the risks that she did, to have had the vision that she did, is an extraordinary testament to who she is. But the point that I’ve made, in a respectful way, is that building a business from zero to one is different than scaling a business. My job, I feel, is not to supplant my mom, but rather to augment her vision, in a way that is relevant to today’s challenges and where we are in terms of scale.

“In terms of following somebody in a business, I think it doesn’t do you or them any good to say that what they did was wrong. Even if you feel that things should be different, you should emphasize the positive things that their leadership saw.

“If you’re very transparent about how you’re arriving at conclusions, when things go wrong — not if, but rather when — you have a group of people that understand why you were thinking the way that you were. And they’ll probably back you.”

Cam Murphy:
“You have to be careful not to compare yourself to or overextend yourself in emulating the founder. You’re blessed to be in the position you’re in because of the founder. So you have to be fully invested in the business and learn the culture and every aspect of the business. Understand what the founder’s intentions were and morph that into what applies today.

“You have to learn from your failures. You’re not going to be perfect at everything, and the times that you do fail, you have to admit, ‘You know what, I made a mistake.’ And learn from it.

“I sat down with my father, and he described to me the things he wanted to see in the business. I took a lot of notes, so that when we were redefining our company culture, I could say, ‘These are the values that are going to guide our decisions.’

“You have to have mental toughness, and have mentors, and educate yourself as much as possible so that you can add value to the business. You unfortunately have to work a little bit harder because you are the second generation coming into the business.

“Results are all that matters, especially to my father. You can tell him a great idea, but if you don’t execute the idea, you’re not going to earn his respect. For my father and my mother, I’ve shown that I can execute on different things. They’ve seen the impact on the business.”

New ideas from a new generation

Travis Klassen was a 25-year-old high school dropout working for his family’s Canadian trucking company, Valley Carriers, when he started studying business leadership and realized how little he knew about the family business. How was the company structured? What were its financials like? Was the company making enough money to provide jobs for him, his brother and his cousins that would support them as their families grew?

He decided it was a time for a family business meeting. So he called his father, his uncles, his brother and his cousins — the company was not yet using email for communication — and made his case. “Finally we got agreement that we could do it, as long as it was done after work,” Travis says. “It was very important to our uncles that none of us were getting paid to attend this meeting.”

To prepare, Travis and others from his generation compiled a list of questions. He also bought a $400 board table and spent about $500 on chairs. “All of those costs were questioned at that first meeting,” Travis recalls. “I don’t know if anyone anticipated ever holding another meeting.”

And so nine members of three generations of the Klassen family — including Travis’s grandfather, company founder Neil Klassen — gathered in a makeshift meeting room in the basement of the old farmhouse where the company’s offices were housed on the evening of April 17, 2008. Forty-five years after the company’s founding, its first meeting was under way.

Although he was no longer actively running the business, Neil opened the meeting with a prayer, a reading from Psalm 128 (“You shall eat the fruit of the labor of your hands”), and words of encouragement.

“He said he was overwhelmed to see the powerhouse that is this board — he called it a board long before we did,” Travis says. “He encouraged us all, instead of running down the weary among us, to lift them up.”

The meeting lasted until after 10 p.m. and ended with plans for future meetings. The third generation didn’t get their financial questions answered, mostly because no one at the meeting had that information at hand. But they had a good discussion: “There was a lot more focus on the future and where we were going after this,” Travis says.

A family affair
Today, the company that Neil started when he bought a truck from his boss to deliver firewood and sawdust in 1963 is a $23 million family enterprise with 110 employees. Neil, now 89, and his wife, Rita, who ran the company’s office until she was 78 years old, still live on the family farm in Abbotsford, B.C., that serves as the company headquarters. The company has a satellite office in Merritt, B.C., about two hours to the northeast.

Travis, 35, is CEO of the Klassen Business Group, the family holding company. The primary operating company is a trucking company, Valley Carriers, which hauls sawdust, woodchips and logs. The family enterprise also operates Klassen Landscape Supply, and it has a majority stake in Klassen Wood Co., which packages wood shavings to be shipped all over the United States and Canada.

The company currently has 10 active shareholders (in addition to Neil and Rita Klassen, who also own shares). Four are Neil and Rita’s children: Reg, 60, who ran the trucking business and is now a senior partner; Dennis, 61, who handled sales and is now a senior partner; Merv, 63, who was the lead mechanic and is now a senior partner; and Genny Loewen, 55, who still works as the people and office manager.

There are six active third-generation shareholders. Travis (Reg’s son) is CEO of Klassen Business Group and chief operating officer of Valley Carriers; Travis’s brother, Ben, 33, is CEO of Valley Carriers. Dennis’s son Greg, 32, is Valley Carriers’ production manager. Merv’s daughter Erin (Klassen) Parkes, 40, is CFO of both Valley Carriers and Klassen Business Group; his son Russ, 36, is general manager of Klassen Landscape Supply and the safety and compliance officer for the Klassen Business Group; and his younger son, Stuart, 33, is operations manager of production for Valley Carriers.

Other family members also work in the business in various capacities but are not involved in management and are not currently shareholders.

Today, when a new truck rolls into the Valley Carriers yard, Neil watches it from his living room.

“He can see everything that goes on from the big window,” says Reg. “He tells me when he doesn’t think much of a driver we’ve hired, how slowly he walks across the yard.”

The business has involved the whole family from the outset.

“We got very involved right from the beginning,” says Reg, who left high school after 10th grade to go to work. “We would go with our dad in the truck. I remember even at a young age, all four of us boys being in the cab of the truck.”

When Reg and his siblings took over the business from their parents, about 25 years ago, there was no formal succession plan or transfer of ownership.

“We basically just worked and eventually we took it over,” Reg says. “It was a gradual thing. We each had our own departments.”

The third generation also started working for the company early on. Erin started out helping her aunt and grandmother in the office, and Reg quickly realized that Travis had a head for the business as well. As the two cousins started looking more deeply at how the business worked, they realized that it was not on a sustainable path.

“You grow up fairly naïve and assume the company must be doing well and there must be millions of dollars in the bank,” Travis says. “Then you open the bank, and you realize that if this is going to sustain all of us for the rest of our lives, we need to make some big changes very quickly. We had to come up with a plan. We could either grow the company or we would bleed it dry.”

Discovering what they didn’t know
Although he never finished high school, Travis took executive education courses to learn about running a family business. He earned the Family Enterprise Advisor designation from the Institute of Family Enterprise Advisors in Vancouver, B.C. He and Erin took frequent trips from Abbotsford to Vancouver for executive education seminars, having what he describes as “strategy sessions” on the train on the way there and back.

The executive education helped them realize what they didn’t know. This was one of the catalysts for that first meeting — which took place when the third generation members were all in their 20s.

“We were trying to understand what the boundaries were, who made decisions,” Travis says. “We realized that there wasn’t a structure, and we came out of that meeting realizing that it was up to us to build a structure for the next generations.”

They quickly built a team of outside advisers, many of whom continue to help the company.

One of their first steps was to take care of the paperwork to transfer the business from the first generation to the second, then to plan the transfer to their own generation.

The family decided to hire consultants to help with succession planning.

“We realized it had not been done well enough: the partnership, paperwork and legalities,” Reg says. “My sister and Dad ran the books, but it was getting way too big for that. We needed Dad to slow down, and we realized that to keep the kids involved, we wanted to make it a partnership.”

Although the business moved gradually from second-generation leadership to third-generation leadership, the process was not without some tension.

“The fact that we were giving ourselves titles and roles and responsibilities, all of that seemed quite pretentious to them,” Travis says. “But we knew if we were going to grow, we needed to modernize and professionalize the company.”

Travis says the mantra “honoring the foundation and embracing the future” helped bridge the gap between generations.

“They do have a lot of wisdom and years of experience,” Erin says. “We respect the past.”

Still, “there’s tension there, with the old generation staying on,” Travis says. “We’ve embraced that tension, and I think we’re better for it.”

Deena Chochinov, who holds the Family Enterprise Advisor title and has been working with the family since 2014, says the family members were guided both by outside advice and by their values during these conversations.

“They brought in best-practice research and had many conversations with advisers. They did it so respectfully,” Chochinov says. “Of course there have been challenging times and difficult conversations between the generations, but nothing that wasn’t able to be managed and worked through in accordance with their principles and values.”

One result of the process: In 2013, they formally created a 10-member board for Valley Carriers with members of the second and third generations. (A separate board for Klassen Business Group was created later.) Then, in 2014, they formalized the executive team — with Travis as CEO and Ben and Erin as the other two members — and worked on creating the current corporate structure, with a holding company and subsidiaries.

There was “very little contention” at the meetings to determine the new leadership structure, Merv says.

More recently, the board took the next step in the company’s leadership transition by voting unanimously to consolidate the number of family seats on the boards of Klassen Business Group and Valley Carriers from 10 to five. They also put in place a plan to add independent directors to the boards. (The boards are separate, though the same family members serve on both. The family has not yet decided whether the independent directors will be the same for both.)

“They are really open and understand that they need to bring in fresh perspectives from longstanding, successful business owners to help them increase their strategic competence and make informed decisions about their growth,” Chochinov says.

Accelerating growth
Under the leadership of the third generation, the company has grown significantly after seeing revenue decline from 2011 to 2013.

In September 2017, Valley Carriers was ranked No. 398 on the PROFIT 500 list of Canada’s fastest-growing companies. The Klassen Business Group was expected to generate $23 million in revenues for 2017, with about 70% of that coming from Valley Carriers.

The company employed 35 people when the third generation took over; today it has 110 total employees (across all parts of Klassen Business Group), including about two dozen family members (in either full-time or part-time positions).

“They have just taken on our vision and run with it,” Reg says. “It’s gotten so much bigger than we would ever have thought. It’s because the young people have the vision. They want to keep growing, and they’ve got a real heart for it.”

One key has been the company’s expansion to Merritt. Ben led that move, building a presence of 18 trucks and 38 employees (for Valley Carriers and Klassen Wood Co. combined) in Merritt in four years.

“My motto is to say yes and figure it out later, which has gotten me into trouble more than a few times,” Ben says. “But saying yes gives you time to figure out how you can do it.”

That was how he came to buy a set of custom-built trailers for a job in Merritt that a customer asked if he could do. Once he had the trailers, he needed to make money with them even when that customer didn’t need his services. He decided to sell landscaping supplies and started by cold-calling landscaping companies in British Columbia and Alberta.

Then a customer asked him if he could drive a logging truck.

“I had never hauled a load of logs in my life, or thrown a wrapper [to secure a truckload of logs], and it’s fairly challenging,” Ben Klassen says. “We bought a truck and trailers and I spent 10 minutes figuring them out the day before in the yard. Then I headed out and made myself a log hauler. It was a pretty stressful first week.”

That led to other opportunities, including a job nine hours away on some of the steepest terrain in British Columbia. “The way we grew this part of the business was that any time a contractor expressed a need for another truck, I would respond with a yes, then find a truck driver and buy another truck,” Ben says.

A second driver of growth was changing how the company managed its fleet of trucks. Instead of purchasing trucks outright and keeping them as long as possible, the Klassens revamped the structure to run a fleet of trucks that are treated as disposable assets. Replacing the trucks more often means they break down less.

Klassen Wood Co. has also helped the company grow. A married-in member of the third generation, John-Mark Ferguson, came up with the idea as a way to find a new use for old equipment. In 2017, the business generated about $5.5 million in revenue.

Finally, last year Klassen purchased one of its competitors, growing revenue and expanding its reach with customers and suppliers.

Encouraging family bonding
Although the Klassens lacked formal family governance until 2008, they have a longstanding tradition of getting together as an extended family outside the business. For the past 35 years, they have gathered for Victoria Day weekend each May. The gathering includes both those who work with the business and those who don’t. In recent years, they have added an extra day for the annual general meeting of shareholders and a meeting of the Klassen Foundation, the family’s philanthropy vehicle.

“This is a great way to connect to the whole family even if they’re out of the business,” Parkes says.
Working with Chochinov, the family has developed a statement of purpose for the family enterprise, as well as statements of mission, vision and values. They have also revamped the employee handbook. The family council, which consists of Erin, Travis and second-generation member Genny Loewen, is working on a family employment policy.

In 2013, the family created a family charter based on notes family members scribbled on whiteboards at that year’s gathering about what was important about the family.

Chochinov says the family’s values — humility, collaboration, faith, growth and change — “are not just considered but I would say guide all their conversations.”

“They are so humble — it’s one of their values, and they live it fully,” Chochinov says. “They know that there is more to learn about growing their business, that they require that knowledge, and they are always open to learning more. There’s not one scrap of arrogance in this family.”

The family is looking to the future while appreciating the growth and milestones the business has achieved.

“We had lots of crazy, outrageous vision and strategy meetings that actually helped us see the future, and here we are actually living it today,” Erin says.

The oldest members of the fourth generation are still teenagers, and some are starting to work summer jobs at the company. The current leaders are working on a curriculum to teach the next generation what it means to work for the company and to be part of a family that owns a business.

Both the generation that has just taken over and the one that is passing the torch are pleased by the company’s success.

“I’m proud of their new ideas and the way they have structured the company to be a professional business,” Merv says. “We basically just worked all our lives, never really planning for the future. But it was a simpler time, and there weren’t as many mouths to feed.”

“In a conversation in early 2015, Travis stated his goal for company growth was that he wanted have $20 million in revenue by 2020,” Ben says. “To which I responded, ‘No problem.’ We reached that in 2017.”                                        

Margaret Steen is a freelance writer based in Los Altos, Calif.

Copyright 2018 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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From slave labor to thriving business: The storied history of McKissack & McKissack

In the fifth generation, twin sisters went separate ways professionally while keeping the family together.

 

Leatrice McKissack never intended to take over her husband’s celebrated family business. William DeBerry McKissack was the CEO of the construction and architecture firm based in Nashville in the 1980s. “Lea” was perfectly happy being a housewife.

But in 1983 — the same week their twin daughters, Cheryl and Deryl, were to graduate from his alma mater, Howard University — her husband had a debilitating stroke. Leatrice, already in Washington, D.C., for the festivities, rushed home to be at his side.

When she arrived, she realized she had to make a decision: Would she take over McKissack & McKissack, or sell?

“The morning after my husband went into the hospital, I had three major architectural companies calling and wanting to buy [the business],” says Leatrice, 87. “I thought, ‘I need to get up here and figure out what I want to do with this business.’”

Armed with a bachelor’s degree in math and a master’s in psychology (“which helped me deal with crazy employees”), she decided to take the reins of the company to “keep it for my babies.”

And indeed, Cheryl and Deryl, now 56, are both continuing the McKissack name in the construction industry. Cheryl now is CEO of McKissack & McKissack. Deryl, meanwhile, is the president and CEO of her own architectural and construction management firm, also named McKissack & McKissack, based in Washington, D.C. Cheryl and Deryl’s older sister, Andrea, 63, is a retired engineer.

But Leatrice’s success story isn’t just about keeping the business going. She had to steward her husband’s family’s legacy, as old and rich as the country itself — and do so in an industry dominated by men.
Before she retired from the business in 2000, Leatrice’s honors would include being named National Female Entrepreneur of the Year by President George H.W. Bush in 1990 and receiving the Presidential Design Award from President Bill Clinton in 1994.

Building history
William DeBerry McKissack (known as DeBerry) represented the second generation to run the company as it’s known today. Its roots can be traced back five generations to a former slave named Moses, who was brought to the United States from West Africa just before the turn of the 18th century. He took on his slave owner’s last name, McKissack.

The McKissack family’s records indicate that the slave owner, also named William McKissack, taught Moses how to make bricks. After he gave Moses his freedom, Moses was able to sell his bricks.

Moses’ son, Moses II, took his father’s trade a step further, becoming a master carpenter. He built spiral staircases and made the gingerbread finishes on the Maxwell House Hotel in Nashville.

Moses III and his brother Calvin McKissack formalized McKissack & McKissack into a construction firm in 1905.

In 1922, the men were the first African Americans granted permission to take the exam for certification as architects in Tennessee; they had completed an MIT correspondence course in architecture. They were later licensed in 22 additional states.

Highlights of the firm’s early projects include the Carnegie Library at Fisk University in Nashville; Pearl High School (and two subsequent expansions), also in Nashville; and a $5.7 million federal contract in 1942 to design and build the Tuskegee Airfield.

DeBerry, who was Moses III’s youngest son, was the only family member in the next generation to join the firm. Moses III died in 1952, and DeBerry took over as CEO when his uncle passed in 1968.

Learning on the job
With such a rich history, Leatrice felt the pressure when she took the reins.

On her first day in the office, Leatrice called a meeting of the private company’s board. The directors, who owned shares, wanted her to take one of the many offers on the table. They had no faith in her taking over the business.

“The meeting started at 9 a.m., and me and my older sister go try to find Mom,” recalls Cheryl McKissack. “We find her in Daddy’s office. She’s got a little bottle of scotch — an airplane bottle — and we say, ‘What are you doing?’ She says, ‘I’m getting fortified.’

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“She’s a strong person, a strong personality,” Cheryl adds.

That strength is probably what gave Leatrice the guts to move forward, having the majority of the shares in the business.

The daughters cheered Leatrice on as she stepped up to lead. Cheryl says she saw the challenges her mother faced but never considered them a barrier.

“We were very happy for her,” Cheryl says. “Neither our mother nor our father told us we would have problems because we were women or African American — not in our household.”

Cheryl graduated with a degree in civil engineering, opting to continue for a master’s degree. Deryl had a bachelor’s in structural engineering and went straight to work. Both women helped their mother when they could as she got on her feet at McKissack & McKissack.

McKissack & McKissack had millions of dollars in projects in progress when DeBerry had his stroke. While construction and design work went on, Leatrice took a deep dive into the day-to-day office operations and financials. She did not like what she saw.

First, there was the resistance to her as a woman. She says one vice president threw a stack of papers at her during an argument. “Don’t think I didn’t fire him on the spot,” Leatrice says.

She also caught a receptionist passing on projects for architects to complete off the firm’s books. Then there were the hundreds of thousands of dollars of completed work she found in a filing cabinet that hadn’t been invoiced at all.

It was obvious, Leatrice says, that these behaviors had started before her husband’s illness, but it was also obvious much of the staff resented her presence.

“I ended up firing all of the employees except two — and they were both women,” she says.

One of the remaining employees, Claudette Howell, now retired, had been handling specs and typing memos for the company for 25 years. “I took her and put her right under me,” Leatrice says. “I said, ‘Can you handle the money? I will go out and get the work.’”

But before the work, she needed architects to replace the ones she had fired. She found a licensed firm in Memphis, bought it and moved it to the Nashville office.

Leatrice says those early days centered on studying.

“The only thing I knew about architecture and engineering was how to spell them,” she says. “Running the whole business was work from sun up to sundown.” At night she would bring a beer to bed and a stack of contracts to study. Her eldest daughter, Andrea, left her job running an engineering firm in Detroit to be in Nashville for three months to get Leatrice up to speed. Andrea did not stay in the family business long-term.

“It was a learning process, day to day,” Leatrice says. “I went in May 9 [right after DeBerry’s stroke], and it was September before I had managed to meet with all the clients.”

Then she turned her attention to the construction arm of the company. She did some housecleaning there as well. After about a year and a half, she could finally move on with new business, working in Mississippi, Tennessee and Alabama.

While DeBerry would never make it back to the business, he survived the stroke, and Leatrice would sometimes take him into the office. But taking care of him while managing the business took a toll.

Deryl offered to help.

“She said, ‘Send Daddy to D.C. so he can do some things for himself,’” Leatrice recalls. “The first night he was gone was my first real good night’s sleep. He had a pacemaker and I was always afraid that it would stop.”

When DeBerry returned he was a new man — and in need of a car. He had relearned how to drive in D.C. and wanted freedom. Every morning he would leave to have breakfast with friends. Once he was gone for three days — he returned with tickets from gambling on dog races in Arkansas and a big smile, Leatrice says.

In 1988, the family decided to skip their Christmas holiday to instead to be together when Howard University’s president honored DeBerry as an outstanding architect. Having seen his daughters once more, DeBerry died at the hotel the week of the award.

After his death, Leatrice stayed at the helm of the company for another 12 years.

She says her favorite project was the National Civil Rights Museum in Memphis. McKissack & McKissack designed the museum that was built adjacent to the Lorraine Motel, where Rev. Martin Luther King Jr. was assassinated in 1968.

It wasn’t an easy project and she says she didn’t profit from it (in fact, “It cost me a lot of money”), but it was important to her to memorialize King, a man whose hand she had once walked across an Atlanta airport to shake. The dedication included such luminaries as Bishop Desmond Tutu.

One becomes two
Though all three of her daughters helped Leatrice transition into the business, it was Cheryl who found herself flying back to Nashville from New York City weekly to help her mother with the workload, including a $50 million contract in D.C. in the late 1980s.

As a result of the ongoing work for the family firm, Cheryl opened an office of McKissack & McKissack closer to her home in New York City in 1990. From there she grew the business, which now focuses on construction management and has left architecture behind.

Meanwhile, in Washington, D.C., Deryl McKissack opened her own company, named McKissack & McKissack of Washington, in 1990. While she also worked in construction management, Deryl’s business is strong in architecture as well, as the original family company had been.

“I used the family name for my business because the name was known for architecture throughout the country,” Deryl says. “My business was started out of my own internal passion to build a business on my own. I had worked for other companies, and I wanted to see if I could be successful in building the right company.”

In 2000, Cheryl called her mother and asked how she was. Though Leatrice said she was fine, her daughter didn’t believe her.

“I said, ‘Honey, I’m so tired of these engineers and architects fighting. The engineers think they know more than the architects, and the architects all want to be Frank Lloyd Wright,” says Leatrice. “She said, ‘Put in your briefcase the things you can’t live without, and I’m going to come down and close that office.’ I floated home.” Cheryl dissolved the original business, paid out the shareholders and closed the offices in the South.

Cheryl re-established McKissack & McKissack as the sole owner. Since taking the reins of the company, she has worked on projects including Columbia University’s Manhattanville campus and the Barclays Center in Brooklyn, home to the Brooklyn Nets and New York Islanders.

While working on the modernization of Harlem Hospital in 2005, McKissack & McKissack focused on helping the surrounding communities. Cheryl says for that project alone, there were 7,000 local residents who wanted jobs. The company established a permanent Office of Community Employment in Harlem in 2012 to connect residents with construction-related jobs.

Currently, the firm’s long-term projects include managing the Manhattan Transportation Authority capital program and managing all design and construction initiatives for the School District of Philadelphia.

Cheryl says she has a $500 million backlog of projects for the next five years. “We’re in a very good space,” says Cheryl, who serves as CEO. In March 2017, McKissack & McKissack hired its first-ever non-family president, though he was released later in the year. There are no plans to replace him, Cheryl says.

Leatrice chairs the advisory board of McKissack & McKis­sack, the company she once led. Cheryl, the CEO, formed the six-member board in 2010.

“I did that because we were going to start some very risky work,” she says. “I wanted as much expertise as I could get. I wanted to grow through mergers and acquisitions.

“As the owner and leader of the company, you’re really on an island by yourself and need a sounding board for bouncing off ideas. If I can’t convince them about a move, I won’t do it.” She says the board was also helpful in launching a specialty service called construction management at-risk.

Deryl’s firm has opened offices in several cities, including Detroit, Miami and Los Angeles, while most of Cheryl’s work is in the New York region.

Deryl’s base remains in D.C., where she lives with her family. It was there that she landed her first major contract, renovating the Treasury building after a fire in 1996.

Several of Deryl’s many projects reflect the history of her family and its business. Just as McKissack & McKissack designed the National Civil Rights Museum under Leatrice’s leadership, 20 years later Deryl’s firm was made the lead architect on the Martin Luther King Jr. Memorial in D.C. Later she managed the design and construction of the Smithsonian National Museum of African American History & Culture.

She says when she walked through the museum for the first time after the exhibits were installed, she couldn’t help reflecting on her family’s history. Deryl says her firm is an outgrowth of the family business, even if it’s separate from her sister’s, and both firms celebrate milestone anniversaries, including McKissack & McKissack’s centennial in 2005.

“We’re the oldest African American architectural firm in the country,” Deryl says. “I thought about how my ancestors would feel knowing I would work on the National Mall.”

She says knowing her family’s history of being enslaved and seeing slavery through the lens of the museum was inspiring.

“If all of this evil, and all of these obstacles, were in the way of African Americans and they were still able to accomplish so much — it makes you feel there is nothing you can’t do.”

Sticking together
Because the twins work in the same industry, operating under the same name but as two separate companies, one might conclude there is a family rift. The women insist there is not.

Deryl says the original plan when they were in college was that the twins would work outside the family business for a while (which they did) and then bring their experience back to Nashville to work together at McKissack & McKissack.

“But best-laid plans…,” she says. “People get married, divorced. Things just happen,” resulting in a change of plans. For example, she settled in D.C. while her sister settled in New York City, away from the original company’s roots in Nashville.

The twins have fond memories of spending time with their dad. On Saturday mornings when they were young, for example, they had a weekly ritual that planted the seed for them to follow in DeBerry’s footsteps.
“He would give us a set of documents and say, ‘I want you to trace all of this 12-story building, with details,” Cheryl recalls.

“It was important [to him] that you had a hand and know how to draw,” Deryl adds. “The proper shading, tracing the right details and knowing the difference between stone and wood on a drawing.”
After spending the morning at the office, the three of them would have lunch. DeBerry would take the girls to job sites, then shopping and home by 5 p.m.

The family meets up on holidays. Last year it was Thanksgiving in Nashville and Christmas in D.C. Before parenting responsibilities got in the way, Andrea, Cheryl and Deryl, along with their mother, would meet up more often for “girl get-togethers.” Leatrice would fly them to different cities and they would talk — a lot.

“We would talk about what was going on in our lives,” Deryl says. “If you had a problem, you were in the hot seat. We’d help you figure out your problems.”

But they offer advice to each other only when asked. Cheryl says she would never stick her nose in her sister’s business without an invitation. She says they sit down and talk about their businesses together twice a year.

The twins have subcontracted for each other occasionally, but generally they stick to the areas where they have offices.

“There can be a problem because people don’t know we’re separate,” Cheryl says. “And if Deryl came to New York with her architectural services and I’m managing construction, there could be a perceived conflict.”

It doesn’t matter to Leatrice. She’s been able to watch all three of her daughters grow into their careers and see two of them take McKissack & McKissack into the 21st century in their own ways.

“I’m so proud of them, I don’t know what to do,” she says.

And as the twins’ children grow, the next generation may be preparing to pick up the mantle when their moms are ready.

It looks as though Deryl’s daughter, Ahlyah, is ready to follow her mother into the architecture branch of the industry. The 13-year-old spent the summer hanging out with her mom at her office. Deryl says the teenager’s even designed a couple of houses without her mom’s help using design software.

Cheryl’s daughters are also on track to take over the original McKissack & McKissack. Deryl, 23 — named for her aunt — graduated from George Washington University with a degree in organizational dynamics. Her sister, Leah, 22, is a freshman at Pratt University majoring in construction management. Cheryl says there will be a place for them at McKissack & McKissack, but it will take hard work.

“I had to buy [the business] from my mother,” she says. “People have to earn that ownership.”      

Copyright 2018 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.                             

A fruitful female partnership at Frieda's

 

Wolfgang Puck, Anthony Bourdain and Gordon Ramsey may be rock stars in the cooking world, but all foodies owe a debt of gratitude to Frieda Rapoport Caplan. A pioneer in the produce industry, Frieda almost singlehandedly introduced Americans to once-exotic, now commonplace produce items like kiwifruit and spaghetti squash. Had it not been for her, many U.S. consumers would never have tasted shiitake mushrooms, Belgian endives or passionfruit sorbets.

Frieda, now 93, still works a few days a week at Frieda's Inc., the Los Alamitos, Calif.- based specialty produce company she founded, but she long ago turned ownership and management over to her daughters. Karen Caplan, 61, is president and CEO; Jackie Caplan Wiggins, 58, is vice president and COO. Business doubled within five years of Karen's taking over in 1986. Now the sisters are starting to look at transitioning to the third generation, currently limited to Karen's elder daughter, Alex Jackson Berkley, 27, a senior account manager. Karen's younger daughter, Sophia, and Jackie's children, Frankie and Rachel, are not in the business at present.

Frieda never planned a career in produce, but her aunt and uncle needed bookkeeping help at their stand in the Los Angeles Wholesale Produce Market. She knew little math and even less about vegetables, but she wanted a flexible part-time job after Karen was born.

She got her start in sales when her relatives went on vacation. As she rang up every order, she asked customers if they needed mushrooms. Few did, but one supermarket buyer pounced. It was a mad scramble to fulfill the enormous order, involving a drive to a nearby mushroom farm with baby Karen in the car, but Frieda realized that offering things other people didn't was the key to success.

In late 1961, Frieda was working for her aunt and uncle when she was approached by the owners of Southern Pacific Railway. The railway, which owned the Produce Market land and buildings, had two stalls available at the produce market, and its owners had been watching Frieda sell for about five years. They convinced her to go into business for herself.

Frieda launched her business in April 1962 against considerable odds: Like the famous chef Julia Child (who later became a friend), she was a female in a male-dominated industry, and she sold fruits and vegetables that nobody had heard of.

Frieda's marketing savvy was the secret to her success. Kiwifruit, for example, used to be known as Chinese gooseberry. In its fuzzy brown uncut form, the fruit wasn't especially inviting, nor was its name. Earlier attempts to rename it had been unsuccessful, but once Frieda championed it and convinced growers in New Zealand to rebrand it as kiwifruit, it became a fruit salad staple. Today, few consumers know it was ever called anything else.

Frieda also pioneered the concept of prepackaged fruit. When customers confused sunchokes with ginger, her solution was to bag and label the tubers, and include a recipe that featured them. De rigueur in the produce world now, this was a revolutionary strategy then.

"When I introduce myself as Frieda's daughter—which I still do on occasion—that just opens doors," says Karen Caplan. A documentary about Frieda's rise in the industry, titled Fear No Fruit, was an official selection of film festivals in San Luis Obispo, Newport Beach, Carmel and Sedona in 2015.

Always a supportive sounding board, Caplan's husband, Al, had his own career as a labor relations consultant and was never part of the Frieda's empire. He passed away in 1998.

Karen, Jackie and Alex recently chatted with Family Business about their fruitful enterprise. An edited transcript of the conversation follows.

Family Business: One of the hardest things to do is take over from a parent who is an iconic figure. How did you step out of your mother's shadow and forge your own path as president?

Karen Caplan: In the beginning it was really difficult. People would always ask, "Where's Frieda?" I was young and trying to make my own way. Internally I struggled with it, but I never communicated it.

FB: Fear No Fruit shows that Frieda is a brilliant marketer, but you doubled revenues within the first five years you were president.

KC: Mom opened doors for the business; I grew the business. There was this small repertoire of growers nobody but Mom paid attention to, but she was waiting for the growers to come to her with product. When my mom started, it was just her and another guy or two who sold at the L.A. produce market to brokers, who sold to others. I was into selling more and making those numbers bigger. I hired a national salesperson, and two or three of us went to [trade] shows.

FB: How did you convince your mom to turn over leadership?

KC: I said, "I'm doing the job of president, but my title is vice president." I was 30 years old and I'd heard of this organization called Young Presidents Organization (YPO), and you could join if you were president when you were 30. Frieda suggested waiting till the company's 25th anniversary to name me president; I was thinking more like "Tuesday." She talked to my dad; she didn't make a big decision without checking with him. I don't know if he decided or she decided or they decided together, but I became president on Tuesday, July 1, 1986.

FB: Did you and Frieda have any disputes about your different philosophies for the business?

KC: I'd either just become president or was about to become president when I took a Dale Carnegie management course that cost about $800. For our final project, everyone in the class had to come up with a project that would save as much money as the course cost. Frieda's had a small facility at the produce market, and about 3 miles away we had a bigger warehouse and offices, about 40,000 square feet. My idea was to sell the produce market location and merge into one facility. I calculated we would save $134,000 per year. When I told Mom, she said, "OK, go ahead. Sounds good." That's the kind of confidence she had, and that tells a lot about our two personalities. She was very willing to try new things, happy to accept my recommendations, and she trusted me. She also realized she had a lot of self-limiting beliefs. She didn't see us expanding nationally, or moving out of the produce market. She's very open-minded about product, but didn't envision the company so big or so well known.

FB: Jackie, how have you forged your own path with an iconic mother and a highly successful sister?

Jackie Caplan Wiggins: From about 10 years old, I spent summer and winter vacations working—stuffing envelopes or, [when I was] a little older, on the sales floor. I had done a little traveling once I graduated college and decided not to go back, but as I traveled around the world, people would ask what I did for a living and I'd talk about our family business. They'd say, "Wow, you have a family business and you're not going into it?"

After about the 10th person said that, I realized I'd really enjoyed working in the business on vacations. No day is ever the same, and I am someone that needs a lot of change, so I made the decision to work in the family business. I don't know who was more surprised—the family or me!

A natural path for me was in sales. Karen had me join the national sales staff. I learned a lot about the business and customers, but it became evident that my passion was on the operations side. There was an opportunity to divide duties between sales and marketing and operations, so for the past few years I've overseen operations. The benefit of having been in sales is that I understand a lot of sides of the business.

FB: From the way your partnership is depicted in Fear No Fruit, it seems that Karen figures out what to do and Jackie figures out how to get it done. Are things usually that smooth between you?

JCW: Karen and I think very differently but have this way of working together and looking at things from different perspectives. And in the end, Karen is the CEO. Karen owns 55%; I own 45%. Karen is ultimately the decision maker, but I don't think either of us would make any decision that impacts strategic direction without consulting the other.

KC: Any conflict Jackie and I have had is usually around people, someone we shouldn't have kept. She gives me 100 reasons why not—and later we have to get rid of them and I have to admit she was right. When we have a lack of alignment on a decision, especially if it's an irreversible decision, we spend an enormous amount of time on it. If it's a reversible decision, we don't need to have a meeting about that.

FB: The documentary said you had some early sibling friction and Frieda had to step in.

KC: That was in 1983. Jackie had been there three months, and it never happened again.

JCW: When we're at work, we talk about work. When it's a weekend or at a family event, we do not talk about the business. When you cross over you get that tension. Karen and I are very clear on what our individual strengths are.

FB: Do you have an outside board?

JCW: We don't have an outside board of directors, but both of us belong to Vistage, an executive peer advisory group. We're in separate groups and we meet monthly with other owners and companies from outside our industry. Interestingly, a couple of members are business partners with one partner in Karen's group and one partner in my group. We see challenges when partners don't approach things the same, and it's intriguing to see how people resolve that.

FB: Was Frieda ready to let go when you took over?

JCW: When Karen took over as president, Frieda went on vacation for two weeks. It was the first vacation she'd taken in years, and it was on purpose, to show she was handing over reins. Mom was just so happy to not have to deal with running the business—but she likes handling the invoices and doing the filing.

KC: Mom once said, "I'm afraid you're eventually going to sell this business, and what am I going to do without the business?" I promised that if Jackie and I ever did sell we would make it part of the contract that she still gets an office and still gets to come in.

She would sign checks and negotiate with growers and do back-office work. She also got involved with organizations outside the produce industry and now volunteers on community boards. Now she can't walk unassisted, so she's not doing filing anymore, but she comes in three or four days a week for a few hours.

JCW: She looks at some of the printouts and some of the emails, but she's not involved in the intricacies or structure of the business.

FB: Since there are only two of you, do you have a lot of non-family executives?

JCW: Key managers—all department heads—are not family members. It's 50:50 male to female just because that's what they are. We have an org chart, which a lot of family businesses don't have, and we have clear roles and responsibilities. It's very, very structured here. I think that has a lot to do with our success, and I think that has helped us recruit. We have 70 to 75 on the payroll; some are contract employees through a temp agency that ebb and flow through the year.

FB: How did Frieda transfer ownership?

KC: I joined the company in 1977; Jackie joined in 1983. In the mid '80s, Mom and Dad were doing their estate planning. The biggest asset my parents had was the business, so they initially structured it with me having 70% and Jackie having 30%. When she had been there a few years, I remember going to my parents and saying I think ownership should be more even. It's not good to have it be 50:50, so I proposed 55%:45%. Back in the day, the one-time gift exclusion [for taxes] was $600,000 per person; the other half we paid through earnings. On Nov. 10, 1990, Jackie and I bought the business.

FB: How did the Fear No Fruit documentary come about?

KC: Originally, the idea was to videotape Frieda telling her own stories about the business as a way to chronicle the history of Frieda's. Through one of our employees, the idea of a documentary was brought up. The plan was to produce a "short" (no more than 40 minutes), but when [filmmaker] Mark Brian Smith came to show us some of the footage, he convinced us—easily—that he had enough to make a full-length documentary.

FB: Did either of you ever resent that your mom was so business-driven in an era when it was the norm for mothers to stay home?

KC: Growing up, I did have a hard time with having my mom work such long hours. It seemed that all my friends' mothers took them shopping, helped out at school and did the typical "mom" things back in the 1960s and 1970s. But Mom was also very accessible. Jackie and I had a special phone number at the office that we could call any time of day or night. My dad always got mad at how big our phone bills were, but Mom insisted she wanted to be accessible to us.

JCW: I have always been fairly independent, and didn't feel a void because my mom wasn't physically there. I was always able to reach her. Our joke was even though she was not a stay-at-home mom, she always knew where we were, as opposed to our neighbors' moms, who often didn't know where their kids were! I have several memories of her attending school events and supporting me, and it was always a treat to go to work with her. So did I resent the fact that she wasn't always at home? Absolutely not.

FB: What about the next generation?

KC: Both Jackie's daughter and son have done internships. My elder daughter, Alex Jackson Berkley, is in sales; she's in a leadership role but has no ownership. We're in discussion now on succession planning. There's nothing specific at this point, but we have been saying we're not getting any younger, and we've always said we're not coming into office at 80 and 90 like Mom. We're discussing what our financial goals and personal goals are, what the options are for leadership of company. We're working with a CPA and business attorney.

FB: Alex, what is your goal within the company?

Alex Jackson Berkley: Karen is laughing because I always avoid this question. In sales I'm trying to grow the business and push our numbers forward and to be a good leader, family member, employee. In my generation, I try to strive for a little more balance than my mom and grandmother, but I try to make sure the reason I achieve something isn't because I'm Karen's daughter but because I'm Alex.

FB: Do you hope to someday be the CEO?

AJB: Some days yes, I think I'm on that path and would be great at it, and some days I'm not sure. Produce is a perishable business and you're dealing with Mother Nature, but 75 people are relying on you.

FB: Do you anticipate competition from your sister or cousins?

AJB: I don't consider it competition. I talked to my cousins and my sister about this, and they're all exploring their passions. We're all very different. I have a passion for produce in general, not just Frieda's, but that led to a passion for the family business. They say, "You have that passion and I don't yet."

I don't even know what it would look like if they came into the business. We're not the kind of family business that will find a place for you if you want to join. It's very clear that you can't just walk in here and get a job. They know that and they respect that. My degree is in PR and communications with a minor in business. That was my first job at Frieda's: I was able to come in as they needed someone to fill that position.

JCW: Alex and I had a conversation a year or so ago when she attended a leadership course, and some of the attendees told her she needed to work outside family business to be effective in the family business. Alex came to me very conflicted because she loves what she's doing. So I asked her, 'What are you not getting that you need to get? Do you think you can't get that here and you have to get that somewhere else?' As long as she is getting exposure to the things she would get in other organizations or places, she can get it here. Alex is on the board of a non-profit school, and dealing with other business leaders, and that's something she might not even get working for another company.

FB: Do you feel you're getting the right opportunities at the right time?

AJB: Yes, I'm fortunate that I have. Karen and Jackie and other managers in the company do a great job of including me on different teams. I sit on the company strategy team; that's new for 2017.

FB: Your mom and your aunt had different feelings about having a career-driven mother. What about you?

AJB: I didn't know my mom being away and working was different than anyone else. It was never brought to my attention [except for] moments when I was the last child picked up from school, or didn't have my parents there at a school event to watch me perform. It has only become something I realized as an adult, now that I am establishing my own priorities and thinking about having children in the next few years. My mom's balance of work, life and family has definitely influenced the balance I have and intend to have when I start a family.

FB: Is there anything you'd like to be doing that you haven't been able to?

AJB: Only one—I want to learn how to drive a forklift! All the great leaders I've ever met have said, "I wouldn't ask employees to do something I can't do myself." I have never loaded a truck, and I want to know how.

KC: I did load trucks. I do know how to operate a forklift. It was a long time ago, before you needed a license. If Alex wants to learn how, we'll make sure she does.

Hedda T. Schupak is a business writer based in the Philadelphia area.

Copyright 2017 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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The rocky road to transition

For more than 145 years, Graeter's Manufacturing Co. has built its success on steadfast adherence to its process: making ice cream by hand, one batch at a time, in 2.5-gallon French pot freezers, regardless of the technological innovations adopted by competitors.

The company has withstood the challenge from mass-produced ice cream. What almost destroyed it was a rocky generational transition.

"When I was a little kid at the plant my great-grandmother started, we had four freezers," says Richard Graeter, 52, president and CEO. Today, the company's new plant has 36 freezers. "We grew by multiplying the number of small-batch machines. Without that small-batch process, you can't make Graeter's ice cream."

The company owns 43 neighborhood stores in cities including Cincinnati, Columbus, Chicago, Cleveland and Pittsburgh. Graeter's ice cream is also sold at 10 franchisee-operated stores and three other venues. All the stores sell Graeter's candy, and some also have bakeries, which help to keep sales up during the winter months.

Today, Graeter's, headquartered in Cincinnati, makes more than 1 million gallons of ice cream per year and supplies more than 6,000 grocery stores nationwide.

The company's annual revenues have climbed from about $5 million when Richard started in 1989 to more than $50 million now. About 1,000 people work at Graeter's in the peak summer season.

To get the company to where it is today, the family had to confront thorny issues of inheritance and control. The Graeters are now working to ensure that future generations experience smoother transitions.

Humble beginnings

The company was founded around 1870 by Louis Charles Graeter, who arrived in Cincinnati when ice cream was a novelty.

After operating stores in various downtown Cincinnati locations, Louis and his wife, Regina, moved to the new upscale neighborhood of Walnut Hills. They made ice cream in the back of their home and sold it in the front parlor; the living quarters were upstairs.

When Louis was fatally struck by a streetcar in 1919, Regina took over the business. She built it over the next several decades, through the Great Depression and two world wars, into a chain of ice cream stores.

"Back in my great-grandmother's day, you made it and you ate it," since there were no freezers, Richard says. "My grandfather used to drive a horse-drawn wagon delivering ice cream to people's homes in a metal pail nested into a wooden bucket packed with salt and ice. They would eat it for dinner, and he would pick up the empty pail the next day."

Around the same time as Louis's death, the business faced another challenge: Commercial ice cream was now easy and cheap to make, owing to modern refrigeration and machinery.

"My great-grandmother refused to adopt these new processes and stuck with artisanal ice cream," Richard says. "Mechanized, mass-produced ice cream companies pushed the little guys out of business—except for Graeter's. As neighborhoods lost their ice cream parlors, Regina went in and opened a new Graeter's."

In the depths of the Great Depression, Regina bought a defunct printing plant, where she continued making small-batch, hand-swirled ice cream in French pots.

After Regina died in 1955, her son Wilmer bought out the shares of his younger brother, Paul. Wilmer's three sons, Richard (Dick), Louis and Jon, joined the business and later ran it together. Their sister Kathy also worked in the business; another sister, Carole Palmer, never did.

When Wilmer's sons wanted to retire, though, painful questions arose.

The fourth generation

"The family culture was that if you wanted anything in life, you had to work," says Robert Graeter, 61, vice president of quality assurance and sourcing. "If you wanted the benefits that were provided, you had to work in the family business. That was the expectation set for me very early on."

Richard (son of Dick) and Robert and Chip (sons of Louis) grew up helping with the business. Although they started out on different paths, they all ended up working for Graeter's.

"By high school, I knew that this was my destiny," Richard says. He was mentored by his uncle Jon, who did the finances and other office work. Richard majored in accounting and finance in college and worked for his uncle during the summers. Later he went to law school. As he was finishing, in 1989, his uncle was injured in an accident and was not able to return to work.

"Nobody had a clue about what he did or how he did it but me," Richard says. He finished law school while doing his uncle's job in the evenings. When he graduated, he turned down a job offer from a law firm and returned to Graeter's, though in 1992 he briefly took a job at a different law firm.

In 1994, Richard returned to Graeter's to help with expanding the plant and running the accounting, finance and legal functions of the business.

Robert did not plan to join the family business full-time, though he did help out in the factory every summer starting in eighth grade. After college, he worked in retail in California for a time, then returned to manage the remodeling and opening of a new Graeter's store. Later, he went to Michigan to get an MBA, returning after graduation to Cincinnati for a job with Procter & Gamble. In 1990, after his uncle had retired, the company needed his help, so he returned to take over management of the nascent wholesale business.

Robert's brother Chip Graeter, 53, says he always considered business and family to be connected.

"My earliest memories are just the incredible amount of effort and hard work that the third generation put into the business. They worked seven days per week, 10 to 12 hours per day, every day," says Chip, chief of retail operations. He would help at the plant when he was young, putting lids on ice cream or stamping flavor names on the tops of the pints. Later he worked in the retail stores, where his aunt Kathy mentored him.

Chip also worked elsewhere after college, including for Delta Airlines, but in 1989, his aunt and uncle took him to lunch and convinced him that the business needed him—and that it was time to start his Graeter's career.

A difficult transition

The arrival of Robert, Chip and Richard at around the same time "created some friction," since there was no clear plan for transferring ownership to the next generation, Robert says.

The key difficulty in the transition was that while the members of the third generation had been equal partners in the business, one partner had one child in the business, another had two, and the third had none. (A related issue was who would be CEO.)

The family considered many options. "Do we split the business up and everybody goes their separate ways? Do we have different levels of ownership? Or do we go forward as equal partners?" Robert says.

If ownership were passed down according to bloodlines, Richard would own half the company; Chip and Robert would split their father's share and each own one-quarter. (The company would redeem the shares of Kathy, who had no children.) The idea of unequal ownership caused tensions. These were finally resolved when the three fourth-generation members met with a psychologist—without their parents present.

The key question addressed at that meeting was "What did the business need to survive?," Robert says. "We all had very different skill sets. Our business psychologist consultant helped us realize that, and that if we worked together we would be better and stronger than if we split up the business."

Working as a trio, however, would require "commitment from everybody involved—and the way we could get commitment from everybody was to be partners," Robert says.

They realized that "the only way we could really build the business to its potential was if the three of us worked together and trusted each other implicitly," Richard says. "We decided that we were stronger together."

They discussed ways to partially offset the financial sacrifice Richard would make if they each were granted a one-third share. And Richard began to realize that one-third of the company they could build together might well be larger than one-half of a company that was stagnating because the owners didn't work well together.

Another key to the successful transition, Richard says, was that the members of the third generation "did not demand to maximize their value out of the company," even though they could have gotten more money by selling to an outside party. "Keeping greed in check and living well, but within due bounds, has been the single most important key to the Graeter family's success through four generations," Richard says.

By 2004, Richard, Robert and Chip were equal partners and owners of the business. They divided responsibilities based on their interests and skills: Richard is the CEO. Robert focuses on product, sourcing, product development and manufacturing. Chip oversees the retail stores.

Richard's father, Dick, retired from the business shortly after the transition in 2004. He passed away in 2014. Louis kept coming in to work after the transition, doing odd jobs and helping make candy, until a fall made it impossible for him to continue. Kathy still works every day in the retail stores.

Professionalizing the operations

Although Richard is the CEO, "we are very much a consensus-managed company," he says. The company's leadership team includes a number of non-family members, and an annual bonus is divided equally among all team members. The three owners meet separately only to discuss issues like the transfer to the next generation.

Those discussions are only in the initial stages, however.

The three current owners agree that any of their children who want to join the company should work elsewhere first and prepare themselves to contribute to the business, though they have not created formal plans or rules.

The fifth generation is not actively involved in the business yet; only a few of them are old enough. Richard says his son Will, who is in high school, plans to study food science and food business management to prepare for a career in the business. In the future others may be interested as well.

Although they have not changed the governance much since taking over the company, Richard says they have put in place a buy-sell agreement that governs what happens if one of the owners dies, leaves the company or retires. A goal for the near future is to look again at governance and succession planning now that the business has grown.

The business does not have a formal family council or board of directors, though Richard says setting up a board of advisers or directors would likely be part of the process of moving to the fifth generation.

With the help of consultants, the company has also formalized systems and processes. For example, Graeter's created a training program for the retail store employees, since the customer experience is such an important part of the business.

Customers anticipate the introduction of new flavors each summer. Graeter's stores also host special events such as Dogs' Night Out, featuring special frozen dog treats and vendors selling wares geared toward dogs and their owners.

Graeter's "Guest Service 101" training for new employees—many of whom are high school students in their first job—emphasizes that ice cream is a non-essential, discretionary purchase, Chip says. "What we need employees to do is match the quality of the product with the same level of guest service—make sure they leave with a smile on their face," Chip says.

Paul Porcino, a consultant with TransformaTech Consulting, started working with Graeter's in 2007, after the transition had been made to the three fourth-generation partners.

"They didn't have clarity on how to move forward, where to go next and how to build the business in a way that met their true goals for the brand," Porcino says.

Ultimately, they concluded that letting franchisees manufacture as well as sell the ice cream was too much of a risk, since the core of the Graeter's brand is the quality of the product. They bought back some of the franchises and required the others to stop making their own ice cream.

The company also worked to standardize the manufacturing equipment and processes and started to predict demand further in advance. This predictability enabled the company to expand to new markets, including other grocery stores.

Looking to the future

The new systems and the new plant have laid the foundation for a stable business, which the current generation hopes to turn over to the next.

In the next decade or so, Robert says, the family will have to decide whether to pass the business to one or more family members who are committed to running it, to find a way for the family to own the business without running it, or to sell (which he says is not the family's goal).

For the future, they are banking not only on the management team and systems they have developed, but also on the allure of ice cream.

"I think people are always going to want something cold and sweet and a place to bring their family together and share an experience," Robert says.

Margaret Steen is a freelance writer based in Los Altos, Calif.

Copyright 2017 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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Promoting family togetherness

It took courage and spunk for two adventurous young men to launch an advertising agency in Detroit in 1929, when the country was teetering on the brink of the Great Depression.

Lawrence Michelson and Leonard Simons were fresh out of high school, with no clients and no experience. Advertising as we have come to know it was in its infancy.

Michelson and Simons' optimism paid off. The business they launched, now based in Troy, Mich., and called Simons-Michelson-Zieve Inc. (SMZ), is still going strong, three generations after its founding.

"My father definitely had something unique about him, and so did his partner, Leonard Simons," says the firm's chairman, Jim Michelson, 75, son of co-founder Lawrence Michelson. "These were two young guys who were ready to make their mark with just their personalities and creativity to sustain them."

Because Simons and Michelson had worked at a small company that dealt in trinkets, they seized on jewelry as an early advertising focus. They introduced a then-new concept: newspaper ads in different sizes that included pictures of the products they were promoting.

The young partners promoted themselves wisely. They gained the attention of jewelers across the country, and came to represent a trade association. Simons, a gifted artist, handled the visual side of the business; Michelson tapped into what his son describes as his considerable charm, organization and people skills. The synergy worked.

Jim Michelson would end up getting the formal business education his father never had. He attended the Wharton School of the University of Pennsylvania and initially aspired to enter the investment world. But a talk with his father clarified everything.

As Jim recalls it, Lawrence Michelson was so smitten with the advertising business that he hated Friday afternoons and loved Monday mornings. "I had seen this all my life, and I also noted that my dad was never bored," Jim says. "He had so much to teach me, and he wanted to share it all with me."

Leonard Simons and Lawrence Michelson never officially retired; they served in emeritus roles at the agency until their health no longer permitted it. Simons passed away in 1995, Michelson in 1997.

Jim Michelson came to the firm in 1963. "It was the best decision I ever made, along with marrying my wife, Bonnie, who I was lucky enough to meet at Penn," Jim says.

Mort Zieve, the son-in-law of Leonard Simons, had joined the agency in 1961. Zieve had been a successful producer and director of local TV shows in Detroit, including Lunch with Soupy and The Soupy Sales Show. He was also a theater director and a musician; he composed jingles that were performed by Louis Armstrong, Ethel Merman, Rosemary Clooney and other stars.

In 1977, Jim Michelson and Mort Zieve bought the Simons-Michelson agency in a smooth transition from the firm's founders. The agency, renamed Simons-Michelson-Zieve, moved its headquarters from Detroit to Troy, Mich.

Jim Michelson says the lessons his father taught him have shaped the culture of the agency. "The message I got was always about building long-lasting relationships with clients, not rushing to get more, more, more," Jim says. "Working with my father was a day-by-day lesson in how to make that happen."

Jim's wife, Bonnie, affectionately known as "The Librarian," also became an integral part of the firm. In the days before the Internet, Bonnie was the agency's assiduous market researcher, studying trends and digging for information. She was a role model for her daughters, showing them that women could make a mark in the advertising world.

"Our mother was amazing, and she kind of forged the way for us," says Pam Michelson Renusch. Bonnie Michelson passed away in 2014 at age 72.

The third generation steps up

Pam, 49, and her sister Debbie Michelson Fuger, 46, both hold the title of executive vice president/group account director at SMZ.

Pam, a Phi Beta Kappa graduate of the University of Michigan, joined the agency in 1989. She and her husband, Paul Renusch, have two children, ages 15 and 8.

Pam says she was determined to avoid the "boss's daughter" label. "I tried to work harder and longer than anyone else, taking nothing for granted," she says.

Today, she handles one of SMZ's key accounts, the Michigan Lottery. "It's definitely never dull," says Pam, who has created TV spots and developed other ways to promote the lottery. Her responsibilities include marketing, media and creative strategy development. She serves as agency liaison for the account service, creative, production, media and research departments. She also manages client budgets and oversees planning activities and client timetables.

Debbie is a graduate of Washington University in St. Louis. She started working at SMZ in 1996. Previously, she was a promotions director for a Michigan TV station, promotions and events manger for Journal Newspapers in Virginia and an associate media buyer at an advertising agency in New York.

"There was never any pressure to come here," Debbie says, "but it turned out to be the totally right move for me."

Debbie, the youngest third-generation member, was the athlete in the family. She now handles SMZ's sports clients, including the Detroit Tigers, the Detroit Red Wings and Fox Sports Detroit. She and her husband, Pierre, are the parents of 6-year-old twins.

"I think everyone in the agency appreciates that I have a pretty hectic life, and I'm surrounded by people who support that without question," Debbie says. "That makes me a very lucky mom, and so grateful that I can share my daily life with my family as well as other colleagues."

Jamie Michelson, 51, today is SMZ's president and CEO. Jamie attended his father's alma mater, the University of Pennsylvania's Wharton School; he graduated in 1987. Also like his dad, Jamie met his wife, Beth, in college.

From 1987 to 1991, the couple lived in New York City, where Jamie worked for the former Geer, DuBois ad agency as an account supervisor. "I was learning the business—how to work with different types of personalities—and meeting people," Jamie recalls. He learned from some major figures in the industry and worked on a variety of brands, including Jaguar, Barnes & Noble, BASF and Sony.

But the New York lifestyle didn't appeal to the young couple, and home seemed to beckon to Jamie. He joined SMZ in 1991. Building on the skills he had acquired in New York, he handled client accounts and got a feel for the family firm.

After several years, Jamie began to feel that he needed a change and some new challenges. "There was no issue, just my own quest to test myself in a setting other than a family business," Jamie says.

In 1996, he decided to explore new options while he and his family were still young. Jamie and Beth have two daughters, now both in their early 20s.

Jamie joined the prominent Doner agency and worked there for 10 years: five in Baltimore and five back in Michigan. Clients he served included PNC Bank, ADT Security, Old Country Buffet and Bally Total Fitness. The experience he gained at Doner was an important steppingstone, Jamie says. "It gave me confidence in my skills as a leader, and I was viewed as someone who could have an impact on the destiny of a client's business," he says. "Doner grew quickly in that era, and so did I while I worked there." He held the title of group account director at Doner.

In 2006, Jamie returned to SMZ. "I returned not as the result of a grand plan but, frankly, because it just felt right—the right time for the agency, and the right time for me," Jamie says. "As part of the third generation of SMZ, I realized that I actually felt a duty to guard the legacy of my father and grandfather and their partners."

Jim was happy to have his son back at the agency. "My hope and my expectation was that Jamie would come back and work with us," Jim says. "He and I always have had a close relationship, and I recognized his growth in the business, management and client services areas over the years."

When Jamie returned to SMZ in 2006, both Pam and Debbie were working there. Mort Zieve, who had been SMZ's chairman, had passed away a year earlier.

Was there fallout from the return of the prodigal son? "I don't want to make this sound like a fairy tale," Jamie says, "but the family was totally accepting and ready for this transition. My sisters have been gracious, welcoming and supportive. I'm grateful that this has never been about my being the oldest, and the only male sibling. It's about all of us doing what we seem best suited to do."

Pam says her brother's return felt altogether right. "It has never been a competition among us," she says. "We're family members working together to run a family business."

"We've all been supportive of each other's decisions and were glad that [Jamie] was making a move that he felt was right for him," says Debbie, who entered the family business shortly after Jamie left in 1996. "I was truly happy to have the opportunity to work together with my brother."

The patriarch, Jim, first began thinking about continuity after the death of his own father in 1997. Those stirrings returned upon the death of his partner Mort Zieve in 2005. "It's definitely a process; at least it was for me," Jim says. "You begin to look into the future with new eyes and, yes, a new mindset." Jim handed operational responsibilities to Jamie over time; today, Jim is semi-retired, but he still has ongoing client contact.

"Everything important has been reduced to writing, and my dad has been transferring shares to the third generation for the past several years as we continue to look and listen and learn from him," notes Jamie. Jim and the family members who work in the agency are the only voting shareholders.

Longtime clients have built meaningful relationships with all of the family employees. All family members usually meet new agency clients, whether they are the lead person on the account or not.

"I'm aware that while the family members are different in many ways, they also understand the fine art of collaboration, respect for clients, dedication to creativity and, yes, loyalty to one another," Jim says.

Jamie's wife, Beth, a math teacher, has taken on some tasks to support the agency over the years, such as when the firm moved offices in 2014; she also has worked on new business support and on implementing the agency's email marketing campaign.

One third-generation Michelson sibling does not work in the business: Laurie Michelson, who is Pam Michelson Ren­usch's identical twin. Laurie is United States District Judge for the Eastern District of Michigan, appointed by President Barack Obama in 2014.

"I knew that law was my path, and I think everyone in my family kind of knew it, too," Laurie says. After graduating from Northwestern University School of Law in 1992, she served as a law clerk to the Honorable Cornelia F. Kennedy of the United States Court of Appeals for the Sixth Circuit. She then joined the firm of Butzel Long, where she practiced in the areas of white-collar criminal defense and media/intellectual property law.

Laurie is a shareholder in SMZ, though she doesn't have voting rights. "I never had any doubts about my path, and while I so admire what my family does together, it just isn't the right fit for me," the judge says.

Looking toward the future

Although it's possible that a "cousin cohort" might emerge, currently none of the older fourth-generation members has expressed interest in joining the agency.

"I credit my late wife with helping to create the atmosphere here," says Jim. "We celebrate holidays together, even vacation together, and I hope what the grandchildren experience will eventually influence their own lives."

SMZ, which now has 40 employees, hopes to expand on its already wide-ranging client base. The firm has come a long way since the time when print was the dominant advertising medium; its capabilities include digital technology, social media and search, in addition to broadcast, print, outdoor and point-of-service.

Every Friday, there's an agency-wide ritual: Everyone indulges in treats, especially M&Ms. "It does create a nice end-of-the-week feeling," says Jamie.

Jamie occasionally is accompanied to work by Derby, his golden retriever—a continuation of a tradition started by his father, who brought the adored Michelson family dog, Webster the labradoodle, to the office.

"I'm aware that while family members are different in many ways, they also must understand the fine art of collaboration, respect for one another and, yes, loyalty to one another," says proud father Jim Michelson.

"I genuinely cherish the history and tradition of this company," says Jamie. "Yet I also feel the pressure to look forward—to look after what's been created as best I can, and in my own way."

Sally Friedman is a writer based in the Philadelphia area.

Copyright 2017 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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November/December 2016 Openers

Kelly Conklin, 36, became president of Gordon's Window Décor last year when her father, Gordon Clements, passed the torch—literally. (Clements decorated a yard light and presented it to his daughter at a company party in a gesture Conklin calls symbolic, moving and goofy.)

Gordon's Window Décor marks its 30th anniversary in 2016. The company, founded by Gordon Clements in his basement, today is based in Williston, Vt. Gordon's has some two dozen employees, who supply shades and window treatments to businesses, schools and homes. The company's mission is to turn clients into "raving fans" by "delivering exceptional custom window treatments and an experience that makes them smile." The casual workplace environment emphasizes fun as well as continuous improvement.

I recently spoke to Conklin about the excitement and challenge of being a second-generation family business leader. An edited transcript of our conversation follows.

Family Business: Does your father still come into the office?

Kelly Conklin: He does, a bit. We've patented a product that helps with lockdown situations in schools, and that has become his baby. That product's called SecurShade. So all of his focus really is on SecurShade, while I do the running of the business. He's in the shop occasionally, but mostly just for SecurShade meetings.

FB: Now that you've been at the helm for a year, what are your plans for the future of the business?

KC: Right now, it's such a place of change. I've hired a VP who comes from a lean manufacturing background. He's the VP of continuous improvement; that's his actual title. And I have also hired an installation coordinator who will be moving into operations. He comes to us from Keurig Green Mountain, so he's very focused on systems and processes.

What we're doing right now is really focusing on standard work, and what does standard work look like, and how can every interaction with Gordon's create a consistent raving fan? Gord built a really successful business, and he was able to [build] it so that everybody in Vermont knows who Gordon's is, and now we've established ourselves quite well in the Mid-Atlantic area; the majority of our commercial work is in Washington, D.C., and Virginia. What we have been lacking a little bit are the standardizations and the processes that mean that anybody can step in and understand where in the process the project is.

So right now, my three-year plan is all about maintaining where we're at and getting these systems in place so that we can grow our margin more, our bottom line. And then from there, I will feel really comfortable trying to take on active growth. I would feel uncomfortable trying to grow broadly right now, because I don't think we'd do it well. I'm excited about us focusing in and getting really, really good at what we're doing now at our current levels, and then kind of launching from there.

FB: Usually in the second generation, a company branches out and hires department heads and professionalizes the management. Have you found that challenging in a casual culture like the one at Gordon's?

KC: Yeah, it's been very challenging. The team that I've got is deeply passionate about this company, and that is so exciting and so gratifying. It also means that there's a lot of opinions. We've always been a very democratic company, and so there's nobody on staff who's afraid to voice their opinions. We have a lot of heated discussions about "What do these changes mean? Are we losing what made Gordon's, Gordon's?"

I would say the most difficult time was the six months or eight months when I first took over. Because Dad and I did not do an awesome job communicating what we were doing—what the plan was. And, you know, we learned a lot from that. We do a better job now, for sure, and now there's some really exciting things that happen.

A common phrase in the works for us right now is "run the experiment." And that's sort of where we're at. We're at this place where we're saying, "OK, we want this system. Let's run the experiment and see if it works." And people are starting to pick that up, and they're starting to embrace that. The weekly meeting is becoming more and more of, "OK, here's this cool new thing I tried. Here's where I failed. Here's where it did well." So, I think, as people see that "lean" doesn't have anything to do with getting rid of jobs, and it doesn't have to do with making people work harder or anything like that—it's all about making their workplace more joyful—they've come to get excited about it. But it was very difficult. And we're not there yet, by any means. It's exciting, for sure.

FB: A visitor to Gordon's Facebook page can see that it's a happy place to work. It seems that you all have a lot of fun around there. Has that been important in keeping everybody on board with what you're trying to do?

KC: Having fun is hugely important. Part of why I love family business is because I do think that the business takes on the tone of the family, and that's where our democracy comes from. Nobody in my family is a sous chef; we're all the chefs. And so I think naturally, that's kind of the personalities that we ended up hiring.

We laugh a lot. We have a team-wide Monday meeting. And [at a recent] Monday meeting, the majority of the meeting was one of our installers telling a story about one of her installs that was hilarious. And we're all just cracking up, and it's really wonderful that we're starting Monday with laughter at that team meeting. And then we got into safety goggles and stuff like that afterwards.

FB: Have you had any issues with being a young woman at the head of the business?

KC: We're part of two industry groups that are comprised of really powerful businesses in their geographies, and [Gordon] started bringing me to those meetings in the beginning. I've been going to those meetings for 10 years, so all those guys know me now. I have a bunch of mentors in the industry through these groups, and they've seen me come into my own.

I've been in the company for so long—I've been working here since, oh gosh, 2003—it's not like I'm new to the industry or new to this company, so I think I've earned my stripes, just through time, and sort of having done everything in the company. And the same goes with our vendors—we have really, really tight relationships with our vendors, so they all know me, as well. I wasn't just the new young girl coming in. They've known me for a lot of years, so I don't think there was much anxiety about what would happen to Gordon's without Gordon there. Even our bankers and insurers; we've been very conscious about making sure those relationships were passed off slowly.

FB: Was it helpful to you to have mentors from the industry in addition to your dad?

KC: Absolutely. My dad and I have an amazing relationship. And I respect very much what he has to say and the lessons he has for me, but it's very helpful to have two specific gentlemen [as mentors]. And their businesses are a different size, they're in different industries, they've had different experiences. So they just have more to draw on to help advise me. I'm an information gatherer in that way, so the more advice I can get [on] anything, I'll take it.

FB: How does your management style differ from your father's?

KC: I'm very human resources-driven. I like to have engagement lunches with my team, just to check in and see where they're at, and I have people in my office all the time, just sort of talking about what's going on in their lives or whatever. And Gord is more numbers-driven. And that's actually something he and I sort of laugh about, because he says he'd like to learn a bit from me about that people aspect. I'm actually taking a course right now called Emerging Leaders, through the SBA [the U.S. Small Business Administration], because I need to move my management style to be more metrically driven.

FB: Did you and Gordon have any conflicts over different styles when you were working together?

KC: No. In the time I've been here, there are two decisions that he's disagreed with, but he's let me make them. We kind of laugh about them sometimes, and he'll sort of nudge me and say, "Well, if you hadn't …," but [it's] in good fun. We talk through everything. He's been amazing at letting my team and I make our mistakes. He's there and he's very invested in what's happening in the business—you know, he gets all the reports that are sent out—but he's also cognizant that we're trying to forge our business with us running it, and if he is too heavy-handed, he's going to hamper that growth. It's not easy for him. I think he wants to speak up more than he does, but it's been really remarkable to me how wonderful he's been with giving us the leeway to figure this out.

FB: Is there a third generation in the wings?

KC: My son is 6, and my daughter's 3 1/2. And then I have a nephew who's 7. So they're very young. My daughter has said she wants to sell for us, but [laughing] she's 3 1/2.

FB: She would probably be very effective in marketing.

KC: I agree. Absolutely. She's adorable.

FB: Have you thought about the issues that will be coming up for the currently very small and adorable G3s, and what has to be put into place to avoid conflict in the cousin generation?

KC: Absolutely. I went to the Transitions West conference in California last year, and it felt very exciting to listen to these incredibly complex businesses that are in [later generations]. It's all relatively simple for me to put in place now the things that will make it easier for [the third generation,] rather than getting to that very complex place and then trying to set up family councils and all of that [after problems have already arisen].

FB: Do you feel any pressure about being a member of the pivotal second generation?

KC: I'm only kind of peripherally aware of it. I have such confidence in this business, and I'm so excited to rock it for the next 30 years or whatever. So at this point I'm just really excited about this business that I get to take on. Because the kiddos are young and all of that, I think I'm a little young to be thinking legacy. I'm more thinking about the next hour.

FB: What are your family's shared values?

KC: More than anything, we value time spent laughing together. We set aside a time for family vacations, family holidays, and eating and drinking together. And that's part of what I try very much to bring to Gordon's—the importance of sitting down once a month with everybody and sharing pizza. Eating together is so very powerful.

We're passionate about the communities that we live in and do business in. We take part in our communities however we can, and that's the stuff that is the fabric of this company.

No team member ever second-guesses having to call out because of a sick child, or because something has happened in their family. They know that everybody will pick up the slack to support them in that. And they understand why we get out in the community as much as we do, and why it's important to show up in the community. Those are definitely parts of the family values that have become the fabric of Gordon's values.

Copyright 2016 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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Taking a Chance

A career spent in Hawaii working with rare and precious gems to make beautiful jewelry might sound like paradise to many people. For brothers Gale and Flint Carpenter of Big Island Jewelers in Kailua Kona, Hawaii, it's been a way of life since the business was founded in 1983.

Now both brothers are approaching retirement—Gale is 59 and Flint is 66—and they've begun turning over the business to Gale's son Chance Carpenter, 28, in what is planned as a multi-year process.

The Carpenters are lucky that Chance is eager to learn and take over. Independent jewelry stores are a shrinking category in the United States. The business is there—U.S. fine jewelry sales are increasing every year and topped $68 billion in 2015—but distribution channels are changing. Not only is fine jewelry available in more and more non-jewelry-store outlets, but also a high percentage of the country's approximately 20,000 independent jewelers are close in age to Gale and Flint Carpenter. While many jewelry stores are run by the third, fourth and even fifth (or higher) generation, for an increasing number without a family member ready or willing to take over, this is the end of the line.

Chance Carpenter didn't plan on being a jeweler. But, quoting George A. Moore, he says, "A man travels the world over in search of what he needs and returns home to find it." For about three years Chance owned Silhouette, a boutique creative advertising and marketing agency. He later co-founded trim, a surf culture publication. In fact, unlike most jewelers' children, he didn't work in the store at all growing up, not even as a summer job.

"I had peripheral exposure at the dinner table," Chance says. "Most family business [owners] talk about their day at dinner, but I didn't have any interest in it at all." In fact, when he went to college, it was to study architecture, though after an internship he realized that field was not where he wanted to remain.

Chance is Gale's only child. Flint's children, Taimane, 26, and Cache, 24, had no interest in taking over the store. Other, older cousins—the offspring of Gale and Flint's other siblings—live in the continental United States and never were part of the jewelry store.

Big Island Jewelers is known for its craftsmanship and handmade, custom, one-of-a-kind fine jewelry. Most of its merchandise is designed and made on the premises by Flint Carpenter, a self-taught goldsmith with almost four decades of experience that he's now working to impart to his nephew. Chance's father, Gale, runs the business side. It's a common arrangement in many jewelry families: One sibling or spouse is the creative talent, and the other is the business talent. Flint has a master's degree in fine arts, while Gale has a business degree.

Neither Chance's mother, Julie, nor Flint's wife, Cassie, works in the business. Both women were involved in the early years—especially Cassie—but as both had children, they decreased their involvement with the store.

A golden opportunity

Chance co-founded trim magazine with a partner, Matt Luttrell, who serves as the publication's editor. Chance was trim's creative director. The offer to take over Big Island after only two-and-a-half years at trim was a surprise, Chance says.

"The opportunity came out of nowhere," he says.

Gale and Flint Carpenter had been approached by an individual who wanted to buy the store and leverage its name and reputation to create a larger business along the lines of well-known Hawaiian jewelers like Na Hoku or Maui Divers. The offer gave the brothers pause, because they hadn't really thought out the store's future.

Discussing the proposal made them realize that "they were approaching retirement age with no transition plan," says Chance. They knew they didn't want their store to become one where all the merchandise was a brand or a commodity. It was their older brother, Ralph, who suggested they approach Chance.

Before he said yes, Chance talked at length with his father, Gale, about legacy and craftsmanship, as well as his feelings about continuing the business.

Chance says he was able to give only a month's notice of his departure to Luttrell and trim's staff. To be fair to Luttrell and to maintain their friendship, Chance relinquished all equity to make up for his sudden departure.

Chance feels his prior experience with both the agency and the magazine has put him ahead of the curve in taking over the store. He might have to learn how to make jewelry, but he already has a handle on how to run a successful business. "Owning a small business, being fortunate to experience the world, earning regional and national accolades, and meeting fascinating and inspiring people has allowed me to join the family business with a valued and meaningful perspective and insight, vs. simply transitioning from college," he says.

It's also helped tremendously in avoiding some of the most common intergenerational conflicts that arise when a business is transitioning. Because Chance has real-world experience running his own small business, both Gale and Flint Carpenter respect his knowledge.

"It's super-easy to work with my dad and uncle," says Chance. "Some family businesses work, and some don't. Some have passive-aggressive things going on; we don't."

For example, Chance has applied much of his prior experience to Big Island Jewelers; he handles all the branding, photography, graphic design and other marketing matters for the store. He wanted to do a brand evaluation, which could have become a bone of contention, but he approached it as he would have for any other client of his former agency: He created a brand-assessment book complete with an analysis of the competitive landscape, suggested visual imagery and so forth, and presented it to his father and uncle as if they were clients of Silhouette.

A gradual transition

Chance is learning the goldsmith aspect of the trade very slowly and deliberately, through an old-fashioned apprenticeship that's expected to last five years. He estimates that 90% of the time, he's at the bench with his uncle; the other 10%, he's with his father learning the finance and business aspects of the store.

Chance's wife, Tammie—currently the public relations manager for the Sheraton Kiahuna hotel—plans eventually to join Big Island Jewelers to focus on business, while Chance will create bespoke pieces for the store's international clientele.

Chance is now learning goldsmithing literally at his uncle's elbow. He says Flint is incredibly patient and willing to stop his own work at any time to answer questions or show him a technique.

"It's important to me to see Big Island Jewelers continue on for generations to come—just to see other families benefit from all the great work we have accomplished over the years," says Flint.

To transition the business, the family is using a gradual equity exchange. "We have always surrounded ourselves with people smarter than us. So we asked our financial adviser, attorney and CPA to meet with us to discuss the buyout," says Gale. "After a few meetings, we all decided that a stock reduction plan would work the best."

"The stock buyback option was recommended by our financial adviser, allowing for a smooth exchange of equity, and it was the best option when considering taxes for all parties," Flint says.

First, Flint is gradually reducing his equity, while Gale is increasing his. That transition will occur over five years, one of which has already passed. "The initial transition was decided by age: Flint will be 70 years old when the five years are up," Gale says.

Next, Gale will in turn decrease his equity as Chance increases his, until Chance assumes full ownership. "That period of time will be at least five years, and it could be up to ten years," Gale says.

Gale plans to stay at Big Island for at least two years after the transition has been completed. "I will train the person that will take over my job," Gale says. "After the initial two years are completed, I will have to take a look to see if I can be of value to the business."

Both brothers say they're very satisfied with the plan they developed and how it's been progressing.

"Chance is humble, artistic with mind-changing ideas; an overachiever, very eager to learn, appreciative and compassionate with people and jewelry," his father, Gale, says proudly. "He also brings to the table being a graphic artist, photographer, entrepreneur and soon to be goldsmith."

Chance, for his part, says he's thrilled to be taking the business into the future. "Although equity will change over time, I hope my father and Flint will always be a part of the business," Chance says. The store has three non-family employees: Jose Delgado, also a trained goldsmith, is the master fabricator; Tarah Klarc and Lauren Pfaff handle sales.

Big Island Jewelers serves as the official jeweler of the Timex Ironman World Championship, which takes place steps away from the store's front door. Big Island makes all the official jewelry merchandise for the event, as well as the championship rings. The Carpenter brothers signed on as the event's second sponsor 20 years ago, just months after Timex.

Chance says his decision to take over the store stemmed from a desire to be part of something lasting and permanent.

"Jewelry is a part of our human story, evoking passion throughout time and inspired by generations of thoughtful craftsmen from every corner of the earth," he says. He notes that graphic design, by contrast, is becoming highly automated and commoditized.

"The significance, craft, journey and culture of jewelry is fascinating and profound," Chance says. "We are honored to be part of people's weddings and special moments. The pieces we create today will be here longer than you will, so it's not a responsibility to be taken lightly."

Hedda T. Schupak is an editor and analyst specializing in fine jewelry and luxury retailing.

Copyright 2016 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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Thinking ahead about transition

At a conference table in the sleek, contemporary headquarters of Friedman Realty Group, a real estate investment and management firm in Gibbsboro, N.J., Brian K. Friedman and his son, David, are reflecting on issues that have taken center stage for them: analyzing risk, their business future and structure, as well as continuity, succession planning and exit strategies.

With them is Nancy Drozdow, principal and founder of the Center for Applied Research (CFAR), a consulting firm that has offices in Philadelphia and Boston. Brian and David Friedman (no relation to the author of this story) have been working with Drozdow for two years. "Second-generation businesses often have a need for future planning and reorganization, and a medical event can be a strong signal for outside help," Drozdow explains.

The Friedmans know that now.

These two men had to become more deliberate about their plans for the future of their business after Brian Friedman suffered a stroke following surgery in 2004. They also have had to become more self-aware.

"Of course, I've learned a lot about life, about risk and, most of all, about my family and myself," says Brian Friedman, the president of Friedman Realty Group.

"They are both working really hard, individually and together," notes Drozdow. "Like most of us, they didn't expect that a crisis would force them to look squarely at themselves and their business."

Lightning strikes

Brian Friedman hadn't planned on undergoing major neurological surgery, the results of which could not be predicted with certainty, at age 50. Still, the surgery was not optional. Without it, a brain bleed would be fatal.

Brian awakened after the procedure to discover that a stroke, attributable to the surgery, had left him with vision and language impairment.

"It was a shock, and yes, I was frustrated," he recalls of those early weeks and months. Brian's business had been the driving force in his life. Rehabilitation took a totally different kind of energy and commitment.

"You ask yourself, 'Will I ever be able to do what I used to? Will life ever be the same? What will happen to my family?,' " Brian reflects.

A decade later, he has most of the answers. He recovered and was able to return to the office. And his son David is proving to have strong potential as a successor. In the aftermath of Brian's illness, David stepped up to the plate not solely out of a sense of duty, but because the business his father launched attracted him, and tapped into his own skills and interests.

The Friedmans are taking steps toward succession. Brian's situation forced them to begin thinking about transition sooner than they otherwise would have, and to have explicit conversations about matters they might not have discussed openly.

As David continues to learn from his father, their story remains a work in progress.

"Brian is still figuring out what he wants for himself now, and David also is aware that even though he has learned a lot already, he still has more to learn," says Drozdow.

"We're experts in real estate," Brian says, "but not in how a father and son can define their roles."

Building the business

Brian Friedman's earliest years were spent in Philadelphia and then in nearby South Jersey. His father, an accountant, began investing in distressed properties with his accounting partner in the early 1970s. Brian began working with them in May 1975, about the time of his college graduation. Property management was a good fit for him.

About three years later the company, Associated Property Management, sold all its properties. At that time Brian bought out the APM partners and changed the name of the firm to Friedman Realty Group Inc. "I loved the business, and I saw that I could expand it," Brian says.

Initially, Friedman Realty focused on apartment communities, office buildings and retail shopping centers in the Philadelphia-South Jersey region. Its more recent area of emphasis is value-added apartment ownership and management, with a specialty in improving existing properties both inside and out, and enhancing them with added amenities.

Life was full, exciting and challenging when Brian Friedman's health issues intervened. His wife, Marcy Dash Friedman, owns and operates an interior design firm. David was just about to start his freshman year at the University of Maryland. David's younger brother, Eric, was still in high school.

After a few months of rehabilitation, Brian went back to the office part-time. Yes, he needed help, and he needed to accept that fact. "It's not easy to do when you prefer doing things yourself, but I really had no choice," he recalls of those transitional times after the surgery.

David, who had had summer internship experiences in unrelated businesses, joined Friedman Realty upon his college graduation in 2008. His parents were careful to ascertain that coming aboard was truly something David wanted to do—that concern for his father's welfare was not his only motivation.

When David entered the business at age 22, Brian gave him this advice: "Watch what I do. Learn my way. Be a sponge, and ask questions in private."

A son learns the ropes

David Friedman and his father are different—in some ways, very different. Nancy Drozdow of CFAR has helped them to see and understand those traits.

David was always studious and scholarly. His parents would often say that their older son had an "old soul." Brian is more instinctive, and has strong opinions. The company he leads now includes a headquarters staff of nine and an outside regional staff of about 55.

David, now 30, remembers his early days at the firm. "I recognized from the start that I might be seen as 'the boss's son,' and I certainly didn't want that image," David says. "I wanted to be the guy who worked harder than anyone else, not the guy who got away with things because of who my father was."

David's first office in the company's former headquarters was a tiny, dark space, but he didn't mind the stark environment. "That was fine with me," he says. "My goal was to prove myself by adding value to the company."

As is true of many fathers and sons in business together, the working relationship between the two had to be defined, and there was a bit of a learning curve. "My dad had been at this many years more than I had been," David says, "but I also wanted to carve out a place for myself if this was going to work."

David's calm, quiet demeanor contrasts with his father's admittedly more impatient nature. "David can involve himself in long conversations with our property managers, while I tend to be quicker and shorter," Brian says. "But it's an example of how I can learn from him."

By the time David came into the company, his father had gone through his rehabilitation and adjustment to a somewhat altered lifestyle. The determination that has guided him to success in business and life, Brian believes, has motivated him to conquer his limitations.

While Brian has recovered much of his language acumen, he still occasionally is slow to access words. David has had to learn to recognize when his father needs help in expressing himself—and how to offer his assistance.

"Sometimes, I want and need to be an extension of my father," David says. "When he can't express what he wants to, I can do it for him—but I always wait for him to try."

Learning from each other

Brian has been capitalizing on David's technological skills. The younger Friedman recently spearheaded a redesign of the firm's website.

Brian has had to make space for David to expand his responsibilities. David, for his part, has needed to absorb and learn from his father's long experience and considerable knowhow. Both have been gaining the insight that knowledge flows both ways.

"David is absolutely prepared to do property management and does it extremely well," Brian says. "I want to be more cautious about having him do asset management too soon, and completely on his own. The buying, selling and refinancing can get very complex."

Yet Brian has discovered that good things can happen when he is open to his son's suggestions—and David has learned that having the courage to express a differing opinion can pay off. They recall a disagreement over a property in a nearby South Jersey town that David felt had enormous potential. His father was skeptical, wary of its small size. David prevailed, the company purchased the property, and it has proved to be a successful acquisition.

"This was a case of the son convincing the father," Brian says. "And I'm not easy to convince!"

"That kind of flexibility is really important for both father and son," Drozdow notes. "Even though there are skills David may need to [acquire], he has the talent and aptitude. And it's being recognized."

Brian's staff, and his son, look to him as an expert in his field. In 2004, Brian wrote a book, The Real Estate Recipe: Make Millions by Buying Small Apartment Properties in Your Spare Time. He wrote it with his then-teenage sons in mind. "I just wanted them to know that this isn't such a profound mystery," he says.

At this point, Brian is not ready to step completely away from leadership, though he and David are preparing for transition. "All of these buildings we own are my 'children,' " Brian says. "It's hard to let go."

Friedman Realty Group has weathered market fluctuations and changing trends in housing, but Brian's health crisis was by far the greatest challenge he and David have faced. They believe they passed that test.

"We're stronger as a family," Brian says, "and I've surely learned that in business and in life, it's how you handle the tough times that defines who you are." Drozdow, their adviser, says Brian and David are doing the hard work they need to do, with loyalty and love as their motivation. "Decisions have to be made," says Drozdow. "But I am awed by their progress, and they should be, too."

Sally Friedman is a writer based in the Philadelphia area.

Copyright 2016 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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