By Barbara Spector
In 2014, members of the family that owns Sycamore, Ill.-based IDEAL Industries participated in what was to be a routine telephone meeting to discuss arrangements for an upcoming Family Business Network conference. "It was the first time we were going to a conference as a big group," recalls Jamie Tucker, a fourth-generation family council member. The family's Development and Education Fund planned to cover the cost of conference attendance.
During the phone call, a disagreement arose about a matter the family hadn't previously considered: Should family members be required to attend all conference sessions in order to qualify for reimbursement? Some thought perfect attendance should be mandated; others favored leniency. "This disagreement bubbled up, sort of out of nowhere," Tucker remembers. The conversation became tense.
At that point, the family members drew on their proven conflict-management strategy. After the conference, they would convene a family task force to study the attendance question. The task force would report on its findings, enabling the full family to make an informed policy decision.
Knowing the matter would eventually be examined in depth helped those with strong opinions to put the matter aside, Tucker says. "It gave us the appropriate time and place to deal with the issue, instead of everybody going to this meeting all [annoyed with] each other," he explains. After the conference, family members realized that an attendance policy was part of the requirement for receiving funding from the Development and Education Fund. The family is now creating a set of expectations for those who obtain conference funding, including requirements for conduct, attendance and a report to the full family, Tucker says.
Tucker's second cousin Meghan Juday, fourth-generation chair of the IDEAL Family Council and a director of the company, says the task force process is an effective conflict-management tool because it involves multiple family members—including those who feel the most strongly about the issue being examined. Before task forces were instituted, "These decisions were made at the top," by the third-generation chairman or the family council chair, Juday says. However, she notes, "The third-generation decision-making model stopped working when the fourth generation got old enough and started asking questions, and wanted to be more involved in the process."
Decision making is more complex for a business owned by cousins than it is for companies in the founder or second generation. The division of the family ownership group into branches and the larger number of stakeholders make consensus building more difficult. Another complication involves diversity in the shareholder group: Family members might live far from each other. The different households might not share the same values or even the same faith. Branches are likely unequal in size, which can result in some family members owning larger stakes in the business than others. Such circumstances can be incubators for discord.
Juday and other later-generation business family leaders say that building a culture of inclusivity can help families manage conflict productively.
"When you don't have an inclusive environment, you really are running the risk of doing damage to your business," Juday says. "If you have people who feel excluded, they're eventually going to lash back or disappear and take their assets elsewhere."
On the other hand, Juday says, family members feel appreciated when their opinions are sought out and their suggestions are taken seriously. This serves to build engagement and buy-in, she says.
The family as 'nested cultures'
A later-generation family enterprise system can be thought of as "a set of nested cultures," says Steve Lytle, a fourth-generation member of the Agnew family and a director of The Agnew Company, a single-family office based in the Pacific Northwest. Constituencies within a family, Lytle explains, include individuals, nuclear families and branches, in addition to various dichotomies such as older generation/younger generation, linear descendants/married-ins, and those working inside the business/those not working in the business.
Around the fourth or fifth generation, Lytle says, "the family gets so large that they have to think much more collectively than nuclearly. And the biggest work in terms of keeping the family enterprise system together is to make sure there's enough overlap of these cultures—there's enough shared principles and enough shared vision—to warrant holding it all together."
When the family includes a substantial contingent of people who don't work in the business, "the biggest challenge is to keep the momentum going," because these family members aren't thinking about the enterprise on a daily basis, Lytle notes.
A "pernicious and difficult" constituency, Lytle says, are family members whose needs aren't being met, especially those who are uncomfortable discussing those needs. Instead of speaking up, "They resist, consciously or unconsciously." This resistance often takes the form of non-participation. "It's way more passive than it is aggressive," he says. "At the end of the day, if the system's not meeting the needs of the individuals, you're not going to hold the system together very well, no matter what you do."
Juday says that in her role as family council chair, she has reached out to family members who opposed initiatives supported by the majority. "We continued to move forward with the majority of the family, and I continued to loop back through emails, conference calls and phone calls, and personal connections with these individuals who were not engaged or excited," inviting them to contribute feedback. After years of effort, "many of these individuals who were on the 'no' side have come into the 'yes,' " she reports. "But it was through that continual invitation, and continual loop back."
Opening avenues for communication
For about the past seven years, the Vermeer family—owners of Vermeer Corporation, a Pella, Iowa-based manufacturer of industrial and agricultural equipment—has been working to heal a longstanding rift. The family split into two factions in the 1970s owing to a falling-out between founder Gary Vermeer and his brother Harry Vermeer, who had worked together for a quarter-century. After the split, the Gary Vermeer side owned 75% of Vermeer Corporation; the Harry Vermeer side owned 25% of the company and had an ownership stake in a local bank. From then on, under a tacit family understanding, no one from Harry's side would work for the company, and no one from Gary's side would work at the bank, explains Heidi Vermeer-Quist, the third-generation chair of Vermeer's ownership council and a member of the board.
An emphasis on inclusivity and open communication—simply "starting to have conversations"—has helped reunify the family, according to Vermeer-Quist, a licensed clinical psychologist. She and her father—Gary's son Bob Vermeer, now chairman emeritus—reached out to the Harry Vermeer branch. "We came to find out that they still really wanted to be involved in the business but also felt completely in the dark, which was understandable," Vermeer-Quist says.
Initiatives were developed to increase interbranch contact and information flow: a quarterly newsletter and a family website, educational forums for all branches of the family and "family camp."
Amy Schuman of the Family Business Consulting Group facilitated a timeline exercise that examined world events juxtaposed with key events in the family business from 1940 to 2010. "That was really helpful," Vermeer-Quist says, "because some of the long-held resentments were brought up in a way that was put into some context." The exercise, she says, also inspired the family to consider how to move forward while learning from their past.
"What has been really helpful for us is going back and remembering and honoring our family history as well as our loved ones, focusing as a family on our common interests and causes," Vermeer-Quist says. "I think that's really helped to develop a family glue."
With the help of consultants Schuman and David Lansky, the full family created an ownership council, in addition to separate family councils for the Gary Vermeer and Harry Vermeer branches. Representatives of the ownership council communicate with the board, which has a family chairman and a majority of outside directors.
Vermeer-Quist says that family members might hesitate to speak up because they don't think the rest of the family cares about their opinions. "So we've said, 'Yeah, we do care, actually, and we think your head in the game makes us stronger. So do speak if you have something you want to say, or something that could be helpful to the business or the family, or us developing as good stewards and owners of the company.' "
Family leaders hold themselves accountable through progress reports and measurable goals. Surveys are conducted to assess family members' views of how well family governance is working and whether family activities have been successful, Vermeer-Quist says. Family members are encouraged to "speak the truth in love to each other—try to be as honest, but also as loving, as possible in our interactions with one another," she says.
The Clemens Family Corporation, a Hatfield, Pa.-based holding company that owns pork processing companies as well as logistics, transport and real estate operations, emphasizes communication and feedback in addressing the concerns of a very large stakeholder cohort. As of late October, there were 679 members of the Clemens family. Fewer than half (290) are shareholders in the business.
In 2000, faced with shrinking profits and fierce competition, the company underwent a restructuring that, among other changes, reduced the number of family members working in the business from more than 40 to about 15, and transitioned to an independent board of directors. Professionalizing the business paid off in increased value for shareholders; today Clemens generates annual revenues of more than $780 million. Twenty-four family members now work in the company.
Fifteen years after the restructuring, the subject is still sensitive for some third-generation family members who lost their jobs or were unhappy with the situation, says John Reininger, a fourth-generation married-in family member who holds the title of chief relationship officer at Clemens. "They get very vocal and involved because they don't want the same thing to happen to their son or daughter if they're in the business," Reininger says. In an effort to address concerns stemming from the reorganization, he says, he has had conversations with third-generation members "to help them understand what happened and why it happened."
Family members who are qualified for open positions at the company and who have the talent and passion to succeed are eligible to apply, Reininger explains. "It doesn't matter what branch you're in; it comes down to being qualified to enter the business in a position where you can add value," he says. When Reininger discusses career planning with next-generation members, he tells them, "Make sure you get the education and the training to match what your desires are, because your last name doesn't get you the position; it's what kind of value you can add."
As part of the restructuring in 2000, Clemens created an owners' advisory council, which addresses issues of concern to shareholders. A family council, formed in 2013, organizes events to engage the full family. Two family meetings are held per year.
Business is not discussed at the family meetings, Reininger notes. "At family meetings, it's about fun and connecting," he says. "What we do discuss at family events is our family heritage and legacy. To break it down, at family meetings we talk about who we are, and at shareholder meetings we talk about who we are and what we do as a business. And, to note, we are very open with our shareholders with business information."
The Clemens family also organizes fun outings for the whole family, like picnics and ice cream socials, as well as events to support charitable causes, such as volunteer days at non-profit organizations.
Reininger says family members receive brief surveys after each event so organizers can obtain feedback and suggestions for the future. Summaries of the survey responses are sent to the entire family. Family members have been pleased to note that many of their recommendations have been put into practice, Reininger says.
Reininger says he reaches out to those who routinely skip family events. Sometimes their absence is due to a misunderstanding, he says. "When I called some of those folks that would never show up, the response was, 'Well, we feel out of place here, because we're not shareholders.' That was a misconception on their part; they thought it was a shareholder activity and not a family activity," he explains. "And they came to realize they weren't the only ones that weren't [shareholders]. So they felt better about it, and began to show up." Logistics might also play a role, Reininger says. "Some people just don't like large crowds," he says. "So we try to invite them to some smaller venues if we have them, or find out what kind of things they like, and try to incorporate those types of things."
Though some might disagree with decisions that are made, he says, all family members are given the opportunity to express their views.
"I think the key to transparency is timeliness," Reininger says. "Since I do a lot of the coordination and communication with shareholders and family, I have a goal of responding back to anything that comes in within 24 hours. And even if I don't have the answer, I still will get back to them with something."
Connecting with the family
At Menasha Corporation, a packaging and merchandising company owned by descendants of Elisha D. Smith and based in Neenah, Wis., fifth-generation member Sylvia Shepard spearheaded the effort to form a family council to improve communication among the business, the board and the family. The Smith Family Council was established in 2003.
It was no easy feat to bring together the owners of this historic company, which was founded in 1852. "There wasn't a database of emails or phone numbers or anything," says Shepard, the former family council chair. The only information on hand was a list of shareholder addresses, many of which were merely post office box numbers. It took about a year to gather viable contact information for the whole clan, Shepard recalls. "Nobody knew each other," she says.
When the idea for the family council was first raised to the family, "They didn't really understand the need for it," Shepard says. "They thought it was going to be like a shadow board." The initial resistance, she reflects "kind of came out of ignorance."
Eventually, though, the family came around to embracing the idea. The council's first project was a family survey, an initiative that has been repeated regularly. Other council projects include an annual family meeting, educational programs and a family newsletter. There are 237 family members, 175 direct descendants and 135 shareholders, and the council has served as a vehicle to keep everyone informed, give family members a voice and encourage engagement. "Now [the family council] is just a fact of life, which is great," Shepard says.
Survey responses have indicated that family members are comfortable bringing their concerns to family council members, Shepard reports. "I do feel that people feel that they're heard, that their opinions matter," she says. "The more people get to know each other, the less tension there is."
One recent successful family engagement effort was the creation of a philanthropic fund that is managed by next-generation members. "I'm really proud of this, because it ended up engaging about seven people," Shepard says. The next-generation members organized an auction "that was the highlight of our family meeting," she says. "It was really fun." In addition to raising money for charitable causes, the project drew in "seven next-genners who are now engaged on a different level," Shepard notes.
Family values build unity
Many families have found that developing a list of shared values strengthens family bonds. The values statement helps provide direction on family and business conduct going forward. Perhaps more important, coming together to produce a document that everyone endorses is a success that serves as a foundation for future successes.
"Our task force process has a basis, and that basis is our core values," says IDEAL Industries' Jamie Tucker. The family's fourth generation created its own set of shared values.
In the Vermeer family, faith is an essential value. "For our family, Christian beliefs are really something that's common core," Vermeer-Quist says. "We all kind of grew up in church, and the idea of a loving God, and loving one another as you would have them love you, were core principles."
Vermeer Corporation developed a "4-P Philosophy"—principles, people, products and profit—that "was easily transferable to our family group," Vermeer-Quist says. In 2011, the family held a ceremony to celebrate the signing of its mission and values statements.
The Clemens Family Corporation's founder, John C. Clemens, established his business in 1895 with an emphasis on Christian principles. The company's mission statement is, "We aspire to operate in a way that honors the Lord Jesus Christ as demonstrated through our ethics, integrity and stewardship."
"We're not afraid to share that with people," says Reininger. In all issues related to the Clemens family and its business, he says, "We really strive to model our mission statement when we engage, involve and work with our family and shareholders."
At IDEAL, on the other hand, the family values do not include religion. "We have such a mix of religions in our family," Tucker says. "The values we came up with were the ones that we agreed on. People's interpretation of faith can be varying."
Transparency and inclusiveness are among the family's most important values. Jenna Juday, who is married to Meghan Juday's brother Ben, speculates that the third generation was probably uncomfortable with the fourth generation's emphasis on those concepts. "They just had to believe that it was going to be OK," she says, "because I know there were moments when they thought, 'What the heck are these young people doing?' " She credits the third generation for stepping back to let the fourth generation determine its own values. "I think that took a lot of courage and a lot of forward thinking on their part," she says.
Resolving issues through task forces
Meghan Juday notes that the task force participants look back as well as forward. "The first thing we do in a task force is look at what worked really well in the past that we want to keep [as well as] what are the things that aren't working well today that we want to change," she explains. "And so you really are honoring the history when you're doing research. And I think that makes people feel comfortable in the process." The task force process was introduced to the IDEAL family by consultants David Lansky and Dennis Kessler.
In the past, when family members brought their questions to senior leaders, the answer could be interpreted as being based not on the legitimacy of the question, but on the leader's relationship to the person who asked. The task force process, by contrast, is based on "all of us trying to get to the answer to the question," says family council chair Meghan Juday.
The family ensures that the person who raises a task force question is part of the group that investigates the matter. "You can't just sit in a family meeting, throw in a bomb of a question—I say 'bomb' because sometimes these questions can be incendiary, they get everybody's emotions up—and you can't just do that and then turn around and walk away," Jenna Juday explains. Task force volunteers have included those who feel strongly about the issue as well as those who are just interested in learning more about it.
Task force projects are generally conducted via conference call or webinar to accommodate the far-flung family. (One key to the process, Meghan Juday says: The research is presented as a series of PowerPoint slides rather than as a Word document, to emphasize that the matter is a merely work in progress. Showing the family a Word document, Juday explains, gives the impression that the language is final.)
"If I ever thought that somebody was really invested in the outcome, either for or against the task force topic, and yet they were not participating in the task force, I would call them several times throughout the process and make sure that they understood the research or recommendations that we'd come up with, and make sure that all of their feedback was included as part of the conversation," Meghan Juday notes.
"We would always roll out the results of the task force at the annual family meeting, but we would actually do a webinar several months in advance," says the family council chair. "And if we had feedback from the family as a result of the webinar, we would go back and make the changes, and then we would do another webinar, so we would continue that rollout process until the family was satisfied with whatever the recommendation was of the task force. And then the family would approve the recommendation of the task force at the annual family meeting."
Meghan's sister-in-law, Jenna Juday, says the task force process "has given us a known channel" to discuss family members' issues. "If you have a question, we're going to bring you in," she explains. "We're going to address your question; we're not going to brush it aside or say it's not important or make up an answer that we want you to have."
In addition to conducting task force projects on emotionally charged issues, like the dividend policy and the family employment policy, the IDEAL family has convened task forces simply to accomplish important missions, such as planning a program for fifth-generation members at the annual family meeting.
When the family first began working with task forces, they were in "a put-out-the-fire mode"; now, they are in "a more preventive mode," Jenna Juday says. "I think there's trust building every time we address a concern." She says that while family members used to arrive at family meetings projecting an air of being "poised for battle," today "I think there's a lot less tension overall."
Meghan Juday concurs. "The one outcome is that we got through a lot of our issues as a family, and really got into the deep stuff, and addressed a lot of the stuff that was kind of holding us back," she says. "But additionally, we really got to know family members in a way that we wouldn't have known otherwise, and it's because we were working together on common projects. The projects gave us the context to then learn a lot more about each other personally. And so people who worked on a lot of task forces have become very close as a family."
Family fun and education
Fun activities that bring the extended family together are important bonding experiences. Last summer, the Vermeer family's activities committee, working in conjunction with the family office administrative team, arranged a "history hunt" around the company's hometown of Pella. The family divided into teams that were intergenerational and inter-branch. The hunt took the teams to sites that the company helped build, organizations that received funding from the company or the family, or places that were meaningful to the great-grandparents who are the common ancestors of both family branches. A "treasure chest" hidden at each destination contained information about the significance of the site; upon finding each treasure, teams were required to take a photo at the site.
At Vermeer family dinners, "we do the great shuffle," Vermeer-Quist says with a laugh. Assigned seating splits up nuclear families to give diners a chance to converse with relatives they likely don't know as well.
The Vermeer family has instituted a "family camp," an annual three- to four-day gathering that combines business updates, family governance work and fun. In 2014, the theme of the camp was "One Vermeer," to accentuate family unity.
The IDEAL "family camp," an annual three-day multigenerational retreat at a family property in Wisconsin, puts the emphasis on fun. "Our relationships to each other have so much to do with the business portion," Jenna Juday says. "What's really nice about family camp is that it's not really about the business; it's about us having valuable time together. And that less pressured time together is great."
The IDEAL family includes about 50 total members, with 30 shareholders in the third through fifth generations. A recent family camp drew between 20 and 30 participants. Jenna Juday, a regular attendee, acknowledges that family camp, with its emphasis on outdoor activities, "is not everybody's thing." Organizers are brainstorming about different types of inclusive activities, she says.
Family education helps bring family members together and develops well-informed stewards of the business. While it's essential to teach family members about the "hard" issues—such as how to read a financial statement, how to be a good beneficiary or trustee, and the fundamentals of tax planning and estate planning—family members also need to build relationship competencies, The Agnew Company's Steve Lytle says.
"In my family system, at every family meeting we have a block of time allocated to education and competency building. And about half the time, that education and competency building is what some people might call 'soft side'—qualitative, interpersonal education, versus quantitative, financial education," Lytle says. "We bring resources in to help the family develop communication skills, so that folks can speak their truth skillfully."
IDEAL has created a Development and Education Fund that finances education, leadership development, coaching and mentoring initiatives for next-generation members. The fund was originally seeded by second-generation member Tug Juday, who has since passed away, along with three third-generation members.
Transparency is an essential part of the development and education process, Meghan Juday says. "We wanted to be very clear about the competencies that family members need to take on specific leadership roles," she explains. There is a wide range of roles a family member can potentially fill, and many talents that are needed. Quarterly reviews are conducted to assess each family member's progress. This model emphasizes that the family wants to support individuals' rise to leadership, as opposed to a focus on screening out candidates, Meghan Juday says.
Dealing with the disaffected
In some families, despite family leaders' concerted efforts to be inclusive, there is a faction that resists participation in family meetings or activities. Menasha's Sylvia Shepard laments that if these family members decline to interact with the broader family, there is little a family leader can do to heal the hurts of the past.
It's challenging to engage family members who refuse to voice their concerns, family leaders say. "We really work hard at giving [family members] avenues to communicate and voice their opinions," says Clemens' John Reininger. He says he hopes that family members will speak up rather than stew in silence, "but at the end of the day, they're responsible for their own emotions and feelings." He emphasizes that family members should raise their concerns through family channels—not in public.
"The hard thing is, there are always a few people you can't make come to the table," Vermeer-Quist says. "But then you've just got to keep going. And those people may, unfortunately, be left behind for a while."
IDEAL's Meghan Juday says that over the years, she has changed her views on how to deal with disaffected family members. The epiphany came after a family survey found that more than 92% of the IDEAL family "was experiencing a significant high emotional return from being part of the family business," Juday says. "Up to that point, I kept trying to cater to the very small percentage that was unhappy, and trying to figure out what their issues were and seeing if we could resolve them. And I ended up realizing that I [was] neglecting the majority of the population that was really happy."
Addressing inherited conflicts
Some interpersonal issues are so difficult that they must be left for a future generation to heal. Heidi Vermeer-Quist says of the rift between the Harry Vermeer and Gary Vermeer branches, "I think there was a desire—I know that there was a desire amongst the second generation, and certainly a wondering amongst the third generation—of, 'How can we communicate better with one another? How can we bring this back together?' " But because of "pretty strong personalities and sort of a traditional male leadership feel," she reflects, "I don't think anybody dared take a step toward reunification until [both patriarchs] passed away."
Yet in some cases, resolution need not wait until the senior generation dies; it might come when the next generation reaches maturity. Institution of the task force process at IDEAL, Meghan Juday says, has "created bridges for individuals in our family to build relationships independent of any of the negative legacy that's been passed down."
"I think what happened in our family," says Menasha's Sylvia Shepard, "is that the issues of the previous generation just weren't that important to the next generation."
Shepard says the appointment of her father, Tad Shepard, as Menasha's CEO in 1981 caused tension with a member of another branch who had vied for the job, Mowry Smith Jr. "That was kind of an underlying conflict that pervaded, that I was aware of growing up," Sylvia Shepard says.
Through working in the Smith Family Council, Sylvia Shepard grew close to Sue Gosin, a niece of Mowry Smith's. "We think a lot alike," Shepard says. "And she and I decided that it was time for Mowry and my dad to make amends." The two women arranged for Tad and Mowry to meet for lunch. "My dad kept saying, 'It's nothing,' which was typical of my dad," Shepard recalls. "But [for] Mowry, it was important for him to have this lunch. It was important to him to have a real face-to-face talk with my dad."
The result was a rapprochement between the two fourth-generation men. "My dad was never one to acknowledge any conflict; he kept everything very, very close to the vest, and didn't even acknowledge that there was a problem between him and Mowry," Shepard says. "But Mowry felt really good afterwards. He felt good about the meeting, and that he and my dad kind of resolved things." Tad Shepard died in 2011; Mowry Smith Jr. died in 2013.
Although the family council did not bring about the reconciliation directly, Shepard says, it played a role because it enabled her to grow close to Mowry's niece Sue Gosin. The lunch meeting was a result of the two women "coming together and serving on the council together," Shepard notes.
Bringing the family together
Meghan Juday says inclusivity has led to progress in her family. "From having demonstrated our inability to talk about [sensitive] topics for the previous ten years," she says, "the fact that we can do it today—and, really, with very difficult topics and subject matter—to me means that we've really come a long way."
Heidi Vermeer-Quist says that in her family, "The differences seem to work themselves out eventually. Some take years, but they've been working themselves out, as we keep coming to the table and talking."
Vermeer-Quist says, "I still just think it's remarkable that our family business has been able to come together as strongly as we have in seven years, after a 35-year split."
When she talks to other family business owners who are trying to work through conflicts, "I just want to say, 'Hey, if our family can do it, and they didn't even talk for almost 35 years, then maybe there's hope,' " Vermeer-Quist says. "Somehow, maybe your family, or at least a group within your family, can work together for the good of the business and the people who work at your business, as well as the strengthening of your family system."