Dueling Perspectives: IDEAL Industries and E. Ritter & Company

By Barbara Spector

Two views of branch representation on family councils.

E. Ritter & Company, a Marked Tree, Ark.-based portfolio company currently focused on agriculture and telecommunications, elects its family council members. The Ritter Family Council consists of three branch representatives — one chosen from each of the three family branches — and four at-large members, elected by the whole family. Council service, originally limited to blood descendants, now is open to married-ins.

IDEAL Industries Inc., based in Syca­more, Ill., is a diversified global business that designs and manufactures products and tools for multiple industries. The IDEAL Family Council does not hold elections — anyone who wants to serve on the council is welcome. IDEAL has taken this open-membership structure to the extreme: A non-family member serves as chair of the family council.

We asked Katy Wilder Schaaf, chair of the Ritter Family Council, and Meghan Juday, the former chair of the IDEAL Family Council who will become IDEAL Industries’ chairman on Feb. 1, to explain how their council membership policies evolved.

Meghan Juday, G4, IDEAL Industries:

“When the fourth generation took over some level of leadership and influence [in] the family council, that’s when we really started looking at our attendance policy and inclusive values more strategically.

“[The family council has] a relaxed policy. Anybody can sit in on a family council meeting, but if you want to be a member, all you have to do is commit to being a member. We’re happy to have you — we want the voices, we want the perspectives and our goal is to represent the whole family’s interests at all times. The more diversity we have in the room, the better off we are as an organization.

“Even if there were somebody there from each branch, there is no branch representation because the responsibility of the family council is to represent the whole family’s interests at all times.

“One of our biggest drivers to finally drop the last vestige of branch representation was when my father, Dave, was talking about retiring as chairman, and [it was clear] that we were not going to replace him with another family chairman. That [focused] our conversation around, what responsibilities do family directors have, now that we no longer have a family chairman?

“That forced us to look at, how do we get away from branch representation and start talking about merit-based appointments for developing highly qualified family directors and family leaders? That was really the final nail in the coffin to branch representation. Because you’re not going to get the most qualified, you’re going to get the most qualified in any given branch, which isn’t necessarily the best person for the role.

“For those positions where we require certain qualifications, we have resources and development opportunities, and we have leadership positions inside family governance where [family members can] grow their skills. That was the other complement. You can’t say, ‘We’re going from branch representation to merit’ and then just expect people to line up who are fully qualified. That decision to go to merit-based appointment was a huge driver for our development and education program.”

Katy Wilder Schaaf, G5, E. Ritter & Company:

“We developed our family council a little over 10 years ago. It was kind of a new concept for us, and our family had some hesitations. I think that branch representation initially really helped to sell the idea of a family council.

“Branch representation was a way to reassure the family that there wasn’t going to be this body of people who spoke for the family but didn’t represent at least some of the views, or understand some of the views, of the different branches. We have one very large branch and two much smaller branches.

“One of the pros of branch representation is that in a larger family, it’s less likely for one person to have deep, connected relationships with the entire family. When we want to gather the voices of family members we might not be in touch with, the branch representative typically is the point person.

“I think that the con of branch representation is [that it] assumes division where, I think, at least in our later generations, there isn’t necessarily that mindset anymore.

“In our family, as we become more geographically dispersed, the idea that one cousin would have significantly different views than another cousin because of what branch they come from is just not something that is on the table very often. It feels like there’s probably more differences in views amongst generations than amongst branches.”

A family council with a non-family chair

Mary Nicoletti joined IDEAL Industries as family governance manager in 2017. A year later, she was named family council chair.

Nicoletti is not a member of the family that owns IDEAL. Before she began working with the family, she served as director of the Initiative for Family Business and Entrepreneurship at St. Joseph’s University in Philadelphia. Prior to that, she was senior program coordinator at the University at Buffalo’s Center for Entrepreneurial Leadership.

“I think one of the biggest advantages [of the IDEAL role] is that I have a very different perspective,” Nicoletti says. “Though I work with the family, I’m not an active part of the family dynamics. That allows me to observe family dynamics and get a better perspective on risk and, I would say, opportunities” to bolster family development and education efforts.

Why would the 50-member IDEAL family want a non-family member as chair of their council? “We’ve come up with a really good analogy: We are composers of really complex music which we cannot play ourselves,” says fourth-generation member Meghan Juday, former family council chair.

“We have done some very meaningful work, but to run the governance process that we believe we need to run a really strong development and education program — to manage all the logistics, the meetings, the notes, the minutes, everything — is a huge job.”

In addition, Juday notes, “Part of our commitment to development is that if somebody’s working towards a leadership role and they become qualified, they are not stuck in a lifetime of limit in some other role because we can’t fill it [with another family member].”

When Juday served as family council chair, she was working to become qualified for the role of board chairman. In 2018, she was named non-executive vice chair of the board. To make time for the new responsibilities, she needed to relinquish her family council role.

No one in the family had the right combination of skills, desire and availability to take the job. “It’s rewarding, but it’s difficult, because [it involves] a lot of psychology, a lot of organization, and a lot of working with people very closely about something that’s really emotional,” Juday says.

Nicoletti has established a system for measuring family engagement and adjusting council plans based on those metrics. “I think she really took it to another level, which has been super exciting for us,” Juday says.

The company covers Nicoletti’s salary as well as that of the non-family member who succeeded her as family governance manager. The return on this investment in shareholder relations has been “very significant,” according to Juday.

“The whole point is to ensure that the family is not only getting a financial return but also an emotional return for being part of the family business.”

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

Article categories: 
January/February 2020

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