In this issue
The family members of IDEAL Industries Inc. refer to ourselves as the IDEAL family in jest. Ideal isn’t a name that suits our modest family members, and our family interactions at times have been far from “ideal.” It took us years to figure out that when our founder and my great grandfather, J. Walter Becker, chose the name for the business, IDEAL referred to the relationships he hoped to cultivate; it didn’t refer to himself or the business.
I recently met a woman—I’ll call her Gladys — who owns a substantial enterprise that employs several family members and loyal managers. She is extremely proud of her company’s stature in the community and its ability to provide jobs and contributions to philanthropic endeavors. The only problem? The business has been consistently unprofitable. She keeps it afloat by infusing her own money, to the tune of several hundred thousand dollars for each of the past four years.
The opportunities for involvement and information that privately held companies extend to investors who are strangers are rarely extended to shareholders who are relatives. In my experience, few family businesses provide their minority shareholders with even one of three critical protections most investment bankers, venture capitalists and private equity investors insist on before purchasing a minority interest in a privately held company. Majority owners of family businesses often view a family member’s request for even one of these protections to be almost a declaration of war.
As the spinning quarter struck the glass covering the wooden table in the conference room of a suburban law office, a plunking sound disturbed the somber silence reining among the lawyers and the opposing clients—a brother and sister, “Hal” and “Joan”—sitting at opposite sides of the table. That sound was followed by a tinny grinding noise made by the quarter as it rolled on its edge in a meandering fashion until it fell, tails-up, directly in front of Joan. Tails, she loses.
There are many myths about family businesses. One of the most common is that all family companies are led by a family member. In fact, many family-owned companies, including some of the world’s most successful family firms, have non-family CEOs at the helm. Yet some people—even those who are family business owners themselves—find it hard to fathom that this is a viable arrangement.
When planning a family business transition, owners tend to give too little attention to the actual operational succession of the business. While generally they spend an adequate amount of time on estate planning, tax and control matters, they often fail to ensure the executive leadership of the company is properly transitioned (or they incorrectly believe that the transition is solid).
During World War II, Paul Fisher worked for a Chicago-area ball bearing company that built propeller retention bearings for military aircraft. After the war ended, he became a partner in a screw machine job shop whose customers included an early ballpoint pen manufacturer. When the pen company folded, Fisher started making writing instruments himself. He founded the Fisher Pen Company in 1948 as a division of Fisher Armour Manufacturing and developed a chrome bullet pen.
Ellis Hardware Inc., founded by Joel Wallace Ellis in 1872 in the rural community of Seneca, Ill., is the oldest family-owned hardware store in Illinois. The store, which once served as the town’s post office, sold turpentine in wooden barrels, along with horse collars and agricultural implements. Today, says fifth-generation manager Michael Ellis, 33, the business is akin to a general store. “We have pretty much anything from candles and dip mixes, to standard nuts and bolts,” he says. “We really have a little bit of everything.”
An online assessment to determine steps your family should be taking
The Family Wealth Sustainability Toolkit
By Fredda Herz Brown, Ph.D., and Fran Lotery, Ph.D.
John Wiley & Sons, 2012
102 pp. plus online access; $125
Also available as an e-book