In this issue
Imagine a family business where each family member, regardless of competency, feels entitled to a high-paying position. In such situations, business needs are eclipsed by family members’ desires, and confusion results as the roles of both the family and the business are left undefined.
Such situations are not rare. Conventional wisdom often dictates the decision to separate the family from the business—to build a wall between them or do whatever it takes to keep the family’s whims from derailing the business plan.
What is Sheetz? To motorists in the six states where the Altoona, Pa.-based company operates, it’s a beloved convenience store that offers made-to-order food. According to a survey sponsored by the Pennsylvania Department of Community and Economic Development, Sheetz is one of the best places to work in Pennsylvania. But for the eight family members involved in the 61-year-old company, Sheetz is a family business ready to make a leadership transition.
A lot is known about how to help the next generation enter the family business successfully. While each family and situation is different, there are some “exemplary practices” that yield success. For example, internships for next-generation family members during school vacations help them learn about the company and gain valuable experience. And completing a post-high school degree and seeking work experience outside the family business prior to joining full-time build professional credibility.
It’s a game changer. The audit process for wealthy families, particularly business owners, has taken on new meaning as the Global High Wealth Industry (GHWI) Group within the IRS begins to hit its stride. Created by the IRS in 2009, the GHWI Group focuses specifically on complex returns, such as those filed by business owners or family offices with complex entity structures and intra-family transactions.
Working with relatives requires a different set of rules than most jobs, and departing from the family business should also be handled with care. Unlike at another company, you’ll have to see these people again. A lot. When you leave the family company behind, it’s never just a business decision. Treading carefully is a must.
Empires, like many family businesses, may fail, flounder or prosper, yet most seek to pass ownership to succeeding generations. From the standpoint of continuity and longevity, the Roman Empire was perhaps history’s most successful. And yet its first emperor, Augustus, was an unlikely successor to that of his great uncle, Julius Caesar.
Generation of family ownership: Third.
Annual revenues: More than $600 million.
Number of employees: Approximately 9,000.
Years with the company: 41.
First job at this company: While in high school, I loaded trucks and stacked products on pallets in our factories.
At what age? 15. After I graduated from college, I worked as a line employee in the restaurants.
An online survey of U.S. family businesses commissioned by Deloitte Growth Enterprise Services found that many of these firms “have gaps in governance, board operations and succession planning,” according to the survey report.
The study, conducted in March and April 2013, found that more than a quarter (28%) of respondents’ companies lacked a formal board of directors. Of those that had boards, only 39% were controlled by a majority of independent directors. In 60% of the companies, family members held 51% to 100% of the board seats.
A recent survey of family businesses by Deloitte Growth Enterprise Services (see Openers, page 6) found that 28% of the respondents don’t have a formal board of directors. Advocates of good corporate governance will be dismayed at the news that more than a quarter of the family firms in Deloitte’s sample lack a fiduciary board, especially given the size of these enterprises. (Deloitte polled companies with annual revenues of $50 million and up.)