Professionalizing your firm helps to ensure continuity

By Barbara Spector

Instituting effective governance and managing family dynamics can help you improve performance and plan for succession.

Ever since Family Business published its first list of America’s oldest family businesses back in 1999, this special feature has attracted considerable reader attention. Since 2001, when the list was first posted on our website, the interest has mushroomed.

Trade associations and business publications have requested permission to reprint the list. Managers of family firms that are “merely” a century old have contacted us to ask where they stand. And owners of venerable family businesses we inadvertently overlooked have brought their companies to our attention. (The result is our latest updated list, which begins on page 53 of this issue; a more detailed version is available at www.familybusinessmagazine.com.)

It’s no surprise that the list has touched a nerve. Earning a place among the ranks of the country’s oldest family firms is a remarkable accomplishment. In the life cycle of every family business are several crisis points at which the leaders’ actions (or failure to act) can either heighten the chances of the company’s survival or increase the odds that it will falter.

The owners must lay the groundwork for a smooth transition from a company run by a single creative entrepreneur to a sibling partnership and then, in the third generation, to a coalition of cousins, some of whom may own stock but work outside the firm (and live far from the ancestral home). With the expansion in the number of stakeholders, corporate governance must evolve further.

As the business moves through each succeeding generation, the number of family shareholders increases; thus, the business must grow to support them. Those with a vested interest in the company’s success include non-family executives, in-laws and the youngsters who represent the future of the business; company leaders cannot ignore the needs of these key constituents.

The business must not only be profitable in the present but also nimble enough to move in new directions so it doesn’t fall prey to changing technology or customer tastes. At the same time, a process must be developed for maintaining shareholder harmony and strengthening far-flung owners’ ties to the business.

On page 48 of this issue, we profile one of the companies on our list—Laird Norton Company LLC, founded in 1855 —and describe the system its leaders have put in place to manage a diverse enterprise with nearly 400 shareholders and three lines of business. For advice on how to set your own family firm on a course for success, see the just-published 11th volume in our handbook series, The Family Business Shareholder’s Handbook.

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Summer 2008

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