Star-spangled survival

By Barbara Specto

r As of this writing, the state of the American economy is grim. The state of American politics is contentious. But the state of American family businesses is resolute. Naturally, some have been more successful than others. Even in prosperous times, it’s not easy to balance the competing demands of family membership and business ownership. When investment yields and company profits are declining, conflicts below the surface are more likely to bubble up. Which family enterprises will thrive in this sputtering economy? Though every clan has its own way of approaching its challenges, the most resilient have the following qualities: • They take calculated risks and embrace innovation. Later-generation leaders’ complacency can lead to businesses made obsolete by technological advances or eclipsed by global competitors. Savvy successors continually test the assumptions behind their strategic plan and invest in adjustments when needed. Hussey Seating Company of North Berwick, Maine, was founded as a maker of plows in 1835 and reinvented itself several times during and after the Industrial Revolution. Hussey now makes seats for schools and arenas. • They achieve family buy-in. While family members who work in the business are committed to its mission, those who don’t work there may view it as just another investment. Consider Menasha Corporation in Neenah, Wis., owned by about 150 descendants of founder Elisha Smith and run by non-family managers. Fifth-generation member Sylvia Shepard says the family began to reconnect to its legacy as it prepared a history book to celebrate the company’s 150th anniversary in 2000. She later spearheaded creation of the Smith Family Council to unify family members, educate shareholders and give them a voice. • They conserve cash and use debt wisely. “Cash is king” is a common family business mantra. That philosophy is serving family firms well in these recessionary times. But debt has its place if it’s used to finance smart growth or facilities upgrades. In 2006, Ford Motor Co., America’s second-largest family business, borrowed $23.6 billion by putting up all its major assets as collateral. That helped the automaker to survive without a government bailout. • They learn from their legacy. A family business legacy is a strategic advantage. Courtney Cole and Monica Peck, sixth-generation owners of Noblesville, Ind., Chevrolet dealer W. Hare & Son, say awareness of their family’s persistence through a depression and two world wars helps them keep the current recession in perspective. But a distinction must be made between embracing a legacy and clinging to an outmoded tradition. When W. Hare & Son was founded in 1847, it sold buggies—not a wise business model for the 21st century.