The long-term odds for a family-owned business are not good. Even if the founder builds it into a prosperous enterprise, that success likely won't last.
According to the Family Business Institute, while 88 percent of owners believe their company will still be in the family's control in five years, the reality is far different: only 30 percent make it to a second generation, 12 percent to a third and just 3 percent reach the fourth generation.
To help its members overcome such daunting statistics, the Heating, Air-conditioning and Refrigeration Distributors International brought a handful of members to a suburban Chicago hotel Nov. 8-9 to talk about succession planning and the needs of family businesses today and into the future.
Emily Saving, HARDI's director of education and its research foundation, said it's a timely issue for members.
"The need is very clearly there," she said.
The average age of HARDI members - many of whom oversee family companies - has been creeping up in recent years, and many will be entering retirement in the near future. They want to ensure their businesses continue and their sons or daughters are ready to take on the added responsibilities, Saving said.
"At the same time, our members are recognizing that it's not enough just to teach your son or daughter what you have already learned," she added. "We're also in a time of changing dynamics in the (distribution) channel itself" and that may require a different leadership style.
Among the people brought in for the meeting was Mike Workman, Ph.D., a university professor and consultant who has studied wholesale distribution and its evolution. Workman acted as facilitator for the two days of discussions.
GAPS
There's a bit of a generation gap when it comes to ideas about distribution, Workman said, and this meeting was designed as a way to start crossing that."The whole idea was what's different about the channel, what's different about business, what's different about where we're going, than what it was when you came up," Workman said. "What kind of skills and/or abilities do you think the next generation of leadership is going to need to be effective in that marketplace?"
The meeting included several HARDI members whose companies were either in the middle of a generational transition or had already gone through it.
Among them was 30-year-old Drew Dennis, residential product manager at the Dennis Co. Inc. The Davenport, Iowa-based distributor is currently in a leadership transition process. In preparation, the third-generation family company has an interim non-family member as president while it gets ready to eventually hand over control from one generation to another.
Dennis said his generation wants to be able to "think outside the box" when it comes to the way things are done. That doesn't mean changing everything, but older leaders should be open to different ideas.
LISTENING, LEARNING
"I did a lot listening at the event," Dennis said. "It was a great group of people that were there."Another participant was Russell Geary, co-chair of HARDI's Professional Development and Training Committee. While his company, Geary Pacific Supply, went through its generational transition some time ago, he realizes now that the experience could have been better.
"There is a need for executive development and succession planning," he said. "We've had some events come up at our company. We've been blessed that we've had some lessons learned, if you will."
Families involved in businesses need to understand there is a difference between family "leadership" and family "ownership," he added. Current family executives need to make the business something the next generation cares about, and one way to do that is to take some of the younger leaders' advice.
"The young executive has a voice, and it's important that voice be heard," Geary said. "How do we keep things relevant to them? How do we keep it, not to sound corny, but fresh? What's important to those guys?"
Other issues touched on during the meeting included company culture, a company's mission and its goals.
'HUNGRY'
Young leaders "are hungry for knowledge," Geary said. "They want to all do a good job, and they're all really into their companies."Eventually, because the subject of generational leadership is so broad, it could become the focus of its own HARDI council or committee, Emily Saving said.
"I think what's most important is to give our members - the emerging leaders especially - a way to connect," she said.
Peer learning, networking, benchmarking, could all be part of such a council or committee, should one be established.
If it is, one thing the committee won't be, Saving said, is another group centered on helping older executives learn how to talk to Generation X or Generation Y. Many HARDI members are beyond that.
"The concern is not about how we transfer the family business," Workman said. "The concern is how we transfer leadership of the organization."
And it's often not easy, he added.
"That's a huge problem for small businesses in all of distribution, because the number of emerging leaders who want to be in the family business is one of the most rapidly decreasing numbers you can find in business statistics," Workman said. "They don't want any part of that. They'd rather do something else." .
