SUCCESSION

From Page 8

Heinrich said developing and implementing a formal succession plan that includes guidance is imperative for family businesses to survive and thrive. She said the lack of follow-through is a major factor in the decline of family-owned businesses.

According to Family Firm Institute Inc., a research group based in Boston, only:  30% of family-owned businesses survive to the second generation;  12% are still viable in the third generation; and  3% make it to the fourth generation and beyond.

“Without a plan, you often see dissension, confusion and a little bit of anarchy,” said Mantese. “Failure to plan is planning to fail.”

Make regular family meetings the norm

From the rst season through the fourth, family members in “Succession” habitually held one-on-one backroom meetings to vie for leverage. While that behavior may temporarily bene t one family member, it isn’t good for the company’s overall success.

Experts say regular family meetings can be an e ective tool for identifying future company leaders because they provide family members opportunities to discuss business strategies, short- and long-term goals, con icts of interest and other pressing issues. “Developing that dialogue will help with the natural selection of who the successor should be,” Heinrich said.

She advised adding new family members to the regular meetings as soon as they enter the company to understand their desired career paths and determine their roles in the business.

“Systematic, routine, open and candid communication will keep

Family

From Page 8

“A family business is like any other business in the country. Except you also have to manage the family, and it has to be a priority,” said company Chair Bill Zehnder.

Bavarian Inn Holdings Inc. requires family employees to adhere to a “family creed” that de nes terms and requirements in areas such as education, outside work experience, stock ownership and voting control conditions.

“ e leadership of any organization has a responsibility to all the stakeholders that are impacted by that business,” Zehnder said.

Drawing on insights from experts and another fourth-generation family business, here are six tips for hiring and managing family member job applicants and employees in a family-owned company.

Set expectations

Attracting and retaining employees is increasingly competitive. In April, the U.S. Chamber of Commerce reported there were 9.9 million open jobs in the U.S. but only 5.9 unem- ployed workers.

To compete, experts say family members interested in joining a family business should meet the same criteria for education, experience and training as nonfamily member job candidates.

Giving family job candidates preferential treatment damages credibility and makes hiring top-notch talent more di cult.

“If nonfamily employees see that someone without enough merit gets hired for positions that any other nonfamily employee would be capable of, you’re going to have a perception of unfairness, and you will not attract talent,” said Gonzalez.

Compensate fairly

Just as hiring requirements should be standardized across the company, so should com- pensation levels.

Gonzalez said basing family employees’ salaries on market-based compensation bolsters the perception of fairness.

James H. Cole Home for Funerals Inc., a fourth-generation family company established in 1919 and Detroit’s oldest Blackowned funeral home, is run by third-generation President Karla Cole. Cole works with her sons, funeral home directors Antonio and Brice Green. e company has 50 employees.

Antonio Green said Cole bases most sta pay scales on regional industry standards and follows Small Business Administration of Michigan-recommended guidelines for executive compensation.

“Having these measures in place ensures that we will not have to address such an issue amongst family members in the future,” he said.

Remain transparent

A commonly advocated best prac- tice is routine family meetings.

Cole uses its monthly family meetings to discuss general business ideas and direction.

“ ese meetings not only help maintain an understanding amongst the family but also ensure that the sta receives a cohesive message and a reassurance of the direction that the company is moving in,” Green said.

He said family business meetings can help them work through disagreements that may arise.

“ e communication piece is what’s really critical,” Green said.

“Making sure that everybody understands the reasoning beyond a decision helps ensure everyone is on board.”

Have family employees gain outside experience

Business experience isn’t innate. Some experts say gaining employment experience at outside companies before joining the family business can be bene cial.

Detroit-based LoVasco Consulting Group, which provides insurance, employee bene ts, retirement products and communication services, typically advises companies to have family employees work elsewhere for three to ve years to gain knowledge and experience in the industry.

“ e worst thing you can do is have someone come right out of college or high school and come into the family business,” company President Gene LoVasco said. “It’s important that they earn their stripes and don’t walk in from day one thinking that they own the place.”

One client brought his son into his manufacturing business right out of college and placed him in an executive role, LoVasco said. e plan backred.

From Page 10 family dynamics on an even keel over time,” Heinrich said.

Involve outsiders in the decision-making process

When choosing a company’s future leader, external consultants — business advisers, attorneys and certi ed public accountants — can present objective views that alleviate tension in the decision-making process.

“Good succession planning engages all of these professionals to make a tight and well-thought-out plan for the future,” said Mantese.

Bill Zehnder, third-generation owner and chairman of Frankenmuth Bavarian Inn Holdings Inc., said nonfamily employees and consultants “take a lot of the emotion out of the process.”

“ ey’ve experienced all the good, the bad and the ugly in families,” he said.

Frankenmuth Bavarian Inn Holdings has about 1,000 employees spanning the Bavarian Inn Restaurant, Bavarian Inn Lodge, Frankenmuth River Place Shops and Frankenmuth Gift Shop Inc. e Frankenmuth-based holding company dates back to the Bavarian Inn Restaurant, known as Fischer’s Hotel when the Zehnder family acquired it in 1950.