By Harrell Kerkhoff
Maintenance Sales News Editor
Family businesses are quite common in the janitorial/sanitary industry. They include distributorships, manufacturers and various types of cleaning services. They are considered, by many, the lifeblood of the jan/san industry.
Planning is necessary to make sure a family business not only survives the transition to the next generation, but future generations as well. For every success story, there is often one of failure.
Addressing this important topic during an ISSA/INTERCLEAN® North America educational session was Henry Hutcheson, of Family Business USA, a business consulting firm. Hutcheson, whose presentation was titled, “Become More Than The Next Generation,” comes from two renowned family businesses himself — Olan Mills Portrait Studios on his mother’s side, and Peerless Woolen Mills on his father’s side.
Today, Hutcheson focuses on family business succession, and his work includes helping family business leaders manage conflict, enhance communication, plan for a smooth family business transition from one generation to the next, and helping the next generation of family business leaders become high performance leaders.
A Nation Of Family Businesses
What do the Ford Motor Company, Walmart and Cargill all have in common? Besides being major corporations within the American business landscape, they were all started as family businesses. Despite countless challenges, the United States is still dotted across the nation by significant numbers of small, medium and large family businesses.
According to Hutcheson, 80 to 90 percent of all U.S. businesses are family owned, run or managed. Other facts include:
• 78 percent of new jobs are created by family businesses;
• 62 percent of employment comes from family businesses;
• 25 percent of family businesses have a CEO who is a woman, compared to 3 percent for Fortune 500 companies; and,
• one-third of all Fortune 500 companies are somehow influenced by a family.
Hutcheson added: “On average, family businesses outperform non-family businesses when comparing a number of financial metrics.”
Reasons for this include a true sense of loyalty among family members running the company, and a high personal interest and passion for the family company.
“A lot has to do with trust and loyalty. It’s that trust among family members such as parents, children, siblings, etc., that can enable them to better optimize their business,” Hutcheson said. “When that trust is taken away from a family business, a downward spiral often follows.”
Family Business Best Practices
Family businesses often benefit from a closeness experienced among their ownership and management members. The down side, however, is the domino effect that can result from major and/or sudden changes within the hierarchy of these companies.
“A family business is made of three components: the family, the business and the ownership, the latter of which can include family members who don’t actually work at the company,” Hutcheson said. “It’s important to remember with a family business, however, that one change within the family can have a great impact. If somebody in the family gets a divorce, dies, gets married, wants to leave the business, etc., this can reverberate across the entire system.”
He added that uncertainties within a family business are to be expected. A lot of these issues relate to succession questions, followed by business matters and family conflicts. Therefore, Hutcheson recommends several “family business best practices” that can be implemented:
• Common goals must be put in place — “It’s important that family businesses develop some kind of commonality regarding its direction to remain successful,” Hutcheson said;
• Key roles within the company must be filled with competence — “This sounds simple and easy, but leaders in a family business naturally reach out to their children and say such things as, ‘Hey, why don’t you become the chief accountant. Why don’t you become the head of marketing. Let’s see how that goes,’” Hutcheson said. “I’m not saying you shouldn’t cultivate your children, but they need to be competent at some point if they are going to succeed in a particular task.”
He added there are roles in every business that require serious competence, such as accounting. These are positions where most people have to study and get experience before they are hired.
“Financial controls are critical. There are family business owners notorious for running companies ‘by the seat of their pants.’ However, it’s important to have dedicated and trained professionals on the financial side. You just don’t name anybody the CFO;”
• Weekly or monthly review meetings are a must — This allows company officials to see how the family business is progressing on a continual basis. This also helps meeting participants to view business trends and see how the company is doing compared to its competition. These meetings should include minutes. This lets those people not able to attend a particular meeting to be kept informed about what was discussed, and not feel left out;
• Develop a family business mission statement — “This may not seem important at the moment, but as the years go by, a mission statement can properly define a company and show what it’s all about. This will help future family members going forward. It’s all about establishing boundaries,” Hutcheson said;
• Establish sound governance — “It’s important to hold regular board meetings and establish a family council that also meets regularly. The latter is especially good for large family businesses where there are family members not actually working at the company. They may still like to have some say on what goes on,” Hutcheson said.
He added it’s better for these family members to provide input during a family council meeting than around the Thanksgiving table;
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• Develop a family employment policy — According to Hutcheson, it’s vital that family business leaders spell out in detail to all family members working at the company certain key policies. This includes hiring, ethics, vacation time, pay and benefits.
“As a family business goes forward and more people start joining the company, at some point you have to have a policy in place stating all of the rules. This is often easier said than done,” Hutcheson said. “The sense of entitlement can be an enormous problem at family businesses. The fastest way to do poorly as an up-and-coming person in a family business is to have (the entitlement) attitude in place, especially around non-family employees. These employees will not respect that person, nor help or follow him/her.”
Hutcheson said it’s also important that family members who are part of a business learn how to handle ‘no,’ be able to differentiate between wants and needs, have the ability to tolerate delayed gratification, be able to make trade-offs and develop healthy skepticism; and,
• Have an independent board of advisors in place — “There are family business owners who will say, ‘My company is not big enough to have such a board.’ I always respond, ‘Yes, your company is big enough,’” Hutcheson said. “I know a person who runs a third generation (soft drink) distributorship. He has three people meet with him four times a year for a two-hour lunch. He provides the company’s financials, gives them an update on the business, and then receives their feedback concerning different issues. He doesn’t pay them anything. They just go out for lunch. Every business owner can find people to fill similar roles.”
The Fine Art Of Succession
The scary fact about family businesses is that two-thirds of them fail after being passed from one generation to the next.
“Those are really bad odds. That is why I do what I do,” Hutcheson said.
The trouble is often with the succession plan, or the lack thereof. According to Hutcheson, only 45 percent of family business CEOs who plan to retire within 5 years have given serious thought about a succession plan.
“I have found that a large number of family business CEOs, by their own admission, plan to die in office. There have been clients who have told me, ‘They are just going to find me slumped over my desk some Monday morning,’” Hutcheson said. “I then respond, ‘There has to be a better plan.’”
Hutcheson discussed four strong common feelings most family business owners have when it comes to succession planning. They are:
• I want to treat all of my kids fairly;
• I want to take care of my non-family employees;
• I want to make sure my family stays together; and
• I don’t want to give all of my money to the government.
“When it comes to succession, there is one fundamental area that is very important. It’s helping members of the next generation to establish a physiological awareness, belief and comprehension of independence. Because of this, many smart family business owners don’t let their kids come to work for the company right after college graduation. They will let their kids work all the way through college at the family business, but must go somewhere else for awhile right after college,” Hutcheson said. “It’s important that members of the next generation figure out who they are and make their own mark to some degree. Then, they can come back to the family business if it’s their desire.
“For many young people associated with a family business, they have spent their entire lives under the family’s wing. If a member of the next generation is expected to be able to stand toe-to-toe with Dad and/or Mom in the family business, then it’s important that he/she first find his/her true worth, beliefs and values. This needs to be done by going somewhere else for awhile.”
Hutcheson said it’s never too early to start working on a family business transition plan to help alleviate the challenges of succession within a company. He also mentioned the importance of “same generation strategies,” once the younger group of family members take over.
“A big reason family businesses fail is that once the next generation is in charge, they can’t get along,” Hutcheson said.
Hutcheson said it’s critical to keep past childhood disagreement and issues with other family members in the past. They should not resurface while running a company.
“You can still have that special family feeling with a family business as long as there are rules in place. It’s important to professionalize the business,” he said. “Also, there should only be qualified people working at the company. This applies to family members as well. Running the business should not be reserved for family-members only.”
He added it’s very important that the family business owner starts transitioning the leadership of his/her company over a period of time. It’s good to have a long-term plan in place, and start the transitioning process before the actual change-over begins. It can also be good if the retiring owner is able to step back, but stay active in a smaller role, letting the day-to-day operations be handled by the successor.
“Succession is difficult. It doesn’t happen naturally. It’s important to be proactive and aware that family businesses are complex. All factors must be considered,” Hutcheson said. “It’s also good to guard against entitlement. Don’t provide an easy path for anyone. Make he/she earn what he/she gets. Preparation takes time. It can even take years.”
He added that there should always be an emergency plan in place addressing sudden succession. This will help a company survive an unexpected death.
“It’s important to have such a plan written down. It’s even more critical to get everybody together and discuss succession,” Hutcheson said. “It may not be much fun to talk about a sudden death possibility, but it’s very necessary.”
Hutcheson has written a new book titled,
“The Dirty Little Secrets of Family Business.”
for more information.
Voting Now Open for 2014
ISSA Innovation Award Program
“The Innovation Award competition recognizes the cleaning industry’s most innovative products and services as voted by industry distributors and end customers. The program features more than 50 innovative products and services from manufacturers and service providers throughout the cleaning industry," said ISSA spokespeople.
Products and services are entered in five categories: Cleaning Agents, Dispensers, Equipment, Services & Technology, and Supplies.
Online voting determines five Innovation Award category winners and remains open through October 31, 2014. Voting will continue on site during ISSA/INTERCLEAN® North America 2014, November 4-7, in Orlando, FL. Entries will be on display in the Innovation Showcase on the trade show floor (Booth 1781). There, eligible attendees will have a chance to see the innovations and vote to determine five additional Visitors’ Choice Award winners.
All 10 award winners will be announced during the Excellence Awards Luncheon at 1 p.m., Nov 7.
Online voters will have a chance to enter to win one of three Pebble Smartwatches during ISSA’s monthly prize drawings.
2014 Innovation Award Entries
Below are the 2014 ISSA Innovation Award Program entries by category:
• 3M Building & Commercial Services Division | Scotchgard™ Resilient Floor Protector;
• Athea Laboratories, Inc. Enviro-Caustic™ Drain Opener;
• Carroll Co. | ULTREX - Antimicrobial Hand Cleaning Wipes;
• Clorox Professional Products Co. | Clorox® 4 in One Disinfectant & Sanitizer;
• Essential Industries, Inc. | T-Rx Complete Terazzo Solution;
• Nyco Products Co. | OM¹ Series;
• Procter & Gamble Professional | Tide® Professional Coldwater System;
• Sealed Air Diversey Care | StandOut™ Durable Floor Finish;
• Sealed Air Diversey Care | Pro Series Chemical Concentrates.
• Anderson Chemical Co. | DOSE by SURFLEX®;
• Deb Group | GrittyFOAM®;
• Kutol Products Co. | Designer Series Wall Mounted Dispensers;
• Tennant Co. | Orbio® os3 System.
• Cleanmax Commercial Vacuums | Pro-Series Zero Vacuum;
• Intellibot Robotics, LLC | Hydro17™;
• Kärcher Commercial | BR 35/12 C Bp;
• Minuteman International, Inc. | X17 CFS - Chemical Free Carpet Cleaning;
• Nilfisk-Advance, Inc. | TrackClean;
• NSS Enterprises, Inc. | eForce ™ Burnisher;
• ProTeam, Inc. | ProGen 12/15;
• R.E.Whittaker Co | Smart Care TRIO;
• Sealed Air Diversey Care | TASKI swingo XP;
• Tennant Co. | B5/B7 Battery Burnisher;
• Tennant Co. | Q12 Multi-Surface Cleaner;
• Tennant Co. | T17;
• Ultimate Solutions, Inc. | i-mop.
Services & Technology Supplies
• CleanTelligent Software | Bidding and Estimating;
• Intellibot Robotics, LLC | Intelli-Trak™;
• Mats, Inc. | JanSan Matting Calculator App;
• SCA | Tork Easy Handling™;
• SCA | Tork EasyCube™;
• Sealed Air Diversey Care | TASKI Intellitrail;
• Spartan Chemical Co. | CompuClean Cloud;
• Tennant Co. | IRIS® Asset Manager.
• Aluf Plastics, Inc. | Slim-Fit™ Drawstring Trash Bags;
• Americo Manufacturing Company, Inc. | Full Cycle™ Floor Pads;
• Cascades Tissue Group | Cascades Pink Towels;
• Fimop USA | Healthcare Workstation with EQUODOSE® Microfiber Charging System;
• FoodHandler, Inc. | oneSAFE™;
• Georgia-Pacific Professional | Brawny Industrial® Flax Wipers;
• IPC Eagle Corp. | Cleano;
• ITW Professional Brands | Sertun™ Rechargeable Sanitizer Indicator Towel;
• Kimberly-Clark Professional | KLEENEX® and SCOTT® Non-Tree FiberProducts;
• Rubbermaid Commercial Products, Inc. | Quick Cart;
• Sealed Air Diversey Care | TASKI MicroFit;
• Sofidel America Corp. | Dissolve Tech Paper Towels;
• Unger Enterprises, Inc. | RestroomRx BETTERx Cleaning System;
• Vileda Professional - Marino | PVAmicro;
• Vileda Professional - Marino | Waste Management; and,
• Vileda Professional - Marino | SpillEx.
WAXIE Sanitary Supply
Announces Several Promotions
In his new role as director of channel marketing and sustainability at WAXIE, Keith Schneringer is responsible for connecting sales to marketing and the continued development of WAXIE’s Sustainability and Corporate Social Responsibility (CSR) programs.
He began his career at WAXIE as a sales representative in 1990. He became the sales manager in 1999, and was promoted to marketing manager in 2005. In recent years, “Schneringer has become the ‘champion’ of WAXIE’s sustainable products program,” according to the company.
Sandy Nourian will assume the responsibility and role of director of procurement and programs management. She will continue to manage the entire procurement process, the corporate buyer team, inventory performance metrics, vendor programs, product information, and analytical data.
Nourian began her career as a purchasing manager with WAXIE Santa Ana in 2000, and became director of procurement in 2003.
Umahl Anderson has been a member of the WAXIE San Diego sales team for the past two years. Anderson recently was promoted to the position of WAXIE San Diego sales manager.
He was originally hired to fill the role of health care specialist. Prior to WAXIE, he held positions as senior pharmaceutical sales rep for Lily USA and senior specialty sales rep and pharmaceutical sales rep for Merck & Co. Inc.
WAXIE San Diego also named Louis Horvath as the new sales manager. Horvath joined WAXIE in Santa Ana two years ago.
Prior to joining WAXIE, he spent over 14 years in sales and account management with Nestlé Waters North America and UPS. Horvath holds an advanced degree in management from the University of Redlands.
Based in San Diego, WAXIE consists of over 800 professionals working out of Inventory Centers servicing the western United States including California, Arizona, Nevada, Utah, Idaho, Oregon, Washington, Colorado and Alaska. Visit www.waxie.com for more information.