by Michael Carp and Keren Ludski
Our business started out as a paying hobby – we didn’t even know what the running costs were! But as Kez’s Kitchen quickly grew into a serious venture involving many more members of the family, we were determined not to let rifts or arguments over money or hiring and firing issues ruin our lives and get in the way of success. So we set up a Family Council and appointed an independent Chairman of the Board. We haven’t looked back. None of us initially had any skills to run a business and we would have “drowned” if we hadn’t made these decisions.
Michael was the logical choice as CEO with his business and legal background and Keren says there is no-one else she would rather trust in the job. Our mother wanted to scale back her involvement in the business and Keren was planning to have more children. Despite having founded the business, Keren didn’t want the day-to-day stresses of running the company. She was already feeling “torn” by the conflicting demands and family values have always been extremely important to us. So, while it was a difficult decision for her to let go of this “other baby,” the family unit always comes first. Keren is still very involved in the business as Director, Business Analysis and has a say in all decisions as a member of the Board.
As CEO, Michael was responsible for setting all the wage levels in the business. Unfortunately, this included all the family members – including himself. Deciding what we should earn was not a fun job. As a son, brother, and husband, he wanted to pay everyone far more money than they were earning. As the boss, he obviously wanted to pay them a lot less. And of course with his own wage, he felt that he could never win. In other people’s eyes he was being paid too much. In his own and probably his wife’s eyes, Michael’s salary was never enough.
It was these sorts of issues that led us to the realization that we needed outside help. A few years earlier we had adopted a similar strategy when we appointed non-family members to some key senior management roles. We felt these people brought additional skills and knowledge to the business that we were not able to provide. We also came to the conclusion that we needed to have structures in place to enable honest discussion and resolution of family issues within the business.
The appointment of an external Chairman of the Board was one of the best decisions we have ever made. The first thing the Chairman did, was to take on the role of overseeing remuneration and setting all the family’s wages at the appropriate level. Some of us were probably happier than others but we all now agree that the new system is fair and meets current market levels, with a slight family bias. As a result, everyone is a lot more comfortable with the process.
Michael may not be with Kez’s Kitchen today if we had not appointed the independent Chairman because having a professionally run business and happy family is extremely important to him. In fact we would all close the doors on the business tomorrow rather than risk our family relationships.
The Chairman has overseen the introduction of corporate governance structures for the business and also acts as a mentor to Michael. We all see the benefits to the business of Michael having a non-family member as an advisor and sounding board.
Having an independent Chairman does not mean we have completely avoided family problems within the business. But it has meant that we have been able to face up to issues early on so we have been able to avoid the damaging family rifts you often read and hear about elsewhere with people sniping behind the backs of others. Whilst we’ve had to make the hard decision to terminate a couple of employees over the years, we haven’t had to fire a family member of the business. But, it is reassuring to know that there is a process in place to deal with this hopefully unlikely event!
Keren and our mother Helen do not like dealing with employee termination issues. Both are happy to hire people but Keren says firing employees makes her feel “sick” even when she knows the decision is correct. Michael doesn’t enjoy the process but has a more business focused approach.
The Board comprises a large number of family members but we also have a separate Family Council which meets regularly to deal with issues that are family related and not necessarily part of the everyday running of the business. We wanted to give family members an opportunity to speak their mind and raise issues without taking the time of the Board.
In the early days of the company we’d find a position for any family member who wanted a job. That’s not the case any more. Several years ago when Michael’s wife wanted to join the business, her employment was first raised at the Family Council before being formally voted on at Board level.
While it would have been awkward if the Board had voted against her employment, she was more comfortable in the knowledge that her job prospects were being discussed openly and honestly. As a result, she is much happier as an employee. She knows that she was hired with open eyes; everyone knows her skills and the role that she was hired to fill, and all members of the Board have confidence in her ability to do the job.
Despite the family involvement in the business we don’t believe other employees see any of us as an impediment to their own career within the business. Our mother is the Director of Business Development and Marketing but the other three senior jobs reporting to Michael are all non-family members – a National Sales Manager, a Financial Controller and a Manufacturing Manager. We have always been very open about the fact that we see no reason why in the future, the CEO’s role must be filled by a family member. That view is also supported by the Board.
The senior management team knows that there’s technically nothing stopping them obtaining any position in the company. We think any negative thoughts they may have are considerably outweighed by the fact that they enjoy working in a family business. In our environment, decisions can be made far more quickly than in many other companies and managers have as much direct access to Michael as CEO, and the Board as they require.
We have deliberately set out to surround ourselves with people who know far more in their specific fields than we do. To deny these managers the authority to make the day-to-day strategic decisions to do their work effectively would be very silly.
In the last six months we’ve all started to realize that we need to look to the future of the business without necessarily as much family involvement. One of the benefits of the senior management team is that all family members are now able to spend more time outside the business.
For example, Michael has recently joined a CEO Forum Group through the auspices of Family Business Australia. Through this Group, he is able to meet with nine CEOs of leading companies for a minimum of half a day every month to swap thoughts and ideas. Keren gets to spend all the time she wants with her kids and is able to work from home a fair bit if she needs to do more than her three days a week.
These opportunities don’t arise unless you sit down and ask yourself what you need to do to be able to look and think strategically. If you’re not doing that, you’re getting bogged down in the day-to-day management issues and it just makes it far more difficult to succeed. This includes all the human resource issues associated with working as a family business. If you have the plans and processes in place early you can avoid potential problems down the track. This not only makes a better business but also a happy family.
Michael Carpjoined Australian gourmet biscuit and gift producer, Kez’s Kitchen, in 1994 and has been its Chief Executive Officer since 1996. He has a Bachelor of Economics and Law from Monash University in Melbourne, Australia and is admitted to practice as a Barrister and Solicitor in the Supreme Court of Victoria, Australia. Michael is 32 years of age and is married with two daughters.
Additionally, Michael is an active member of Family Business Australia and is a founding member of the Family Business CEO Forum group. He is also a committee member of the Bakery Industry Association of Victoria in Australia. Michael’s wife, mother and two sisters work in the business with him and he enjoys the challenges and opportunities this represents.
Keren Ludski is the Director of Business Analysis at gourmet biscuit and gift producer Kez’s Kitchen in Melbourne, Australia. She co – founded the company with her mother Helen in 1991. The business started with both Helen and Keren baking from the kitchen at home in the morning and then hitting the streets in the afternoon to sell the product. Kez’s Kitchen now employs approximately 100 people and is set up in a large custom built factory. Keren is a graduate of Australia’s Monash University with a Degree in Arts, majoring in Psychology.
She is also the mother of three children aged 10, 8 and 2. It is for this reason that Keren now works three days on a part time basis. These hours give her the flexibility to combine both her roles successfully. Keren is also an active volunteer for the Sudden Infant Death Syndrome (SIDS) organization in Victoria, Australia. Keren’s brother Michael, who is CEO, now runs Kez’s Kitchen.