Sharing Some Family Secrets

Sharing Some Family Secrets

by Gail Shaffer
Warfield’s

Family feuds aren’t funny when they threaten the survival of a business. But where do small, closely-held companies with internal problems turn for help? Loyola College has one answer: Learn from other closely-held companies with similar problems.

The Baltimore College is home of the fledgling Loyola Center for Closely Held Firms, which offers advice and seminars to operators of small companies looking for management solutions. Attendance at the organization’s early seminars has been healthy, but the group’s steering committee plans to redouble its marketing efforts to interest firms in membership.

The center is the result of a three-year planning effort by three founding sponsors–First National Bank of Maryland; Frank, Bernstein, Conaway & Goldman; and C.W. Amos & Company–as well as faculty members of Loyola’s Sellinger School of Business and Management, and principals from a few local, closely-held firms. Its mission is to serve the specific needs of closely-held and family-owned firms.

The principals of such firms face unique challenges that large and/or publicly traded firms do not. And while these challenges may not threaten a company with failure directly, says Marty Fetsch, a partner with C.W. Amos, such problems “can cause a firm to fail to prosper and grow because of divisiveness, sometimes resulting in a firm being split up among family factions. It’s a matter of lost opportunities–something difficult to measure, but debilitating for a business.”

Perhaps the stickiest challenge for family-owned businesses is that of succession. Handing the reins of management (and therefore control) over from one generation to the next is wrought with emotion and conflicts that easily can subvert a company’s well being.

Probably the key dynamic at work at the new center, says its director, Loyola Professor of Management Harsha Desai, is the opportunity for members to talk with peers who face or who already dealt with similar challenges. “No matter how good a lawyer or consultant or accountant is (with advice),” says Desai, “it is never as good as someone being able to say that they have been there. That credibility makes the shared information at our center extremely valuable.”

Says John Beever Sr., president of John Dittmar & Associates, a fifth-generation custom woodwork manufacturing firm in Golden Ring, “To have people tuned in to the same problems you’re facing is so critical. They already understand much of what you’re saying, and they can give you advice that is meaningful.”

“It’s a tough thing in a family business when you’ve got maybe a 90-year-old president who won’t let go,” Beever notes. “The younger generation can become disinterested, feeling they are not going to be made a part of things, so much so that they might leave.” He says that his firm has been successful in successions because each time, the older generation has recognized it was time to let go.

Tick Phelps, president of Carroll Independent Fuel Co. says he finds the fresh perspectives he gleans from other members particularly valuable. “Sometimes you just need to look at your problem from a different angle to see its solution,” he says. “Someone will say, ‘Have you considered this?’ and that may be enough to help me resolve the question.”Too many principals “can’t see the forest from the trees,” he says.

Although Phelps, a members of the center’s steering committee, believes the $1,500 annual membership fee is justifiable, he wonders if the economy is a least partly responsible for the center’s small membership thus far. Desai reports only 10 companies have joined as members, although both seminars to this point have drawn more than 30 attendees. Phelps says the handful of members and sponsors committed to the center’s success believe it is only a matter of time–and probably better marketing–before the idea catches on: “There is so much potential here for the family-owned business,” Phelps says.

Several business schools across the country have launched similar programs.Besides membership dues, the center acquires its working capital–for paying speakers, covering newsletter costs, and setting up programs–from its corporate sponsors, who are asked to contribute $5,000 annually.