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The wills and the ways....

Some people feel that family members who go into business together blend just about as well as oil and water. it's hard enough running a company, they say; why complicate matters even more by adding family to the equation? Better leave well enough alone.

But a host of men and women, many of whom have been members of thriving family businesses for two, three-even five-generations would disagree. In addition to the satisfaction that comes from managing a profitable company, they have the special pleasure of continuing a family legacy, one that may have begun with a grandparent, mother, father or in-law.

As a group, family businesses are no small factor in the economy, accounting for more than 60 percent of the country's gross national product and employing one-fifth of the nation's population (about 50 million people).

Being involved in a family business, however, is not always a positive experience. Sharing a common history with the people with whom you work can create challenges totally different (and possibly more permanent) from the ones found in non-family corporations. Sometimes sibling rivalries or domineering parents lead to irreparable family conflicts. In other instances, those who inherit a company from a parent or other relative may be ill-equipped to manage it or will allow too many family members to come into the business, making the company inefficient or unprofitable.

So-with all these potential pitfalls, why do some families succeed in building businesses that not only prosper but also grow through the years? Is it simply a matter of good luck or timing or are there certain characteristics separating the businesses that thrive from those that founder? And how do families best make the transition of the business from one generation to another? What are the advantages of being in a family business and what are the perils?

"We have less of a bottom-line attitude than a public company has," says Richard B. DeMars, chairman of Indianapolis-based Geupel DeMars, Inc., a construction company founded in 1927 by DeMars' father-in-law, Carl M. Geupel. "We try especially hard to be flexible and understanding, even when people make mistakes, because of the fact that we're a family business. We try to extend that family feeling to all our employees."

In some cases, however, that same understanding of a family member's mistakes can cause the company's demise. Take, for example, a southern Indiana manufacturing company that was headed by a daughter-in-law who lacked the skills to make good business decisions.

Her husband, says one of the family members involved, couldn't maintain a professional attitude about her capabilities. She should have been replaced, he says, but never was. As a result, the family got into a major argument over her role in the company. "We've never fully recovered," says the family member. "There are relatives I will probably never speak to for the rest of my life.

"My grandfather, who started the business, was never willing to teach anyone else in the family how to handle it," he continues. "He wasn't able to loosen his control." After the founder's death, his children inherited the business. The company did well for about a generation, mainly because it was a profitable company and because one daughter managed to stay on top of things. "But the tide finally turned, and it's been a continual struggle since then, "he says. "No one was adequately prepared to run this company."

But it doesn't always have to work that way. There are several different ways in which families successfully plan for their successors to come into the business. "My father let us test and implement many of our ideas,' says F. Michael Wells, who's president of Wells & Company, Inc., in Indianapolis, a fifth-generation business and one of the largest insurance agencies in Indiana. "He gave us time to develop confidence in our skills and was always there if we needed advice. I felt supported by my father's presence, but not hemmed in.' Both Wells and his brother work for the family firm.

"My father allowed me to sit in on meetings with clients and let me observe how business was transacted,' says Fred C. Tucker III. Tucker is a third-generation president of Indianapolis-headquartered F. C. Tucker Company, Inc., the state's largest real-estate firm. He was very good about exposing me to the company without putting any real pressure on me to come into the business." It was a technique that had worked with the elder Tucker as well. While Tucker, Jr., had dreams of getting rich quick in the Oklahoma oil fields, Tucker, Sr., the company's founder, had brochures that he left lying around. Brochures? About what? You guessed it-about a career in real estate.

Some senior owners leave elaborate sets of instructions detailing how to handle the business, as did Thomas E. Reilly, Jr., who was president of Reilly industries, Inc., a family business that was founded in 1896. Indianapolis-based Reilly Industries is one of the world's leading producers of performance chemicals. Thomas E. Reilly III says he still refers to his father's list of directions. It's made my job much easier,' he maintains.

The best lesson in how a company works, of course, is experience. "It is very helpful if family members work in a variety of jobs within the business rather than starting out in a top position," says DeMars. His son, Dan, for instance, worked as a laborer on one of the company's construction jobs when he was only 15. Dan DeMars is now president of Geupel DeMars, but before that, he was a project accountant and project manager. "Over the years, he handled as many different aspects of the business as he could," his father says.

But not all preparation comes from on-the-job training. Often, it is achieved by shining example. "Some of my best preparation came from my grandfather," says Darleen Myers, who's executive vice president of Biddle Precision Components in Sheridan. Biddle, a manufacturer of machined parts that was founded by Myers' grandfather, recently celebrated its 50th anniversary. "He had a determination and drive that I have inherited to some degree,' she says. "He wasn't a quitter and when things have gotten difficult, I've remembered that."

Both Tucker and Dan DeMars agree that the values their parents passed on to them have helped, rather than hindered, them in business. DeMars admits, however, he didn't always feel that way. He speaks of the time he wanted a 10-speed bike that his father refused to buy for him. "He knew I had a paper route and was fully capable of earning the money myself-which I did," he says. Dan DeMars also bought himself his first car.

Fred Tucker thinks it's important to have a game plan, or "some sense of future planning for the company," is how he puts it. This can be a great asset for successors," says Tucker. 'If I walked out tomorrow, I feel the business would still succeed because my partners and I have spent so much time outlining our goals as well as methods for achieving those goals.'

F. Michael Wells urges family members to develop three-to five-year game plans. "Most of all," says Wells, "make sure you can communicate clearly with one another and that you have compatible goals."

Reilly takes this one step further. "Provide a clear estate plan and try to put in place the next level of top management ahead of time," he says. The federal estate tax, says Reilly, is a big factor in the destruction of family businesses, which often have to be sold to pay the tax.

Different financial expectations distinguish family businesses from other businesses. In a family business, "you don't always have to maximize profits in the short run and can sacrifice short-term profits for a long-range view," explains Reilly. "Public corporations often expect instant results. We also don't always have to be as conservative."

A family business believes in helping its community more than might a business that has its corporate offices outside the state, points out Myers. "We've built and donated a park to the city, renovated the community center and bought fire trucks. We really want to give something back to the people who've supported us.' Biddle, Myers' company, is Sheridan's largest employer.

While family tradition may dictate that succeeding generations work from cradle to grave only in the family business, many younger members of family businesses recognize the value of working elsewhere first. My father and I have differing view about this," says the younger DeMars, who believes it's a good idea to get experience in a non-family-based business first.

Tucker, who practiced law for four years before joining F.C. Tucker, concurs with this point of view. His legal skills gave him a way to bring to the business the legal expertise it needed. "I had a talent that could be used in the business that was very helpful,' he says.

Mark Schenkel, a fifth-generation family executive at Fort Wayne's Schenkel & Sons, Inc., didn't join the family construction business until he was 31 years old. Before joining the company in the early 1980s, Schenkel gained a broad base of experience through work with a retail grocer, a lumber company and a supplier. His experience outside the family company, he says, lends it a fresh perspective. Otherwise, he says, "You tend to end up doing things the way your father or grandfather did."

Starting work with the family business can be tough on the new initiate. Non-family employees may well resent the owner's kid, even if he or she has earned business stripes elsewhere first.

When Kim Fuller and her husband, Dennis, came into her family's business in 1983, they still had to prove themselves, she remembers, even though they came with MBAs and experience in banking, sales and marketing in Fortune 500 companies such as PepsiCo., Inc. Kim Fuller is executive vice president of Little Crow Foods in Warsaw, a business that her stepfather's grandfather founded in the early 1900s. We had to go slowly when making major changes and be sensitive to the employees' point of view," she says.

Dan DeMars acknowledges that he found it hard, at times, to supervise people who were older than he. "I had to be very sensitive and aware of their feelings while showing them that I was experienced," he says.

The partner in the estranged-family business looks at it from another angle. When I first came to the company, I went out of my way to make sure my family connections weren't discovered,' he recalls. He didn't want to create the impression that he was merely coasting along on his family ties. Another employee who knew his background, however, pointed out the flaw in that line of reasoning: Other workers believed that the owner's relatives had a stronger interest and desire to make the business work because of the family bond. "And although I didn't agree with him at first, I came to see that this was true," he says.

"You have a lot of pride in the family history and want to see it continue to be successful," agrees Tucker. It's a very strong factor.'

Myers also feels an extra commitment to Biddle because of the family connection. The family's had good offers for the company from prospective buyers, which they have rejected. "There's more than money at stake here,' she explains.

Wells expresses it another way. "There is some extra pressure in being responsible for the family business," he says. "But there's also plenty of joy."

Myers' admonition to anyone who might be thinking of starting his or her own business is: Walk around and talk to your employees as often as possible.' The workers at Biddle frequently provide some of the best information and suggestions, she says.

"Talk to others in related business," insurance executive Wells recommends.

I also believe in youth," Reilly adds. "It's wise to have young people coming into the company to keep it abreast of the future.'

The question as to whether businesses should be inherited automatically elicits a resounding "no' from Wells, the elder DeMars and Tucker.

Says DeMars: "Ours is a very tough and complicated business. Someone without a solid background and skills in our area would almost certainly fail."

Says Tucker: Since this business was not automatically handed to me (he purchased it with two other partners), I can't imagine passing it on to someone who hasn't proven that they're capable of handling the responsibility."

Says Wells: if they weren't interested in coming into the business, I'd have difficulty having them be absentee owners."

Kim Fuller wavers just a bit. 'If we do end up making a lot of money, I'd like to give it to our kids. But,' she concedes, "the most important thing a parent can do is to have them make it on their own."
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Title Annotation:Geupel DeMars Inc.'s history
Author:Corn, Jane
Publication:Indiana Business Magazine
Article Type:company profile
Date:Mar 1, 1990
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