In 1971, Joseph and Anna Maria Severino turned their passion for authentic homemade pasta into Westmont’s Severino Pasta Co. Forty years later, the family is still making pasta—and doing a brisk wholesale business that includes a partnership with Whole Foods Markets, which runs mini Severino Pasta shops within its stores across the Mid-Atlantic and Northeast—under the guidance of the family’s second generation, three Severino siblings.
But that doesn’t mean the transition was easy, says Pete Severino, one of the three co-owners.
“In the early days, when we were making changes, it was always a bit of a struggle with my mom and dad as far as what we were going to do or doing something new and different, because there was an older, set way of doing things,” says Severino, who now appreciates his father’s steadfast pursuit of quality products and fresh ingredients.
As with many other South Jersey family companies, keeping the focus on the business—while maintaining the sanctity of family relationships—has been key. After all, working with family means trust and mutual respect, but it can also pose very unique and sometimes daunting challenges. Nevertheless, family firms continue to serve as the backbone of our economy. According to the U.S. Small Business Administration, approximately 90 percent of U.S. businesses are family owned or controlled, ranging from hard-working mom-and- pop shops to regional powerhouses like Dietz & Watson, contributing a staggering 50 percent of the nation’s gross domestic product.
“There’s a lot of synergy and a lot of special relationship there that can make a family business even more successful. But at the same time, it does present some challenges,” says Ray Compari, associate dean of the Rutgers School of Business. Compari also oversees the Rutgers Family Business Institute, a program that helps family businesses to succeed through networking, training, coaching and a family business certificate program.
The first lesson they teach is the separation of business and family life. While there are success stories, experts caution that as few as one in 10 of these businesses survives through the third generation. That’s why putting the business first—even while preserving family ties—remains critical.
“You’ve got to keep the focus on running a business together, whether you’re partners, or brothers and sisters, or whatever your relationships happen to be,” says Severino. “Business is business and family is family. You have to be responsible to it like you would for any other particular job, and not let family dynamics become a part of your everyday business.”
If putting family squabbles on the backburner is key to succeeding as a family business, the first step in doing so is establishing a clearly defined role for each family member. A structured approach to assigning responsibility and decision-making will eliminate many disputes, experts say.
“You have to be able to understand that people bring certain expertise and certain responsibilities to running the business,” says Michele Ballet, founder and principal of Applied Consulting, a Marlton-based consulting and executive coaching firm that focuses on family businesses. Ballet says that means establishing clear roles for family members based upon their skills and expertise, not family hierarchy or entitlements.
“In the old days, it used to be the oldest son always will take over the business, but things are different now,” she says. ”The youngest son or the youngest daughter might have his or her MBA, and have the skills and the personality to be able to more readily fit into the CEO role—and that may cause some problems with other siblings that they may or may not be able to handle.”
Ballet says that if relatives all focus on what’s best for the business, reaching a consensus should be possible.
For Ed Hutchinson, president of Hutchinson Plumbing Heating Cooling in Cherry Hill, carrying on the business started by his father and uncle in 1948 has meant working side by side with his four brothers. Now a $40 million company with 215 employees, Hutchinson succeeded by retaining family values but not family rivalries. “It’s amazing how, when you’re running a business and you check your egos at the door, then you say, ‘All right, well that’s a business decision, so that’s what we should go with,’” Hutchinson says.
Of course, sometimes it’s not a matter of too many family arguments—it’s just too much family.
Elaine Damm, vice president of ACCU Staffing Services in Cherry Hill, can relate.
She recounts how her father’s strong work ethic, having worked in management at RCA and General Electric for 40 years prior to joining the family’s staffing business in 1988, pushed the family toward 50-hour workweeks. “My father could go all year without even taking a day off,” says Damm. “Both my parents have always worked tremendous hours all their lives. As the second generation, I think that we’ve kind of been given no choice but to walk in the exact same footsteps. That doesn’t necessarily mean that we always agree about working until 7 p.m.”
Working in such close quarters naturally poses another difficult challenge for family firms: how to keep business and personal lives separate.
That, says Ballet, is why family members need to establish boundaries for personal time and space outside the work setting. She describes one client who worked closely with her mother. The mom would pop into the daughter’s office throughout the workday to catch up on family matters such as her grand- children’s homework or baseball games, and call late into the evening to discuss both business and family affairs. Finally, the daughter had to set boundaries: no calls during dinner or after 10 p.m. Instead, she set a meeting with her mother every morning before work hours, simply to chat for 15 minutes about either work or family. It took time, but eventually the mother-daughter relationship flourished.
Damm works closely with her mother Doris, who founded the company in 1979. She also works with her father, two brothers, a sister-in-law and a niece. They’ve been successful: the $50 million privately held staffing firm now has 21 regional offices, including 98 full-time employees and 2,500 temporary associates. But, says Damm, “When our weekend time comes, we really all try to separate our time from one another, because I think it’s healthy and very much needed. We all kind of go to our own separate area and try to spend time with our own personal families, because we’re so intertwined during the week.”
Of course, there are other, more formal measures companies can put into place. “Having an advisory board can help to prevent disputes and resolve conflict,” says Ballet. Also essential are periodic family councils/meetings, which can take place weekly, monthly or quarterly, depending on the complexity of the business and the family dynamics involved. During a family council, members discuss not only strategic business issues but also integral family matters such as how the next generation will get involved in the business, what roles family members will play, which philanthropic endeavors to support, and even who gets to use the family Shore house. “What family councils usually do is that they help families clarify their own values and goals as a business-owning family, and develop policies for how the family wants to treat major decisions,” explains Ballet.
And, most importantly, families must lay the groundwork for the next generation. Planning for such a transition can be an important indicator of a family company’s future success. Damm says her family has discussed succession and already has a clear plan in place. “It’s a difficult thing, but it is reality,” she says. “I’ve seen very successful businesses really struggle by people not preparing for the next generation.” When her business faces that hurdle, they’ll be more than prepared—and they’ll face it together, as a family.
Published (and copyrighted) in South Jersey Biz, Volume 1, Issue 8 (August, 2011).
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