Multi-Generational Dealerships

By Howard Riell, Contributing Editor

Operating a multi-generational E&S dealership and all that it entails - from development to management to addressing succession issues - requires careful planning, deft diplomacy and the ability to preserve the past while working to build the future.

Bill Boelter, president and CEO of The Boelter Cos. in Milwaukee, recently acknowledged that being part of a multi-generational family business, as his is, is one part blessing and one part, well, let's call it challenge.

"The blessing," said Boelter, "really is that you can always think long term as long as you're planning your succession with family members. Otherwise, you're mainly focusing on your balance sheet and P&L, just like a publicly held company does."

The challenge, he continued, is developing family members who are able to carry on the business from generation to generation. Or as Dan Rottenberg, the editor in chief of Family Business magazine put it, "Sometimes, the genetic well runs dry after a couple of generations."

Genetics notwithstanding, handing a family business from one generation to another, and then another, as many dealers have done, can prove as delicate a negotiation as any a firm will undertake with a foodservice operator or factory.

Deciding how and when the present generation will exit, how best to transfer ownership, who will run the company, how profits will be shared among relatives both in and out of the company, how the corporate culture should or should not change and a host of other considerations can trigger emotions that have no place in a boardroom. And, even when egos are put aside, there are a great many ducks that must be lined up correctly for an enterprise to thrive once its creator - who may feel synonymous with the business itself - departs.

Harry O. Hay, left, Lewis M. Bolton, to his left, and James B. Speicher, leaning on the counter, shown here in the 1940s, successfully fused a pair of families into a single highly successful enterprise. At right: the Edward Don & Co. main building, circa 1930s.

"The job interview is easier but the work is harder," said Lewis W. Bolton, president of Bolton & Hay Inc. in Des Moines, Iowa, about being a part of multi-generational family businesses. "When you're working for your family it's different. There's an emotional component and different expectations. It varies on issues, but there is always family baggage." Bolton's grandfather, Lewis M. Bolton, became associated with Harry O. Hay in the restaurant business in the early 1920s.

"As a third-generation person, when you work for the largest company in the industry you don't get a whole lot of credit for making it successful," admitted Steve Don, 37, CEO of Edward Don & Co. "So, there are some challenges when you're on top; no matter what you do, you don't necessarily get the recognition."

Attachment to a family enterprise often tends to blur the distinctions between business and personal life, a linkage that can heighten tensions in both spheres. Said Bolton, "Typically, when the day is done my employees go home and they're finished. But for me there's just not that division. When I get home I'm still thinking about what to do next, and whether we can improve it. It's kind of a nice way for me to focus, but then, maybe, I miss some of that family and personal time."

Running a family business is harder than running any other kind, said Henry Hunsicker, vice president of sales of Buckelew's Foodservice Equipment in Shreveport, La., because, "You tend to let your heart into it more than your head, and not just with family but also with employees."

Among family businesses that succeed, said Boelter, the scenario that he thinks works best is one in which the organization grows to the point where it can establish different operating units "or maybe even different companies that the siblings can head up. That way they've got their own areas of responsibility, their own P&L. That tends to simplify things."

Perhaps the ultimate truth about family businesses, multi-generational or otherwise, Boelter said, referring to his own company, is that "it has always been run on the premise that it's not really being run for the family. It's being run for the associates. Family just can't do it by themselves; it's impossible. You've got to create an environment in which non-family members can grow, have significant roles, maybe even have some ownership roles."

The Boelter Cos. was founded by Bill's father, Fred, after he was laid off following the onset of the Depression. He began to sell janitorial supplies to rooming houses and taverns as a matter of survival. Bill joined the company in 1963, and became its president in 1970.

Bill's older son, Rick, has been with the company for 10 years following a stint at Kimberly Clark. He serves as president of the company's beverage group. Younger son Eric worked with the company for seven years before leaving to start up the industry portal FSXchange.com, which recently merged with EFS Network Inc. His plans are to return to the company in the near future. The firm is projecting sales of about $90 million this year.

"What you've got to do to prepare for [succession] is discuss with your eventual successors the working relationships, the dynamics, the company's culture," said Boelter, 62. "They also have to have an opportunity to work in the business and earn the respect and admiration of the other associates in the company."

Approximately 80% of American companies are family-owned or -run, according to Loyola University's Chicago Family Business Center. Two-thirds of those companies don't last until the second generation, and only 12% last to the third. And if you think those who run multi-generational family businesses aren't aware of these facts, you're mistaken.

"The story I'd always heard is that the third generation always loses the business," said Andrew Scruggs, vice president of the Scruggs Inc. division of Strategic Equipment & Supply Co. in Knoxville, Tenn. "Well, the only thing I was going to ensure was that we weren't going to go under on my watch."

Scruggs Inc. was founded by E.C. Scruggs in 1932 to service restaurants and back-road markets in east Tennessee. Andrew's father, Jim, came into the business with two brothers in 1949, and took it over in 1980. When one of Jim's brothers died and the other left the business, he was left alone to run the company.

Andrew, who was working in the Steak and Ale management program, and his brother Lee, who was a minister, decided to join their father. Lee left the company last year after 20 years to rejoin the ministry. Jim Scruggs slowly phased himself out of day-to-day operations, and officially retired almost six years ago. Two-and-a-half years ago, Scruggs Inc. merged with five other dealers to form Strategic Equipment & Supply.

Andrew, 47, and Lee, 49, worked well together. "What was special for me, I think, was the fact that my brother and I both recognized our talents," Andrew said. "All I ever did was sell and manage sales and that type of thing. He always did back of the house, and was never on the street as a salesperson.

"Lee was our visionary and I was the doer," he continued. "We both respected that what each of us did, we knew better than the other. My brother was probably the biggest architect of our culture. Our egos didn't get in the way; there weren't any power plays or that kind of thing. I'm very thankful that I got to work with my brother. It's meant a whole, whole lot to me."

Edward Don & Co. has been owned and operated by the Don family since 1921. It was in 1985, after six years as CEO, that Robert Don was, according to the Chicago Tribune, "forced to call a showdown meeting" because his relationship with other family members involved in running the company had deteriorated. "'I told them I thought we needed to sell the business,'" Don told the Tribune. "'I expected days of debate and anguish, but the meeting was over in an hour and a half. They wanted their capital.'"

For the Don family, inclusion in the business has always been about opportunity. "I think everyone in our family has the opportunity, and there is no pressure if you don't want to be" involved, said Steve Don, who succeeded Robert, his father, as CEO. "By the same token, it's an open door if you want to be involved."

The inner connection to a family legacy must come from inside, and cannot be coerced, Don added. "There is sort of this concept of [the business as] a family heirloom," he reflected. "I think you either feel that it's part of who you are ... or you don't. But I thought it was a great opportunity, and not too many people have that opportunity."

Nor are many equipped to take advantage of such opportunities. Steve has a degree from the Wharton School at the University of Pennsylvania and an MBA in marketing and finance from Northwestern University's Kellogg Graduate School of Management. He joined the family business in 1992 after stints at investment firm Salomon Brothers Inc. and Walt Disney Co. He became executive vice president in 1998 and, a year later, president and chief operating officer.

Robert, 66, Steve Don's father, moved up to chairman when Steve was promoted. Steve's brother Adam, 33, heads up the firm's sales efforts in California, while sister Abbe, 40, who serves as an internet consultant, is the only non-active sh

areholder. The Don family has put together a detailed succession plan that includes "time lines of when it was going to happen and what needed to get done," Steve noted, "and it was all out in the open. Our management team knew about it."

While the details of the plan were not made available, Steve noted that "part of my challenge is to take everything that's made Edward Don & Co. successful over the last 81 years, maintain what is good and then improve upon it. You need to respect the past and what got you to where you are, and also make sure you tweak it so you keep the company going positively into the future."

In the case of Bolton & Hay, the dynamics included not one but a pair of families. Such an arrangement, Bolton noted with a smile, may at times raise the emotional ante.

John Speicher, left, Bob Bolton, center, and Lewis Bolton have built their families' venture into a multi-million-dollar organization.

As the name implies, the corporation is co-owned by the Bolton and Hay families. A third-generation son from the Hay family, John Speicher, serves as vice president. He and Bolton are the only remaining family members in the $5 million-a-year business.

Bolton joined the family business in 1982. He took over the reins as president from his father Bob, who had run the company since 1960, in 1996. The succession, he recalled, was quite gradual. "It was more like me assuming more responsibility and him assuming less."

Indeed, the elder Bolton is still not out of the business. "He still has a desk and he comes in for an hour or so, and I brief him on what's going on," Lewis W. noted. "He might look at numbers. He doesn't fish, he doesn't golf; this is kind of his hobby."

Ownership in Bolton & Hay has not changed, however. It remains primarily between the two fathers, although transfer of stock is taking place "in bits and pieces."

Lewis W. Bolton said he remained "hopeful" that one or more of his children - they range in age from 16 to 3 - will want to follow in the business. "I don't know that it's going to occur," he noted, "but, then again, I have some desire to continue with it. I would definitely give my children some opportunity. I guess maybe it's an ingrained loyalty; I don't know. Obviously, if my dad did it all these years he must have enjoyed it."

It was back in 1869 that the Buckelew Hardware Co. was started by Wilbur Fisk Buckelew, Henry Hunsicker's great-great uncle. John Hunsicker and his son, John Jr., bought the company from Wilbur C. Buckelew in 1947. John III joined the business in the late 1960s, while Henry, 44, and Newton, 40, came aboard a decade later.

Henry and Newton bought the company from their parents in 1984, with Henry serving as CEO until turning the reins over to John III, 63, within the last year. Newton is the company's secretary/treasurer.

"My dad was the only one in his generation of the family who was involved, so I think [running it] was probably easier for him," suggested Hunsicker. "But then it became difficult when he brought his kids into it, which is always hard. At one time, there were five or six of us involved, and I think it was probably hard for him, being the patriarch, to decide who's going to do what and who's going to be over whom."

Each company, he noted, "obviously is different. Some of them remain constant, some of them change dramatically, and some tend to blend a little bit of both." His own firm has maintained a good deal of continuity, which is attributable to the fact that his father remained involved in the business for 15 years after turning over control.

And make no mistake: It is the turning over control - to children, cousins or even siblings - that lies at the heart of what makes multi-generational family businesses so much more complicated. But, equally influential is that sense of simultaneously owing something both to the past and to the generations yet to come.

The bottom line is that legalities can always be handled by the lawyers, but affairs of the heart - and where does a family or, for that matter, one's own business, reside if not in that most sensitive of regions - require a far more personal type of management.