Family firm frictions

In many respects, TRACO is an archetypical Pittsburgh family business.

Started in the 1940s by a Depression-era couple, it developed into a major manufacturing company, from a mom-and-pop operation into a global business. It even parallels the geographic movement and migration of the region: It has its roots in a small North Side operation that later moved to fast-growing Cranberry Township.

And as with too many family enterprises, conflicts between the first and second generations marred the transition from one to the next.

About 75 percent of family businesses don’t make it to a second generation, says Jim Kwaiser, partner in family business consulting firm CHALLENGES INC. And the reason, he says, has little to do with the financial health of the business.

“It’s generally not because of financial issues but because of interpersonal issues,” says Kwaiser.

Unraveling longstanding personal conflicts between parents and their children and among siblings is the most critical step in the succession process, and Kwaiser suggests using an objective adviser to facilitate it.

“That’s not always easy to do, but it’s necessary,” says Kwaiser.

Kwaiser gives an example of a business he worked with at which the father had given a yacht to his son and daughter. Misunderstandings arose between the children over the upkeep of the craft and payment of docking fees. Because of their conflicts, the siblings hardly spoke to each other for two years.

Kwaiser dug into the attitudes of each of the children and learned that the daughter resented her brother because she thought he talked down to her and didn’t listen to her. The brother saw his sister as unreliable, financially irresponsible and lacking follow-through.

After smoothing out the misunderstandings, the two reconciled and the business got back on track. Even so, says Kwaiser, damage had been done to the company as the personal conflicts spilled over into the effective operation of the business.

Says Kwaiser: “Do you think they made good business decisions during those two years?” How to reach: CHALLENGES INC.,