To have a successful career takes more than being born into a family business. Just ask Mike Malley, chairman of Malley’s Chocolates; “Hoby” Hanna, president of Howard Hanna Real Estate Services; Gwenay Reaze-Coniglio, president of The Coniglio Co.; and Jeff Heinen, president of Heinen’s Inc.
“Just because your last name is Malley doesn’t mean you need to be the chairman of the company,” Malley says. “That can be really hard to accept because if you’ve grown up in the business, there are a lot of wonderful attributes brought to the table, but you also have some blind spots.”
Reaze-Coniglio carries it one step further — to the succession level.
“Just because you carry the last name doesn’t mean that you’re given the right to take over the business; it’s earned,” she says. “Children need to know that very early on. Parents should set the precedent that this is business, and business is business.
“It’s all about qualifications and not the fact that you carry the last name. That is truly key when you’re thinking about succession planning.”
Speaking before the recent Smart Business 2015 Family Business Conference, Malley, Reaze-Coniglio, Heinen and Hanna discussed how to address the blind spots that often come about in leading a business using strategies that can be applied to many non-family businesses as well.
Seeing the unseen
To spot the blind spots in your business, it often takes an external observer. To use an old cliché, it’s about not being able to see the forest for the trees.
Reaze-Coniglio’s company has a board of advisers who are not involved in the day-to-day business. The board naturally is a step back from the operations and is more likely to think critically when needed.
“It’s better for the company to get an objective view,” she says. “They’re not family members because we really need that outside input to give us honest opinions and assessment of our business.”
At Howard Hanna, Hanna has seen some success in setting up an unofficial advisory board, all the while stressing the need for an official board.
“We’ve never had a formal advisory board or board of directors,” he says.
“I’ve been trying to push that within the family dynamic, but not everybody’s ready for that.”
The company has four senior leaders — the CFO, chief legal counsel, president of the mortgage company and VP of operations, who serve in the role of advisers.
“They have been in the business for a long time, they’re not owners, and they understand the dynamics,” Hanna says. “So they have become de facto advisers to us in different roles.
“Then I’ve tried to pull in three or four others who have strong relationships with my father and my aunts and understand the dynamics of the family business. They’ve been invited to some shareholder meetings and to participate in discussions, but they are not a formal advisory board.
“I know I can call on them for counsel and advice, and now the generation before us also feels comfortable going to them and sharing some of their challenges or questions. It’s really helped out.”
Heinen, with tongue in cheek, says his company probably isn’t the “poster child” of how to handle the advisory board issue.
The sudden death of his father Jack Heinen in 1994 set in motion changes that simplified the ownership structure. The majority of shareholders supported Heinen and his twin brother Tom in their efforts to lead the company, and the remaining shareholders as well were in alignment.
Malley, when he joined the company after 23 years in publishing and advertising, found his company’s board of advisers invaluable in establishing policies regarding the four D’s of transition — death, disability, disowned and divorce.
“The board felt there should be a document in place since we needed something that had to be put in place to protect the company and protect the shareholders,” he says.
“That was important for all the obvious intellectual reasons, but there was a lot of emotion around it because by being the new guy, I was raising an issue that was — and is — about succession.”
There is no ideal template for an advisory board, Malley says. What works for one company may not work for another.
“Everybody uses a board differently, and along Jeff Heinen’s line, I don’t know if we’re the poster child or not because my parents sought lots and lots of advice,” Malley says.
Dealing with relationships
Problems in managing employees may develop into frustrating situations whether the business is privately or publicly held.
Family businesses, however, top the list for potential emotional boilovers.
“The board could be used to facilitate tough conversations that may get emotional,” Malley says. “It’s a lot different than if you’re sitting down with somebody who’s not a family member; you can be somewhat more objective and straightforward.”
Malley leverages his unofficial advisory board members because they help him plan the tough conversations, but also are a resource for all family members.
“For example, and I am not suggesting this is the case, but if a family member was under performing in a certain role or wasn’t a good fit in the organization, or conversely if a partner has business issues with me they can go to the third-party advisers,” he says.
While the Hanna family members in the business are very close, there are still times when they debate and argue like family members and brothers and sisters. But the discussions are motivated by what’s best for the business.
“There’s really no jealousy within those people who are in the business and the four or five shareholders who are outside of the business,” Hanna says. “But they believe and trust in those of us who are guiding the growth and making things happen. People play different roles; not everybody does the same job. Those family members in the business bring different perspectives.”
The debates are conducted respectfully, just as brothers and sisters would do when working through a disagreement, Hanna says.
“I know that whatever we decide in a closed room, or what we analyze, discuss and disagree upon, the decision that we bring out to the public, our employees and our sales associates — everybody’s in lockstep. There’s no politics. Everybody’s together in that decision and is supportive. I know they all have my back, and I always have theirs.”
Focusing on a long-term mission has helped Heinen’s be successful, Heinen says.
“There is definitely emotion at times; you can’t escape it,” he says. “But what has helped us succeed is being totally aligned in where we want to go. It makes the next step, how do we get there, a lot easier.
“The other thing we’ve done is that if there’s a big decision that we do not agree on, we don’t do it. That occasionally meant a missed opportunity, but more often than not we say to ourselves, ‘Thank God we didn’t do that.’”
Planning the succession
For a first-generation family business like The Coniglio Co., succession planning is a continual discussion, but a tough conversation.
“In thinking of a succession plan, I never considered my children because I don’t want them to go through the day-to-day stuff I go through with my business; you want to protect them,” Reaze-Coniglio says.
“I have a daughter in college and a son who is 10. It’s very hard for us to have a succession plan because of our kids being so far apart.”
A business that doesn’t have a formal succession plan will not find itself alone. Many companies don’t have them, they are outdated or the company wants to be acquired. But as the legalities of business grow more complex each year, it is important to have a formal succession plan, especially for a family business.
Malley and Hanna both say that as a first step in succession planning, the company owners must think like owners and not family members.
“It’s about thinking like owners and looking at shareholder value,” Hanna says. “If the company grows to a point that I’m not the right person to continue to lead it and whether it’s an outsider or insider, we have to decide for the family and the next generation of Hannas, employees and sales people that want to see us stay in business.”
Malley says his company has been reviewing its ownership structure. He is stressing the importance of getting the right talent to lead a company and not being obligated to select only family members.
“It’s like, ‘Guys, let’s think like owners.’ I’d like to hire the best to be on the team. I can own a baseball team. It doesn’t mean I’m batting cleanup, it’s just, ‘Let’s get the best players to be on the team.’ So that’s kind of where we’re at and sort of our growing stage right now.”
Pearls of wisdom
It may not surprise the average person that the best piece of advice from a family business leader is not that different from what a public company leader might offer.
“Although it’s nice to say that you have a family business, make sure that it’s meaningful and that it’s purposeful,” Reaze-Coniglio says. “Don’t just get a bunch of family members together and say, ‘We’re going to own a business.’ Make sure that each person has a purpose, and that it makes sense.
“That’s the real goal. Business is business, and you have to make sure that the people inside the business have the right mindset.”
Having an advisory board is one of Malley’s recommendations.
“Even if you’re not going to be the head person running the company, find some mentors or someone who can counsel you who aren’t your spouse or sibling — because sometimes you just need to have candid feedback,” he says.
“Sometimes you need someone to say, ‘This is where you should go and get some continuing education to shore up where you have some weaknesses.’
“Get some people who are going to challenge you, but also could be a resource, who also could be a very constructive outlet for you.”
Heinen offered a piece of advice that isn’t often voiced, but could serve as a foundation for decision-making for a higher-profile company.
“We make a decision, whether it involves the business or the family part of the business, as if it were to show up on the front page of the newspaper the next day — would we feel good about it? That’s something that governs our decision-making,” he says.
For Hanna, his best piece of advice is to gain extensive experience before taking the reins of a company.
“If you’re going to come in from the next generation to the business, the guiding rule we’ve had is that you do something else outside of the business that would offer a new thought, a new perspective or a new view,” he says.
“Or if you’re coming straight into the business, like some of my family members have, you have to start in sales. You have to start from the ground up. That was the course I took, it’s the course my father and my aunts took, and I think it helps you to relate to the business and understand it.
“I don’t mean just doing it for six months and then you become vice president so you have a title. I mean really grinding it out, doing it, building your own business because then you get the confidence and trust of people you will lead later.”
How to reach:
The Coniglio Co., (216) 391-1800 or www.theconigliocompany.com
Heinen’s, (855) 475-2300 or www.heinens.com
Howard Hanna, (800) 656-7356 or www.howardhanna.com
Malley’s Chocolates, (216) 226-8300 or www.malleys.com