Mid-life crisis Featured

12:31pm EDT April 25, 2003
Euclid Industrial Maintenance and Cleaning Contractors Inc. has stayed in businesses far longer than most family-owned business.

Nearly one-third of Fortune 500 companies are family-owned businesses (FOBs), and studies show their average lifespan is less than 25 years. More than 30 percent survive into the second generation, 12 percent are viable into the third and only 3 percent make it to the fourth generation and beyond.

With 100 years in business, Euclid Industrial Maintenance and Cleaning Contractors Inc. has made it into that 3 percent, and is in the process of being taken over by the fourth generation.

"I developed some health problems," says COO Martin Presser, a third-generation member of the firm. "I worked all my life to build something and didn't want to lose it."

Life-altering circumstances gave the Pressers the nudge to start the succession process, but many other FOBs keep putting off the inevitable.

According to an Arthur Andersen/Mass Mutual study, 25 percent of senior generation family business shareholders have not completed any estate planning other than writing a will. And 81 percent want the business to stay in the family but 20 percent are not confident of the next generation's commitment to the business.

"(Our) succession plan is very simple," says Mark Presser, president of Euclid Industrial Maintenance and Martin's son. "We keep working until we drop."

Both Mark's parents still work an average of 40 hours a week, but over the course of the next few years, all of their corporate shares will be reabsorbed into the company.

This was planned out about six years ago with a call to one of the family's financial advisers. But other FOBs have a more difficult time hashing out the details of succession.

"You have to be able to make the separation," says Martin Presser. "If you need to have your name on the business your whole life, if you have a big ego, it's not that easy. It's much more rewarding for me to see my son doing well."

The Andersen study showed that heredity does not guarantee future wealth: 52 percent of family-owned businesses surveyed plan to favor only active heirs in their estate plans.

"Our other son worked here for a little bit. He was fired by three supervisors, and now he's a social worker," says Martin Presser. "I have complete trust in (Mark), I know he is capable of running the business."

And how did the father know when the son was ready? He's been watching him work since he was in his mid-teens, including during a stint working with other crews cleaning windows from 11 p.m. to 7 a.m.

That's the secret, according to the Pressers. Every generation has worked every part of the job and is willing to roll-up their sleeves and get dirty.

That wins the respect of both clients and employees.

And then, "You get to the point where the clients call for him and not you," says Martin.

The key is to keep things as open and amicable as possible.

"I have a friend who fired his own mother," says Mark. "In our business, we fight like crazy, and then go to lunch and talk about the grandkids." How to reach: Euclid Industrial Maintenance and Cleaning Contractors Inc., (216) 361-0288

Family matters

Wharton Enterprising Families Initiative conducted a study examining a cross-section of mid-sized to large family enterprises in Puerto Rico that have been in business from nine years to 118 years, with nearly 10 percent of firms into their fourth generation of family ownership.

It came up with seven recommendations for running these businesses.

* Harmonize business, family and personal goals of diverse stakeholders. Leaders of family-owned businesses need to understand and address business, family and individual goals, and create systemwide goals.

* Move communication, planning and leadership from informal, intuitive processes to more formal and intentional processes. While 94 percent of families believe written guidelines are important, only 4 percent drafted them.

* Listen to the less powerful before asking for agreement. When a group member feels his or her views are fully heard, that person has a higher commitment to implementing decisions.

* Work to build high levels of trust. Family members with higher levels of trust report a greater sense of unity.

* Beware of the mid-life crisis. The study found that family members in successor generations who were over age 35 had lower trust levels than other family members.

* Align growth expectations with acceptable strategies for growth. Family enterprises need to align growth expectations of family members with their conservative risk profiles.

* Enlist the insights of outsiders. Outside advisers can provide valuable input in testing the assumptions of family members. Source: Wharton Enterprising Families Initiative