Driving a family business Featured

8:15am EDT January 30, 2004
Genco Inc., founded in 1897, has survived into its third generation of family leadership and grown substantially in the process, thanks in no small part to progressive leadership by each generation.

While the longevity of a business is only one measure of its success, it is no small accomplishment to continue an enterprise across three generations of family leadership. Achieving such longevity will no doubt become harder rather than easier in a competitive environment that changes rapidly and renders once-viable business models obsolete.

Hyman Shear, Genco's hard-working founder and a businessman who saw the value to his business of going from a horse-drawn wagon to gasoline-powered trucks, loved to be out on the road, driving and making deliveries himself. When his son, Samuel, took over the business in the 1940s, he realized that working hard at developing and retaining relationships with customers, not driving trucks, was the best strategy for him to employ to grow the business.

When current and third-generation CEO Herb Shear took over Genco, he saw the potential for information technology to revolutionize the transportation business. As a result, Genco is a markedly different company today than it was when it was founded, in no small part because its leadership recognized when it was time to change.

Smart Business asked Ann Dugan, executive director of the Institute for Entrepreneurial Excellence at the University of Pittsburgh's Katz Graduate School of Business, to talk about passing the torch and navigating change across generations in a family business.

How critical is it that successive generations understand the need to change the company to adapt to new markets and industry environments?

It is critical to the ongoing success, as it is never possible in business to stay still. The world moves around you, markets change, technology changes, new competition enters. Relationships change. All these must be monitored and be part of a continual strategic planning process

What are the barriers to change?

Often they are complacency, the lack of passion for the business that maybe the founder had but next generations do not feel the same urgency. The fear of the unknown. The idea of "if it's not broke, don't fix it." (It) may not be broken today but the fact is unless you continually change, update, modernize, it may break tomorrow

What do business owners need to take into consideration when they are contemplating a major change for their enterprise?

What are the effects on the organization, people, processes, capital requirements, technology? All the levels of the organization should be analyzed and effects planned for upfront to minimize chaos downstream.

What can help in overcoming resistance to change by the older generation?

Writing the plan for the change. Why is the change necessary, how much will it cost in terms of people, resources and, of course, capital? Show them the return on this investment and when it will be realized.

Research the need for the change and show why. Write all of this down into a coherent plan. Lastly, break the change into smaller parts so that it is not one big grand step but a series of baby steps. HOW TO REACH: Institute for Entrepreneurial Excellence, www.iee.katz.pitt.edu