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9:59am EDT July 22, 2002

The Henne family could be a model for a 1950s-style television series. In an age in which broken and blended families can appear to be the norm, the Hennes are an intact nuclear unit. They are in a business that literally surrounds them in glitter and luxury and exposes them to customers who are often marking the milestones of their lives. Jack Henne displays a serene, serious demeanor and genuine, well-honed wisdom, and while he often worked long, hard hours no different from any other entrepreneur, he managed to spend significant time with his family.

His wife, Nancy, pleasant and supportive, is a strikingly fitting complement to her husband, one who brings a calming effect to the business, says one of the children. She didn’t go to work in the family business until recently—when she was encouraged to do so, and long after her children were raised.

They profess a strong religious faith that they say guides their decisions and actions and has played no small part in their family’s success in keeping the business together. Their three children are well educated, gracious and poised, with distinctive personalities and demeanors. Meeting the Hennes could easily lull you into believing that their conflicts and difficulties are as amusing and easily resolved as any found on a half-hour TV sitcom.

But this is real life, you need to remind yourself, and real life means genuine conundrums, complex legacies and powerful emotions that can drive wedges between members of the most neatly joined families. Entrepreneurs, by nature, must have can-do, optimistic attitudes. Henne Jewelers, a single-store operation in a business in which chains are squeezing out small operators, would not have survived three generations of family ownership had Jack Henne not been confident that the store his grandfather founded would make it.

Mixing business and family is a challenge in the best of circumstances, and the Henne family, despite its cohesiveness, could easily have fractured irreparably in the process of keeping the family business together. For Jack Henne, that would have been unacceptable.

For the Henne children, the responsibility of preserving a 110-year-old business weighs heavily.

“Would we be the ones to blow it up?” Jack’s son, John, asks.

By all appearances, even in the real world of tough decisions, the Hennes seem to be on the road to a successful transition to the fourth generation. That evolution, however, has not come without hard, sometimes painful, work and extensive outside counsel from those specializing in delicate family business succession issues. The process, it turns out, never ends.

The Henne history

Henne Jewelers was founded by Rudolph Joseph Henne, a jeweler and optician, in 1887 in East Liberty. The business thrived as railroaders brought in their watches for regulation and repair and Henne became a jeweler of choice to members of Pittsburgh’s richest families, including the Hillmans, the Heinzes and the Babcocks.

Rudolph’s son, Rudolph Gerald, inherited the store in 1934 and kept it going through the Great Depression and World War II. Jack started with the business in 1950 and took over when his father retired in 1975. In 1978, Jack moved the business from the Center Avenue storefront, where it had operated for 91 years, to its Walnut Street location in the stylish Shadyside retail district.

The high value that Jack Henne places on family harmony comes into sharp focus when viewed through the lens of the heritage of three generations of Hennes running a single store. In a business in which customers come in and tell of grandparents who purchased their engagement and wedding rings from Henne’s, tradition is not taken lightly.

But the value of the business isn’t merely sentimental. Henne Jewelers has a reputation for high-end jewelry designs. The store employs two goldsmiths on its staff of 13, who craft one-of-a-kind pieces while a TV monitor displays live images of them working at their benches. The store buys estate jewelry, and an appraiser is available to determine the value of jewelry for estate and insurance purposes.

A fourth generation business?

Jack Henne began thinking about how he would resolve the succession of the family business a half a dozen years ago, knowing he would have to sell it or hand it over to his children. He had seen too many friends and business associates fumble when it came to succession planning and pay dearly for it.

About three years ago, Jack told his son, John, that if he intended to take over the business, it would have to be soon, while Jack still felt inclined to hang around long enough to help with the transition. That had begun to happen when the plan hit a potentially family-splitting bump in the road. Jack and Nancy’s oldest daughter, Anne Henne Rockwell, a consultant with Andersen Consulting at the time, decided that she, too, wanted to come into the family business.

Jack balked, recoiling because he feared his two oldest children would clash. “I thought it would be impossible,” says Jack.

“I think our main concern was whether we could work together,” says Meg Gibson, the Hennes youngest daughter.

Anne was firm in her resolve to be a partner in the next generation, but early on, even she had some doubts. “I was starting to believe that we really couldn’t do this,” she says.

All in the family

John and Anne are, by their own admission, strong-willed, each with definite ideas about how to run the business. Both, by virtue of their backgrounds, have the credibility for their ideas to be taken seriously. Jack, too, had his own ideas about how the business should proceed.

Jack decided that, if John and Anne sharing the business was going to work, they needed advice. He interviewed consultants, even investigated out-of-state advisers recommended by friends and associates.

An initial meeting with Jim Kwaiser, president of Bethel Park based C.H.A.L.L.E.N.G.E.S. Inc., less than impressed Jack.

“I thought he talked too much,” he says.

But Kwaiser’s philosophy and view that family comes first meshed with Jack’s and Nancy’s own ideas of where their priorities were.

“In a family business,” says Kwaiser, “you have to blend together the family and the business. You can’t separate them.”

“Jim had a good understanding that the family comes first,” says Anne, “and that’s the way we all felt.”

Kwaiser recommended something the family hadn’t even considered at that point: He urged Nancy Henne to become involved in the business, something she had never done, and Meg Gibson was encouraged to enter the business, too. Kwaiser’s reasoning was that all family members should understand the business and that they could best accomplish it by being involved directly.

Division of labor

Perhaps one of the most challenging succession tasks was determining who should be in charge of what facets of the business. Kwaiser got the process rolling by having group and individual meetings with the family. He administered psychological tests to all of them to determine how they could best work together and who might be best equipped to administer various tasks in running the business.

By the time Meg came into the business, Kwaiser had helped all of the family members identify where they would best fit into the organization.

“It was very comfortable,” says Meg. “Everything was all in place.”

Kwaiser suggested that each of the Henne children take responsibility for distinct areas, rather than all trying to oversee every aspect. Anne had her heart set on taking on the duties of sales manager, for instance, but Kwaiser suggested John Henne might be better equipped to handle the job.

“For a couple of days, it was upsetting to me,” says Anne, “but there’s something bigger than that, and that is that I want to be in this business. Each and every job has to be filled and has to be done by the person best-suited to do that job. Rather than two or three of us trying to accomplish the same thing and walking on top of each other, we’re working in different areas to accomplish the same goal.”

Anne, they agreed, would handle advertising and personnel, a natural since she had worked in Andersen Consulting’s human resource department. Meg, in the business for about a year and a half, is learning inventory control and sales. Nancy Henne works in the store, and the children say she has contributed significantly to its growth.

Nancy says that working as a team has had another benefit: “Now that they’re working together, they’ve gotten closer,” she says of her children.

Where families fail

Kwaiser’s experience indicates family businesses are like snowflakes.

“Of the hundreds of family businesses we’ve dealt with, we’ve never found two that are the same,” he says.

Yet common characteristics trouble many family businesses. Most problems center around a failure to communicate, says Kwaiser. Often, family members haven’t committed to interact with each other as equals. They have failed to address what Kwaiser terms the “unspeakables,” issues everyone knows about, which may have their roots in earlier experiences and which have caused hostility or barriers between family members.

“It’s really important to get to know each other as adults,” he says.

The need for a plan

Ann Dugan, executive director of the Family Enterprise Center at the University of Pittsburgh, says that, while succession and estate planning are critical to the survival of a small business, too many families put them off. While it can be a 15- or 20-year process, business owners sometimes wait until a crisis erupts to plan.

“The worst time to do it is when it’s situational,” says Dugan.

Or they will buy life insurance in the belief that it, alone, will take care of the succession issues.

Dugan recommends family businesses form advisory boards to help them through the planning and decision-making processes. In any case, says Dugan, it’s never too late—or too soon—to begin planning.

An ongoing process

The Henne family keeps the business going by following a schedule of regular meetings to discuss issues that affect it. Each week, all five have an after-hours meeting. Every two months, they hold a meeting off-site; every six months they hold a one-day conference at which long-term issues are discussed.

They have developed a plan that includes a buy-sell agreement and life insurance to fund it, and plans that cover a variety of scenarios, including death, marriage and children.

As a result, the Hennes say they have resolved much of the anxiety they had over the future of the business. That peace of mind allows the family to concentrate on growing the business, a requirement if the company is to support multiple members of the current and future generations.

Says John Henne: “If there’s a lot of uncertainty, it’s difficult to focus on where you’re going.”

How to reach:
Henne Jewelers
5521 Walnut St., Pittsburgh, PA 15232-2325
(412) 682-0226
www.hennejewelers.com

James Kwaiser
Phone: (412) 833-8070
CHALLinc@aol.com

Ann Dugan, executive director
Family Enterprise Center, University of Pittsburgh
(412) 648-1542