According to the U.S. Census Bureau, 90 percent of U.S. businesses are family owned or controlled. These types of business face special considerations such as successful transition between generations and determining the role of non-family members, according to the panel of experts discussing “Leveraging the Power of a Family-owned Business” at CRE.Converge 2017.
The moderator: David Ransburg Jr., Senior Consultant, The Family Business Consulting Group.
The three panelists: Jason Ting, Principal, Ting Realty; Caitlin Russell, Vice President, Russell; and Jordan Lott, President, Lake Washington Partners; represented first-, second- and third-generation family-owned businesses, respectively.
There are certainly benefits to being part of a family-owned business, the panelists said, noting shared goals, increased flexibility and stability of leadership.
“The advantages we’ve seen circle around having good alignment of goals and directions,” said Lott, “having a good understanding of what we’re doing and why we’re doing it.” Rather than considering themselves the owners, Lott said he and his brother think of themselves as stewards of the business. “If you pick it up, you carry it and want to transition it to the fourth generation,” Lott said. He pointed out that it is rewarding and meaningful on a personal level to work with his grandfather (who founded the company after World War II), brother and other family members.
From Russell’s perspective, employees in a family business are driven, motivated and focused on problem-solving. In her family’s business, “No one would ever say, ‘Sorry, that’s not my role,’” Russell said. The group embraces the long-term view. “For us, we’re making decisions that might affect us in 5 or 10 years, not just on a quarterly basis,” she said. Ting agreed: “I have a one-year-old and I don’t know if she’ll be in the real estate business, but I want to build something that will last for a long time. You want something that could last for your children and your children’s children.”
Ting also noted that high-level decisions can be made more efficiently, making deals more streamlined. “From the leasing and brokerage side, the advantage is being able to make decisions and not have to go through multiple layers of hierarchy to get things done.”
Among the challenges of family-owned businesses: Keeping work at work, establishing a strong succession plan and keeping nonfamily member employees motivated and engaged.
“We use the expression, ‘putting the fence around the yard,’” Lott said. “We try to be really intentional about where and when you have certain conversations.” Holiday dinners, he noted, are not recommended for business discussions. “We all bring our work home – we all bring that phone and that stress through the door – but we don’t want to double-down and have that affect the rest of our family as well,” Lott said.
According to Russell, the flexibility that can be an advantage of family-owned businesses can also present a challenge when multiple family members strive to do the same job. “Governance can help get rid of that challenge as long as everyone follows it,” Russell said.
Russell said her company makes a point of engaging nonfamily employees in the success of the business; while her family owns 70 percent of the company, key employees own the rest. They encourage nonfamily members to see a future in the company and the potential for advancement into senior roles, rather than assuming certain roles are reserved only for members of the family.
Succession planning is a major consideration for family-owned businesses, a process that needs to start 5 or 10 years before the transition is expected to occur in order to be successful, the panelists said, and these discussions should be incorporated intentionally and on a regular basis.
Engaging an outside consultant can help with navigating the succession planning process, who provides an objective perspective and helps facilitate any difficult conversations. “You need the confidence and commitment of your whole team,” for a successful transition, Russell said. Families can also learn from transitions handled by the previous generation.
Ultimately, the “goal is to grow and create opportunities for family and employees,” said Russell.
At the end of the day, however, she added, it’s also a business.