Next gen tackles family business succession

Three family business directors have opened up to Business News about taking over from their parents.

Jeff Ash borrows the phrase ‘founder syndrome’ to describe the situation facing his parents.

“When someone has spent so long, seven days a week, 24 hours a day, putting their blood sweat and tears into a business, it’s hard to let go,” Mr Ash said.

His parents, Rosemary and Hugh, established Filter Supplies more than 50 years ago, and while Mr Ash is now managing director, they are still involved.

“Mum and dad have always been there and they still come in now, they love it,” he said.

“They are in their 80s and have crafted their roles to do what they want to do.”

Tom Bromberger faces a similar situation at Pelican Manufacturing, which was established by his parents, John and Susan, in their suburban garage in 1987.

“I’m very much the driver of the business and he’s happy for me to take that role, though I don’t have the final say on anything,” Mr Bromberger said.

His father is still very active in the business.

“Dad still loves working and he comes in most days.

“He’s just as enthusiastic as he ever was.”

Mr Bromberger’s mother was very involved in Pelican's early days. She now goes to the office once a week, overseeing approvals for Pelican’s instruction manuals, and does a lot of work from home.

Megan Bagworth is also going through the process of taking over the family business and has encountered many challenges along the way.

“I started calling it a family business and I remember mum saying to me, no it’s my business,” Ms Bagworth recalled.

“That was a real challenge for her because she had independently grown the business.”

Each of these ‘next gen’ business directors has joined Family Business Australia to help manage the challenges entailed in taking over management, and eventually ownership, from their parents.

They have adopted very different approaches, recognising that every family business has its unique circumstances.

What’s the plan?

Mr Bromberger has a formal succession plan for Pelican, which manufactures specialised medical devices.

Its first product was a foam booty that helped to protect heels from getting pressure sores, and it now produces a wide range of soft products made with sewing machines and cloth.

Mr Bromberger has initiated several documents to help manage future changes – a succession plan, a family constitution, a shareholders’ agreement, and a company constitution.

“Dad’s agreed to it all except for the time frame for handover,” he said.

Mr Bromberger said discussing and planning for succession was an emotional rollercoaster.

“Although we have a plan and it’s in black and white on paper it’s the people involved who are the really important thing,” he said.

Mr Bromberger said ownership succession would be challenging. For instance, he has one brother with his own career and no involvement in the business.

“Any combination of children is tricky,” he said.

“There will be a bit of give and take on the part of everyone.”

Mr Bromberger said FBA had helped him grapple with succession issues.

“A lot of the information has come from other members of the FBA and especially the forum group,” he said.

The forum group has 10 members, who meet monthly and talk openly but confidentially, sharing successes and failures and ideas.

Discussions

Mr Ash has not tried to document a formal succession plan.

“It’s the esoteric stuff that can’t be written down that needs to be spoken about,” he said.

“It’s working out what every generation wants and needs.”

Filter Supplies services a wide range of industries.

“Our range is huge, we do everything from an air filter for a lawnmower to a hydraulic filter for a 250-tonne dump truck,” Mr Ash told Business News.

His older siblings had worked in the business at one time or another, but all chose to leave.

“I started running the business when I was 24, when I was freshly married and had a three-month-old baby.”

His parents were in the process of stepping away from full-time involvement at the time.

“It was quite a daunting prospect at that age.”

Mr Ash said he thought about the needs of both the business and his parents.

“Other members of my family have struggled with mum and dad wanting to still have a role but I’m pragmatic about it,” he said.

“Their input is still valuable; with their age and experience, they offer things I haven’t thought about.”

Like Mr Bromberger, Mr Ash said there was an emotional side to the decision-making.

“It’s about finding a role and happiness for everyone involved, and there is a lot of ‘argy bargy’ in that,” he said.

“Some people who are less emotionally aware really struggle with succession because they are not thinking about what the business really means to the founders. It’s almost like a living, breathing entity.”

Back on board

Ms Bagworth initially pursued a career outside the family business, with support from her mother Pam.

“She didn’t want it to be an obligation; she always encouraged us (my siblings) to pursue our own dreams,” Ms Bagworth said.

The family business reflects her mother’s background as an English teacher.

Academic Group is an exam preparation business. It runs revision courses with expert teachers and publishes study guides.

“She saw this opportunity to run a business and also saw a need in the market in terms of students being able to access good quality resources,” Ms Bagworth said.

Her mother took over a small tutoring company in 1994 and built it into a substantial business that operates throughout WA.

It also has sent teachers to China and sells schoolbooks to Singapore, Malaysia and China.

Megan’s dad later joined the business after retiring from his work as an electrical engineer.

While working in Canberra, Ms Bagworth was asked to take over a new business her mother had bought.

“I’d never planned this but my gut instinct told me it just felt right,” she said.

Ms Bagworth said her move into the family business was an eye opener.

“One thing I didn’t appreciate, when you come into a family business, there’s a burden you feel straight away,” she said.

“There’s a lot resting on your shoulders, the family inheritance, the obligation.”

Ms Bagworth said her relationship with her mother had gone from being her child to an employee to her successor, and that presented further challenges.

“You need to have the skill to know which hat to wear at different times, to be able to manage the interactions and relationships,” she said.

“One of the biggest challenges was mum building trust in me. I didn’t understand it at the time but it’s her baby, it’s her business that she’s built up.”

Ms Bagworth said her family has developed a three-year plan that involved succession for both leadership and ownership of the business.

“We needed to go away as a family because there are so many dynamics that come into it, there are other siblings,” she said.

“They were discussions that can be quite difficult but you need to address them.

“One thing I’ve always been an advocate for, I’d rather address them head on now when we can all express what we really want.”

Going to FBA events and hearing from other family business owners helped Ms Bagworth and her mother deal with the succession process.

“It’s very different when you hear it from other founders instead of from a child,” Ms Bagworth said.

Ms Bagworth’s parents are still engaged in the business, in an advisory capacity.

“We’ve spoken about the experience you can get from the older generation, and I don’t want to lose that,” she said.

“It is important to maintain and build on the founding values but also to take the business in new directions.”

When it comes to ownership succession, Ms Bagworth said her goal was to safeguard the business.

“When you work in the business, when you’re living and breathing it, you become really invested in it, and I want to make sure it continues going.”

Family Business Australia state manager WA Lorraine Lloyd said forum groups were a safe place for members to discuss business and family issues.

“You can trust the people in the group to give you an honest answer, without wanting anything out of it other than to see you succeed,” she said.

“There aren’t many places in the business world where you will find that.”

* Family Business Australia has a NxG seminar in Perth on March 27. For details, go to the Family Business Australia website: www.familybusiness.org.au