tv Nightly Business Report PBS November 25, 2010 6:30pm-7:00pm PST
>> by being a family company, i think we have been able to maintain a consistent set of beliefs and values throughout our 100 years. >> susie: like many family businesses, hallmark started small and just kept growing. it's still run by two brothers, proof the family-owned-and- operated business model still works. >> tom: but few family firms keep going for more than a generation or two. and these days, the challenges are bigger than ever. >> susie: so how do some family businesses manage to survive and thrive? we'll see in "all in the family: secrets of successful family firms." this is a special edition of "nightly business report" with susie gharib and tom hudson. "nightly business report is made possible by:
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>> susie: good evening, everyone. tonight, we'll look at one of the most common business units in this country and around the world-- the family-owned firm. tom. >> tom: susie, given america's agricultural past, the first family firms in this country were farms. recently, one of the longest- running family farms-- the tuttle farm in dover, new hampshire-- was put up for sale. it's been in the family since 1632. lucy tuttle, a member of the 11th generation, says her children are interested in doing other things. but she says, for centuries, there was no question that someone in the family would take over the farm. >> and there was always somebody who wanted to continue because, you know, that's what you did. you all lived in one house and everybody did the work. and the youngest son-- or at least one of the sons-- would be there to carry on. i'm sure nobody ever said, "we are going to be here for 11 generations. isn't that cool?" >> susie: but while the tuttles are giving up on farming, some
other farm families are determined to keep going. diane eastabrook reports on one that's planning to build up its business through a mix of innovation and teamwork. >> reporter: as morning breaks over wisconsin, crave brothers farm is well into its work day. four brothers run this sprawling operation in south central wisconsin, which includes 1,700 acres of land, 2,000 cows, and a cheese factory. each of the crave brothers has a specific job. >> you'll be tiptoeing around through the tulips here. >> reporter: mark rides herd over the heifers. >> this we will used for cattle feed. >> reporter: tom tends the crops. >> this is the melted mozzarella curd. >> reporter: george runs the cheese factory. >> it's nice to have an office where i don't have to plug in the space heater when i walk in. >> reporter: and charlie keeps the books.
crave brothers is one of wisconsin's largest and most successful family dairy farms. but 30 years ago, few could have predicted its success. the crave family lived on a small farm. but their father, bob, sold it in the mid-1970s. in 1978, fresh out of college, charlie and george wanted to get back into farming. they rented some land and began with 50 cows. a couple of years later, the two bought this farm and began buying more cows and more land. tom and mark joined them along the way. from the beginning, the craves thought big. >> why monkey with a small corn planter if i could operate a large one? let's use our skills in a more contemporary fashion. >> reporter: when the craves started this operation in 1980, there were about 40,000 dairy farmers in the state of wisconsin. today, there are only about 13,000. many of those producers have gone out of business because the price of milk has been relatively flat, while other farm costs have risen.
the craves say the key to surviving and thriving in this industry is innovation. >> each one of those vats will produce about 25,000 pounds of cheese today. >> reporter: ten years ago, george got the idea to use their milk to make cheese. >> we wanted to get off the commodity treadmill. we wanted to insulate ourselves from the commodity market and get our product closer to the consumer. >> reporter: today, the cheese factory is the crave's biggest money maker, cranking out thousands of pounds of mozzarella, mascarpone, and a soft cheese called les frere, which appropriately is french for "brothers." and where will this be sold? >> this is sold in a lot of specialty markets, boutique markets, and wine stores and that type of item. this is a very much a high end type of a cheese. >> reporter: another innovation- - a methane digester. the huge structure converts manure from the cows into energy for the area's power grid. >> it's enough power for the farm, the cheese factory, and
300 homes. >> reporter: and byproduct from the digester is pumped out to the fields to fertilize the crave's corn and soybeans. >> this is a little bit cheaper than loading it on trailers and hauling it out to the field on tractors, so we save some money and we aren't compacting the soil. we figure 150 if we're easy. >> they always look toward the future. recently, mark, the youngest brother, was made the farm's general manager. >> i try... in my new role, try to spur just a little more momentum behind decisions and try to get them done a little quicker, not that i'm making them all. >> reporter: do your brothers ever question any decisions that you make? >> oh, certainly, they're brothers. >> reporter: and what do you say? >> we talk it over again. >> reporter: and george is learning more about marketing from his wife, debbie. >> should we promote two things at a time, two recipes, or should we just stick to one? >> i think we should do a dessert, too. >> reporter: the craves aren't
sure just where they'll go from here. an onsite cheese store is one possibility, but their main objective is to keep this a family farm. >> we need to keep the family business successful, and that's going to provide us with the income. it's going to provide us with opportunity for the next generation. >> susie: as we just saw, the crave brothers run their business with a minimum of in- fighting. but that's not always the case. there are many stories of squabbles between family business partners that almost reach the point of war. dennis jaffe has been studying the issues behind family feuds. he's a professor at saybrook university and the author of "stewardship in your family enterprise." i began by asking dennis whether conflict in a family business is inevitable. >> conflict is inevitable in any business, but in the family business you're adding a whole dimension of the history that people have together as family
members and trying to fit it into the business. so you have the issue of, are you dealing with the person as a business partner or as your father or your uncle or sister. and all these things get mixed up, and it makes it tremendously difficult sometimes to avoid conflict. >> susie: now, dennis, you say that there are some classic triggers that create family feuds, and let's look down the list, you mention things like money issues, control, unhappy family relationships and gender issues. why is it that these issues stir up resentment and conflict in family-run businesses? >> well, because they come from the family, and people have an idea of what's fair in the family. so in the family everybody should be treated equally. yet in a business things aren't sometimes equal, some people make more or are treated differently or some people have a higher position. so if people feel like what's being done is not fair to the family, like your uncle's side
of the family is being treated better than you, or your sister is making more money than you are, these things generate a lot of emotions, and yet the business, these are good business decisions. but sometimes people expect the family rules to be applying inside the business. >> susie: you say that there are ways to avoid these conflicts, and you have a couple recommendations, you recommend that families should define fairness and justice, respect an individual's growth and development, create structural clarity, and to include outside mediators. now, how do these prevent conflicts? >> well, the thing about conflict is that people have different expectations. so i think people have to anticipate that there's going to be conflicts and figure out the different ways that it can come up. and make things clear, make it clear what people will inherit, what it means to work had the business, will the people working in the business inherit the ownership or will everybody in the family inherit ownership.
are men and women treated equally. it may be in the parents generation they felt that women would get married and not have a place in the business, and the older son would take over. and then it may be that later on those values change in the next generation, and people, the women in the family feel like they should be treated more equally, they should have a place in the business, there may be a conflict between say an older brother who feels the business is his and the younger sister who is maybe more competent or more, have who are professional training, may feel that she should be the one to run the business, and they're fighting, really their old battle of brother and sister and what's fair, and not really about who is the best the run the business. >> susie: you know, many families fantasize about how about if we go into business together, but based on everything that you know, is it really worth it to have a family business? or is the cost just too high? >> well, when, we hear about all
the terrible conflicts. but the fact that is that a great majority of the family businesses run just fine. family members really like working together, couples, parents and children, have a wonderful time. they love each other and they work well together. so we hear about the bad examples. but it's the good examples that people want to have and that motivate people to create a family business. >> susie: dennis, thank you so much, an interesting topic to discuss with you. >> thank you very much. >> tom: still ahead, we'll see how two third-generation brothers run hallmark, and how they plan to keep their card business going in a digital world. while it's not easy to successfully manage a family business, handing over the business to the next generation can be even more difficult. and sometimes the transition happens much sooner than expected. diane eastabrook reports on one such case involving a firm in a different aspect of the dairy business.
>> reporter: kefir, a tart dairy drink with a funny name, is catching on with consumers across the country. lifeway foods is the king of kefir, cranking out about 30 million bottles of the stuff a year. >> we have the gold standard. >> we have the gold standard. we were the first. we are ahead of the curve. >> reporter: julie and edward smolyansky are never far from the production lines at lifeway. the sister and brother run the publicly traded firm just outside of chicago. she's the chief executive officer, he's the chief financial officer. there's a bit of sibling rivalry, but mostly, there's synergy. >> we agree on a lot of things. most things, we agree on. >> sometimes, we disagree on what a flavor should be, what kind of a mix should it be, or what the name of a product
should be. but those are all fun things to kind of bicker about. lifeway foods was the dream of michael smolyansky, julie and edward's russian immigrant father. smolyansky immigrated to the u.s. in 1976 with his wife and baby julie. a decade later, he launched lifeway foods, taking the company public a few years later. national media attention soon followed. julie joined the company after college in 2000. but just two years later, her father died suddenly, thrusting julie into the executive suite. we profiled lifeway foods a month after michael smolyansky died, and asked julie about assuming such an awesome responsibility at 26. >> as much as i would not like to have to deal with this so quickly, i was very prepared, very well ready for the job and task. >> reporter: when i was there this time, julie and i watched that interview. at the time, do you really think you were prepared to take over this company?
>> i think that my stubbornness and my drive and need to make sure that his dream would be accomplished, i think that took me really far. >> reporter: today at 34, julie's on the cover of business magazines, recognition she never imagined having at such a young age. >> i'm very proud of myself. >> reporter: edward, who just turned 30, admits he was anxious about becoming c.f.o. at 22. >> at that time, that's when a lot of the kind of regulatory sarbanes-oxley things were happening, a lot of... there was enron and worldcom and all of these companies were being blown up. >> reporter: their father's insistence on teaching the kids about business is helping them grow the business. they're rolling out new products, like the kids drink pro-bugs, and kefir snack bars. the company recently opened two frozen kefir stores in chicago called star fruit. plans are in the works to franchise the concept. experts say the smolyansky kids'
ability to step in and successfully run their father's firm isn't unusual. john ward from northwestern university's center for family enterprises says children often have very keen insight into their parents companies. >> what is the attitude towards the employees? what is the focus on the customer? so, they just pick up so much that is so valuable, so precious. >> reporter: the siblings call lifeway their father's lasting legacy. it's a legacy they hope to pass along to julie's 15-month-old daughter, leah. >> tom: only a small minority of family businesses survive for several generations. so how do those lucky few achieve lasting success? joining me now are two people who work with companies transitioning from one generation to the next. from boston, marion mccollom hampton is a senior partner at cambridge advisors to family enterprise. and here in miami, stephen salley is a senior partner of gen-spring family offices, and head of its family business
center. welcome to "nightly business report." marion, why would a family business owner resist the effort to bring the next generalers into the family in a timely manner? >> people think of business owners as being controlling and as wanting to have all the decisions to themselves, and that's not the whole case. i think it's natural for parents to think of their children as children, long after their children are not children any more, and and are capable of adult decisions. so some of that is normal family developmental issues. i think many times and this is a great example of that, parents don't tend to treat their adult children who are in their mid 20s as adults. so that transition if there's a sudden transition is much hard harder. >> tom: at what point should a family c.e.o. begin to communicate at operational, at an adult, at a high level with their children preparing for that kind of transition?
>> you can't tart at the high level, you have to start at the low level. one of the things that we find absolutely stunning was some of our multi generation al families is that grandchildren or great grandchildren have been implicitly trained that the business represents a point of stress, a point of worry, rather than a point of satisfaction. by the time children are 12 or 13, they already have an attitude toward the family business that mirrors what they've been shown. >> tom: i would imagine preparation is one of the ingredients necessary for a successful transition between the generations. marion, as we mentioned earlier, many companies don't survive that kind of transition. why not? >> well, surprisingly to most people, the main reason is not due to economics. the main reason is due to communication within the family. what we know, and there's been substantial research on this by now, is that families that manage to communicate well enough across generations have a very good chance of making it. families that don't communicate
well that have difficulty sitting down and discussing, making decisions, coming to the table, those families are families that are likely to experience problems going from generation to generation. >> tom: but you still have to separate family from business, don't you? >> absolutely. that's one of the main principles that we work from is to treat your family like a family and treat your business like a business. look, the main issue is that the family learns and has the discipline to work as a team. a team, the players on a team have different functions, not everyone is going to be the c.e.o., not everyone is even going to work at the company. and possibly not everyone is going to be an owner of the business in the long term. but still, the family has to be engaged and supportive of what the business means to the family what they want to accomplish through the business, and there's got to be a support and kind of mutual cheer leading section really among the family for each other.
that's what really makes this work. >> tom: how does an operational c.e.o. of a family protect against his or her children, or even grandchildren feeling entitled to take over that role? >> first of all, i like the word communication. and communication to me is both communication on a sharing of information level, but also training. and once the younger generations have been exposed to both the benefits and the burdens of the business and can make a mature decision as to whether they want and are properly trained to step into managerial or ownership positions, those decisions start to shake out within the family pretty well. it is the family that tries, or the seniori;o generation that s to preordain what each child will do in the business, or to preestablish who is going to have what role that you start running into the competition between their role as family member and their role in the
business. marion is absolutely correct. you've got to treat family as family, business as business. and the interface between them has to be mutual support. it does not have to be equality. >> tom: marion, what do you think about that? >> i believe the question of entitlement is really addressed in the family through the family values. many of our clients, most of our clients where the families have very strong values of humility and hard work and appreciation for employees and commitment to customers and community, those types of values breed nonentitled children. and they breed an atmosphere in the family where people feel privileged to work in the business, and they feel that they need to own it. and most of the young people that i work with have that kind of an attitude. >> tom: thank you for the perspectives, our guests here, marion and steve, we appreciate your insights. stephen salley, with gen-spring family offices in florida, and marion mccollom hampton of cambridge advisors to family enterprise.
>> susie: family firms generally start small and often grow over time. one example is a greeting card business that started in kansas city a hundred years ago. now, it's a household name-- hallmark. today, the company has more than 13,000 employees, and it's still run by the hall family. as diane eastabrook reports, the halls' emphasis on constant change has kept hallmark a market leader. >> reporter: when you see the name "hallmark," this is what you think of. >> happy birthday. >> reporter: hallmark is known worldwide for greeting cards, wrapping paper, holiday ornaments, and in the u.s., a television network. but less known is the family behind the kansas city-based firm. donald hall, jr., is the third generation to run hallmark. while touring the company museum, he told me what's kept the iconic company around for so long. our creativity, our innovation, and constant change.
>> reporter: it all started in 1910 with j.c. hall, an ambitious nebraska teen who came to kansas city to sell postcards. when the postcard fad fizzled, j.c. turned to greeting cards and an empire was born. hall was a shrewd businessman who licensed works by walt disney and norman rockwell. he was also an innovator, who invented tiered card displays still used today. in the second half of the 20th century, j.c.'s son donald expanded hallmark, buying the crayola brand and branching into television. today, hallmark is a $4 billion privately held company with more than 13,000 employees. don jr., and his brother david are carrying it into the 21st century, and they see as much opportunity for hallmark now as their grandfather did 100 years ago. >> people are separated from distance more. they're busier. so the opportunities for real human connection is more challenging.
if you think about how often you have the need to connect with others, it's almost a limitless arena. >> reporter: with more people connecting through the internet, hallmark has embraced technology, offering greeting cards on-line and over handheld devices. recordable books are becoming some of its hottest sellers. >> this is the story of impossible things... >> reporter: to stay connected to customers, the halls stay closely connected to their business. >> when you press jingles ear, you'll hear a bell. >> reporter: david often meets with product designers. on this day, he's being updated on a new interactive plush toy that can link to apple's ipad. >> ruff, ruff. >> cute, that's very fun. >> reporter: at hallmark, the employees are as much a part of the hall family as the halls themselves. that's because the family credits all 13,400 with making the company the success that it is, and if you look at this banner behind me, you'll see the names of every single one.
>> hi. how are you doing? >> reporter: don stays connected to employees through monthly c.e.o. forums which let workers ask questions about the company. >> how does everyone see christmas 2010 shaking out? two weeks ago, over the weekend, we had the ornament debut, and that was not as successful as we wanted it to be. i think this is a great way to foster dialog. it's a great way for me to collect information and get a broad view of business. we believe very strongly that culture drives behavior and behavior drives results. >> reporter: culture also drives continuity at hallmark. many so-called "hallmarkers" have worked here for decades. craig lueck has been an illustrator for 27 years. >> even though it's so huge, it still has that sort of intimate more family feel to it. we have deadlines, but there seems to be time to keep refining the craft and the skills.
>> reporter: the halls say keeping hallmark family-owned lets them focus on customers, rather than profits. and they think that could keep this company around for their grandchildren to run. >> this brand is in the business of needs that will be around in a hundred years and we know that, yeah. >> tom: that's it for this special edition of "nightly business report." i'm tom hudson. good night, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib, good night, everyone, and thanks for watching. "nightly business report" is made possible by: pm÷ investing, it comes from navigating up and down markets for 60 years, spotting opportunities at home, and abroad. global investing from franklin templeton investments, gain from our perspective. >> and by exxon mobil. this program