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August 2004
Helping Family Business Survive and Thrive
By Ellison Clary

      Mike McMahon feels better about compensation for a key executive of his company, Mack Truck Sales of Charlotte, because of recent expert advice. The executive is not a member of the McMahon family ownership that includes McMahon’s father and brother. But the family knew it wanted that person to stick around for the long haul.

      “We made a (compensation) change for the better,” McMahon says. “It’s something that I would not have thought of had I not gone to that roundtable.”

      The roundtable he refers to was a benefit of Mack Truck Sales’ affiliation with Charlotte’s new Family Business Center. The Center is a program of Wake Forest University’s Babcock Graduate School of Management and operates out of its SouthPark campus.

      In private affinity group discussions, members talk confidentially about sensitive issues they’re grappling with, from compensation to how to get the preceding generation to let go of some responsibility. These groups are often the only outlet where members feel comfortable discussing such issues.

      Director Tom Ogburn opened the Charlotte Center in September 2003, after several years of success with a similar facility on the WFU campus in Winston-Salem. Both facilities are geared to address unique management concerns of family businesses.

      Ogburn understands family businesses firsthand. After 25 years as a marketing executive with R.J. Reynolds Tobacco Company, he founded a successful ostrich meat marketing operation in the Triad during the 1990s. Though he was raised in a family business, the big bird trade reinforced for him that family businesses don’t have many resources for help, except each other.

      So Ogburn molded the Family Business Center in Winston-Salem into a membership-driven organization when he took control in 2002, three years after its founding. Ogburn has been a member of the faculty of the Babcock School teaching business courses for several years. He also found additional corporate sponsors for the program to supplement funding from membership fees.

      Today, the Family Business Center in Winston-Salem has 63 members and the similar Charlotte Center has 10. Both are on track to grow aggressively, Ogburn says, as word circulates that they provide real-world solutions to the problems of family businesses. He sees the Charlotte program swelling to 200 companies.

      Ogburn and assistant director Nicole Stephens devise programs in which member representatives can listen to nationally known experts on family business issues, absorb knowledge from the Center’s sponsors and learn from each other in roundtable sessions.

      Ogburn has set up a series of educational forums featuring experts on closely held firms and executives of nationally known family businesses who speak to members about various family business issues, such as growth strategies, financial planning, boards of advisers, succession, communication and teamwork. Dr. Craig Aronoff, who founded the Family Enterprise Center at Kennesaw State University, kicked off the series. Another speaker was Linda Bershinsky, former chief executive of Molly Maids, who now runs a family computer company.

      Mack truck dealer McMahon remembers vividly experiences that Jim Perdue shared recently about taking over agricultural products company Perdue Farms from Frank Perdue, his well-known father.

      “Our family right now is doing our succession planning,” McMahon says. “Some of the things Jim Perdue said really hit home. That was a really positive experience, to know that our family is not the only one going through these issues. I really got to take home a better feeling about facing the issues and talking about them proactively among family members.”


Succession a Big Concern

      Succession is a big concern for family businesses, Ogburn says, as well as for the nation. “Because of the baby boom,” he adds, “about one in 10 families intend to transfer ownership in the next five years. That’s a massive amount of wealth, ownership and responsibility that’s going to be passed on.”

      More sobering facts from Ogburn: Family businesses make up nearly 90 percent of all U.S. firms, yet only 30 percent survive to the second generation, mostly because of poor planning. Twelve percent make it to the third, and a measly 3 percent remain for the fourth generation.

      Yet, family businesses are much stronger than non-family firms, Ogburn maintains, for many reasons. “They treat their employees more like family, they’re less likely to have layoffs, they’re usually not as leveraged and they tend to survive the fluctuations of the economy better,” he says.

      Ogburn believes the Family Business Center can increase those odds dramatically in three ways: With talks and advice from nationally known family business survivors and experts, with education family business ‰ members gain from each other through affinity group discussions, and with expertise from Wake Forest’s MBA faculty and sponsoring firms.

      Charlotte Center sponsors Poyner & Spruill, BB&T, Grant Thornton and Greater Charlotte Biz magazine have provided experts for periodic roundtable discussions with members. Topics range from how to compensate valued non-family members to employment law and estate planning.

      “What really got our attention is the fact that there’s nothing like it currently in the Charlotte business community,” says Frank Bryant, who heads the Poyner & Spruill law firm’s corporate division in the Queen City. “Closely held businesses are a large part of our clientele. That is a segment we actively seek to serve.”

      “We strongly recommend to our clients that they look at membership,” Bryant adds, “because of the value they get.”

      Bryant’s firm was one of the initial sponsors of the Family Business Center in Charlotte. Besides Poyner & Spruill’s early commitment, Ogburn praises accounting firm Grant Thornton and BB&T for their sponsorship involvement. Both concentrate on middle market and family businesses and each also is a sponsor of the Winston-Salem/Triad Center. Sometimes a group from the Family Business Center will even meet at BB&T offices to learn more about new tax law impacts or employment law according to Ogburn.

      Rael Gorelick, managing partner of Gorelick Brothers Capital, LLC, says his company is a member of the Charlotte Family Business Center because of a referral from an executive of Grant Thornton, where the firm that also involves his brother and his father often does business.

      Gorelick says the Center is helping him adjust to being in a family firm situation. “It’s an overall dynamic I’m trying to get my arms around,” he says of his presence in the family’s private investment partnership, “learning the ins and outs of everyday working with those you love and in a different context.”


Getting Along Better is a Popular Topic

      Getting along better is a popular topic at the Family Business Center, Ogburn says, and this isn’t confined to family. Non-family executives often attend the Center’s sessions and pick up pointers that help them and the company.

      An example is Anne Woody, controller of Livingston & Haven Technologies, Inc., owned by Clifton B. Vann III and Clifton B. Vann IV. The firm consults with manufacturers to improve productivity.

      “I feel responsible for looking out for the business,” says Woody, who’s been with the company for a decade. “But it’s so intertwined with the family that you can’t do one without taking care of the needs of the family as well. It’s good to have an affinity group where we can talk about those issues.”

      Woody added that she hopes to help the Center decide what types of programs it will offer. Such member guidance is key to delivering real value, Ogburn says.

      Additionally, all kinds of closely held businesses can benefit from membership. “We’ve got a lot of manufacturing companies, but we’re picking up many more service companies,” Ogburn says, speaking for both Centers. “We’re beginning to get high tech companies.”

      Size of Center members varies widely in both locations, from startups to firms with sales of hundreds of millions of dollars and thousands of employees. Interestingly, Ogburn says, problem issues are similar in every closely held organization, regardless of size.

      Member firms pay an annual fee that covers anyone the company wishes to send to the Centers’ programs. With the various programs and seminars, a company representative might attend as many as 30 sessions a year.

      If a company is not seen as a traditional family business but is closely held, Ogburn will consider accepting it for membership. “We had in the Triad a company with no family members but several partners,” he says. “They worked as a family and many of the issues they faced – that weren’t blood issues – were similar to family businesses: How do you pass on the business, how do you handle who’s going to come into the business, how do we treat the children of partners who may want to join the firm?”

      Most firms that join stay long term, Ogburn says, and turnover is low. “Hopefully, that speaks to the value we contribute to the member companies,” he adds.


High Hopes for Charlotte Center

      “We want the Charlotte Family Business Center to be one of the best programs in the country,” Ogburn says, adding there are about 100 such centers in the United States, but only one other in North Carolina (aside from the Triad Center), on the UNC-Asheville campus.

      “We picked Charlotte because the Babcock Graduate School has a campus here and we have a real interest in Charlotte,” he says. “We’ve been here a long time. We didn’t even consider going somewhere else.”

      There’s talk of a Babcock Graduate School presence in a possible new Wachovia Corporation tower in uptown Charlotte. If that materializes, Ogburn says, the Family Business Center will move to the South Tryon Street facility.

      “Uptown Charlotte’s a center point for the metro area and we understand we will have good parking facilities,” he says. “We’re excited about going uptown.”

      Whether in SouthPark or center city, though, Ogburn wants the Family Business Center to be known for helping to solve problems in a way that executives find palatable. Most members follow up on advice from the Center and Ogburn thinks it’s related to a low key approach.

      “We don’t say ‘you need to do this and the other,’” he explains. “We try to make them aware of the issues they have and give them some insight in how to deal with those issues. If a company wants to bring in more one-on-one professional help, we will help them by suggesting some candidates.”

      Tom Barnhardt, chief executive of Barnhardt Manufacturing, says his cotton bleaching operation has been with the Family Business Center since its first Charlotte meeting in September 2003. “Tom (Ogburn) brings a lot of leadership and knowledge,” Barnhardt says. “The Center is going to grow and become every bit as successful as the Winston-Salem Center.”

      After achieving success as a corporate executive, an entrepreneur and an academic, Ogburn professes to find immense satisfaction in watching Family Business Center members conquer vexing work situations.

     “When somebody says ‘I took the advice I heard and this and this happened,’ boy, that really makes you feel good,” Ogburn smiles. “I see that in almost every meeting we have. Helping people sleep better at night, it makes you feel good.”
Ellison Clary is a Charlotte-based freelance writer.
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