Two years before Craig Wassenaar stepped into the role as president and CFO of Skytron LLC, a Cascade Township-based medical device company owned by the Mehney family, the plan for his next role with the business was already well underway.
A veteran financial executive at private and publicly traded companies, Wassenaar initially was asked to become CFO of The KMW Group Inc., the Mehney family holding company that also includes Thousand Oaks Golf Club, Great Lakes Marine, Midwest Parts and Accessories and Grand Arabian Horse Farms.
The role at the holding company served as a proving ground that Wassenaar fit with the family ethos and vice versa.
“Even though I joined in a different role initially, they asked me early on in the recruitment process if I would be willing to step into the role of president sometime relatively soon,” Wassenaar told MiBiz. “It was important to then just understand more about the ownership and where they wanted to take the business. You have to earn their trust and respect over some period of time. The family needed to understand that my judgment was sound and that I kept their interests in mind.”
Wassenaar believes he was chosen to lead Skytron because of this demonstration of shared values and “complementary skills” to the family members that remain a part of the business, including owner Dave Mehney Sr., who even in his 80s, still works from the office every day.
“Every family-owned business situation, even though we have some threads that run through all of them, each one is unique and people that come into these situations from the outside need to be able to adapt to that particular family and company,” Wassenaar said. “There are probably no two that are exactly alike.”
Family-owned businesses require a special blend of experience, shared values and trust building to ensure the success of any non-family member moving into executive leadership, according to Diana Schad, director of the Grand Rapids-based Family Business Alliance.
“Family businesses are their own unique creation,” Schad told MiBiz.
The Family Business Alliance has a membership of 171 family businesses of all sizes, which require a special brand of research, advocacy and education resources, she said.
Schad, a native of New Jersey and a former Washington, D.C. lawyer, said West Michigan is a hub for family businesses and a place where family-owned companies tend to grow bigger and last longer than in other parts of the country.
“You don’t see as many of these large family manufacturing businesses and construction businesses (in other places),” she said. “I see a lot of our family businesses who have made it to the third or fourth generation because there is such a commitment to the community. That connection to family, that connection to community and that work ethic create an ideal environment for family businesses to thrive in.”
Whether out of necessity or a desire to seek outside perspectives, many family businesses bring in non-family members to serve in executive management.
Most often when a non-family member is chosen to lead a family-owned business, it is because the next generation of that family is either too young to take over, uninterested in the business or unqualified to lead the organization, according to Schad.
“A lot of times, we’re hearing that Millennials are looking to do something else,” she said. “They don’t necessarily want to work with the family business. They’ve seen their parents put in hours and hours of work and they may have other interests.”
Schad has seen this situation play out within her own family through her husband, Matt Schad, who is the fourth-generation member of the family-owned Nucraft Furniture Co.
Matt Schad has led the Comstock Park-based manufacturer of conference tables and casegoods since 2014, but did not take over immediately when his father stepped down as president two decades ago. Instead, he and his brother, Brandon Schad, pursued college degrees and individual careers while the company brought in a non-family member, Bob Bockheim, to serve as president and COO.
“He just really didn’t have the experience and wasn’t ready from that perspective to take over the business,” Diana Schad said of her husband. “Transitions can take seven to 10 years. It’s not something that goes quickly and there’s a lot of training involved in that, especially if you’re going to have the next-gen or a non-family (executive) involved. You really want somebody who knows the business and is qualified to take over.”
Despite the many benefits that come with prior planning for major events like a generational succession or executive transition, many family businesses — and businesses in general — fail to take the steps needed to ensure they’re prepared.
In fact, that lack of proper planning when it comes to succession “threatens the longevity of many Michigan family-owned businesses,” according to data from the Family Owned Business Institute (FOBI) at Grand Valley State University.
Eighty percent of the 690 West Michigan family businesses surveyed by FOBI reported they intend for the business to be passed on to the succeeding generation. Still, only 19 percent report that they have begun planning for succession.
When a non-family member is brought in to lead a family business, they are often a late-career executive chosen for their many years of experience in the industry or within the company itself, as opposed to a younger executive with new ideas, according to Anna Gonzalez, director of FOBI.
That was the case for Wassenaar at Skytron, whose career spanned officer roles at a range of companies, including Gerber Products, Ameriwood Industries, Family Christian Stores and Musicland Group, as well as a 15-year stint at CPA firm Ernst & Young.
“Prior to joining Skytron, I had opportunities to do a lot of the things that helped drive growth in other places,” Wassenaar said. “The family had a goal to grow the business and so that made sense.”
The unique cultures of family businesses and a delicate balance of family politics can be a harsh learning curve for an experienced executive who primarily values profits, according to Gonzalez at FOBI.
For example, the FOBI survey found that family businesses function differently than other companies during an economic downturn. When faced with reduced revenue, 76 percent of family business owners would reduce or not take a distribution and 58 percent reported that they would reduce or not take a salary. Layoffs were the last resort, after decreased spending in other areas like advertising and research and development.
FOBI has labeled this phenomenon the “flat spline economic theory of family businesses.”
Non-family executives need to take the time to study these business practices, understand a company’s culture and earn their trust before taking the job, according to Gonzalez.
“It’s not about becoming close friends necessarily but about understanding and respecting decisions,” she said.
Although generational transitions can be a slow process, outside executives have potential to incite serious growth within an organization.
That’s according to Monica King, managing partner and CEO of DWH LLC, a Grand Rapids-based business management and financial advisory firm that specializes in ownership transitions, succession planning, growth management, turnarounds and restructuring.
King said family-owned companies often come to “appreciate and value outside perspective” when bringing in an outsider to their business.
“Sometimes when you’re around as a business, you’re in the weeds a little too much and you may not be capable of getting out of that and looking at it in a high level,” she said. “A lot of times, especially in a family-owned business, there are a lot of emotions around it. Having a third party come in without that emotion or without bias is really a wonderful thing.”
DWH often works with companies in transition to set up governance systems — like formal levels of authority, information and management — to ensure the autonomy and efficiency that can make way for a growth spurt.
Those systems can help executives navigate the dynamics unique to family businesses and position them for growth.
“You don’t want to step on each other’s toes. There’s nothing worse than going into an organization and having ‘seagull management,’” she said, referencing a management style where a leader interferes only when they deem a problem exists, acts hastily and creates a messy situation. “(The documentation) provides a lot of clarity, and clarity and transparency are really important to transitions.”
At Skytron, Wassenaar has helped lead the company through a time of growth and expansion. The Skytron business now represents more than 90 percent of the revenue and income of The KMW Group, and has expanded with operations throughout North America, Europe, Asia and the Middle East in addition to representation in Central America, South America and the Caribbean.
As the enterprise has grown, it’s been important for the company to adhere to its strong family values, according to Wassenaar.
“Even though (the Mehney family) has been very successful, the number one goal is not all about making money. It’s more about building long-term relationships and part of the core values of our company that we believe very firmly,” Wassenaar said. “We live that out every day. That was important to demonstrate to the family that I adhere to those values, too.”
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