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July 16, 1999

5 Min Read
Keeping family owned companies focused

In his years as a financial consultant to family owned businesses, Jon A. Barwick learned how difficult it can be when family members are business partners. "I probably spend 80 percent of my time being a family counselor and 20 percent on the financial aspects," says Barwick from his Seattle office.

Other business consultants agree. Because there is more than one family member involved in the business, often a parent and a child, or sometimes several children as partners, there are unique aspects of the family owned business that make it almost more difficult to deal with than General Motors.

The answer: a board of professionals from outside the company-and the family-whose responsibility is to provide advice and help family members stay focused on company objectives. If constructed properly, an advisory board can also offer a company expertise in areas where it is lacking, such as sales, marketing, or finance.

A Molder Focused on Growth

Hillsman Modular Molding Inc. (HMMI), a modular and conventional custom molding company in Titusville, FL, is typical of companies in the injection molding business: It is family owned and operated.

Founder Ralph Hillsman and his wife Doris ran the business for many years until their four children became involved in the early 1980s. In 1984, the elder Hillsman died and Doris took over until she retired in 1994. The focus of the parents was "to make a good living."

Rodney Hillsman, now CEO, along with two other active family members, has a different vision for the company than did his parents. His focus is to position HMMI for growth.

"The overriding problem with family business is often tunnel vision," says Hillsman. "In most cases where family is management, the primary business involvement is within the family organization. This can create a stagnant environment in which management becomes internally knowledgeable but is also internally focused."

The key is finding an even handed way to manage the business in a family owner setting. Difficulties in family owned businesses begin when family relationships overlap into the business. Familial roles are not the same as business roles, say experts in the field. The patriarch of the family might not be running the day-to-day operations. And sometimes it's difficult for parents to see their adult children as anything but children who need to be told what to do and how to do it.

Hillsman decided that what HMMI needed was an advisory board to keep management members on a track with an externally focused vision. "If your objective is growth, you must be externally focused," says Hillsman. "Your customers are not within your walls, and their needs are not determined by what we do in Titusville."

The Board in Action

Finding the right people to sit on the advisory board wasn't easy. After Hillsman networked extensively in the local business community and the Service Corps of Retired Executives (SCORE), the advisory board for HMMI began to take shape. "We sought professionals from the areas of sales, marketing, finance, operations, and education," Hillsman says.

The advisory board is comprised of five people who have expertise in areas where Hillsman feels he and his siblings are lacking. He pays the advisors on a per meeting basis. The advisory board meets about six times a year, with each meeting costing approximately $2000.

Wallace Weeks, president of The Weeks Group Inc., a financial consulting firm for small businesses in Melbourne, FL, is a member of the advisory board. Weeks says that what he and the others bring is "a pool of expertise from various fields and views from outside their own industry, their own family, and their own history.

"It helps them make better decisions on methods for managing their business and provides an ability to be unique in their marketplace by transferring management ideas and techniques across industry lines," Weeks explains. "I think that the benefit of the council is one of having a variety of expertise available on an as-needed basis, that otherwise they couldn't justify on their payroll," he says.

Hillsman believes that the best thing about having outsiders sit on the board is the broad perspective they bring. "Advisory council members are not familiar with your business, so they bring objectivity," he says.

Dr. Quentin P. (Pete) Ciolfi, a professor of business at Brevard Community College in Melbourne, FL, also sits on HMMI's advisory board. He says that the involvement of the advisory board has resulted in HMMI achieving several goals based on the board members' guidance. "Our role as we see it," explains Ciolfi, "is to help the Hillsmans set parameters around their efforts, to help develop a vision and objectives that are measurable and achievable."

Lessons Learned

Ciolfi emphasizes that several things are necessary to help family members function together in a business setting. First, he recommends having clearly defined areas of responsibility for each family member. This involves writing distinct job descriptions to help family members understand their individual roles.

Secondly, it's absolutely necessary that someone be designated the supreme arbitrator to settle any disputes that might arise and that an individual be chosen to lead the company. This might be the oldest child or the oldest male child. However, the true leader articulates the vision for the business and guides family members through this vision to achieve the goals, says Ciolfi.

The only negative that Hillsman sees to an advisory board is that members don't know the unique aspects of the custom injection molding business. "But, they've been in many other companies and even if their ideas don't exactly fit our particular business, they make us think about different alternatives."

However, Ciolfi says that an advisory board doesn't have to be a long-term proposition. It's something that will evolve as the company evolves, from an informal group of consultants providing advice periodically to a full-fledged, paid board of directors with specifically designated legal and fiduciary duties. Working together, the Hillsmans and the advisory board have been able to create an excellent working relationship among all family members while keeping the company on track toward its goal of growth. "I can highly recommend the use of advisory boards for family owned businesses," says Hillsman. "The cost is minimal vs. the return on your investment. And in business, keeping your thumb on ROI is key to long-term success."

Contact information
Titusville, FL
Rodney Hillsman
Phone: (800) 492-9040
Fax: (407) 269-9077
Web: www.hmmi.com


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