Keeping It in the Family

Operating a family-owned company takes more than just rounding up mom, dad and the kids. Here are tips to keep your family firm fit.

When he was five years old, Terrance Z. Jackson started working in his family’s public relations firm, Circulation Experti Ltd., in Hartsdale, New York. While other children his age were playing games and sucking lollipops, Jackson was licking stamps and sealing envelopes.

Today, Jackson, 30, serves as vice president of company operations. He’s not alone. His big sister, Tenley-Ann Hawkins, 40, is vice president and head of public relations, and brother, Garrison, 36, is executive vice president.

Launched in 1968, Circulation Experti Ltd. is the nation’s oldest and largest minority-owned public relations agency, with several Fortune 500 clients, including Chase Manhattan Bank, Unilever Home & Personal Care U.S.A. and Kraft Foods, and billings in excess of $10 million.

The firm’s 70-year-old founder, Warren Jackson, and his wife Tena, have no problem leaving the day-to-day operations of the company to their sons and daughter when they retire. But Mr. Jackson, who serves as chairman and CEO, never pressured his children to join the business.

“My father hoped, but never pressed us to come into the business,” says Terrance of the firm his father started after years in the circulation department of the New York Times and as a media consultant on minority reporting and coverage. “Each of us had a different expertise that we could bring to the company, and that was the lure.”

Roughly 95% of all U.S. companies are family-owned–the founder’s relatives own stock or are actively involved in the day-to-day operations. But only about 30% are like Circulation Experti in that the owners have succession plans. Moreover, few survive beyond the first generation: only 33% survive into the second generation, 10% into the third generation and a paltry 3% into the fourth.

Sibling rivalry and financial difficulties are the primary reasons these businesses fail. Others falter because there are no qualified relatives who are up to the task of assuming ownership.

Take the case of Daniels & Bell Inc., the first black-owned Wall Street securities firm. After founder Travers H.J. Bell Jr. died of a heart attack in 1988, his son Darryl inherited the firm. Short on business experience, he took the company through a series of bad decisions and lavish spending sprees. The result was an exodus of both clients and company assets. In 1993, Daniels & Bell became insolvent, marking the end of a family legacy.

Operating a family-owned firm is not easy. While there are everyday issues facing the average business venture, such as financing, advertising and customer service, other concerns are unique to family enterprises. For instance, if there are already several siblings in the business, who will take on the key leadership role once a parent retires or dies? Or who should be the successor if the next of kin has neither the experience nor interest in running the company? What if an unrelated employee knows the business inside out and wants to lead the firm?

“Addressing these issues can be difficult because there is a whole set of rules when you’re dealing with a family business,” says Tom Plaut, a

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