Success is Relative:
With 46 of the state’s top 100 private companies family-owned, what should be a seamless transition in leadership can get split by the generation gap.
Reposted from Business North Carolina | By Steve Row
In the television series Father Knows Best, patriarch Jim Anderson often served up the wisdom of his experience to solve some problem caused by the inexperienced youth of his three children. Lawson Williams must know how the kids felt. He had a moment like that this past summer with his father. He had become president of M.R. Williams Inc., a Henderson-based food and merchandise supplier for convenience stores, in spring 2009. His dad, Mike, retired from day-to-day management but remained chairman of the company he had founded in 1976.
Last year, it started a construction project, one stage of which involved moving tobacco products into a mezzanine in the main distribution center. “One day, my dad said to me, ‘Remind me again why we are moving the tobacco products into the mezzanine.’” Williams replied that he thought it would reduce labor costs and speed up the process, but he needed to quantify it. “Give me a day or two,” he told his father. After mulling the move, Williams concluded it wouldn’t produce the efficiency gains he originally thought it would. “And by not doing it, we probably saved a total of $100,000 in equipment and labor costs.”
But even Jim Anderson didn’t always know best. In the same project, Williams suggested changes in how products are loaded off a conveyor system in the warehouse. His father balked but eventually went along. “My way,” Williams says, “proved correct.”
M.R. Williams Inc. is going through a process common in family businesses, and that makes it a frequent occurrence among the companies on the annual ranking of the state’s 100 largest closely held companies that Grant Thornton LLP compiles for Business North Carolina. This year, 46 are family-owned, and though not all of them are undergoing a generational change in leadership, many have or will. M.R. Williams apparently is handling it well; it moved up five places on the list, based on the latest fiscal year’s revenue, to 33rd. The company at the top, Charlotte-based Belk Inc., is run by the grandsons of its founder.
To be successful, such transitions should clearly delineate the responsibilities each person has for the company’s future. The older executive, in particular, must figure out how quickly he will relinquish power. “One of the first things that must be decided is what he wants to do, what role he wants to play in the family business, especially when the next generation comes in and wants to make the business more modern, more competitive,” says Kathy Baker, director of the Family Business Center at Wake Forest University.
One company still trying to sort that out is Barnhill Contracting Co., a 60-year-old construction company based in Tarboro that has built, among many other things, the Raleigh Convention Center and, a few blocks away, the Progress Energy Center for the Performing Arts. It ranks 20th on the list, down from 11th in a tough year for its sector. Robert E. Barnhill Jr., the 63-year-old son of the company founder, named Robert E. Barnhill III president this past summer. The elder Barnhill, who remains chairman and CEO, heads the division that supervises construction of buildings, but he has transferred most of the company’s day-to-day responsibilities to his son. As president, the younger Barnhill, 39, will be chiefly responsible for grading, paving and highways. “We’re still working our way through who’s going to be determining what about the future,” the new president says. “It’s not something we ignore, because the worst thing you could have is two folks in the business both giving directions.”
Like many who ascend to the top in a family company, the younger Barnhill got a taste of it before he graduated from high school. “I had worked here as young as 15 in our equipment and maintenance shop in Tarboro. I was sort of a mechanic’s helper, sweeping floors.” His father did his best to make sure he wasn’t given special treatment. “I can remember one day the foreman asked my dad what to pay me, and my dad said, ‘What is your lowest-paying position?’” After graduating from UNC Chapel Hill in 1994 with an economics degree, the younger Barnhill went into BB&T Corp.’s management-development program and worked in Virginia Beach. He saw it as a natural step, given his degree, and he thought he could be successful in banking.
Besides, he couldn’t go back home to the family business — at least not if he wanted to claim his full birthright. Company policy prohibits the children of officers from moving into an executive position without working outside the company at least two years. “It’s important to us as a family business to go and work in a management position somewhere else before we come back, as much for the individual family member as for the family business. It does a whole lot of good to learn from within another company and pursue something else.”
He finally rejoined Barnhill Contracting in 1998. His first job was in Raleigh as a grading foreman, and he later became a divisional vice president before moving back to Rocky Mount and becoming a regional president. In Raleigh, he had often had to act independently, because that’s what’s expected of a divisional vice president. “We provide the accounting, insurance, equipment and things like that, but they manage their operations,” the elder Barnhill says.
Though the transition from older to younger Barnhill is far from complete, it hasn’t been as difficult as the company’s previous leadership change. The elder Barnhill says he and his father, Robert E. Barnhill Sr., had a more difficult time getting along. “We were both headstrong, and we would disagree on a lot of little things.” The result: The first- and second-generation Barnhills stayed close to the operations they were most familiar with — Barnhill Sr. with highways and paving and Barnhill Jr. with buildings and contracting.
In the three years since the younger Barnhill has been in company headquarters, there have been few, if any, father-son disputes. “I can’t really think of any conflicts. Over time, you have information-technology things that the younger generation might push for and the older generation might be a bit reluctant to take on. I think the younger generation is naturally more open-minded to technological solutions,” the younger Barnhill says.
How and when to adapt to changing technology is an issue that frequently divides the old and new generations. The use of social-networking technology is a specific example, the Family Business Center’s Baker says. The older generation might ask why, and the younger generation will say, “Why not?” And the younger folks often can show that adding social-networking technology increases a company’s visibility and reach. Intergenerational differences of opinion about how to do things are a common problem in family-owned businesses, she says. Depending on the structure of the transition, “they can be at odds over what their objectives are.”