Industry Watch

Industry Watch Plus: Family Business

An Industry Watch + features a collection of stories, Q+A's, How-To's and more to give readers a 360 degree look at industries.

Traction For The Family Biz
Q&A: Jeff Warner
Resources for Family-Owned Businesses

Traction For The Family Biz

Family business expert finds EOS is a way to provide an overarching structure for growth

 

It’s no exaggeration to say that family businesses form the backbone of the American economy. According to Sara Stern, president of Family Business Minnesota, approximately two-thirds of privately held businesses are family-owned — that is, wholly or majority-owned by blood and/or marital relatives. Minnesota’s family business ecosystem is especially well developed; some, like hardware-and-appliance outlet Warners’ Stellian, are bona fide household names.

Fixing the family business

Family businesses don’t always run as well as they could or should, though. While every enterprise faces challenges, smaller, closely held companies face formidable risks: uncomfortable mixing of the business and the personal; perceptions (or reality) of nepotism; reluctance to break with tradition; poor or nonexistent succession planning and much more.

Stern helps family businesses face those risks head-on. A trained business coach since 2001, she’s a veteran of Target and the University of St. Thomas. In her current role, she immerses client companies in the Entrepreneurial Operating System (EOS), a “business optimization” framework designed for closely held companies with fewer than 250 employees.

EOS is the brainchild of Gino Wickman, a Michigan entrepreneur who turned his family’s struggling business around in three years. Wickman eventually sold the business, formed the Detroit chapter of the Entrepreneurs’ Organization, and set about expanding EOS into a full-fledged system — synthesizing his own life experiences and borrowing liberally from cutting-edge management and leadership theory.

“Wickman took all the best busines-leadership thinking and put it into EOS,” says Stern.

Professional EOS Implementers must endure a rigorous three-day “boot camp” and collaborate regularly within the EOS network. Certified EOS Implementers, the system’s gold standard, must have at least 10 EOS implementation clients under their belts and conduct at least 48 EOS sessions per year. Thanks in large part to Minnesota-based Mike Paton, an early adopter who literally wrote the book (with Wickman) on EOS, the Twin Cities region has more implementers than any other U.S. metro: great news for Minnesota-based family businesses looking to optimize.

Challenge, meet solution

EOS is built around three core principles: Vision, Traction, and Healthy. Traction is the linchpin: the means of “instilling focus, discipline, and accountability throughout the company.”Traction empowers family-business leaders to implement their vision clearly, rationally and efficiently so that they (and the rest of the team) are healthier and happier.

“EOS and Traction remove the personal aspects from the decision-making process,” says Stern. For instance, the system helps leaders identify which jobs they need to create, define and fill with candidates whose skills and values align — rather than simply creating one job per family member to quell conflict.

Well defined roles are especially important during leadership transitions, which pose unique, potent threats. Stern helps clarify roles well before succession plans are in place, so that “it’s crystal clear who should fill each role,” she says.

“If family members don’t get jobs or move up the ladder because there aren’t enough positions to fill or they’re not suited to the roles, it becomes the system’s fault,” says Stern – not Mom’s, or Grandpa’s or whoever’s calling the shots at the time.

EOS in the field

EOS can be applied across the entire organization: recruiting, human resource management, sales, process efficiency, vendor relationships, finance, logistics.

Jeremy Sizer, who owns and runs Coon Rapids-based Industrial Door Company with sister Jodi Boldenow, retained Stern to help the multi-location company implement EOS — and it’s paying off.

“EOS provides our management team with direction and organization,” says Sizer. “We’re now in sync and on the same page more often than not.”

Sizer’s team works off an accountability chart that shows precisely who reports to whom, and where those people are spatially and geographically. It also uses EOS principles to implement division-based goals that break the overarching corporate vision into manageable chunks. That’s a big help for a family-run company with subsidiaries in Arizona and Ohio.

“EOS has really helped us organize the business as we grow, which is especially important given that we’re spread basically from coast to coast.”

That’s likely to serve the far-flung IDC crew well in the years to come. According to Sizer, IDC is aiming to double its revenue by 2022. He expects to reach this aggressive goal mainly by buying out smaller competitors and adjacent businesses — and, naturally, integrating EOS into each new acquisition.

No matter how those acquisitions play out, EOS is an invaluable confidence-booster for Sizer. He and Boldenow, both in their 40s, have six kids between them. The older ones have already worked entry-level jobs at IDC. If they or any of their younger siblings are game, Sizer and Boldenow would love to keep IDC in the family for another generation.

But Sizer is realistic. He figures he and Boldenow have about 15 years to determine whether any of their kids want to make careers at IDC. If not, he says, “We’ll start thinking about selling the business.”

Thanks to EOS, they won’t be selling a Sizer/Boldenow family heirloom. They’ll be selling a formidable industrial-door parts manufacturer that could well become the crown jewel of its acquisitor’s portfolio.

 

BIZ BRIEFING

Industrial Door Company
Headquarters: Coon Rapids
Inception: 1974
Leadership: Jeremy Sizer and Jodi Boldenow, co-owners
Employees: 170
Revenue: Undisclosed
Description: Manufactures springs and other heavy-duty door products at three facilities in Minnesota, Ohio and Arizona.

Headquarters: St. Paul
Inception: 2016
Leadership: Sara Stern, President
Employees: 1
Revenue: $350,000 (projected)
Description: Provides EOS implementation for family businesses
 

Q&A: Jeff Warner

Former President of Warners' Stellian

Jeff Warner (in gray suit) was only the second president to lead Warners’ Stellian (WS), the venerable St. Paul appliance retailer that’s been in his family for 45 years. He recently handed over the reins to his younger brother, Bob Warner (on right). 
 
How did one of Minnesota’s most successful family businesses get started? 
In 1954, my father Jim Warner began his career as a book keeper at Stellian [an independent hardware store on Larpenteur Avenue in St. Paul]. He moved into sales almost immediately and was elevated to store manager in a few years. In 1971, Jim purchased Stellian, changing its name to Warners’ Stellian. I began my career as a deliveryman in June of 1975. Jim suffered a heart attack while vacationing in Mexico in 1984, which motivated him to begin the process of ownership and leadership transition. Today, his nine children are the shareholders.
 
Describe your succession process.
All nine shareholders have the choice to gift shares to their children, no matter if they are or will become employed at WS or not. The number of shares that any single third generation family member may own is capped so that no one owns more than another. Each family unit that receives the gift of ownership will have one voting share.  
All family businesses go through an annual value assessment. Safety measures have been put into place to ensure the company remains financially healthy throughout the redemption period that is rapidly approaching — as all current shareholders must gift or redeem their shares during or before their 65th birthday year, and many of us are getting close.
 
How does WS compete with bigger organizations?  
Competing on price isn’t a problem, as everyone in our industry price-matches and no one consistently has the best price. WS has the trusted brand; we are a Minnesota family-owned business with years of strong performance. I don’t believe a business can promote good service; that’s what satisfied customers do. 
What’s more, WS offers more brands. Some manufacturers don’t do business with the big chains, because their innovative products require more understanding to sell and service. They always choose WS to unveil these products to the Minnesota market. 
 
How has WS managed to remain in business and successful for so long? 
We have a very strong founder, who showed each of us how to win the right way. He demanded our best. He taught us to exercise core values daily, including humility. One of his favorites is, “You were given two ears and one mouth for a reason.” 
Our dad taught us that generosity and charity pay dividends to the soul and much more. He led us in faith. He made hard work fun. He taught us how to identify opportunity. He showed us the value of respectful assertive communication. He built amazing relationships with the manufacturers, which continue to pay off. He placed each of us in the position we were best suited to excel at. He allowed us to fail and taught us how to get up and stay up.
 
What challengesdo you foresee for WS?  
We need to continue to strengthen our brand and attract talented people. Many good Minnesota businesses are facing this challenge with us, and I fear its magnitude will only grow in coming years. We also need our local lawmakers to remember small businesses. Minnesota needs to grow its focus on creating good balance between the needs of business and government. 
On an equal, if more distant level, we remain concerned about the instability of
our world and worry about how the state
of humanity will affect us in business and
at home. 
 
[Interview was edited for clarity and brevity.]

Resources for Family-Owned Businesses

Minnesota’s small and midsize family businesses face plenty of challenges: price competition from larger peers, wage pressure from multinationals, confusing and contradictory regulations — you name it.

But they’re not in it alone. These resources — and many more not mentioned here — have their backs. Most of the resources listed here were gathered from the University of St. Thomas’s excellent Family Business Advisers directory, with assistance from Sara Stern, president of Family Business Minnesota.

 

Allied Executives

A “peer learning exchange process” for executives and rising leaders in various industries. New members are assigned to “best fit” peer groups.
Contact: John P. Palen (651-274-2292)
 
A meeting-based professional development group for corporate leaders. 
Contact: Michael Miller (952) 426-3056
 
The local chapter of “the world’s leading chief executive organization.” Roundtable format with access to expert executive coaches
Contact: (612) 256-2856
 
A peer networking organization that helps executives “design and execute strategies that enhance personal life and personal freedom while producing sustainable growth and profits.”
Contact: Bill Mills. (763) 477-5599
 
Executive search for “privately held businesses, ESOPs, EOS/Traction companies, mid-market companies, healthcare organizations and professional associations.”
Contact: Mike Frommelt (612) 375-8900
 
Senior leadership search for closely held businesses and family enterprises. 
Contact: Joe Reardon. (952) 767-7025
 
“Outcome-agnostic” approach to exploring “exit planning options, map[ping] realistic strategies and develop[ing] an action checklist to accomplish the owner’s objectives.”
Contact: Dyanne Ross-Hanson (651) 426-0848
 
A consulting firm for family-owned businesses facing transitions or 
inflection points
Contact: John Hughes; Shayne Fettig. (763) 432-2306
 
Specializes in succession planning, team-building, leadership coaching and more
Contact: Katy Mitchell. (612) 332-6336
 
Legal advice and representation for “families of wealth, closely held businesses, private charitable foundations and entrepreneurs,” with a focus on charitable planning, estate planning, succession planning, and enterprise growth.
Contact: Margaret A.T. Cronin (612) 335-1579
 
Legal services from a family business perspective. Handles succession planning and estate planning for family businesses, with a focus on the hospitality industry.
Contact: Rebecca Bell. (763) 582-1414