The Success Gene
Why some family businesses thrive year after year after year.
Even successful family businesses tend to resemble fireflies. They flicker brightly for a brief moment, then die away. Consultants call this the rule of thirds: Only about a third of businesses make it to a second generation, a third of those live to see a third generation, and on and on. A precious few family businesses, though, do manage to beat the odds. They are passed down, revived, and reinvented from generation to generation, while all the others have long since gone bust, been bought, or just slowly faded away, done in by family feuds, hard times, or changing tastes.
We have taken a close look at half a dozen fifth- and sixth-generation family businesses. It turns out they are a very special breed. They tend to make and sell products that last: guitars, pool tables, furniture. They have managed to keep much of their manufacturing in the United States. And they are able to put today's challenges -- globalization, say -- in perspective. "You think this is bad?" they might say. "You should have seen what happened during the Great Depression!"
These families have a lot of pride in their forebears' accomplishments, yet they are unusual in the business world for their modesty. They are quick to credit the hard work of previous generations yet speak humbly of their own contributions. That's awfully refreshing in our modern gilded age of high-fiving tycoons shuttling between their private jets and megayachts. Then again, these families are about a lot more than just material success. They have a powerful sense of duty both to the past and to the future.
Hussey Seating Company
Founded: 1835
North Berwick, Maine
Tim Hussey, 51, CEO, sixth generation
"We started as a plow company and grew to be a good-size agricultural implement business in the 19th century. The third generation started to diversify into all kinds of structural steel products -- fire escapes, ladders, ironwork, and steelwork for building construction. My grandfather came into the business right after the first World War. He and his father got into ski equipment -- ski jumps and chairlift towers -- and we had a whole line of waterfront equipment -- docks, diving boards. In the 1950s, when the school boom really started to take off, we got into indoor retractable bleachers, and that's when the company really grew.
"The business followed the school boom and then the civic center boom and then the stadium boom. Over a period of about 15 years, starting in the late '80s, we did about half of the major league stadium and arena new construction in North America. We were doing maybe a million dollars in 1960 and $80 million by 2000.
"When the stadium boom ended, we went down to $50 million and downsized from 500 employees to 200. Restructuring was painful. The stadium and arena business was high-flying and got nice headlines, but it wasn't as profitable as the school business. The export business has picked up, and we're looking at other markets and products.
"Part of the value proposition of the company is making sure we've got innovation in our product lines -- whether it's a closed-deck bleacher or flexible handicapped seating. International competition from Asia and Latin America is growing, and we can't be the low-cost guy. We need to offer something unique.
"We're doing some manufacturing in China and Taiwan, but our bread-and-butter manufacturing is still in Maine. The Chinese and Mexicans still have a hard time competing with us because we're so highly tooled, we have high volume, we've been doing this forever, and we're the best in the world at it. I tell employees that as long as we can be the world leader in bleachers, we'll continue to do them here.
"We have an annual shareholders meeting. The majority of our board has been outside directors for the past 40 years. This has been a valuable thing, and I really encourage other family businesses to do it. All my direct reports are professional managers. We have experienced people in sales, finance, and operations. I just hired a new CFO -- our current CFO is retiring after 29 years.
"I remember my grandfather telling me stories of the Depression, when the company almost went out. It was just a handful of employees, and he would go out and sell the fire escape and then come back, design it, go on out to the fab shop with a welder or two and weld it up, and then they'd go over to the nearby town and install it, and he'd collect the money. That was part of his kind of entrepreneurial perseverance, just sticking to it in tough times and finding a way to make things happen.
"Another thing I learned from my dad is the importance of integrity -- in how you conduct your life and run your business and make decisions. The first three generations were active Quakers. And those Quaker values of integrity and high standards have been part of the culture here. My dad knew in his heart to do the right thing. You can't always define that, but you know it when you see it."
C.F. Martin & Company
GUITAR MAKER
Founded: 1833
Nazareth, Pennsylvania
Chris Martin, 52, CEO, sixth generation
"Our business in America started in Manhattan. The family moved to Nazareth in 1839. They had come from a small town in southern Germany, and they didn't feel comfortable in a big metropolitan area. My great-great-great-grandfather was able to more consistently make perfect guitars than anyone from that era. People still say C.F. Martin set the standard for quality for American guitars.
"I was going to become a marine biologist and worked here summers. People were saying, 'Aren't you going to join the family business?' I remember I went to a trade show with my father when I was 14 or 15. My dad said that someone from CBS wanted to talk to us about selling the business and asked me what I thought. I said, 'I would like to think about joining the business -- I can't guarantee that I will.' And we went over and met this gentleman at the show, sitting at a big desk, and my dad said, 'This is my son, and he may want to join the business someday, so we're not for sale.' I have a 3-year-old daughter named Claire Frances, so if she ever wants to be C.F. Martin, she can. She comes to work with me every once in a while, and we go out to the plant -- right now we're watching a ukulele being made.
"When I took over, in 1986, the business was barely breaking even. We'd ridden the folk boom and then the folk-rock boom through the '60s and early '70s, and then business started to trail off with disco. Production peaked in the late '70s at around 20,000 units; by 1983, we were down to making and selling 3,000 guitars a year.
