"The guitar started regaining popularity thanks to things like MTV Unplugged. We've got about 600 employees here in Nazareth and about 250 in Mexico, where we make our strings, our backpacker guitar, and our Little Martin travel guitar. Last year, we made 85,000 guitars.
"My father made a bunch of acquisitions. Aside from buying a string company, which was an astute move, none of these panned out. And when they didn't work out, he would take the people who were really smart here and send them to try to fix the acquisitions. As a result, the core business suffered. The people making the guitars were like, 'Hey, what about us?' And they'd hear, 'Oh, we've got to go fix the drum company! We've got to fix the banjo company!' It was really a distraction.
"I also found a very hierarchical situation: top-down, traditional, the boss tells the worker and the worker does it and goes home. As much as I knew there was a better way, forever and ever the old way was what everyone knew. I went on an Outward Bound course for a week, and I really learned the value of teamwork. I came back, and I was all fired up: If the Martin Company was going to move ahead, we needed to involve the workers more. We went through a lot of formal training, all the way down to the hourly level, about employee involvement. And since I came in, we've given out about $15 million to the employees in profit sharing.
"We hired a gentleman from Bethlehem Steel to formalize our quality assurance program a couple of years ago. One day he came in and said, 'Chris, people work really hard here, and I keep telling them, "Hey, we're not trying to make the perfect guitar!" ' And I said, ' Vince, we are trying to make the perfect guitar. "
Iwan Reis & Company
TOBACCONIST
Founded: 1857
Chicago
Kevin Levi, 37, general manager, fifth generation
"Our store opened four years before the Civil War. It was started by my great-grandfather's uncle. We are the oldest business in Chicago that's still owned and operated by the same family, and we're the oldest family-owned cigar shop in the country. We've been doing mail order since the 1950s, and today mail order is probably half of our business.
"I started working here 14 years ago. I had quit a job in advertising after getting a promotion, because it wasn't a direction I wanted to go in. My dad, Chuck, and I split responsibilities. He handles all the financial aspects, and we share most everything else -- advertising, marketing, the website, buying, customers. We have eight employees, and my mom also helps out. In the store, we get 100 to 120 customers per day -- a lot of regulars. We also get a lot of new customers through the Internet.
"I smoke pipes, cigars, and cigarettes -- from 9 to 6:30 or 7, till I get back to the house. My dad is a cigarette smoker. My grandfather smoked cigars till the day he died at 92.
"The 1980s were a horrible time. If you looked at daytime TV, what was on? You had Jane Fonda workout videos, Jazzercise, nobody was eating meat -- it was kind of a health-conscious age. Our business really suffered then. We moved from the ground floor of our building to the second floor and rented out the first floor just to keep us around. In the late '80s, my dad didn't take paychecks for a number of months -- he had to pay the employees. Then, in the '90s, steakhouses started popping up everywhere, and the cigar boom happened. It was a total backlash to the late '80s, and it was amazing for business.
"In addition to retail and mail order, we used to do a small wholesale business selling to bars and restaurants around town, but that all ended January 1, when a no-smoking ordinance in Illinois went into effect. I think the ordinance will improve our in-store business, because we're one of the only places left where people can actually go and smoke. We just finished building a 1,200-square-foot members-only lounge. If you can't roll and change and adapt, you're going to be dead.
"My dad told me, 'We only own two things. We own our inventory, and we own our reputation.' Our employees hear it all the time. When people come to work on our sales floor, we tell them flat out: Don't ever take anything personally, but we're going to watch you. Even though you didn't do anything wrong, we're going to tell you there's a way that we do things -- there's an Iwan Reis way. And a lot of times we're schmucks. We bend over backwards for customers when we probably shouldn't, and a lot of times we lose money because we replace things we shouldn't replace. So we might lose $100, but especially nowadays, with blogs and websites and newsgroups, if that guy goes out there and writes that he had a great experience and we took care of him, that's worth a hundred bucks."
Harden Furniture Company
Founded: 1844
McConnellsville, New York
Greg Harden, 51, CEO, fifth generation
"I was the least likely member of my generation to join the business. I graduated from Colgate in 1978 with little direction or interest in the business. I was a good golfer in college, and that was my primary focus. I eventually recognized that very few ever make it to the tour. I guess furniture was in my blood -- or at least, other than hitting a golf ball, I didn't have any other talents to rely on.
"We make better-quality solid-wood and upholstered furniture. Very few family members are active in the business today. The furniture business is not particularly exciting, and that may have been influential in family members choosing other careers. My father, who ran the company before me, and his sister are still modestly involved, and they lend a lot to the culture of our organization. Just that they are active and visible after more than 60 years here means a lot to our employees and customers.
"The business has changed radically since our founding 164 years ago, perhaps more in the past five years than at any time except the Great Depression and World War II. It is a daunting challenge for a family business to adjust to extreme changes in markets, consumer behavior, globalization, industry consolidation, and an economy that has no mercy on those who cannot adapt. Lower-priced products have flooded our industry -- and their quality has improved dramatically. Durham, a Canadian company that was our No. 1 competition in the solid-wood-bedroom category, has fallen on hard times.
"The most important thing I've learned from the fourth generation is that their almost fanatical commitment to financial conservatism is very valuable when the business and industry are faced with challenges. We have virtually no debt, and a big cushion of cash is a tremendous advantage.
