Business success is usually judged by a company’s balance sheet, but in a family business, the bottom line includes more than just dollars and cents.
Family-based operations require excellent business and financial acumen. But, they also demand the stamina to withstand scrutiny, criticism and even competition from close relatives, in-laws and others with a genetically vested interest.
Familial fights and relationship strife can easily spill into the workplace, while complicated issues like nepotism – or the appearance of it – can muddy hiring and promotion decisions.
And something major like a divorce can throw a wrench in the best-laid plans.
That scenario could have threatened the future of fourth- generation Durham moving company, J.E. Ladd & Son Transfer, when the owner’s daughter, Lori Ladd, and her husband, Rodney Lewis, decided to separate several years ago. The dynamic could be awkward in any company, let alone in one as small as Ladd & Son, which covers the Triangle area but has only four total employees. Lewis had been a valued employee for three decades and was asked to become a co-owner when the family patriarch, Jimmy Ladd, retired in 2013.
“Rodney was the natural choice to step in; he is like a brother to me,” said Jay Ladd, who now operates the business with Lewis.
While Lewis’ ownership in some ways breaks with family tradition, it follows a pattern set by the original J.E. Ladd, known as Jim, who started the business during the Great Depression.
“Succession happens to those who make the family business their career,” Ladd said. “It isn’t an entitlement; it’s kind of an earned right. There are certain things that have to be passed along by being on the truck, interacting with customers and putting hands on the furniture to see how it all works. You can’t put that into a PowerPoint.”
Second-generation offspring who reject or delay their entry into the family business can pose another type of crisis.
Jay Ladd initially wasn’t interested in joining his family’s moving company. He studied chemistry in college and worked in pharmaceuticals for several years before joining Ladd & Son.
“I felt a little pressured to go into the business when I was younger, which may be why I decided to go to college and explore other interests,” he said.
As he matured and grew to understand the value of business ownership, he said, he returned to the fold.
It is a perspective shared by Charles “Charlie” T. Wilson III, 47, president and a third-generation owner of C.T. Wilson Construction. Though he knew early in life that he would enter the business his grandfather started, Wilson was compelled to demonstrate his abilities before climbing aboard. He started working construction sites as a teenager, and said he felt scrutinized by the older workers.
“I was always trying to work harder than everybody else to prove that I wasn’t getting a pass because I was part of the family,” Charlie Wilson said.
Still hesitant to view himself as a leader in his father’s firm, Wilson, who has a civil engineering degree from N.C. State University, enrolled in graduate school at the University of Texas and started working at an Austin construction company. He joined the family firm in 1999. C.T. Wilson, which also has an office in Greensboro and last year generated $90 million in revenue, has 90 employees.
Wilson’s younger brother and sister decided not to become involved in the family business, creating another common and potentially tricky complication.
A formal succession plan helped ensure that members of the family were compensated for their interest in the company through life insurance and other assets.
“We run across this pretty often: An owner has three kids, but only one is interested in the business,” said Mark Costly of Clarity Legal Group in Chapel Hill, who specializes in family business consulting.
“When you have one child that’s running the business and two that have a lesser role but get income out of it, you have a lot of potential for conflict. If one is doing all the work and the others are simply receiving income, it can breed resentment. And if one is getting a big salary for running the business on top of his ownership share, the others may feel underpaid.”
It is also important, Costly said, for a family business succession plan to account for any philosophical disagreements between the old and new guard.
“The next generation often has ideas about running the business that they think will add value, but the prior generation may be reluctant to embrace that,” Costly said.
Kris Lloyd, president of USA Flooring, attended college briefly before taking a warehouse job in the business his father started in 1979. USA Flooring is based in Durham and has locations in Raleigh, Fayetteville and Wilmington.
Lloyd quickly moved to sales, rising to become top salesman.
“Being able to demonstrate I could outsell everybody was my way of making the point that the owner’s son could lead by example,” he said.
He also felt he needed to earn the trust of his father, who built the building himself, since they had differing management styles.
“I’ve added some new things to the business that my father was reluctant to spend money on,” Lloyd added, listing new equipment and updated inventory.
Charlie Wilson also pressed for changes when he took over from his father, Charles “Chuck” Wilson Jr. Charlie moved a portion of the construction business toward private clients and away from his father’s favored government contracts for schools and military facilities.
Chuck resisted.
But, with Chuck still active in the business at 74, it left father and son little choice but to work toward common ground.
“Right now, I’m president and my father is CEO,” Charlie Wilson said. “My grandfather came into the office until three weeks before he died,” he added.
“I think my dad may be like my grandfather. He’ll never retire.”
