The baton has been passed

P2840752It’s hard to believe that there was a time when Niki Russ Federman, now co-owner of Russ & Daughters, considered walking away from the family business for good. Today, the New York City staple serving bagels, smoked fish and other “Jewish appetizing food” is a beloved brand that includes sit-down restaurants at its historic East Houston location and at the Jewish History Museum in Manhattan, a bakery, a retail counter, and an e-commerce arm, with plans for expansion.

But the business had incredibly humble beginnings—it began as a barrel filled with herring sold on the street by Federman’s great-grandfather and Polish immigrant Joel Russ. As the business evolved to a pushcart, then a wagon and finally, a storefront, Russ knew he needed help. He brought in his three daughters—one of which was Federman’s grandmother—and the family business was born. As the store was passed down from generation to generation, Federman knew she’d one day have to decide whether or not she’d want to continue the tradition, but she delayed making the choice.

“I used to think that if I just do what my grandparents used to do, then that means I somehow failed in this American individualistic ethos that we all have,” Federman said at the TK TK TK. Her father had been running the business since the 70s, but by the early 2000s, he gave her an ultimatum: she had to take over, or he would sell it.

It was a breaking point for Federman, who was still unsure that she wanted to dedicate her life to Russ & Daughters. She applied and was accepted to Yale Business School to buy herself some time, but realized that a business degree wouldn’t solve her internal dilemma and left the school after a semester. By that point, her cousin, Josh Russ Tupper, had expressed interest in running the business and it seemed that Federman finally had a way out.

But it was this very shift in responsibility that awakened something. “I left the business, and I left business school. I was hiding out in New Haven, Connecticut. And at this point, because there were no expectations on me,I was able to look at the business with a fresh set of eyes. I began to realize that this is a tremendous gift to be part of a lineage like this. Small businesses are disappearing, and there’s such a loss of character as a result,” she said.

By 2006, Federman was back in the family business as co-owner, alongside Tupper. Together, the two have been unstoppable, expanding the business across multiple locations and formats. Their latest endeavor? An 18,000-foot space for Russ & Daughters at the Brooklyn Navy Yard, featuring a sit-down restaurant, retail counter, and shipping business. “I love what we’re doing today,” she said. “I love the way in which it forces me to live in the past, present, and future all at the same time. The baton has been passed.”

We’re Not Done Yet

P2840828On September 27, attendees of the Women and Family’s Business Roundtable gathered for dinner at Russ and Daughters Café in New York City. The women were mostly members of or were affiliated with family businesses. Dinner conversation ranged from growing up female in a patriarchal society to the Kavanaugh hearing that occurred that day, topics that foreshadowed the tone of the next day.

The roundtable opened with a session on glass ceilings and gender stereotypes. Daniela Scur discussed key points of her research – that families were more likely to keep family businesses if there was at least one son and that daughters are more likely to be CEO’s if there are no sons. The attendees weighed in on the roots of these findings. There were countries where it is illegal for women to inherit businesses, adding a concrete layer to the glass ceiling. The session ended with the conclusion that management should start from home and society will naturally follow.

The second session on “When Work is Family and Family is Work” started with a discussion on work life balance. Most of the women in the room grew up with parents who brought a business mindset into parenting. This mindset continues with them today as they go about their careers. The table then discussed ways to navigate the workspace given the blurred line between family and business. Some tips shared were:

  • Work outside the family business first to gain gravitas and a sense of best practices.
  • Study something related to your family’s business to carve out a space for yourself.
  • Do not call your parents mom or dad, instead use their names or initials.

Niki Russ Federman of Russ & Daughters shared her own story over lunch. Niki narrated the story of humble immigrant beginnings to the creation of a store that anchored a sense of history in a city where the only constant is change. She discussed her journey into leadership that had to balance history and tradition with innovation and relevance. This brought about Russ & Daughters Café, new stores, an online store, and bakery.

Alvina Lo and Kaleen Allyn moderated the third session on parents as effective mentors. The group dove into a discussion on the differences and norms between mentoring and parenting. It was shared that mothers are normally tougher on daughters and that fathers normally underestimate daughters. The parents in the room weighed in on the importance of highlighting the mother’s career to normalize it among the children. It was also important for parents to include daughters in discussing the business and making small decision from a young age to grow a sense of ownership.

The final session was a presentation on Realizing Impact of Female CEO’s and Executives by Kimberly Eddleston. She discussed that women leaders extract more synergistic environments that emphasize people and relationships over status and money. It was also mentioned that people tend to associate classically masculine traits with leadership but prefer classically feminine traits in their leaders. This brought about opinions over gender normative language.

Through the day, the room remained united in its frustration and determination to create a world where women could be powerful without the implications of today’s society. I left with the words “we’re not done yet” in my head.

Kelsey Cheng is a 2020 MBA Candidate at Cornell University and an active member in her family’s business, Bounty Fresh Food, Inc. in Malaysia. 

Erin Kelly joins the Smith Family Business Initiative as Assistant Director

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We welcome Erin Kelly to the Smith Family Business Initiative as our new Assistant Director. Erin will focus on expanding the campus presence of SFBI and related student activities, both at the undergraduate and graduate level, as well as strengthening many of our outreach programs.

Erin Kelly, BFA, MS

Erin is originally from the Central New York region and joined the Cornell community in 2006 when she returned to the area after several years living and working in Manhattan. Her time at Cornell includes both contract and endowed positions, an invited rotation with Organizational Development, two years of service with Cornell CARES, and three years chairing the CALS Core Values Awards Committee. Erin has been with the Johnson School since 2016 where she most recently served as Academic Manager of the Executive MBA Metro NY program there.

Prior to entering into higher education, Erin worked for a series of family-owned businesses ranging from small and local to multi-faceted and globally-proportioned. This experience resulted in practical familiarity with the unique business complexities relevant to students, owners, and stakeholders associated with family enterprise. Erin’s firsthand experience with family business dynamics, twelve years at Cornell, and a Master of Adult Education translates into a distinct mix of creative thinking, administrative experience, technical expertise, and practical knowledge. Already familiar with the Smith Family Business Initiative (SFBI), Erin embraced the opportunity to use her uniquely applicable talents and experience to contribute to the innovative work being done by SBFI to provide family businesses with resources vital to both their immediate and long-term success.

Erin received her BFA from Syracuse University and an MS from Elmira College. Erin enjoys traveling, meeting new people, listening to their stories, and learning about them. She has three children and resides with her family in Cortland, New York.

Notes from the Family Innovations Summit

Written by Pierre duPont

cornell-2018-0523-0105Thanks to Daniel Van Der Vliet and Cornell’s Smith Family Business Initiative for a stellar event earlier this week. This was a day of private discussions between family-owned businesses of all types and sizes – from some of the largest in the world with 20-50 family members to some small and with only two or three family members.

Across all the sessions, I heard one overriding message: communicate with your family about your business and understand your family’s views and needs – now. Do it openly and as soon as possible, as the business starts and grows, and even if the business is large or it appears to be too late to start such communications. And do this whether you think your family (and the business) needs it or not.

Another message seen clearly: many families with successful businesses have visible and not-so-visible dysfunction, and that dysfunction can create nearly-insurmountable hurdles for continued success or a leadership transition to the next generation. And yet, dysfunction CAN be overcome as we heard several times.

In one case (all will remain anonymous given the incredible amount of openness, and even raw emotional pain, expressed by some of the participants) we heard of several older generations of the leaders in a family-business who appeared to want to limit the continuing success of the company – the next-gen leader overcame this across ten or twenty years through perseverance, many creative ideas, standing ground when faced with strong family pressure, and even by walking away to force the family’s approval of the desired business-change. The result? A household-name business expanding in new directions and generating new levels of success, to the benefit of the whole family.

In another case, we learned of a family faced with discord amongst the older leaders at the top of a large and prominent global company. The discord was clearly hurting the business, so the next-gen came together as a whole to drive leadership changes and new family-control-mechanisms which proved to be the right steps for all generations and for the business itself.

We learned of family-communication done well, too. There were several examples of 20-something and 30-something children who were given leadership roles in their family businesses, and who then rose to the challenges of evolving markets and changing technologies – with appropriate guidance from their parents to the youngers, and from the youngers to their parents.

And we heard an illuminating example of a very prominent family where the elder-generation cousins who lead the business meet regularly to have their business arguments and ‘family squabbles’ behind closed doors, rather than in the public view.

Tactical advice was given by two family-leaders regarding how to strengthen multi-gen families and their businesses, and how to head-off or repair the dysfunction that can arise: engage external family-business advisors/consultants/therapists early, whether or not you think you need to do so today. I was pleased to hear this said several times, confirming the value such external and independent advisors can have – partly that value arises because such advisors have no ‘horse in the race’ (and be sure to look closely for that – sometimes there are hidden agendas and unclear profit-opportunities for external advisors), and partly it arises because the better advisors have seen and learned from many situations.

Contact Daniel if you are a family business who might like to participate in future events like this week’s. And even if you don’t want to participate, I am sure Daniel will welcome calls (as do I 🙂 from family-business owners (whether you are the older generation or a younger generation) to talk confidentially about successes and challenges and failures – lessons can be identified and shared, and paths-forward found, just by talking it through with a suitable outsider.

Pierre duPont is an advisor, entrepreneur, investor, partner and business owner.

Conflict is good, poorly managed conflict is the issue

The first Cornell Family Business Roundtable “Family Business Conflict: From the Inside and Out” took place on April 5th at the Hult International Business School in downtown San Francisco.

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Doug Baumoel, ’78, facilitated the initial discussion by posing the following question to the delegates: “Why are conflicts in family-owned businesses so common, extreme and intractable, and what can individuals do to manage these?” It was interesting to hear from delegates who spanned from first to fourth generation family business members, and more interestingly from 5 different continents. After a very fruitful discussion, Doug explained that interdependence is the main cause of conflicts in family businesses- whether it be emotional, social, economic or reputational. Doug continued to differentiate between disputes and systemic conflicts. While the former can be resolved, the latter can’t be resolved but can be managed. We were also lucky to get a copy of book written by Doug and Blair Trippe – “Deconstructing Conflict” which focusses on understanding family businesses, shared wealth and power. The book really helps you understand the reasons that underlie conflicts, what triggers them and why they are so intractable.

The following session, facilitated by Frank Burke ’72, laid the foundation for a discussion on dispute resolution. Various methods such as negotiation, arbitration, adopting independent boards, reviewing family employees, having a different business board from a family board, etc. were considered. The most extreme step of litigation was also discussed in the end, though a consensus was formed that this measure should be the last to resort to. One of the major learnings imparted in this session was that every contract should have a dispute resolution clause, for example, in case of a dispute, the principals must meet and try to resolve the dispute before taking further action.

The last two sessions facilitated by Ms. Joan DiFuria and Dr. Dennis Jaffe revolved around emotional triggers and cultural aspects that lead to family issues. We had an in-depth discussion about communication being one of the key reasons for conflicts to occur in family businesses. Dr. Dennis Jaffe, who also shared his book “Cross Cultures”, divided the world mainly into three major buckets- Collective Harmony (SE Asia), Individualist (N. Europe, N.America, Australia) and Honor (S. America, S. Europe, S.Asia, Middle East). It was really interesting to hear from him, the role of culture in observing various parameters such as communication, evaluation, persuasion, leadership, decision making, trust, disagreement and scheduling.

The conference was concluded by parting words from Professor Daniel G. Van Der Vilet, who very effectively summarized all the sessions and pointed out the main takeaways. It was a pleasure to be in the company of such wwell-respected professionals and family business members. The key takeaway for me was the learning that I got and the network that I built with new mentors. I got the opportunity to interact with individuals from various industries, some of who have already been through conflicts, some that are in conflicts and some that are preparing for the future when the family tree branches out. It was also a pleasure to interact with other students from Hult International Business School, and build a strong network with leaders of the future. I definitely learned a lot and will have a lot to take back to my business post graduation.

Rohan Sangari, MBA ’18, is a second generation member of his family’s business Sanrok Enterprises in India. 

Why are conflicts in family owned businesses so common ?

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Ujjval Shah, MBA ’18

“Why are conflicts in family-owned businesses so common, extreme and intractable and what can individuals do to manage these?” This question formed the overarching theme at the San Francisco Family Business Roundtable organized by the Smith Family Business Initiative, Cornell. The roundtable brought together a highly distinguished set of global individuals involved either directly or indirectly in the world of family business. This included conflict mediators, academics in the field of family business, family business consultants, lawyers, owners of family businesses as well as students from both SC Johnson College of Business and Hult International Business School seeking to join their respective family businesses.

The first session at the roundtable chaired by Doug Baumoel ’78, – a family business consultant – explored the primary reason for conflict in family businesses: interdependence. When families are deeply entrenched in businesses it is not easy to separate emotions from rational behavior especially when there are disagreements over fundamental values, beliefs, or skill sets. Frank Burke who describes himself as a recovering lawyer and spends much of his time now on arbitration for family businesses moderated the next session on methods of dispute resolution. The participants discussed instances when they had to utilize reactive methods such as negotiation, mediation, arbitration, and the most damaging of all – litigation. These stories brought out many insights into the complex world of family businesses and showed the importance of having well-crafted rules, procedures and shareholder agreements via consensus building to proactively anticipate all that can go wrong and prevent the need to have reactive dispute resolution.

The next two sessions at the roundtable were focused on identifying the emotional triggers that breed conflict, especially in an increasingly cross-cultural world. Many students, like myself, are returning to their family businesses in different parts of the world and it is important to understand that there are various cultural patterns that can affect decision making. Dennis Jaffe, a leading academic, highlighted three major ones: Collective Harmony (SE Asia), Individualist (N. Europe, N.America, Australia) and Honor (S. America, S. Europe, S.Asia, Middle East). As families become more and more global they might move from one culture to the other which was highlighted in the enriching experiences of the participants of the roundtable which collectively represented 6 continents. Joan Difuria, who herself had a family business and now provides consulting services to other private organizations, showed how even seemingly trivial matters can act as emotional triggers and can stall decision making in family businesses. Through various anecdotal examples, she demonstrated how communication with low risk was the key to manage such identity-based conflicts.

The real value of the roundtable lay in its diverse group of participants and as a freshly minted MBA student looking to join the family business soon after graduation, I found this opportunity very enlightening as I utilized each of the participants as a source of learning. I also had the opportunity of sharing my story in front of the distinguished panel and was able to garner some great insights which I can put to use once I return. The discussions were stimulating and the stories encouraging as one participant aptly put – “don’t be afraid when you run into conflicts in your family business – you are not alone”. With the number of contacts I made at the roundtable I surely feel confident of entering the world of family-owned organizations.

Ujjval Shah, MEng ’17, MBA ’18, is a third generation member of his family’s business, Prakash Chemicals International Private Limited, in India. 

We are a Tribe

 

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Sabrina Fung Co, MBA ’18

Applying Corporate Best Practices to Family Businesses

 

Cornell University’s Smith Family Business Initiative hosted its first roundtable discussion on family conflict in partnership with the Hult International Business School in San Francisco last April 5, 2018. With the theme of “Conflict: From the Inside Out”, the roundtable discussed how family businesses differ from traditional corporations, and how to adapt corporate practices into family business settings.

What makes family businesses and its conflicts different?

A family business can range from your mom-and-pop stores to big multinationals (SC Johnson, for example). Ideally, a family business is at its core, a business. In practice, however, it is not.

Conflicts within a family business are more common, extreme, and intractable. There are a lot of factors as to why this is, but we focused on two—interdependency and lack of common language and bond.

Interdependency. As Doug Baumoel, one of the roundtable facilitators emphasized, families running businesses have more interdependency with each other and the business. Family members within the business are interdependent on both fronts—the family unit and the business unit. Therefore, conflicts can cross lines and get personal quickly.

Lack of common language and bond. As families grow bigger, there tends to be a lack of common language and emotional ties to the business. This may be especially true for 3rd and subsequent generations as they see the wealth but not necessarily understand where the wealth came from. A common language and bond can be formed by investing in resources that focus on the family’s learning and development about the business’ background.

Corporate practices into the family business

“The best practices for your family business has not been written yet”

 No family business is alike. While a family organization can apply best practices as much as they can, they face organizational politics unique to their own family dynamics. Therefore it is important to adopt best practices that can fit into how your own constraints.

I worked in my family business for five years before coming to Johnson. Based on my experiences, I chose two scenarios that could get… “delicate” with some advice on how to overcome it.

 Scenario 1: Giving feedback

Giving feedback to a supervisor or subordinate can already get awkward. Can you imagine if you had to give feedback to a family member?!

“Hey (insert parent, aunt, uncle, sibling, cousin), you tend to take over during meetings. I think you should step back and allow others to share their ideas. I’ll see you for Sunday dinner!”

I don’t think so.

If family members are already hesitant to give feedback, employees may be even more hesitant due to the repercussions they can face.

Solution: While having non-family supervisors, an independent board of directors help evaluate performance; they may not have their ears to the ground. To get a more well-rounded evaluation, implementing an anonymous 360-degree feedback system can incorporate subordinates’ and colleagues’ feedback.

 Scenario 2: Initiating Change

When your boss or supervisor has known you since birth, it gets hard to be taken seriously. Furthermore, they may already be resistant to change because it can signal the need of letting go of their ‘baby’ a.k.a. family business.

Solution: It may not come as a surprise that research on 100-year-old family businesses show that change is usually initiated by the younger generation.

While initiating change may be easy, getting buy-in from the older generation can be tedious. The facilitators suggest building allies and accounting for intergenerational cultural differences to help bridge the gap.

Allies can be in the form of family or non-family members. The important thing is they understand the business’ history from a different point-of-view than yours. These allies can help you to build a better context of the situation. A non-family member also has a different relationship than what you have with your boss (most likely your elder family member) and you can gain insight on their communication preferences in a professional setting.

Intergenerational cultural differences can be found in 8 scales—communication, evaluation, persuasion, leadership, decision-making, trust, disagreements, schedules. For example, an older generation may follow a hierarchical leadership style. A younger family member may be influenced by a Western education and prefer a more democratic process for decision-making.

Sabrina Fung Co, MBA ’18, is a third generation member of her family’s business, Manly Plastics, in the Philippines. Sabrina is also the immediate past president of the Cornell Family Business Club