A nonprofit publication of the Kentucky Center for Public Service Journalism

Operating a family-owned business can be rewarding, but the challenges increase as the tree grows

By Mark Hansel
NKyTribune managing editor

The family-owned business is sewn into the fabric of Northern Kentucky, but working with relatives is not always easy.

At the monthly Northern Kentucky Chamber of Commerce Eggs ‘N Issues at Receptions in Erlanger Tuesday, some local business leaders talked about how they have managed to smooth out some of the bumps.

Eric Haas of National Band & Tag and Deborah Simpson of Multi-Craft talk about the benefits and challenges of running a family-owned business (photos by Mark Hansel).

Eric Haas of National Band & Tag and Deborah Simpson of Multi-Craft talk about the benefits and challenges of running a family-owned business (photos by Mark Hansel).

Eric Haas of National Band & Tag, and Deborah Simpson of Multi-Craft, joined Larry Grypp, president of the Goering Center for Family & Private Business, for a candid discussion on the topic.

“There are many definitions of family businesses, this is the one that we choose,” Grypp said. “Where two or more related, that’s the operative term, own lead, or make the major decisions for a company. As a group, they truly are the backbone of our economy.”

In the United States, there are 5.5 million family businesses that are responsible for $8.3 trillion of gross domestic product (GDP), according to the Goering Center. They make up 63 percent of the workforce and are responsible for 78 percent of all new job creation.

The number of successful family-owned business in Northern Kentucky was brought into focus when those who were employed by such a company were asked to stand Tuesday. Less than half of those in attendance remained in their seats.

The Goering Center, which is associated with the University of Cincinnati’s Carl H. Lindner College of Business, helps businesses work through issues that consistently arise in family-owned or private companies

Grypp said family business generally begin with an owner founder, and if successful, moves on to a sibling partnership. If the success continues, the next stage of progression is a cousins consortium.

“The issues change with each generation; how decisions are made, how ownership is held,” Grypp said. “At any point it could change back to one owner.”

National Band & Tag, was established in 1902 and has pretty much followed the stages of progression Grypp described. There are now 11 family members employed in the fifth generation company.

The impact of family-owned businesses in Northern Kentucky when those who worked for such a company were asked to stand at Tuesday's Eggs "N Issues. Only a scant few remained seated.

The impact of family-owned businesses in Northern Kentucky when those who worked for such a company were asked to stand at Tuesday’s Eggs “N Issues. Only a scant few remained seated.

“It’s not easy. Let me tell you and it takes a lot,” Haas said. “It was probably 35 years ago when we got to the cousins level and it becomes very difficult to keep things going. It’s been a long process of continuing to focus on keeping the family business together.”

Despite the challenges, the family is determined to persevere, as evidenced by a sign right above its time clock, that reads, “This Company shall continue forever.”

“That speaks volumes to us as a family and it speaks volumes to the employees,” Haas said. “They know that our intent was not to build up the business and then turn around and sell it, make a bunch of money and leave them without a job.”

Haas, who is also a cofounder of Newport’s Hofbrauhaus and the Fort Thomas mayor, has stepped down as president of National Band & Tag, which employs about 65 people. He now serves as a consultant.

Simpson’s father started Multi-Craft with a partner in the basement of the family home.

“We never thought of our business as a family business because they had partnered and they had a lot of kids between the two of them,” Simpson said. “They knew the business could not support all of the children, so they had an agreement that there were no children in the business.”

That changed in 1969 when her father moved the company out of the house, bought his partner out and the company receptionist quit. Simpson had always dreamed of being in business which, at that time, meant becoming a secretary and not much more than that.

“I looked at it as a golden opportunity and went to work and fell in love with the business,” Simpson said.

She worked at different jobs throughout the company and became its president in 1990.

While both companies are family-owned they serve very different customers and their approach to business is consistent with the stage of family participation they operate in.

Haas has reached the cousins stage and beyond, while Simpson is still in the sibling phase. Simpson owns a third of Multi-Craft, as do a brother and a sister.

“When dad owned it, he was the sole proprietor and he made all of the decisions,” Simpson said. “I don’t know if we ever discussed how we would make decisions. We are so blessed as a family and as a business (because) we have the ability to disagree agreeably.”

Simpson can recall only one time when the three did not agree on a direction and she was outvoted.

“I really felt that what I thought we should do (was right),” Simpson said. “Thank goodness we voted because a week later it was clear that had we gone in my direction, it would have been the wrong direction.”

Haas said he can make decisions in that way with his sister but it’s “a whole different ballgame” when it gets to the cousin level.

“Our decision-making was similar in the beginning; my great-grandfather made all the decisions,” Haas said. “He had two sons…and they would make the decisions between them. Then it went down to the cousin level and now another level and we basically got to the point where we still tried to make the decisions unanimously.”

Getting 11 people to agree on even the simplest task can be challenging, but when it comes to making decisions that ensure the continued success of a century-old business, it’s nearly impossible.

Haas credits the Goering Center with teaching the group to make decisions that were in the best interests of the company, which will ultimately benefit the family.

The family partners developed a notebook of policies that helped determine how decisions were made. Using outside consultants, that developed into the company charter.

“I would encourage all of you, take advantage of bringing outside people in because once you get to the cousin level, it’s hard to communicate,” Haas said. “If you have a dominant personality, they are going end up running what’s going on and if you don’t agree with them, nothing is going to happen. Communication really just stalls.”

The companies also differ in hiring policies for family members.

NKY Chamber logoSimpson said Multi-Craft, which now has 47 total employees, will always make room for family members.

“We think it’s important to engage as many of them that want to come in” she said. “What we’ve experienced to date, with our third generation, is that when it’s part of your family, you take a certain level of pride and I think your decision making is a little different.”

That doesn’t mean relatives get a free ride on the family coattails.

“For us, if you want in, as long as you are qualified to do what you want to do, the pay is whatever the position pays and there are no added benefits,” Simpson said.

National Band & Tag previously employed a similar philosophy, but as the family has expanded, things have changed.

“Now there has to be a position available and they go through the interview process just like anyone else would,” Haas said. “That part is a little bit tough.”

Stock is more of a company asset than a benefit of ownership for family members in both companies.

At Multi-Craft, a family member must be working at the company to hold on to stock. If they leave the company, retire, or become disabled, they must sell the stock back to the company.

“If you’re not there every day, we don’t believe it’s fair that you have a say in it,” Simpson said.

National Band & Tag requires all stock to be gifted to the next generation upon retirement or separation.

“You have to have be working or been offered a job to own stock in our company,” Haas said. “So the stock is virtually worthless to us as individuals.”

Haas and Simpson agree that the goal must be to continue the legacy for both the family and the employees.

“It can never be for personal gain, it always has to be what is best for this business to move it forward,” Simpson said. “To make sure that it’s still around and that the decision is benefiting everyone in there because you are making decisions for, in our case, 47 other families.”

Contact Mark Hansel at mark.hansel@nkytrib.com

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