Finding Your Niche in the Family Business

Discovering the right fit for each relative can make the difference between success and failure-for the company and the family alike.

By Gwen Moran

After New York hotel magnate Benjamin Denihan Sr. died in 1986, he bequeathed Affinia Hospitality - New York City's largest owner-operator of all-suite hotels - to an equal partnership of four sons, a daughter and two sons-in-law. The new partners worked diligently to find roles that fit their talents and interests. Then came the 2001 attacks on the World Trade Center and their devastating effects on New York City's hotel industry. Suddenly a $100 million company with nine hotels and some 1,000 employees faced a shaky future. And the Denihan heirs were forced to take a hard look at how their jobs needed to change to ensure the company's survival.

"Right after 9/11, things were really bad," recalls Brooke Barrett, Benjamin Denihan's daughter and one of the original seven equal partners. "We had this big meeting where we said, 'Let's take a look at our roles and responsibilities, how we can cope, what more we can be doing to be sure the company survives.'"

To weather the impact of the terrorist attacks, Affinia would have to change its approach to running the business. Without an emphasis on growth and development, the company might not survive. That meant the six partners would have to re-examine their own roles - no easy task for siblings who'd invested years in the jobs that best suited their strengths. But it may be one of the most vital tasks a family business faces.

Clear division of responsibilities and accountability are critical for family business harmony, argues Len Green, a family consultant based in Woodbridge, N.J. Green advocates adopting a system that allows family members a certain degree of autonomy while avoiding a sibling hierarchy.

The Denihan partners were luckier than most in this sorting-out process. By the time of the 9/11 attacks, they'd already been through more self-analysis than the characters in a Woody Allen movie, beginning a year after their father's death. For the first year after that loss, the survivors continued to work at their old jobs without discussing what to do next or even choosing a new CEO.

"It's not like we weren't speaking," Brooke Barrett says. "But no one talked about the big white elephant in the room."

At a family business seminar in nearby Princeton, N.J., they heard Illinois-based consultant John Messervey expound on his favorite subject: the critical importance of finding meaningful roles for family members within a family business, instead of becoming the employer of last resort for relatives who can't find work elsewhere.

"If you say, 'Go over there and make widgets for the next 30 years,' without knowing that the family member wants to make widgets, you're writing a prescription for disaster," Messervey explains.

The Denihan heirs subsequently hired Messervey to help them figure out their appropriate niches at Affinia. It's an intense self-examination process of meetings, skill assessment tests and retreats, all aimed at matching an individual's interests and skills with the company's needs.

By September 2001, "We had evolved to an attitude of 'let's talk this out,'" Barrett recalls. "That was a very difficult time, but we had gotten better at saying, 'I'm good at this or that,' which helped us get through."

Out of the talks came a whole new game of musical chairs at Affinia's top levels. One partner - Benjamin Denihan's son-in-law John Ferrari, now 49 - had already been involved in growth and development, so it was natural that he would continue in that role. But moving Donald Denihan, now 43, to focus fully in that area was a little less obvious. Although he'd been involved in development in the past, Donald's primary forté was technical services, including the hands-on renovations of many Affinia properties. He was the point person for most of Affinia's construction projects because of his architectural aptitude.

Laurence Denihan, now 39, the youngest partner, had been overseeing a diverse array of marketing, sales, technology and finance functions. But over the course of several family meetings about the future of the company, Laurence volunteered to get involved full-time in finding new revenue sources.

That meant more shuffling to find someone to take over the major brand overhaul that the company had just completed. In this case, gregarious and upbeat brother Daniel Denihan, now 56, previously head of human resources, added this responsibility as well.

Brooke Barrett, now 53, who had experience in managing several properties and had recently served as head of a company-wide employee coalition, continued to oversee operations and some finance functions. And Patrick Denihan, now 51, the company's executive director, would keep his hands in a bit of everything, pinch-hitting when needed in various roles.

It's too soon to judge whether the Denihans' new assignments at Affinia will pay off. And Brooke Barrett admits that, while the testing and talking that her partners do are important, they don't necessarily make the process of assigning roles an easy one. She recalls a time when younger family members came on board and felt as if they were getting responsibilities that other family members didn't want. Younger brother Laurence, who joined Affinia in 1986, was put to work in the laundry because that's the position that was open. Although he wasn't initially happy about the assignment, Barrett says, Laurence used it as an opportunity to show the rest of the partners what he could do. After he made a number of improvements in the laundry systems, his ambition ultimately led him to the position of managing director of finance.

To overcome hurt feelings, family members participated in a series of meetings and discussions to determine how the newer family employees would best fit within the organization. Some of those meetings, Barrett says, were heated.

Younger family members "wanted to make changes in who was responsible for what," recalls Barrett. "They said that they were getting the leftovers, the jobs that no one else wanted. That was their perception, but perception is reality."

No matter how heated the discussions got, however, Patrick Denihan says that there was another motivating factor that helped them work out their differences. Their father, Benjamin Denihan, had fought with one of his brothers for more than two decades over disagreements about how to grow the family's laundry business.

"They made two attorneys very rich," Patrick recalls. "They sued each other instead of talking it out. We spend a lot of time making sure that doesn't happen in the future."

Toward that end, Affinia now has a protocol for new family members to join the business or to receive funding to start their own ventures. Each new hire is required to go through an 18-month internship program. Once the program is over, family members are terminated, as any other employee would be. Then they can apply for a specific position within the company. But family members need to show how they'll contribute to the company. Recently, the company has also agreed to let relatives present proposals to start new businesses. The company will either bankroll the proposal or, if the partners reject that option, they will put the individual in touch with independent financing sources.

A merit-based system:
Albert Smyth Fine Jewelers

When Tom Smyth first joined his family's fine jewelry and gift store in Baltimore in 1970, dividing responsibility among his relatives was a simple matter. At the time, Albert Smyth Fine Jewelers had only 20 employees, so it could support only one member from each of the founder's third-generation families.

Since one of Albert Smyth's five children had no children of his own, four third-generation cousins ran the shop after their parents retired. When cousin Chip Smyth left to start his own business, the remaining three cousins shared equally in the ownership as well as the president's title: Tom Smyth, now 52, was president for marketing, growth and advertising; Bobby Smyth, 54, for operations, personnel and jewelry merchandise; and Buzz Getschel, 55, for giftware merchandise and corporate business.

Under this troika, the shop expanded, but so did the Smyth family, as well as the number of relatives hoping to work there. By the late 1990s, the partners anticipated a day when more family members would want to join the business than the business could support. So in 2000, they instituted a merit-based system of hiring for relatives and non-relatives alike.

"If you're a family member and you have value, you're welcome," says Tom Smyth. "If you're a family member and we wouldn't hire you without the name Smyth, we're not going to hire you just because your name is Smyth."

Although the company hasn't turned down any family applicants yet, Tom Smyth says that's because the policy is widely known, so relatives understand that they must acquire a skill set - a college degree or gemology diploma, or specialized experience - before they apply. That skill set will determine where the family member will be placed within the company. Then performance-based reviews, conducted by a non-family member, will determine whether the family member has a future in the company.

But sometimes, Tom Smyth admits, making a family member a good fit isn't an easy task right off the bat. Recently, when a relative wasn't performing as expected, the three partners met and decided to put that person on probation. That meant that the person had six months to show a marked improvement in job performance, or the job would be terminated.

"This is a relative of mine and someone whom I've seen born and raised and now I'm saying, 'If you don't change, you'll be fired,'" he explains. "But if you don't do that, the business is going to suffer."

Smyth recalls that the employee was the child of one of the company's partners. When the decision was made to put the employee on probation, the parent partner was hesitant.

"I do agree with the policy in theory," the partner said. "But now that it's my child, I feel differently." In the end, Smyth recalls, "We went back to our agreement and decided that this was the best thing to do." Ultimately, the family member's performance improved and the probation ended. Today, Smyth says, that relative is a valuable member of the team.

Gravitating naturally:
Plaster Fun Time

Some smaller family businesses don't need formal structures to assign roles and responsibilities. Nancy Selvaggi of Boston and her three sons launched Plaster Fun Time, a group of six drop-in art studios for children. From Day One, says Selvaggi, she and her sons each gravitated toward different areas - marketing, leasing, operations and bookkeeping - with little overlap.

"You can't all grow up together and not know each other's strengths," contends Selvaggi, who is 61. "Our strongest asset is the knowledge of the other person and being able to count on them."

To be sure, says her 38-year-old son, Joseph, some tasks find more takers than others. "When it's time to look at a contract or pay the bills," he says, "that's not necessarily fun. It's not something everyone rushes to do. But [sister] Laura is naturally careful with money and wanted to be sure that we're not going broke, so she took that over. Since I had looked over one of the leases, it was natural that I'd look at the next one. That's how we found our responsibilities."

Autonomy has its downside, of course. When the Selvaggis decided to buy their own vending machines instead of leasing them, Joseph took on the task of researching the project and making the purchase. Based on his preliminary Internet research, he chose a provider that turned out to have a dubious delivery record. In the end, the decision cost the company $12,000.

"It was hard to go in there to my partners and admit that I'd made a purchase before doing due diligence and may have squandered a great deal of the company's money," he recalls.

But instead of re-thinking each partner's autonomy, the Selvaggis simply resolved to be more careful about due diligence, especially when dealing with online companies. The key, Joseph says, is an atmosphere of professional trust. "It's trial and error and ultimately having the fortitude to come back to the table and make it work."

But John Messervey, the consultant, warns that it doesn't always work out so well. He says he often sees situations in which two siblings ended up vying for the same spot. Len Green, who operates four family firms (including his consulting firm) with his wife and their three children, saw this in his own real estate business. Two of Green's daughters wanted to take over leadership of the company. At first, Green insisted that one daughter find another area in which to focus. However, the women met and discussed their father's concerns. They worked out an agreement and presented their plan to be co-CEOs.

"They told me that there was no reason why this wouldn't work and explained that they would each have different areas of responsibility," Green says. "They're not reporting to each other. They pointed out that we have checks and balances in place for them to turn if there is a difference of opinion. What they said made sense, so we're giving it a try. You have to be flexible."

Keeping the peace

Another common element of harmonious family businesses, says Green, is the presence of an objective third party to whom the family can turn in case of conflict over individual roles and responsibilities.

"In my father's company, the advisory firm was wonderful," he says, "but they were his lawyer, his accountant. He played golf with them, and they answered to him. When someone came to them with a new idea, they'd look to him to see how to react." By contrast, Green's advisory board includes 18 professionals who have no ties to any family member or to the company.

Another peace-keeping measure in the Green organization is its Family Business Council, which includes all Green family members involved in the businesses as well as their spouses. The council meets regularly on an informal basis, allowing family members - and their spouses - to discuss their feelings about the businesses.

The Smyth family took that notion a step further and appointed a general manager who was not a member of the family. All family members, with the exception of the three partners, report to the general manager, ensuring that family biases don't affect how employees are evaluated.

Patrick Denihan of Affinia agrees that sometimes the best person to fill a specific role isn't necessarily in the family, especially if that would mean that a family member was taking on a position that was a bad fit. When that happens, he says, "We're not afraid to go outside and hire people."