The leadership crisis in family business: Next generation CEOs seek help in executive coaching

Originally published on Page A1 of the York Daily Record/Sunday News on Sunday, September 30, 2012.

Daily Record/Sunday News

Shawn Wiley didn’t apply to be a CEO. It just happened one day.

In 1999, his father, Robert, died of a heart attack, leaving behind the company he created in 1973 and its 13 lunch trucks serving the hungry workers of factory-rich southcentral Pennsylvania.

At first, business blossomed for Continental Food Service’s 30-year-old executive — trained by the man before him to do the books, make the sandwiches and keep the employees happy.

Two years later, the Sept. 11 attacks rattled the nation’s economy, and recession followed.

“Shops of 60 employees may now employ 30,” he said. “You’re not going to do the same business.”

And the shy CEO, born and raised in York County, found himself with fewer mouths to feed in an era of globalization, layoffs and competition no one warned him about.

“I certainly don’t feel I was prepared for this,” he said.

Leadership succession has been, and always will be, crucial to the survival of the family business, especially as more and more baby boomers begin to retire.

But this latest generation of executives faces unique hurdles, marked by the changing economic climate and struggles over progress that can pit the blood line against the bottom line.

Take, for example, Troy Billet. He was fired once and quit twice from Billet Industries, the company his father, the current CEO, founded in 1972 after serving in the Vietnam War.

Today, the 43-year-old prepares to succeed the man with whom he doesn’t always see eye-to-eye.

It’s a clash that nearly knocked the firm from family hands.

“You always doubt your ability to lead,” Troy Billet said. “You always wonder if you’re capable of doing it.”

He and Wiley — along with 14 other CEOs in York County — have called on executive coach Michael Falco, 54, of Spring Garden Township.

Two years ago, the hard-driving former president and CEO of Topflight Corp. found a niche in helping leaders of small family businesses using one-on-one coaching, focus groups, 90-day goals and what he calls “pigheaded persistence.”

Every day, he pushes executives to tackle a problem embodied by what he dubbed “the most common phrase in York County.”

“Why do you do your job that way?” Falco asked, as though asking a CEO.

“Because that’s the way I’ve always done it.”

Leadership crisis

Most multi-generational businesses trace their genesis to a basic concept:

“Someone liked making something,” Falco said.

That someone, the firm’s founder, was “a technician, a doer” who probably didn’t have a strategic plan or a degree in business management. “They were haphazard about how they grew their business, and the economy allowed them to be,” Falco said. “You didn’t have China involved. You didn’t have Mexico involved.”

And many are still spinning their wheels in York County, where more than half of the 950 companies with sales of less than $15 million are run by families, said Falco, who commissioned a study on the issue before opening his consulting business in MANTEC’s office on North Hartley Street in York.

In the Lancaster-York area, about 80 percent of employers are family businesses, said Mike McGrann, executive director of the S. Dale High Center for Family Business at Elizabethtown College.

The 17-year-old organization dedicates its research to helping family-run enterprises — one-third of which, according to statistics, will survive into a second generation, McGrann said.

About 9 percent are still viable into the third generation, and 3 percent survive to the fourth generation and beyond.

It’s a startling statistic — until one considers that generations span multiple decades, McGrann said. Family firms, he added, mimic and often surpass the longevity of non-family firms, earning a 6.65 percent greater return on assets.

“There’s more trust,” he said. “They can make decisions faster. They can respond to the markets faster. They don’t have 12 levels of bureaucracy to go through.”

But this success, more often than not, comes with conflict.

Seizure of management rights by inactive shareholders — family members who aren’t employed by the organization — often pose the biggest hurdle for family business leaders, McGrann said. He used the example of a hotel business in which a shareholder would order the front desk attendant to change the flowers and give feedback about the staff.

“They feel like they’re entitled to do it because they saw mom or dad do it,” he said. “Management is an opportunity for qualified shareholders. It isn’t an entitlement because of your last name.”

CEOs who take over the family business today might face other obstacles forged by the previous generation, including outdated leadership skill sets based on “the economy they were successful in 10 or 20 years ago,” Falco said, “not in today’s economy.”

Such habits include emotional ties to longtime employees that can breed a poisonous culture of entitlement.

“When the first generation started hiring people, they felt a sense of loyalty to those people,” he added. “They felt, ‘I’m providing this person with a job. I’m feeding their family.’ ”

Those employees aren’t always trained enough to solve problems by themselves.

“As customers become more demanding,” Falco said, “many of the jobs outgrow the ability of the person doing the job — especially with managerial or supervisory positions.”

Instead of trouble shooting, employees might knock on the door of the CEO with dilemmas that wouldn’t be a senior leader’s responsibility in a non-family organization.

“Many (CEOs) follow what their fathers did,” he said. “They’ll grab the person and run out to machine 32 instead of asking questions about what the problem is and providing suggestions so the person can go out and fix it. You want to teach people how to fish, not fish for them.”

And old habits tend to die hard, especially when they’re lingering around the office.

Cue the former CEO — a parent or grandparent of the current CEO — who hangs out in the plant for no particular reason, failing to relinquish a role that became an identity.

“Here’s another big problem,” Falco said. “The father says, ‘I’m retired,’ but still comes to the office to putz around. Why? He’s done it for 30 years.”

The website fight

Troy Billet wanted a website — something to push his Hellam Township machine part plant into the future.

“We always, as a company, went with the punches,” Billet said. “We never looked five to 10 years down the road to see what we wanted to be when we grew up.”

The company’s first project, he said, was a metal part used to butcher chickens.

By 2005, the company craved exposure to new clients in the energy industry, its growing income stream.

“We always relied on word of mouth and reputation to gain business,” Billet said. “As you know, that doesn’t work in this economy.”

Keith Billet spurned his son’s website idea. For a while, the modest tool maker, never one for the limelight, believed it was a waste of money.

A year later, the in-fighting came to a head.

“The company was doing poorly,” Troy said. “We weren’t seeing eye-to-eye on the direction we wanted to go.”

Troy started his own small business and planned to leave the company to avoid jeopardizing his personal relationship with his father.

The men hired outside management, agreeing to grant them ownership rights if the company turned around.

Billet Industries was about to leave the Billet family — until “my father and I came to the realization that we could do better than the outside managers we hired,” Troy said.

“We both realized I was being unrealistic with what I thought he should be doing, and he was not understanding the value I was providing to the organization,” Troy said.

Ultimately, Keith gave in. The website, Troy said, is now a primary sales tool for the company.

“I’m kind of old school. I’m more the tool maker, more so than the manager,” Keith said. “(Troy) has brought on things that I would not have. But the success of the future is going to depend on his skill set more so than mine.”

‘Geeze Louise’

Shawn Wiley rated his communication skills a 4 out of 10.

His self-assessment worksheet, used by Falco to gauge baseline skills of CEO clients, resembled a genuine introspection from a man striving to improve himself and the company created by his father, who drew on experience as a cook at Joe Bury’s Famous Hamburgers.

“I was really impressed with how honest you were,” Falco said. He popped the cap from a black marker and moved toward a dry erase board, scribbling equations to calculate the cost of manufacturing per cheeseburger.

“All too often,” Falco added, “an owner has an idea of what he wants the company to be. Where he struggles is the ability to communicate it.”

In his fifth one-on-one coaching session, Wiley reviewed progress on 90-day goals. Organization — accounting for waste in five separate revenue streams — was a high priority.

Overtime pay, Wiley said, jumped 385 percent over last year for the West York company’s 30 employees. Volume didn’t dictate the increase.

“Geeze Louise,” Falco responded.

Wiley pulled out the spreadsheets.

“We’re keeping track of more daily occurrences and noting what effects have happened and how they were fixed,” he said. “We’re sharing it with our employees to let them know how well we’re performing.”

In 2000, mobile lunch truck routes to local businesses accounted for 100 percent of the company’s business. Today — as its catering customers dry up — that sector makes up 31 percent of annual activity, Wiley said.

Continental Food Service expanded its portfolio, offering vending machines, office coffee and water cooler services and Sammy Sandwich, a fundraising program.

Costs shifted. In 1999, the annual fuel budget for 13 catering routes was $30,000. Today, with the price of gas, the routes cost more than three times as much.

Sometimes, Wiley confessed, he gets flustered keeping tabs on it all.

For work/life balance, he rated himself at 6 — not a far-fetched assessment for someone who lists his home phone number on his business card.

“How many owners of any company give out their home phone number?” he asked. “That’s how important service is to me and my company.”

This summer, he returned from his first vacation in seven years — a trip to Alaska — and stayed awake working 38 hours straight.

“I’m surrounded by all this food,” he said. “But there are times when I forget to take lunch, or they bring it to me.”

‘Our own little box’

For now, Keith, the 65-year-old CEO, keeps the big office at Billet Industries.

“I may not totally retire ever,” he said. “I don’t know.”

One day in June, his cushy red office chair sat empty, a few outdated newspapers stacked on the desk.

“That’s a pretty big desk for opening mail,” Troy joked.

Keith explained himself later.

“I come to work every day,” he said. “I may leave early. I may not show up.”

The father-son management team is on better terms now, as Keith begins to allow his son to set the company’s new direction.

“It comes down to maturity,” Falco said. “You have to be mature enough to separate the two. The family versus ‘I have a business to run.’ ”

Gradually, Troy has begun to tackle the challenge of ineffective workers — some of whom he grew up with as a kid sweeping the shop.

Some have been there longer than he has.

“We’ve been friends over the years,” Troy said. “You tend to be paternalistic. That’s how my father ran this company. He took care of everybody. That’s one of the things I’m trying to overcome at this point.”

Instead of grabbing a pink slip, Falco recommends placing these employees in different roles, if possible.

For extra help, Troy joined Falco’s Executive Peer Forum group about one year ago. The program gathers executives from area businesses for a monthly four-hour focus session to bounce ideas off each other.

Falco moderates the discussion and helps CEOs develop strategic plans and recognize what might happen if goals aren’t achieved.

“As a family company, we often live in our own little box,” Troy said.

“We don’t know what we don’t know,” he added. “You can go to college and get a business degree, but they don’t teach you how to do strategic planning and how to have a vision for where it is you want to go.”


— About 29 percent have a formal management succession plan.

— The lack of family unity is a concern for 30 percent of these firms.

— About 75 percent have written job descriptions outlining responsibilities, minimum qualifications and reporting structure.

— Half have a written strategic plan.

— Family businesses generate 6.65 percent greater return on assets than non-family businesses and contribute64 percent to the gross domestic product.

Source: 2012 Family Business Confidence Survey, S. Dale High Center for Family Business at Elizabethtown College


Name: Michael Falco

Lives in: Spring Garden Township

Age: 54

Previous management roles: president and CEO of Topflight Corporation, a Springfield Township-based manufacturer of printed labels; vice president and general manager of Adhesives Research; area manager for Johnson & Johnson; business and marketing development a Procter & Gamble division

Clients: 16 York County executives

Services: Facilitates forum groups that allow CEOs to learn from each other; meets with senior management teams to develop companywide goals; one-on-one coaching for business leaders

Why coach? While at Topflight Corporation, Falco belonged to a peer forum group. After leaving the company two years ago, he began interviewing local executives to develop a market-specific vehicle for leadership development. Then, he began cold-calling, targeting CEOs that he thought might need the service.

“I have a passion for helping leaders develop skill sets and making them and their companies more successful,” he said.


Other executive coaching programs: Vistage, Young Presidents’ Organization


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