Family businesses constitute a cornerstone of the American economy. Nearly 90 percent of all businesses in North America are family-owned. In the U.S. alone, family-owned businesses account for about 50 percent of GDP. Additionally, some 60 percent of the United States workforce is employed by a familyowned business.
While these statistics are impressive, it doesn’t mean running a family-owned business is easy. They often have a difficult time sustaining
from one generation to the next. Generally speaking, about 30 percent of family businesses continue into the second generation, with 12 percent staying viable for a third generation, and only three percent surviving to a fourth generation and beyond, according to the Family Business Review. As you can imagine, succession planning and transitions are extremely important.
Peoria has a rich history of family businesses, some of which have been here since very near the city’s incorporation. One such family business is A. Lucas & Sons, a steel fabricator that has been open since 1857. Now owned by the Hanley family, it has the distinct privilege of being Peoria’s oldest manufacturing company.
When asking Margaret Hanley, current CEO of A. Lucas & Sons and the third generation in her family to carry on the legacy of Adam Lucas, about the company’s longevity, it becomes apparent that they have a tradition of mentoring the next generation. It all started with her father acquiring the business, who then found a mentor in Sam Joseph, a longtime employee. “For me, my mentor is Chris Hanley, the shop foreman and my uncle,” says Hanley. “He consistently and continually shows me on a daily basis the true meaning of working hard and doing what is right for our customers.” Mentoring is critical in helping a family-owned business survive from generation to generation. “The amount of knowledge we can pass from one generation to the next is magnified as each year passes,” she adds.
Another secret to the success and longevity at A. Lucas has been succession planning. Margaret says that when her father was beginningto wind down his career, she was still rather young. Luckily, her parentshad formed a strong relationship with their CPA, Terry Machetti. Margaret gives a good deal of credit to that relationship, saying, “It was my dad and Terry who helped make this a smooth and successful transition. Their well thought-out plan was executed and has enabled this company to be successful.” Through this combination of transition planning and mentoring, A. Lucas & Sons has been extremely successful.
There is one other element that is extremely important in this equation, and that is the relationship between the retiree and the successor. As one can imagine, it can be very difficult to let go of a business that you built and led. The lingering presence of a former CEO can pose a threat to establishing the credibility of the new CEO. In asking Margaret about this issue, she replied, “I was very fortunate that my dad never clung to the business after his retirement. He has always been there to help guide and advise me.” It’s important to find the right balance for the former CEO’s involvement—and it could be different for every firm.
Though the list of what makes succession in family businesses work is surely much longer than what has been presented, mentoring, transition planning, and finding the right level of involvement for the exiting CEO are three essential components in the process. These tips have worked for many firms and could help in your transition of leadership, too. Kudos to A. Lucas and all the other family-owned businesses in our community! You are part of what makes our community strong. iBi