CSUF Program Helps Family-Owned Businesses Stay That Way
“Keeping it in the family” has become a tradition for the thousands of Orange County’s family-owned businesses. The Family Business Council at California State University, Fullerton, aims to keep it that way, by helping family businesses develop solid strategic planning and tackle their biggest structural challenges.
The council was organized in 1994 after insurance agent Rachel Owens and a colleague from MassMutual heard a presentation on a similar program at Kennesaw State University in Georgia. Shortly thereafter, MassMutual presented the program concept to officials at Cal State Fullerton, which endorsed the idea.
The husband-and-wife team of Judy and Dave Harman helped co-found the council as part of that initiative by then-dean Milton Gordon, now the school’s president.
“Gordon wanted to augment the school’s ties with commerce and industry,” said Dave Harman. “So he was always looking for areas that needed to be addressed.”
Family businesses started getting recognition the same way general entrepreneurship did 10 to 15 years ago, according to Dave Harman, because Orange County is experiencing an unprecedented generation transfer of wealth stemming from businesses that started in the two decades following World War II.
Organized and supervised by the College of Business Administration and Economics at CSUF, the council gives its members the opportunity to learn from experts in an academic setting.
During each academic year, the council offers two major seminars featuring the nation’s leading experts, eight workshops on topics of special interest and confidential discussion groups.
The council works to develop relationships with other business owners. Members have direct access to the resources of the university as well as the council’s professional sponsors and advisors.
The council, which receives its funding through memberships, sponsorships and the university, also targets professionals like CPAs and attorneys who work with family businesses to provide expertise for family-owned businesses.
Membership is open to family-owned and managed businesses. Key topics include family relationships; communication and conflict resolution among family and non-family members; succession and estate planning; traditions and values; power, control and compensation; strategic planning and other issues surrounding leadership succession and ownership transfer.
Family businesses generate about 60% of U.S. gross domestic product, according to general available estimates. The council doesn’t maintain “hard” data for Orange County, but council officials believe the national numbers are probably about the same for OC.
Family Business Council director Mike Trueblood estimates that the U.S. has 13 million family businesses, and that Southern California has about 10% or 1.3 million of those businesses.
The council usually dissuades members from selling their businesses, although sell-offs do happen, especially given OC’s unprecedented boom.
“Some family businesses are ‘selling out’ and getting acquired,” said Trueblood. “But they’re walking away with a fair amount of cash, which allows them to continue a decent lifestyle.”
Still, Dave Harman maintains that these families and the economy as a whole have more to gain than lose by hanging on to their businesses. He usually works to dissuade family firms from selling the business because he thinks promoting family-owned business helps the economy.
“These businesses think from generation to generation, not from quarterly earnings to quarterly earnings,” Harman said. “I think that provides a big part of the success story of this country.”
The council focuses on family-owned businesses that have “made it,” and have 25 to 50 employees. The business has to want to stay family-owned, according to Harman.
“We’re after businesses that are family-owned and want to stay that way,” said Harman. “It’s more a function of people than dollars.”
The council encourages family businesses to take profits and draw them out where they can so that they keep the business going.
“We advise them to buy the real estate so that they own the buildings in which their company operates,” Harman said.
Council members include many car dealerships, as well as many construction companies like RJ Mayor, and steel firm Orange County Erectors. In retail, there’s Anaheim Western fashion company Boot Barn, with 25 retail outlets. Another major family retail firm is Real Lumber. Hill Bros.’ Chemical is a third-generation family business involving five family members.
Construction is the biggest family business sector, according to council director Mike Trueblood. He also points to the numerous family industrial producers like Cascade Pump, Grade A Metal and Orange County Plating.
“There are some very large family-owned businesses,” said Dave Harman. “There is one 140-year-old company incorporating 329 cousins, and they’ve managed to keep the stock in the family. They are big, and they stay quiet.”
According to Harman, the council’s smallest family business member records $5 million in annual sales, and has 25 employees. The biggest has 7,000 employees and $750 million in annual sales. The average family enterprise has 200 employees and $34 million in annual sales.
The Harmans passed the reins of the council to Trueblood in January. Judy Harman still fills a day-to-day advisory role, and Dave runs what he calls “affinity” groups.
The affinity groups bring together people with similar backgrounds that have the same level of experience, similar issues and the same level of responsibility. His current group is for family business CEOs, to give them a place where they can exchange and develop new ideas for running a family business. He said he will start a next-generation successor affinity group in January. n
