How to Make a Family Business Last Generations

In Partnership With WSJ. Custom Studios

Communication is key when you're in a family business. Failing to communicate can lead to problems with entitlement and expectations later on.

Thomas Calandra, age 25, is the owner of Calandra Enterprises. At least that's how he introduces himself to customers and clients of the bakeries, hotels and restaurants he runs with his sister, father, uncle and grandfather. His grandfather, Luciano Calandra, is a Sicilian immigrant who came to New Jersey in the 1950s to work in his cousin's bakery. There, he made bread, swept floors and ran the register, saving up enough money to open his own shop in Newark, New Jersey in 1962 — Calandra's Bakery.

“My grandfather always says that's his favorite year because not only did he open the bakery, but he also had his first son, Anthony, my father," Calandra says. Four years later, a second son, Luciano Jr., was born.

There were a dozen bakeries in the area back in the '60s, and Calandra's Bakery, a 600-square-foot spot with six employees and one oven, has outlasted them all. Thomas credits this success to his grandfather's hard work, determination and artistry. He makes everything by hand in a brick oven with no chemicals, no preservatives and just four ingredients. “And he's been able to maintain those core ingredients — and core values — for more than 50 years," he says.

But how much longer will it last?

“They have a saying that scares me the most about being in a family business," Thomas says. “The first generation starts the business. The second generation expands the business and the third generation ruins the business."

He describes watching a famous local furniture and jewelry store — family-owned — rise in the hands of the elders and crumble in the hands of the grandchildren.

“They wound up destroying the business, not watching it, letting it go down the drain," he says. “A lot of companies are like that, but my sister and I have instilled in our brains that we're not going to be that company."

Passing the Baton

Thomas's father and uncle joined the business in their teens and opened a second bakery in Fairfield, New Jersey, in 1992. Over time, they took the reins of the company, managing the bakeries and then diversifying into hotels and restaurants.

“From six employees to 700, we're very lucky," says Thomas, who, just like his father, joined the business in his teens and is now running operations across multiple properties.

“I consider myself an owner, even though my father and my uncle are still technically the owners," he says. “I would call myself a vice president."

Technically, though, Luciano Sr., now in his mid-80s, is still in charge. When he's not at his home in Florida, he's in the New Jersey office daily, watching over the family's three bakeries, four hotels and three restaurants dotted across Essex County.

Great partnerships abound, and Calandra Enterprises is run with mutual respect and love, but are the Calandras setting themselves up for problems down the line?

Ted Clark is the director of the Center for Family Business, Northeastern University, and an executive professor in the school of entrepreneurship and innovation at the D'Amore-McKim School of Business, also at Northeastern University.

“Although we're called the Center for Family Business, I joke that we talk about all kinds of things around the periphery of working with family, not just business," Clark says. At the top of the list: the importance of communication.

“Sometimes the younger generation comes into the business thinking that within a few years they'll be running the company. Meanwhile, the senior generation may be thinking they'll never retire — but they won't say it because they want the younger generation to continue doing a great job," Clark says. “The younger generation may look for a succession plan; the seniors may avoid putting one in place."

“The longer you don't talk about it, the longer there's no conflict. But eventually, the conflict will come," Clark says. “You can't communicate too much when you're in a family business. You really want to make sure that everyone is aware of what's happening in the company and why — or else you can develop an insidious problem later on with entitlement and expectations."

He recommends setting up regular family meetings where everyone has the opportunity to discuss issues that are of importance to the family — and leave business issues to business meetings. “Hopefully, by separating family dynamics from the business, you can run the business more effectively."

Joan Crain, a Global Family Wealth Strategist at BNY Mellon Wealth Management, adds that family members “should work together to recognize the needs and contributions of each family member to the business as a whole. As the family and the business grow, it becomes increasingly important to clarify the roles each member will play." She says that family mission statements or constitutions — written agreements that clearly define family roles and responsibilities — can be useful in this regard.

Clark concedes that it can be difficult for families to have these discussions. He recommends bringing in a neutral third party as a facilitator to manage the conversation. “It may sound like doing so will take any kind of personality or emotional love out of the conversation, but actually, when you institute a process, you're more able to have a calm, productive discussion," he says.

Family businesses also may benefit from creating a board of advisors to help bring in new perspectives, challenge owners to take the business in new directions, crunch numbers, make investment decisions or help manage succession more clearly.

When formalizing arrangements, having a written buyout plan is critical to help ensure the business continues on course should a tragedy occur involving the principal owner. Such a plan might spell out a path for certain children or even key employees to purchase the business. Similarly, it may be wise to get life insurance to help fund a buyout or keep the lights on while the family figures out what to do next.

What's next for Thomas Calandra? He's thinking about making the business last another 50 years. “I have a wonderful girlfriend I plan to marry one day," he says. “Definitely having kids and getting them in the business, it would be a dream come true bringing a 12-year-old kid into the bakery with his lunchbox and showing him the operation. My father did it with me. My grandfather did it with him. I can't wait."

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