Business Management

Clogs to Clogs in Three Generations

A good friend introduced me to the above statement when we were discussing the concept of building a family fortune. For those not familiar, clogs (for this discussion) are traditional carved-wood shoes of northern Europe, and the phrase describes the following process:

• An individual (the first generation) with little to no money scrapes and claws his way to success through nothing other than will and determination;
• His son/daughter (second generation) elevates the “family business” to “the next level” through a combination of understanding the parent’s “hunger” and applying his or her education and experience to move the business forward because he/she remembers “those hardscrabble days” of watching mom and dad “sweat it out” about meeting payroll or taking out yet another mortgage on the property to keep the business going. While this is going on, the second generation is giving “the best life possible” to his/her children (the third generation) to both secure the business and keep their promise to provide the child with a better life than the second generation ever had;
• The third generation destroys the business through acts of self-entitlement.

This hit me a little close to home as one of my grandfathers was an immigrant who (in the classic story) immigrated to the US through Ellis Island, NY in 1901, settled in upstate New York, scraped, saved, and owned a grocery store, then (ultimately) purchased and operated a “family vacation ranch” in the Catskill Mountains (similar to that portrayed in the ‘80’s movie Dirty Dancing).

My grandfather had only one child; a son. My father was provided with a life my grandfather only dreamt about in terms of material objects, education and opportunity. My grandfather had the best of intentions…to elevate his progeny’s economic and social class through taking calculated risks.

My father, on the other hand, held a keenly developed sense of self-entitlement. He did not continue to run the family business, opting to take a government job in research (less risk, more security), sold the ranch, and used the proceeds to support my grandmother until she passed away. In our home, he was the first to eat, the first to speak, and the only opinion presented as fact (be it right or wrong).

In my family, the business never got to “second generation” level, much less third.

Some of you reading this are now second generation dealer operators; and, like all of us, you want nothing but the best for your children. The following thoughts are offered with the predication your child(ren) will follow in your footsteps and continue your family dynasty:

• If your child’s passion does not follow the business, do not force it upon him/her.
• Some family members were not cut out to be “Car Guys”, and never will be (no matter how hard you try to shape them);
• Education was not enough for your dad (or you) to either acquire (or take over) the franchise. You earned it through hard work and determination, and it should be no different for your child.
• “Working your way up” while having an income, security, and lifestyle beyond that of an incumbent who is not a family member guarantees failure. Give him/her the same pay plan and living conditions as anyone else who would hold the same job, and do not allow him/her to advance within the company until he/she can demonstrate absolute success in the role being currently held. Do not use a time line (eg. Three months in sales, three moths in parts, etc.). If this means “kick ‘em out” so they make decisions and pay their own way, so be it…you are considering the transition of a multimillion dollar company to another individual, and it should be no different whether that individual is a private party or your child.
• Teach your child to accrue…in all things…save, save, save…accrue for all expenses, save enough to become self-insured, become cash-heavy and solvent. This financial independence will be an absolute necessity for the third generation to pass onto the fourth…or to get out if the manufacturer terminates.

The business is changing right before our eyes for better or worse. Survivors always have vision, a plan, and the cash to back it up. We here at ODS are always ready to help either develop or evaluate your plan forward. Please contact us if we may be of assistance.

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