At the helm: 3rd generation reflections

Four years ago I started preparing for stepping into my father’s shoes. He chaired the family’s 3 small real-estate companies, and had just been told that he wouldn’t get much older, as he was diagnosed with terminal cancer. I was 29, heavily occupied with my own company in a completely different industry, and suddenly felt the weight of the entire family on my shoulders…

Our family history is a classic “Askeladden”. Following the 2nd World War, my grandparents moved from a remote community in Hallingdal to the capital. Equipped with nothing more than a will to work hard and make a better future for themselves than the one they left behind. Their first home, where my father was born in 1950, was a rebuilt hen-house. That says quite a bit…

Originally a furniture carpenter, my grandfather started his career fixing Volkswagens, and it turned out he had a drive and talent that enabled him to start a car repair shop later on. My grandmother did the office work & accounts, in addition to taking care of the household. After getting their own home, all their savings was later put into commercial real estate, as my grandfather had a true entrepreneurial mind and was involved in sectioning several big production units (Thune Mekaniske at Skøyen and Sætre Kjeksfabrikk at Vålerenga) into smaller units that were put up for sale. In the early 70’s he partnered up with his two best friends, and secured a huge contract with NATO, building a civil headquarter for their operations outside of Oslo. At the time, the area was mainly farmland, and the property was a greenfield. He predicted a massive migration to central areas and a huge expansion of Oslo, and as it turned out he was quite right… The property is today part of an industrial park 15 minutes outside the city centre.

And this brings me to the experiences I’ll share with you;

As a typical representative of their generation, these partners’ focus was limited to maximizing operation profits (and dividend) + keeping costs down to a minimum. When my father (who wanted to be an architect and wasn’t too interested in commercial business, but fantastic with people) took over following my grandfather’s sudden death in a car accident in 1997, next to zero maintenance had been done. All profits were shared through dividends every year, leaving nothing for a rainy day. My aunts’ husband handled the commercial parts for some years, until all hell broke loose when my grandmother died and the 2nd generation was split by conflicts. The 8 next years, all accounts and daily operations were outsourced to an external GM, whom my father trusted 100% in taking care of business, while he himself filled the dual role of Chairman and janitor.

The last year before my father got cancer, he started worrying that something wasn’t quite right. Contracts near their termination/renegotiation dates weren’t closed, some key projects never got started, and the GM didnt seem to have the right capacity anymore. But they had become close friends, and my father wasn’t tough enough to confront it and deal with his concerns. No-one else among the families’  members were actively involved, so he bore the concerns and practical challenges himself, just briefly discussing them with me.

In February 2012, as it was clear to me I’d have to step in for my father, I started asking for details, facts and figures, to get familiarized with the state our companies were in. All company files had been moved from our office to the GM’s home, and I couldn’t get access to any account books for the previous 4-5 years, customer or suppliers’ contracts or other relevant information. As my father quickly became worse, and his time was running out, I started becoming worried.

As it turned out, 80% of our contracts were due for termination or renegotiations that very year, and our biggest client representing nearly 30% of our income in one company, had already moved out. The building suffered from a huge backlog on maintenance both inside and outside, and no funds were reserved for covering the costs. And not a single ad was placed to attract new customers. The industry park was suffering from several buildings in the same conditions, causing a hugh amount of vacant space and falling rental prices.

10 May my father passed away, and I was prepared for a heavy job of turning things for the better. The following day I discovered that the 4th generation was on its way. Great timing – completely unplanned! Still, we were a team of two, so I figured that would work out. We would just have to work hard and dedicated, solving one problem at a time. It was clear that we’d also have to invest quite heavily to get our premises in a condition where they would be attractive to potential clients. Unfortunately, the GM didn’t agree. He wanted to stick to his old ways, claiming we had no problems at all, steering towards a healthy result and as long as I didnt disturbing him, things would be fine. He completely refused to come up with any plans or detailed scenarios/budgets, nor follow any directions or enquiries from this new rookie half his age. 11 months and a senior lawyer was what it took me to get our files and documents… And did I get a shocker?!! Things were even worse than I had feared. It became clear that our GM had not only lost his grip, but also couldn’t admit it, even to himself. Income was dropping by 50%, and costs were peaking. And he was on a contract with 36(!!) months termination period. Needless to say, he was also in charge of the other properties, where things were i  the exact same state…

Leaving out the details; 4 years, 1 settled trial and 1 won, loads of hard work as everything from janitor to contract negotiator and key responsible, some bad experiences on 3rd party managers, two huge bankloan, several big projects, 2 babies, loads of frustrations and lessons learnt, handover of one of the chair positions to my aunt, and a new recruitment later, I just wrapped up a board meeting where we went through the initial results for 2015.

After delivering negative (yet steadily improving) results for the past 3 years, we are finally near break-even, and steer towards a neat bottom line for 2016, provided that we keep a good focus on costs and priorities. I owe this development to our dedicated work and priorities, but for the past year, the most important contributor has been an old friend of mine who were coincidentially on the job market as we stood amidst a challenging situation without any resources last January. Hanne has been our hands-on coordinator, administrating dissatisfied customers, projects and suppliers with a steady hand and a smile. Combining an eye for details with fierce ability to get things done. Cleaning up the mess of a really bad contract. For the first year since taking over, I’ve been able to lean back into the role of an ordinary Chair, only getting involved when there’s something to discuss, clarify or decide. And I can tell you, juggling an exciting yet demanding job and a family life, that is something I really appreciate to the maximum. Time is precious.

Living in a world where we see hardship and pain daily in the news, I feel really blessed to experience this opportunity to continue the value creation built and grown by the previous generations. So my story is not meant to be a complaint. This isn’t something I (nor my siblings or aunts) have earnt or deserved. It has been handed to us by chance, and it’s up to us to take care of it so that we can pass it on to our kids one day, preferably in a better state than when we took over. I’ve had a fantastic opportunity to learn a lot during these years, testing my comfort zone and ability to think creatively under pressure. At the same time, missing having a father or a grandfather to discuss and seek advice from. I earnt a few grown-up points along the way, and would make the same choice again.

Still, you rarely get recognized for the efforts done for the family, so I’m very grateful that I can actually combine the overall supervision of our acitivities with a daily job and career that I’ve built in a completely different industry without any ties or connections, solely based on hard work. That matters a lot.

Also, I think the experiences and perspectives built in a different field, is something that strengthens our family business, hoping that we will beat the old saying; “shirtsleeves to shirtsleeves in 3 generations” (meaning that the grandchildren of the founder most often fail in their efforts to secure and strengthen their business)..

Forbes: “Less than one third of family businesses survive the transition from first to second generation ownership. Another 50% don’t survive the transition from second to third generation.”

 

I really hope – and think – that we are proving that statement wrong 😃

Recommended Reading:  The Facts of Family Business (Forbes Magazine) – Avoid the traps that can destroy Family Business (Harvard Business Review)

13.9.1905 Lioddens barn (Ole til høyre)

Leadership & values Working mom

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