Spring 2019: One Big Happy Family Business

At Homecoming this year, we launched the new Give Light comprehensive campaign as part of our Illuminate strategic plan. We are excited about the potential Illuminate provides for our growth and impact within the signature academic initiatives, including health policy and leadership, data analytics, human flourishing and opportunities in Latin America. You can read more about how we plan to grow and achieve more within the Hankamer School of Business here.

This issue of the Baylor Business Review (BBR) is dedicated to family businesses. We believe in the continuity and health of the family enterprise, as it can be essential for human flourishing among business owners, their families, their clients and the communities to which they contribute. In fact, the Institute for Family Business in the Hankamer School of Business is committed to helping more family businesses survive to the second and third generations and beyond. One of their programs, the Texas Family Business of the Year awards is celebrating its 30th anniversary this year. The annual awards program and event, held each fall, recognizes multigenerational, family-owned firms whose families demonstrate a commitment to each other, to their employees, to the community and to business continuity. We’re proud to support and encourage entrepreneurial families within Baylor and our state.

Family businesses, like families, come in all shapes and sizes. Countless Hankamer School of Business alumni, students, faculty and staff, and friends have been shaped, in some way, by family-owned businesses. In this issue of the BBR, we’ll meet a few. Each story is different. The situations change, but family businesses continue.

Thank you for being a part of the Baylor Business family.

Terry S. Maness
Dean
Hankamer School of Business

Baylor Business Review, Spring 2019

The need for innovation has never been greater within the traditional engines of U.S. economic growth

By Eric Krell

Forget blockchain, never mind FinTech and scratch artificial intelligence off your list. U.S. family businesses, rather than Silicon Valley startups, are ideally positioned to foster a wave of innovation at the intersection of organizational culture and values, business processes and technology.

These powerful engines of the U.S. economy are naturally suited to thrive in a competitive environment where success is determined by authentic customer experiences, organizational purpose and trusting relationships. “The biggest opportunity is that many family businesses are highly trusted organizations,” notes PwC US Family Business Services Leader Jonathan Flack. “In an extremely fast-changing business environment, some family businesses have done extremely well in leveraging the value of their trusted brands.”

That said, many family businesses are also hungry for innovative solutions to fundamental challenges – rampant market and organizational disruptions, accelerating technology advancements and stiff competition for talent – that they are intrinsically ill-equipped to address. The breakneck pace of technological change in recent years “has made navigating today’s business ecosystem increasingly complex, demanding even more agility, collaboration and digital innovation than before,” notes Jason Downing, vice chairman and US Deloitte Private leader, Deloitte LLP. “As a result, many family businesses are looking to partner with other organizations to develop new products or services to enhance their own ability to innovate and stay ahead of the competition.”

Welcome to the 21st century family business paradox, one that is inspiring current and incoming owners and executives to develop new ways to optimize their inherent strengths while mitigating their structural shortcomings.

We Are Family (Businesses)

Family businesses represent a major portion of all global companies as well as a crucial driver of the U.S. economy. According to EY research, 139 of the world’s 500 largest family businesses – including Wal-Mart, Berkshire Hathaway, Ford, Cargill and Koch Industries – are based in North America.

The “family” designation varies slightly depending on who is applying it, but it typically reflects a measure of ownership (e.g., shareholding or voting rights in a publicly listed company). By The Family Business Institute’s count, there are between 5 million and 6 million family businesses with employees in the U.S. Of those, 50,000 to 100,000 post $20 million or more in annual sales in a given year.

This combined activity packs an economic wallop. Family businesses create 64 percent of U.S. gross domestic product and account for 78 percent of all new job creation in the U.S., Downing reports. If this valuable job-creation engine is to continue firing on all cylinders, some imposing challenges and inherent disadvantages must be addressed.

3 Challenges Ripe for Creative Solutions

Downing also notes that family businesses “have to deal with issues many traditional businesses don’t, from the importance of family legacy and succession to family chemistry and alignment.” Respondents to Deloitte’s recent family business survey identified “changing family relationships” as the issue that is most likely to cause business disruptions. Three other issues –two that affect all companies and one that has traditionally vexed family businesses – arise most frequently when family business experts discuss how family businesses are evolving:

1. People: Describing access to talent as the top challenge currently facing family businesses, The Family Business Institute Co-founder and President Wayne Rivers reports that some family companies are paying employees up to a $10,000 bonus for referrals that result in a hire. “As an employee earning $40,000 a year,” he says, “you can pick up 25 percent of your base comp [sic] by successfully nominating a new employee. That’s quite an incentive, and it shows you how hungry companies are.” As technology and data analysis skills become a requirement for more job roles, the collection of companies competing for this talent expands. The family farmer is not just competing against other local farms for talent, but also against regional factories and technology firms. In addition to sharpening their recruiting and onboarding capabilities, family businesses are increasing their access to talent through mergers & acquisitions activity and revamping their training capabilities in ways that let them expand their recruiting nets. “More [family businesses] are in that old NFL draft mode,” Rivers says. “They want to get good athletes in the door and then they will train them.”
2. Technology: “The family business community has traditionally been 10 to 15 years behind when it comes to investing in bleeding-edge technology,” Rivers says. Family businesses, he adds, tend to wait to invest in a new technology until it has been proven to deliver value and has been adopted as an industry standard or best practice. This approach proved wise for decades (it was savvy to pass on a Second Life storefront a decade ago), but it has become problematic as the pace of technology advancement has accelerated. In PwC’s survey of 2,900 family businesses, 80 percent of global respondents identified digital disruption as their company’s No. 1 challenge. Only 25 percent of the Deloitte survey respondents indicated that their company has completed a strategy for the use of digital technologies. One way to keep pace with technology’s march, Downing says, is by partnering with other organizations to develop new products and services. Business consolidation can also help; mergers not only give family businesses access to new products or services, but can also deliver new talent and cutting-edge technology. Family business leaders also might consider a less cautious approach to investing in relatively low-cost new technologies, such as cloud-based software and services and robotic process automation (RPA).
3. Continuity: Aging leadership marks a perennial challenge and one that family businesses have made strides in addressing; still, much more progress is needed. Until recently, a disturbingly high number of companies did not have a “drop-dead plan” in place that laid out how to address a founder’s unexpected death. Now, as more family businesses invest in formal succession planning capabilities, savvy leaders realize that these plans should extend beyond ownership and well into the management ranks. “If the owner of your family business is 65 years old, there’s a good chance that the COO and CFO are also in their 60s,” Rivers says, “and most of the executives at the senior vice president level are probably in their late 50s.” For this reason, Flack prefers to use the term “continuity planning” when describing the leadership development and succession planning capabilities his team is helping family businesses get in place.

As they work to upgrade their terminology and capabilities, family business owners and executives appear well-aware of the unique opportunity they have to out-perform competitors based on a comprehensive set of factors that extend beyond process and technology. Seventy-five percent of the respondents to PwC’s family business survey indicated that having a clear set of values creates a competitive advantage.

Baylor Business Review, Spring 2019

A Wild Sprout in the Berry Patch

By Becca Broaddus

At his first job after college, Soren Bjorn drafted a list of ideas to improve the company. When the list was presented to the board, they thought the ideas were so good, they gave him a promotion. A big one. He became chief executive officer at the age of 29.

“That was a good lesson that you need to be careful what you say,” Bjorn laughed. “If you have good ideas, you should speak up. But you should also be prepared to follow through on those ideas. I would say I definitely wasn’t ready at 29, but it was an experience that shaped my career.”

That “follow through” mindset not only secured him an executive position before his 30th birthday, but more recently, it placed him as one of the agriculture industry’s leaders in the United States-Mexico-Canada Agreement (USMCA) discussions, the new trade agreement proposed to replace NAFTA, and now, U.S. immigration policy reform discussions.

“You’ve got to speak your mind, but once you do that, you have to get involved,” Bjorn, who joined the USMCA discussions as a board member for the Produce Marketing Association, said. “I don’t have all the answers, but I can tell a lot about the impact the proposed new immigration policy would have on the U.S. food supply. I feel I have an obligation to share that, but I also have to offer possible solutions.”

At Driscoll’s, the world’s largest berry distributor, Bjorn leads the family-owned company’s largest region, the Americas division. He has been at the company for 12 years, with four years in this role, although he is not a member of the Driscoll/Reiter family. Prior to his time at Driscoll’s, he worked at Del Monte Foods.

“I’ve worked for both public and private companies…The advantage of a family business is it’s looked at much more long-term,” Bjorn said. “We talk a lot in our industry about the next generation impact. Next generation of growers. Next generation of consumers. In our case, we’re in the fourth generation of family owners, and they want to build a berry business that’s going to last another 25 years, and then another 25.”

An immigrant himself, Bjorn’s opportunity to move to the U.S. came in the form of a golf scholarship to Baylor University. (Golf is a big part of the Bjorn family. His younger brother Thomas is a professional golfer in Denmark.)

After attending university in Denmark for three years studying Economics and playing on the Danish National Golf Team, he earned an athletics scholarship to Baylor, thanks to the father of one of his teammates who would later help him get his first job too. (Yes, that first job that eventually turned into a CEO position). Bjorn lettered in golf both of his eligible years and captained the team his final year. That year, he also decided he would pursue a business career instead of a golf career.

After he graduated in 1992 and during his first job in the food industry, he went back to school for his MBA at TCU. He’s been working in the food industry, and the U.S., since his graduation from Baylor.

“I didn’t think I was going to America to live there the rest of my life,” Bjorn said. “For me, America was the land of opportunities. There’s almost no chance something like this would have happened to me in Denmark. I am incredibly grateful.”

Baylor Business Review, Spring 2019

Stay True to Your Core Values

By Roger Lowe Jr., BBA ’91
Vice President and Chief Executive Officer
Lowe’s Market
Littlefield, Texas

I was raised working in our family grocery business sweeping parking lots and bagging groceries. After high school, two awesome events occurred in my life: I attended Baylor University, and I met my beautiful wife Julie. After graduating from Baylor, I joined our family grocery store business and worked in numerous positions and locations within our company before moving back to West Texas.

Our family grocery business has a rich history that can be traced back to the late 1940s when my grandfather, E.M. (Bud) Lowe, started his career selling candy and sundries with only one truck distributing throughout our hometown of Littlefield, Texas. My Granddad, Bud Lowe and my Dad, Roger Sr., founded our family of grocery stores on the principle of taking care of the community, their teammates and their families. The simple philosophy that our company was founded upon still continues today and that philosophy has allowed our once small, “mom and pop” style grocery store to grow from its humble beginnings to 152 stores covering the entire states of Texas and New Mexico, with additional locations in Colorado, Kansas and Arizona.

Family and Christian values are at the core of our existence and those values guide the decisions that have helped keep our company strong since 1964. Several years ago, we developed a logo that is a good summary of our core values. The logo consists of three letters (G, F, G) intermingled together, and those three letters summarize the priorities of our company in the proper order of priority.

God—The big “G” represents God and should be our first priority Family—The smaller “F” represents family and should be our second priority Groceries—The smaller “G” represents the grocery business and should be our third priority

1. God—Being raised in a Christian home by Godly parents was a true blessing for me. The privilege of attending the world’s largest Baptist-affiliated institution of higher learning also had a profound impact on my life. Many organizations seek to keep God as their first priority, but the demands and distractions of life make this a difficult task. I don’t think it is any accident that the very first of the Ten Commandments states we should have no other gods before Him (Exodus 20:3). Our GFG logo correctly lists God as our first priority. We don’t beat you over the head with our beliefs, but we do strive to put God first in everything we do and keep Him in his rightful place, knowing that He is the real reason for our success.

2. Family—We are blessed with great employees and we fondly refer to them as teammates. We value our teammates and consider them part of our family. Vince Lombardi said, “The achievements of an organization are the results of the combined effort of each individual.” We know this saying to be true. The majority of my time at work is spent communicating and connecting with our teammates. I know there is no better way to spend my time than with our valuable teammates.

3. Groceries—We realized a long time ago that you cannot take a cookie-cutter approach to the supermarket business. Focusing on the needs of each store location’s customer base has helped shape our company into one of the most diverse companies in the supermarket industry. We operate under many different banners to meet the needs of the diverse neighborhoods in which we operate. The specific needs of each neighborhood guide our decisionmaking processes for everything, including store layout and the products offered.

As a company, we must hold unswervingly to our core values while being flexible in meeting the diverse needs of the changing world and our customers. The motto of Baylor University that I learned many years ago, Pro Ecclesia, Pro Texana, serves as a great reminder that we exist to serve both God and the world. Our family grocery business provides me the opportunity to do just that every single day.

Baylor Business Review, Spring 2019

Fruits of the (Entrepreneurial) Spirit

By Becca Broaddus

Rebecca Rodriguez is more than just an employee. She’s the youngest of six kids. An aunt to eight nieces and nephews. A Christian. A first-generation college student. A graduate of Baylor University. A global technology financial analyst at ExxonMobil.

“What I do is not who I am,” she said. “Whose I am defines who I am, which directly influences how I do what I do daily. Each day, there are so many opportunities to be bold and to be a light that radiates hope and the power of love. For me, this is only possible by having my feet planted on solid ground—my faith.”

What she does is handle the cost structure for global technology costs and serve as an interface between ExxonMobil’s global affiliates and chemicals technology. From law to tax, she has expanded her understanding of a variety of subjects in her short time at the oil & gas company. Her work environment has proven to be an avenue to embrace who she wants to be while shining through her work.

“I do believe that business is a platform to serve and empower others,” Rodriguez said. “Going into everything I do or want to do, I want to glorify the Lord. This impacts the way I relate to others and how I seek to do business.”

Rodriguez saw the potential within business and decided to use it as her platform. She started early. During her time at Baylor, she co-founded the Christian Business Leaders student organization using her commitment to her faith and entrepreneurial spirit, which she gets naturally. Her mother, Rebeca Peña, and uncle, Jaime Peña, own a pool construction and gunite company, Houston Gunite, Inc. The business has been servicing the greater Houston area for more than 30 years. Rodriguez’s mom inherited the startup from her late husband, and with hard work, lots of prayer and her family’s support, she was able to grow it. Today, nearly 40 families make up Houston Gunite.

“[My mom] told me so many stories about overcoming setbacks and relying on Christ to pull you through, and truly, I believe her example has set the tone for how I choose to respond to seemingly hopeless situations or failures along the way,” Rodriguez said.

Rodriguez decided to take those lessons and skills, and develop them outside of the family business.

“Being the youngest of a large family, I felt like I was given this sort of open door to do something different,” Rodriguez said. “My older siblings are committed and dedicated to carrying on the family business, and I have no doubt they will take it to new heights.”

Because of her confidence in the future of the family business, she chose to take a leap of faith and go to Baylor, instead of a university based in Houston—a shocking decision to most of her family.

“It was quite the surprise for a lot of them, but I know my time in Waco helped me come to a better understanding of who I was called to be, how to maximize the skills God gave me, and find a place where those skills would be of best use to continue faithfully serving and contributing in a stimulating work environment,” Rodriguez said.

Now that she is at ExxonMobil, she’s happy to have her family close while continually being developed and encouraged to innovate at work.

“I grew up in a large family that has always treasured uniting around our kitchen table and breaking bread together,” Rodriguez said. “Something so simple, but so powerful.”

Baylor Business Review, Spring 2019

By Eleanor Hunt

Owners tend to think the issues in their family businesses are unique. Yet family businesses share commonalities, such as sibling rivalries, generational differences and the strain of working together daily. Even when family members share the same goals, conflicts arise.

“I’m researching the work dynamic between father and son; they can be like two ships passing in the night,” said William J. Worthington, director of the Institute for Family Business at Baylor University and clinical associate professor in the Department of Entrepreneurship & Corporate Innovation. “The father wants the son’s respect; the son wants the father’s recognition that he has come into adulthood. Sometimes fathers remain bitter about teenage rebellion. Sometimes sons don’t honor the sacrifices made. They both forget to align outcomes.”

Aligning outcomes is imperative, for only 30 percent of family businesses make it to the next generation. “It’s difficult to maintain leadership from generation to generation because many elements come into play,” Worthington noted.

How does one find the right balance of honoring the past, while embracing the future to keep the family firm on an even keel?

Create balance

Leaders must create balance in four areas: firm, family, faith and fitness. “Without these four things in place and some kind of attention being paid to them on a weekly basis, you’re building that castle on shifting sand,” Worthington said.

For example, personal and corporate health must be embedded in the firm’s culture beyond participating as a group in an annual 5K run. Business owners must pay attention to their tenets of faith and governing practices of the firm. It is important to perpetuate healthy family relationships and instill values in the next-generation entrepreneurs.

“One of the most exciting things in the family business is to continue training children even into their adult years. Leaders are handing them a legacy of dignity along with the family business,” Worthington said.

Adapt to transitions

Families tend to focus on the major transition of leadership succession; however, passing the baton to the next in line is predicated on how well the family managed previous transitions. Did the older generation adapt to the younger’s maturity and increased experience? How well did the younger generation embrace the priorities and age-related needs of their seniors?

“Effective transition management requires open and transparent communication about desires, goals, struggles and frustrations. Balancing needs across generations is a process that entails constant adjustment,” offered Mathew Allen, associate professor of Entrepreneurship at Babson College.

Clarify your vision

Worthington offers one more takeaway. Business owners must recognize that they are their organization’s key asset and invest in themselves.

“They must know that no cavalry is coming. They have to step back, make a commitment to stop lying primarily to themselves and ask a simple question, ‘What do I want?’ Without doing so, they are going to invoke confusion,” Worthington said.

Confusion or confluence? Family entrepreneurs must decide. However, by applying this practical advice, they can chart a successful course for their businesses well into the future.

Baylor Business Review, Spring 2019