🔒As Baby Boomer retirement wave nears, family biz weigh pros, cons of outside leadership

Ever since John Lyman bought a 37-acre tract of land in 1741, his descendants have worked to build his farm into what it is today.

Lyman Orchards has grown to 1,100 acres in Middlefield, including a store, golf course and food distribution enterprise, the result of nine generations’ hard work.

The Lyman family is still directly involved nearly 280 years later, but it now has a non-family member serving as its president and CEO.

The decision to bring in an outside executive is a difficult one that many family businesses will face in the years ahead as Baby Boomer business owners increasingly reach retirement age.

Yet, nearly 60% of business owners lack a transition plan, according to a 2019 study by financial services firm Wilmington Trust, meaning many companies are uncertain about next-generation leadership.

Lyman Orchards’ board first hired an outside person to lead the company in 1997, when the founder’s descendant, John Lyman Jr., retired.

Today, his son, John Lyman III, serves as executive vice president, board member and shareholder, and Gary Jalbert joined a couple years ago to serve as the business’ fourth outside president and CEO.

According to John Lyman III, the family realized they needed outside expertise.

“They were looking to bring in a fresh perspective, they wanted to make sure we had the best talent to lead the company at the time,” Lyman said.

One key reason the family hired Jalbert was to help the business figure out how to thrive even in years when the weather was poor, which negatively impacts crops and on-site visitors.

Lyman said the decision to bring in outside expertise has served the business, first incorporated in 1949, well.

According to Jalbert, the biggest advantage of an outside CEO is having someone with a different base of experience who can improve a company’s metrics and help it move forward in a profitable way.

Outside the fish bowl

The Connecticut Business & Industry Association estimates 80% to 90% of all businesses in North America are family owned.

Most eventually must ponder whether to bring in outside leadership, says Robin Bienemann, program manager of the UConn School of Business’ Family Business Program.

Later generations may have different interests and careers, or believe they need outside help to make the enterprise more successful.

According to Bienemann, families need to discuss whether to keep or sell the business. If they decide to keep it, they need to determine who is available, interested and able to lead it. If the next generation doesn’t meet these criteria, a later generation might, Bienemann notes.

“The outside executive can run the business until a family member is ready,” Bienemann said. “Sometimes, no one wants to run the business, and the family moves more into a board of directors role.”

Families also need to consider what they want for the business, and if an outsider can be brought in to execute the family’s vision, says Bienemann.

“If the family business has made a thoughtful hire, the CEO can bring in another viewpoint that is not tied to family dynamics,” she said. “They know how to run companies. It can be a real win-win.”

Robert Albright, professor and chair of the management department for the University of New Haven and a business strategist, says many families may have a strong emotional attachment to the way things have always been done.

“If you don’t constantly change, you won’t maintain your competitive advantage,” Albright says.

He likes to use the analogy: “If you are a fish in the fishbowl, you can’t see the water.”

“Someone outside the fishbowl can see if the water is dirty,” Albright says. “Changes that are called for are not always visible to you.”

Jalbert advises companies that are hiring an outside CEO to identify skills and criteria they want, cast a wide net, then look at all available candidates.

Words of caution

What are the potential disadvantages to bringing in a non-family member to lead the company?

“Even if it helps with the business strategy, it can be disruptive to the culture,” Albright says.

One of the reasons family businesses thrive is because of their culture and customer service, he notes.

“If an external CEO doesn’t accurately assess the culture, they can inadvertently disrupt a culture that has been beneficial,” Albright says. “If customers and long-term employees don’t like it, then it can be negative.”

Albright recommends new CEOs take 90 days to “look, listen and assess,” what is good about a company and needs to be kept, and what needs to change.

Bienemann says a family needs a common vision for the company’s path to make the outside CEO arrangement work.

“When it doesn’t work well, is when the family doesn’t agree on where they want the business to go,” Bienemann says.

Jalbert said it can be difficult for family members to relinquish responsibility, but he’s been given the necessary latitude to lead and manage the organization.

He was hired because the company needed someone to reduce the business’ dependence on weather, as rainy years adversely impacted crops and guest visits.

The wet 2018 caused the company to experience its worst financial performance ever. At the time, 70 percent of Lyman Orchards’ revenue was from on-property efforts, such as golf, the Apple Barrel store, and pick-your-own, while 30 percent was from wholesale bakery sales at grocery stores.

The board wanted to increase off-property revenues.

“One of Gary’s strengths and experience was in the retail grocery and bakery arena,” Lyman says.

The business had its best financial performance ever in 2019, as Jalbert boosted the wholesale business by 30 percent. Now, a rainy year isn’t as much of a threat to the bottom line.

Jalbert also realigned Lyman Orchards’ team and reduced expenses to improve profitability. He regularly meets with everyone to review the performance of each business unit.

Lyman said it’s important to make sure you not only hire the right person, but also allow them to do the job.

“We need to allow Gary to lead the company and make the right decisions for the business and not worry about if someone doesn’t like whatever," Lyman said.

Grooming future leaders

Another family-owned company, Laticrete International in Bethany, just recently hired an outside CEO. Founded in 1956 by the late Henry M. Rothberg and his wife, Lillian Rosenstock Rothberg, the company makes construction-related materials for the building industry.

Patrick Millot joined as CEO Aug. 10, taking over for second-generation family member David A. Rothberg, now board chairman.

Rothberg started at the company 42 years ago, working alongside his parents and brother, Henry. While four third-generation family members are involved in the business, Rothberg said they are young and not yet ready for the CEO role, but they are potential future leaders.

“In our case, finding a new CEO was a momentous decision,” Rothberg said. “We looked at many people and wanted someone who would fit with our culture, which stresses a work-life balance. It’s not all about money and we wanted a CEO who would understand that. We support a couple thousand families around the world.”

In making the pick, Laticrete’s leadership cited Millot’s experience in running a Fortune 500 company, France-based Saint-Gobain.

While Millot has only been in the role for about three months, the Rothberg family is hopeful his global experience will propel the company forward.

“If you decide to bring in a new CEO, be open to new ideas,” Millot said.