Advantages & Challenges of a Family Business
Working in or with a family business like InSource is rewarding. Sure, every business differs from all others. At InSource, the people are the company and one would use, “they”, “them”, or we” to describe the company. What makes a family business thrive?
- They are typically privately held with carefully selected investors & less regulations.
- They act like a family and build on their strengths and work through their differences.
- They find a niche and serve their customers well.
- They have a strong sense of why they are in business.
- They work smart and hard, but they balance time and energy for their lives away from the workplace.
Public vs Private: Public companies trade on stock exchanges where the public buys and sells shares and prices move up or down continually. Public companies are regulated (Securities and Exchange Commission and state agencies) and must share information about company performance and personnel. They are motivated to sell shares at a higher price. Institutional investors (mutual funds and pension funds) and wealthy investors own large blocks of shares adding both social and management pressures. Nearly all big companies are public. Many smaller companies aim to get big enough to go public and tend to operate more like a public company.
Private companies do not trade on stock exchanges and have fewer shareholders who are selected by the company to sustain their way of doing business. They are not regulated by the SEC and state scrutiny is minimal. Companies with market cap less than $50 million usually are private as they do not generate enough trades to establish firm pricing. Other than tax reporting and disclosure to obtain financing, private businesses are not required to disclose information. They typically seek out supportive, individual investors. Private businesses tend to be more personal, entrepreneurial, and less bureaucratic.
Family: The family is the basic social unit. It is made up of individuals with unique talents working together to both sharpen their individual skills and to cooperate for common good. Family members have a common heritage and bond and have faced common challenges. Families provide social, emotional, and spiritual support to each other. A family business is a continuation of growing up together and applying the principles and techniques that worked growing up to satisfying customers and providing jobs.
InSource is a family business started by sons of Elias and Evelyn Manz in 1997. The sons were 4th generation residents of Paulding County, OH and located their business on one of the family farms. They emphasize stewardship over ownership. They seek a kinder, gentler way of treating others. They emphasize serving customers well over beating competitors. InSource recognizes, they must create enough value in their products and services so their customers will fuel their economic engine. Innovation, cooperation, and high energy are key to providing value to their customers. They highly value creating local jobs. A second generation family member in a key position stated two important elements of working as a family:
- We do that right thing even when no one is around. 2. We each know our area of responsibility and respect one another.
Finding a Niche: In the opening paragraph, we learned every business differs from all others. InSource began as a contract manufacturer for the company one of the founders previously worked for. They built products and sub-assemblies to their customer’s specifications and brand. They contract engineered products which they built for the customer. This first customer was basically their only customer for four years. InSource worked very closely with this customer to improve sourcing, designs, assembly labor, and quality. Starting with a single product, was expanded to hundreds of products for this customer involving controls, wire harnesses, and refrigeration products.
InSource offered the capabilities gained serving their first customer to other customers and continued to gain capabilities from those customers which they offered to even more customers. Ten years after starting, a new largest customer provided a new shot in the arm to gain engineering, product, and process capabilities. In a major step forward, InSource began making their own circuit boards in 2010.
Growth and succession are especially challenging for family businesses. Growth brings a need to specialize and to develop better systems of communication and coordination while keeping the feel of a small company in energy, innovation, and sense of belonging. InSource strengthened their sales force and set up two business units (control solutions and assembly solutions) in 2009. In 2015, they prepared for succession by appointing a chief operating officer and creating a third business unit (harnesses). In 2017, InSource appointed a second generation CEO while the retiring first generation CEO retained the chairman position and began working part time on special assignment. These challenges are ongoing for a family business.
Why are they in business? The family developed a heart for their neighbors and community where they lived. God led them to start InSource to provide jobs in an atmosphere that honored God. The family, while quite ordinary folks, knew if they worked together to serve their customers well, InSource could be special.
They are stewards, not owners. They seek a kinder, gentler way of treating others. They develop their talents and team skills as individuals to become contributors to the team effort. They hate “Big Me, little you”. They recognize they must create enough value in their products and services so their customers will fuel their economic engine. They emphasize serving customers well over beating competitors. In facing challenges, they pursue the opportunity at hand rather than hugging their hurts. In their first year of operation, InSource developed eleven guiding principles. These principles are challenging enough that they do not always fully meet them, but they see value in striving after them. They guard their culture.
Balancing Work and Outside Work: InSource realizes there is a family at home and a life to live beyond the workplace. They want to provide vacation, sick leave, health and life insurance benefits to support that family at home. In times of family emergencies, they want to be reasonable and flexible so those emergencies can be addressed. They don’t take advantage of either work or home in those cases. They carry their load at work and they carry their load outside of work. They recognize the benefits of work and the benefits of home are interdependent – lessons learned at one benefit the other. Their customers know that a high emphasis will be placed on fulfilling their needs as they cover for each other – however there are times where life comes ahead even of the customer.
InSource has been blessed practicing, “One family, under God, indivisible, delivering value with kindness and dignity for all.” This phrase, while newly coined, reflects 25 years of operation. The possibilities are endless.