From generation to generation

Donald Hurwitz of Carlton House Fabrics shows off a panel of cloth depicting the biblical story of Jacob’s ladder.Photo by Emilie Plesset
Donald Hurwitz of Carlton House Fabrics shows off a panel of cloth depicting the biblical story of Jacob’s ladder.
Photo by Emilie Plesset

Donald Hurwitz and his family business, Carleton House Fabrics in Gaithersburg, are both 62 years old. Born in 1952, Hurwitz and the business his parents opened grew up side by side.

Since the great waves of Jewish immigration to to the United States in the late 19th and early 20th centuries, family business has played an integral role in American Jewish life. Free of the shtetls of Eastern Europe, many Jews were able to make use of American capitalism to establish themselves in the United States.

Today, family business owners confront the duel burden of competing against nationwide, established corporations while struggling to maintain the business to hand to future generations.

For family businesses, making a profit is not the only challenge. In addition, they have to deal with the extra stress that can sometimes exist when family is mixed with the professional world.

“I think there are more challenges and almost disadvantages when there’s a family business,” said Greg Gann, a Pikesville, Md.-based lawyer and financial adviser for Jewish family businesses. “Particularly if there are a number of children involved in the business, just because of the complications from family dynamic.”

For most family business owners, finding a qualified successor among the next generation can be the biggest challenge for the company’s survival.

According to the Family Business Institute, a North Carolina firm that provides advice and services for family businesses, only about 30 percent of family businesses survive through the second generation, with chances declining after that.

The institute found only 3 percent of all family businesses successfully operate to and beyond the fourth generation.

Despite such odds, the institute found most family business owners are optimistic that their businesses will continue, with 88 percent of current family business owners believing their family will maintain control of their business in the next five years.

Children not interested

After a brief journalism career, Hurwitz helped run the fabric business with his parents, becoming the company’s second-generation owner in 1995. Despite initially wanting to follow a different career path, Hurwitz said his father had always known he would take over the business.

“I didn’t want to do it, but I found that it was the right path after having several jobs in journalism in Washington,” Hurwitz said. “I worked for a couple of years and didn’t see a future like I could see doing a business future.”

While Hurwitz has run the fabric company for the past 20 years, he said neither of his two adult children is interested in taking over. With one child working for the federal government and another in an executive position at Old Navy, Hurwitz said his children see the family industry as old-fashioned and lacking opportunity for growth.

“This is the touchiest subject and the most difficult one to talk about,” he said.

Going back in the family tree, Hurwitz said his maternal grandfather had a textile mill in Russia that supplied fabric to the czar’s army. With a roughly 150-year background in the textile industry, Hurwitz is concerned not only for the future of Carleton House Fabric, but the potential end to his family’s multi-generational legacy within the textile industry.

“This question looms over me every day: What am I going to do? I can’t answer you, and I can’t answer myself.”

Defining jobs, determining leadership transitions

Robert Stein, director of the University of Pittsburgh Institute for Entrepreneurial Excellence, said some family business struggles could be attributed to the failure to establish solid governance policies.

While passing the company to the next generation can be straightforward if only one child expresses interest and capability, having more than one child involved in the business can make determining leadership transition difficult.

Stein said businesses are more likely to be successful if family members have defined jobs and responsibilities.

“Ambiguity tends to cause families to fight,” Stein said. “That’s when things can really turn south for the business, when they let their family problems get ahead of making money and the customers happy and their products.”

For the Rockville-based G Street Fabrics, founded in Washington in 1942, the business utilized defined governance roles to successfully thrive into its third generation of owners.

Joel Greenzaid started working for the business right after graduating from college in 1983, helping the store move from Washington to Rockville that summer. His brother, Michael Greenzaid, sought a career elsewhere before joining the business five years later.

Though they co-own the company, the brothers maintain different responsibilities. Joel Greenzaid is the company president and chief executive officer; his brother is the chief operating officer.

“My dad made that decision and discussed it with the two of us,” Joel Greenzaid said. “In a family business it is very important for each family member to have a job title and a job description so they know exactly what their role is.”

Though defined positions can be vital in the organization of a family company, Hurwitz said there were not established lines of authority when he started working with his parents. Rather, he and his family worked best running the business as a team.

“I reached a certain age and we all became partners and we did everything together,” Hurwitz said. “We never had a board meeting … we all just agreed on what we were doing.”

Family leadership

For many family businesses, if a member of the next generation demonstrates interest, the current owners may teach him or her the ins and outs of the company, in an effort to pass along the necessary skills to assume the helm.

Though Nolan Rodman, 25, has other siblings, he was the only one to express interest in working at Rodman’s, a chain of grocery and wine shops owned by his family in Washington. At age of 12, Rodman began helping his father by cleaning, pushing carts, working the cash register and shelving merchandise, working his way through every position in the store.

After going to college with the intention of working for the family business, Rodman became the company vice president, on track to eventually become the third-generation owner.

“I feel lucky to be in the position I’m in,” Rodman said. “I’m never going to take advantage of that.”

However, unlike non-family businesses, if executive positions are kept within the family, a certain family member may find himself or herself not suited for the role.

“A family member taking over the business, they may or may not be the best person,” Gann said. “If you were to do a search for a CFO or a president, a board might not pick a family member… that’s part of the challenge. Also, to make sure that the person in that position is well-suited for that position and not just there because of the break he or she had being in that family.”

At the Tabard Inn, a 91-year-old hotel in Washington, Jeremiah Cohen, son of the hotel’s co-owners, was fired in 2013 after serving as general manager for 18 years.

“It can tear families apart,” Gann said. “Money and business and family can be a very lethal combination, and I think that’s why it’s rare the number of businesses that last into the second, and particularly the third generation are very slim. I think the challenges of a small business are what make their viability much less than a business without family ties.”

Future of family businesses

Despite the challenges of maintaining a multi-generational family business, these businesses enjoy the benefits of cultural continuity and a personal pride in the company’s history.

Gann said family business owners might feel a unique pressure to succeed — “if you fail you’ve not only failed yourself, but you’ve failed the legacy.”

“There’s just a lot of weight or pressure on the position to just be in a family business because it’s so much more than business,” Rodman said. “It’s family, it’s your dad, and it’s not just your boss.”

Jon Prince, third-generation owner of the Pittsburgh-area McKeesport Candy Co., said he doesn’t expect the company to stay in his family. With the rapid development of technology during the past decade or so, Prince said the family business model doesn’t always keep up with the industry as consumers become more demanding.

“Technology and the family business model have always been something at loggerheads,” Prince said. “Traditionally, businesses either grow or die. Family businesses, traditionally, cannot grow like other businesses. In reality, they should be able to grow easier than other businesses because they’re not encumbered by bureaucratic structure.”

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