CHICAGO - Stability does not always come easily to a family-owned business.
Ask injection molder Dreco Inc. of North Ridgeville, Ohio. During the past decade, the company has gone through several changes in top management and an ownership restructuring to chase growth.
``These were never easy choices,'' said Dreco co-President Christopher Draudt, speaking May 18 at the 2001 Injection Molding Financial Symposium in Chicago. ``Ultimately, we had to come up with a strategy so you wouldn't have four brothers beating each other up.''
While Draudt may have overstated the case, the company has found ownership transition to be a work in progress. Yet, Dreco's struggles - which led to a written policy that better defines roles and company goals - are nothing uncommon for many businesses, said PenResearch Group Inc. managing director Brian Tartell, a former business planning consultant.
Sometimes, emotional issues get in the way of proper succession planning, Tartell said.
``Everybody thinks that they are invincible and can live forever,'' Tartell said. ``But the going gets tough when the owner thinks about retiring or dies suddenly. You've got to ask yourself what the business is really worth and how you will make the transition easily.''
In Dreco's case, succession grew sticky during the 1990s. The company was founded in 1932 performing sand casting for the vacuum cleaner industry and moved to molding in the late 1940s.
But after Draudt's father retired, the company faced a management transition to his children. A trust fund was created giving equal, one-third ownership to three brothers. When the first-born brother took charge, though, it proved to be a difficult management change, Draudt said.
After some disagreement, the brothers agreed to bring in an outsider, a family friend with accounting expertise, to run the day-to-day operations. But while helping shore up the bottom line, his knowledge of the molding business was lacking, Draudt said.
The accountant was given a five-year deal with performance incentives and not stock ownership. When the transition again did not work out, the Draudt brothers replaced him, he said.
``We had to bring the company to the next level,'' Draudt said. ``We wanted to move from about $18 million in sales to $25 million to $30 million. But we had to find another way to take the company forward.''
Over the past six months, Dreco found a way to share family ownership and resolve some internal conflicts among the siblings. Four brothers - Christopher, Dale, Larry and Russell Draudt - form an executive team, with each having equal voting shares.
Another outsider, who has been in the molding business since the 1970s, has a 5 percent ownership stake.
``We have him on the board to resolve conflicts,'' Draudt said. ``Behind closed doors, we might act like brothers and take cheap shots at each other. But then we make our decisions, go to work and put that behind us.''
Currently, Christopher and Russell Draudt serve as co-presidents, splitting the administrative and plant duties for the 130-person company.
The company is eventually considering how to ease the fourth generation of family members into the business. Funds are available to buy out any of the brothers, if they choose to retire. And eventually, Christopher Draudt said Dreco would like to try handing day-to-day operations to another outsider with more management acumen.
``In 10 years, I don't want to run the business, only check on it from time to time,'' Draudt said. ``Either our children or others can take the same opportunity.''