One of the keys to Blommer’s success, both as a business and in its transition to management by the third generation, has been the group’s enthusiasm for the enterprise, something many third-generation businesses lack. Tori Blommer-O’Malley, who joined the business only after considering the move for more than a decade, notes, “I always thought it would be wonderful to work there—an opportunity and a privilege.” Peter Blommer agrees: “We are all aware that we are blessed with a business with our name on it, and we have the legacy and responsibility to carry it on.” (Click image to enlarge)
Divided We Fall
For any family business, survival into the third generation is a cause for celebration. It must overcome the weight of entropy to avoid losing its business edge. The vibrant vision and energy of the founder is succeeded, in many cases, by the more cautious and conservative management typical of members of the second generation. The third generation therefore often finds itself with a middle-aged business that needs more than a touch of entrepreneurship to revive it. Without that spark, it can quickly weaken. To avoid succumbing to senescence, the third generation must find unanimity and resolve to make hard decisions—not least of which is whether to try to grow the business (as Henry Blommer’s heirs wanted) or to sell and invest their capital and attention elsewhere (as Al’s heirs chose).A family business entering the third generation faces classic challenges: deciding who will lead it, and who will own it. Family dynamics can thwart a third-generation business in either or both of these areas. Members of the third generation are often far removed—both physically and philosophically—from the entrepreneurial founder. These cousins may have different values, concerns and needs, degrees of connection to the business and interest in the founder’s vision.
“[The third generation] is certain to have members who have drifted away from the mother ship,” notes Jared Kaplan, a lawyer specializing in estate planning with McDermott Will & Emery in Chicago. As with the Blommer family, Kaplan notes, “Some family members are invested and emotionally connected to the business, while others want to leave. This is where the rubber hits the road—the family has to accommodate both sides.”
Problems arise when the founder’s and second generation’s work ethic fails to take hold among members of the third generation. Unlike previous generations, a family business’s third generation often has grown up in affluent households. Members of this generation may feel entitled to their wealth, and may be less cognizant of the need to work for its continuation. Also, the growing number of people who now depend on the company’s largesse to maintain their lifestyles—that is, the founder’s grandchildren—can overwhelm its resources and leave little cash to reinvest into the business.
Teddie L. Ussery, a director at Synovus Family Asset Management in Columbus, Ga., a family office that represents many third-generation family businesses, observes: “There are three major challenges for the third generation: defining who has the passion to continue the business, developing a common vision and identifying the talent to run it, both within and outside the family.” Successful third-generation family businesses place the needs of the business above the needs of the family, he notes. They allow new leadership to emerge by opening the door to the third generation.
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