Business Services

From One Generation to the Next

HVAC Contractors Weigh Pros and Cons of Family Business

September 9, 2013
Trans

From father-and-son to mother-and-daughter, and from fifth-generation to just-starting-out, there are a range of family businesses in the HVAC industry. And these businesses provide contractors who choose to “keep it in the family” with unique opportunities.

As Martin Hoover, president of Empire Heating and Air Conditioning Inc., Decatur, Ga., put it: “Doing what you love is great. Doing what you love with those that you love is truly special.”

While the working relationships that are formed are special, family members also face many challenges, from family arguments spreading to the office to disputes over succession. But many HVAC contractors have learned to successfully navigate these issues and are planning how the business will go forward with the next generation.

Delving into Family Dynamics

A common problem in many families is the perception that one child is favored above others. This same dynamic can be problematic in family businesses, when family members are perceived as being treated better than nonfamily employees. Additionally, problems can occur when family members expect to receive preferential treatment.

At Mechanical Air Service Inc. in San Jose, Calif., president Russ Donnici employs his son, daughter, and son-in-law. “I think the biggest disadvantage is when a family member doesn’t follow established procedures within the company,” he said, stressing that no one breaks the rules at his company. “I have a rule that the company operates under one set of rules for everyone — including myself.”

Hoover founded his company with his wife 28 years ago, and has had both positive and negative experiences with employing other family members. He is currently working to integrate his 19-year-old son into the business. Hoover said he has faced the challenge of family members who “sometimes feel entitled to more than they deserve.”

Paul Sammataro, president of Samm’s Heating and Air Conditioning, Plano, Texas, noted that in a family operation, sometimes things just aren’t as smooth as they should be.

As an example, he discussed a time to when he had to relieve a family member from a job.

“The disadvantage is hoping that my family members understand — as my employees do — that I’m running a business, and my decisions have to be in the best interest of the whole company, not just the family,” said Sammataro, who employs his wife as vice president, son-in-law as a service technician, and daughter as a dispatcher. “It is not personal.”

He added that hiring family members is “no different than any other employee we hire.”

“First they have to want to be employed with us, and second, we have to have a job opening,” he said.

Steve Scott, managing member of Comfort Technology in Dryden, N.Y., has employed his son for the last 25 years. From the beginning, he tried to teach his son to be a good technician — and not to expect dad to make things easy for him.

“When he was about 14 or 15, we were installing the mechanicals on a new house. He was tasked to install the boiler. He asked me ‘which way the vent should slope — to the boiler or away?’ I told him that I was pretty sure it said which way in the manual,” Scott said. His son repeated the question two more times, and each time Scott responded with the same answer. “He got a little huffy, but grabbed the manual and looked through it for the answer.”

A year or two later, Scott continued, “We’re again installing the mechanicals on a new house, and my son is again installing the boiler. The first thing he did was grab the manual, sit on the steps, and skim through it. Now, whatever he installs, even if it’s something he’s installed before, he always takes a few minutes and skims through the manual. Too bad more contractors couldn’t take a lesson from my son.”

Life’s Ups and Downs

At Sky Heating & Air Conditioning, in Portland, Ore., owner and general manager Travis Smith will become the majority shareholder at the beginning of next year, officially buying out his father Bill.

“The biggest disadvantage of working with family is that business does not just stay at business,” Smith said. “It is dinner table talk, holiday talk, and just general talk. It is also a hard transition going from father and son to business partners.”

Plus, he noted, “Family vacations also become troublesome because all of upper management leave for a week together.”

Overall, though, Smith said, “The old saying goes blood is thicker than water, and when family members have arguments we have been able to look past them and move forward.”

IC Refrigeration Inc., in Ceres, Calif., is a third-generation family business, and president Rich Imfeld said that although working with family can be rough, he enjoys seeing his father four days a week.

He added that his father just celebrated his 50th anniversary with the company. “He is slowly transitioning away from working every day, but I never expect him to fully retire,” Imfeld said.

Sammataro noted that the worst family feuds occur when trying to convince family members to do something they don’t agree with. But the best moments are when he gets to share success not only with employees — but with family. “We’re hoping to make all our lives better in some way,” Sammataro said.

At Kobie Kooling, a second-generation family business in Fort Myers, Fla., president Fred H. Kobie said family arguments at work can be difficult.

“I’m still dad, husband, brother, and uncle, so it’s tough sometimes to give directions as a boss or take directions from a relative. They all also know my weaknesses and take advantage at times,” he said.

But, he continued, “No matter what, they support me and our business. When it has to be done, or someone calls in sick, or when we need someone to run that extra shift — they do. They work harder and care more because it’s our name and family business.”

Kobie currently employs his brothers, wife, sons, daughter, daughter-in-law, and a few other relatives.

Plus, he said, “My four-year-old granddaughter and four-month-old grandson are there every day. There is no better assistant on the paper shredder than my granddaughter Kaylee, and there are plenty of hands to help a crying baby Freddie.”

A.N. Roth Co. of Louisville, Ky., was established in 1866. Fourth-generation family member Karl Roth Jr. is the current CEO, and fifth-generation family members are currently employed in the business. According to Roth, his father was his hero and taught him how to be successful.

“My dad taught us the secrets of life,” Roth said. “One, it’s not about us — it is about everyone around us. Two, treat others as we want to be treated, always fairly and squarely. Three, wealth is a byproduct of perfecting the first two rules. And four, when blessed with success, share with others and make a difference in the world.”

Nonfamily Employees

While family member employees may be the most visible, nonfamily employees are also a big part of these businesses.

Donnici reiterated that applying the same rules to all employees regardless of relationship has created a good environment for nonfamily employees.

“We employ several nonfamily members in the business, and it has always worked out well since we operate with one set of rules and everyone follows them,” he said.

According to Hoover, “It’s the nonfamily that has made the most contribution to our success. We have been blessed with some great folks that have worked with us for a long time and treated our company as their own. We pay them well and provide excellent benefits, but without their character and integrity, we never would have succeeded.”

Kobie shared that in addition to family, he also employs his best friend, along with his son’s and wife’s best friends.

“I have watched them grow and get married, buy houses, have babies, and live their lives. It’s the most rewarding thing in life,” he said.

Imfeld noted that one nonfamily member at his company is a vice president with a minority ownership percentage.

At Sky, Smith said the nonfamily employees are vital to the company’s success. “They often do feel like family,” he said.

Successful Succession

While a succession plan for a family business may seem like a given, it’s usually not a simple, clear-cut process.

According to Donnici, “My goal was never to have the kids take over the company. I had witnessed too many family businesses suffer when the kids were expected to join the family business to meet a parent’s expectation.”

Still, he was pleased when his son, daughter, and son-in-law decided on their own to join the company. “The current succession plan is for the three kids to take over 100 percent of the business functions,” he said.

At Samm’s, Sammataro acknowledged that the future is unknown. “We are still young first-generation owners, so plans to turn over to the next generation are years away,” he said. “But I definitely have a plan going forward. A lot can change over the years, so we will train and work towards the goal of other family members gaining knowledge and improving on what we started. [This will] give them an opportunity to bring it to a level they like.”

According to Kobie, his family is very focused on keeping and continuing the business.

“This is not just work, but rather our mark on the world. It’s how we feed our babies, how we buy houses, and how we help people. We believe in what we do, and I want my kids to know the security of owning your future. If they make it or fail, it will be because of their effort,” he said.

Roth said he “certainly” plans to keep A.N. Roth going forward as a family business, adding that it is a “money machine.”

“All that has to be done to oil it is treat our employees and customers with the respect they are entitled to,” he said.

Yet not everyone is grooming the next generation to take over the business. For Imfeld, passing the business on to the next generation isn’t in the cards because he doesn’t have children. “I am starting to look at ESOP [employee stock ownership plans],” he said.

According to Hoover, he is working on a succession plan “that could go either way.”

He noted that his oldest daughter has already passed on the company, but his son has expressed interest in becoming a second-generation owner.

However it ends up working out, Hoover emphasized that the planning is important.

“It makes a huge difference to plan for succession. Not planning can result in no value to the company or paying Uncle Sam 70 percent versus 20 percent of the value of the company,” he said.

Publication date: 9/9/2013 

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