Panel explores leadership, compensation, succession and more
Family and business mix regularly in the energy industry, and company leaders face a unique set of management challenges when co-workers and stockholders and also their flesh and blood. Managing Partner Joseph Ciccarello of the accounting firm Gray, Gray & Gray brought those issues to life in panel discussion at the recent NEFI Expo 2015.
Joined by Craig Snyder, of Wesson Energy, and Jim Proulx, of Proulx Oil & Propane, Ciccarello engaged the audience in a highly personal discussion of family and business. The trio set an intimate tone at the outset by stepping off the stage and sitting face-to-face with the audience in the front row.
Ciccarello, a regular contributor to Oil & Energy, said Gray, Gray & Gray is a third-generation company that is now identifying its fourth generation leaders. “You have to decide who will take over and plan ahead,” he said. “The exit strategy should be on your mind, because there are all kinds of implications.”
Prepare for the Worst
As a top priority, management needs to anticipate the death or incapacitation of the current president and put a plan in writing so that the company can carry on without major interruption. “The plan has to be in writing, and it has to be known to people in the organization so that there is a roadmap in case something happens, so someone can takes on the responsibilities and knows the chain of command.”
Ownership also needs to make sure the company is ready for sale if that is the plan and be sure that a sale can yield the expected return. “Is there going to be enough for you to maintain a lifestyle for you and your spouse through retirement”? he asked.
Proulx told the audience that his grandfather established the original Proulx family business and brought his father onboard, but the succession hit an early snag because the grandfather later brought on his nephew who was not in the business. Jim’s father wound up launching his own business that eventually got a lot of the grandfather’s accounts. When Jim’s father was ready to retire, he offered his business to his seven children, and three chose to become owners.
The business has done well with Proulx and two of his brothers in management, but there has been “collateral damage” to the family dynamics, and the company recently reorganized the management structure. Some of the trouble could have been avoided with a succession plan that provided more clarity regarding accountability reviews and compensation. “It was hard for us to grasp,” he admitted.
Things might have been worse, but the Proulxs have received excellent guidance from the University of New Hampshire’s Center for Family Business. “That has been a savior for us” he said. The Center helped the family craft a buy/sell agreement that eased the recent transition when one brother left the business. “It seemed like nothing at the time, but it saved us from a lot of ambiguity now,” he said.
Proulx’s father had assigned roles to his three sons who entered the business: One was treasurer, one was in operations, and Jim was named president, but his power was limited because the brothers made decisions by committee. “I learned that if I did my homework and presented the ideas and concepts well, I only needed to get one vote,” he explained. “Some you win, some you lose. The difficult part was that there was no ultimate responsibility, but most of it did go well.”
Ciccarello asked whether a different management structure might have enabled better decision making. “It would have been better to have someone in charge and setting the direction,” Proulx said, acknowledging that issues among siblings inevitably colored some decisions. Clear job descriptions and compensation reviews based on industry standards could have helped prevent resentments, he added.
Wesson Energy’s Snyder said he is different from many in the business because he is a non-family professional selected by the owner, Bob Wesson, to run the business. William Wesson, the owner’s son, has joined the business since Snyder arrived 10 years ago and will likely take over in the years ahead. When William came on, Snyder worked closely with the Wessons to maintain transparency with the company and be clear about William’s role and the succession plan. “Bob and I have a unique relationship based on trust,” Snyder said.
Two strategies have proved very helpful at Wesson: hiring solid professionals and making a strong commitment to planning. “We plan obsessively so that there are no surprises,” Snyder said. Once every quarter, the management team spends a full day away from work reviewing and streamlining the company plan.”
At Proulx Oil & Propane, recent changes have left only two brothers in the business, and Jim said there are now rules in place for other family members who want to come on board. If a family member wants a company position, they have to work for someone else first and earn a promotion, then they need to come to the company with a concrete plan of how they will add value. “It’s pure business,” he said. “If you want money, this is what you have to do. It levels the playing field for everyone.”
Ciccarello said that job descriptions and accountability are essential to prevent little issues from becoming large elephants in the room. “If you think only the owners know about the problems, you’re wrong,” he said. “Everyone in the organization knows if an issue is not dealt with, and the longer it is not dealt with, the bigger it becomes, and then the company cannot move forward because of the roadblock.”
He said there are family-owned businesses with billions of dollars in sales. “I guarantee they are being run as public corporations and not as family businesses,” he said. “A business is a business, and you need to run as such if you want to be successful.”
Ciccarello said assigning roles is essential. “It is ultimately about wanting what is best for the company and deciding who has the right qualities and who can deliver what value to the organization. We have been involved with many family groups, and that is the hardest thing to decide: who is going to do what and who is going to get paid what. The mother may feel the children should get paid the same whether they are the president or sweeping the warehouse. I try to talk to the owner and say how that is not a formula for success. It is usually a formula for disaster, and they say, ‘But I have to go home to my wife.’”
Parents need to make those tough decisions and not leave them up to their children. “Siblings will accept Mom and Dad’s decisions but not decisions from another sibling,” he said. “The sooner you sit down with them and be open about their strengths and weaknesses and why one would be better in one position than the other, the better. Let them understand that this is how it will be because it will work for the company.”