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Keeping a family-owned business growing across generations


Someday there could be a nonfamily member running ISG Technology. But for now a fourth-generation owner is in charge, and that CEO has advice for any family business that intends to prosper across generations.

Ben Foster is the CEO of a company founded by his great-grandfather. It has grown from a small-town telephone company into a cloud hosting and technology reseller that employs 200 in Kansas City.

“You need the recognition that it’s almost impossible for transition to happen naturally,” Foster advises. “It takes education to keep moving. It took a formula to grow our equity and earnings, to ensure we adapt and ensure that one generation doesn’t take too much money out and not leave money for future generations.”

Someday, too, the family might entertain the possibility of broadening ownership or selling the business. But Foster said the seven family owners in the company now are taking a long-term view as owners, not focused “on the latest bright, shiny object.”

Foster said it’s been key for the family to recognize that it didn’t have all the expertise needed to carry the company into new technology and new business climates. It worked with a family business consultant from Legasus Consulting. It added outside, nonfamily board members to shore up their weaknesses in entrepreneurism, technology and human resources. It created financial incentive plans for key nonfamily employees, designed to encourage them to “think like owners.”

Most important, Foster said, the family had to look inward and have tough conversations about individual roles in the business. It was vital, he said, that it understand the distinction between family members who have a share in the ownership and family members who have ownership and also work in the company.

“When the owners, board members and managers are all in the family, it can be hard,” he acknowledged. “It’s difficult to separate the business from the family, even when the family is number one. There can be occasional differences between those who work in the business and those who don’t, so we meet quarterly to talk about the business, to bring up issues that haven’t been addressed. You can’t let those things go unaddressed.”

Foster encourages family-owned companies to draw on outside professionals to help bridge any work/life barriers.

“It’s easy to talk about it academically, but in real life it’s hard,” he said. “It’s like not talking about politics and religion. A lot of families have trouble embracing frank discussions about their roles.”

The bottom line for Foster is that family-owned businesses — if they survive beyond the crucial third generation (and most don’t) — “can outperform public corporations because we’re not motivated by quarterly change. … We’re motivated by patient capital over the long term.”