Son, Let's Be PartnersMar 04, 2009
photo of Jack & Jonathan Rodgers
Without American family businesses, we wouldn't have Ford Mustangs, Coors' beer, Brooks Brothers' shirts, the Pillsbury doughboy or those chrome-and-steel beasts on "American Chopper." According to Boston's Family Firm Institute, about half of the nation's wealth is tied up in family businesses. But reconciling the dynamics of family with the realities of commerce is not easy, and most family businesses don't last long, even if the names do. There hasn't been a Brooks brother involved with the high-end retailer since 1946. In fact, the Family Firm Institute's research suggests that only about 30 percent of family-owned businesses make it to the second generation. Twelve percent make it to three generations, and only three percent make it beyond that.
Making It Work
The traditional family business model was based on the traditional family—very top-down. But as homes have become less authoritarian, a new and more flexible sort of family business has appeared. In these collaborations, the child sometimes establishes a professional identity and some means, and the generations join forces because they want to. Take, for instance, the principals behind Rodgers Development.
Jack Rodgers retired after a 30-year banking career to what he assumed would be a life of leisure—vigorous leisure, that is, with lots of skiing and sailing and globetrotting, but leisure nonetheless. After roughly six months, a life without work began to pall and Jack started up the small, homegrown Land & Sea Development Company. Real estate had always been a sideline hobby for him—designing the family home in Connecticut, renovating houses for resale, developing a small shopping center and once, a golf course. He'd consistently done well with these projects, but they hadn't added up to a full-time business.
The real-estate bug was well-rooted. Jack's father, "a high school dropout and father of four," was an electrician and a foreman for a small business that did a lot of construction work. Jack had his electrician's license before he was 20 and often worked for his dad. But the promising career opportunities that followed college, business and law school led him away from any serious consideration of joining his father's company. So did the experience of working for his father as a young man. "I had to work harder than any of my dad's other employees and he'd chew me out from time to time just to show that being the boss's son didn't buy me any slack."
Jonathan, Jack's son, recalls a childhood of blueprints and wallboard. "I grew up around real estate, always visiting places my father was working on," he says. Out on his own, Jonathan continued the tradition. Though he worked in marketing and public relations, he and his wife renovated and sold the first place they shared in Boston before moving to California.
The family history became a pathway to entrepreneurship when Jonathan and his wife returned east around the same time Jack came to realize that his tiny real-estate venture—building one house at a time in neighboring seaside towns—could become something much more. Father and son were both looking for a next step. Real estate was something they both knew and enjoyed. The timing was right.
Sharing In Success
Today, after two years in business together, father and son have renovated or built from scratch half a dozen properties in southeastern Connecticut. And now they are developing their first Manhattan property, a brownstone renovation and condominium-conversion project in SoHo. Even better, they are still on better than speaking terms, making money and enjoying their work.
As with any success, luck is involved. Jack's super-short retirement was not in any plan, nor was Jonathan's return home from California. Even luckier is the fact that, although father and son want different things from their business, their goals are not in conflict. At 32, Jonathan wants to grow the business, gradually playing a larger role until he eventually assumes the helm. At 60, Jack wants less of the day-to-day stuff, enjoying most the roles of consultant, planner and investor. It's called a plan of succession, and lack of one is a big reason why many family businesses come to grief.
Perhaps the biggest reason Rodgers Development is working is that the equity between the principals is explicit. "It wouldn't work if he was my employee and we knew that," Jack says. "We're partners."
Their financial stakes are not identical, however. "I have more resources than he does at this point," Jack says, before pointing out that there are other ways to invest in a business. "Jonathan takes on more risk; I put in more cash." Capital loans are repaid at prime rate, and the result is a shared burden.
"We each have equal skin in the game," Jonathan says.
Partners, of course, must share decision-making, and this has been the hardest adjustment for Jack. "At one time, I had a thousand employees," he recalls. "If I told someone I wanted to see them tomorrow at 10, they'd be there. Now I've learned diplomacy. I give due respect."
Both agree that another reason the business works is that they are not side-by-side in an office all day long. And they talk. "I never feel we're trying to dodge an issue," Jonathan says. "We share the load."
For all the differences between the Rodgers' company and the traditional father-son business, what makes both work is the comfort zone—deep and wide— that only family can provide. "I enjoy the companionship, and it's really nice to have a partner who you never have to worry about," Jack says.