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Thursday, August 7, 2014

Market Basket fight is an example of how mixing family and business can be complicated

The battle over the future of Market Basket may be unusual or even unique in the annals of American retail, but at least one aspect isn’t that odd: When it comes to family businesses, “family” can be harder than “business.”

“It doesn’t matter how big they are or how small they are, but family issues and personalities do crop up,” said Barbara Draper, director of the UNH Center for Family Business, which has studied and counseled family-owned businesses since 1993. “It can be very tiny things that cause these problems, and it can go back to things that happened in their childhood – ‘Johnny took my truck in the sandbox.’ ” ...

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The battle over the future of Market Basket may be unusual or even unique in the annals of American retail, but at least one aspect isn’t that odd: When it comes to family businesses, “family” can be harder than “business.”

“It doesn’t matter how big they are or how small they are, but family issues and personalities do crop up,” said Barbara Draper, director of the UNH Center for Family Business, which has studied and counseled family-owned businesses since 1993. “It can be very tiny things that cause these problems, and it can go back to things that happened in their childhood – ‘Johnny took my truck in the sandbox.’ ”

Emily Porschitz, assistant professor in the Department of Management at Keene State University, agreed.

“I grew up in a family business, too. You see these other dynamics that come into it – all these family dynamics that come in. How do you sustain a business into the second and third generation? It’s a big challenge,” she said.

That isn’t to say multi-generational family businesses can’t succeed. They are a big part of the economy in New Hampshire, New England and the U.S., and even if most don’t last 11 generations, like the Tuttle Farm in Dover, it’s not unusual to see a third-, fourth- or fifth-generation business.

Draper said the usual estimate is that around 80 percent of all businesses are owned by a single family, and about half
of those are multi-
generational, having made the difficult transition from the founders to ownership by children or later generations.

Most are small, single-storefront restaurants, inns or retailers, but some are very large. That includes Hitchiner Manufacturing, the biggest private employer in Milford; adhesives firm Worthen Industries of Nashua; and C&S Grocers in Keene, whose owner, Richard Cohen, is not just the grandson of the founder but also New Hampshire’s richest man, with personal worth of $11 billion.

Examples of quarreling business families abound, too – most famously the court fights between brothers Roger and Marc Berkowitz, who own Boston-based Legal Seafoods.

Few quarrels, however, have reached the epic proportions of the decades-long legal battles between cousins Arthur T. and Arthur S. Demoulas over the direction of Market Basket, which escalated once employees urged customers to boycott the store.

“It’s pretty far up the Richter scale from anything we normally see,” Draper said.

“I am pretty confident that there has really been nothing like this – where the management and the employees band together to fight a CEO. It really is unheard of,” agreed Amy Schmidt, professor and chair of the Economics and Business Department at Saint Anselm College. “I’m sure there are going to be cases written about it that business classes will be studying for years.”

The Center for Family Business holds a number of programs and sessions to tackle the sort of problems that happen when relatives and business mix, with titles like “Sibling Rivalry,” “The Right Way to Bring Children into the Family Business” and “Non-active Family Members.”

They are designed to address the difficult dynamic when relations and business interests overlap.

“It’s hard to fire family,” Draper said. “It’s hard to let some family members make huge incomes and others not.”

“If you’re not working with relatives, you don’t have to go Thanksgiving dinner with them, to birthday parties and christenings, and there isn’t that expectation that you’ll be as close and will communicate well,” Draper noted.

Despite the money and people’s livelihoods, Porschitz of Keene State said there’s an aspect of the Demoulas feud that is almost comical.

“It just feels so petty from the outside looking in, to have a family feud like this cause such devastation,” she said.

But despite all that, Draper said, it’s important to remember that in the end, business is business. An important sticking point in the Demoulas family fight concerns how and whether to distribute tens of millions of dollars to shareholders, who are mostly family, or employees

“There’s a lot of money involved,” she said. “It’s always a struggle over power and money.”

David Brooks can be reached at 594-6531 or dbrooks@nashuatelegraph.com. Also, follow Brooks on Twitter (@GraniteGeek).