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Kyle, Colin and Andrew Bornstein witness father Jay Bornstein as he signs a Memorandum of Understanding confirming his agreement to sell Bornstein Seafoods to his three sons, who will be equal partners.
Kyle, Colin and Andrew Bornstein witness father Jay Bornstein as he signs a Memorandum of Understanding confirming his agreement to sell Bornstein Seafoods to his three sons, who will be equal partners.

Case Study

The challenge: Who should 'rule over the others?' Add to ...

THE CHALLENGE

Jay Bornstein is the second-generation owner of his family's fish processing plant, Bornstein Seafoods, in Bellingham, Wash. At age 62, he began to think seriously about his plan to retire at 65, and he quickly realized he needed to choose a successor, and he needed to do it soon. However, with three grown sons he feared it would be hard on family relationships if he picked one of the boys to "rule over the others."

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He reviewed the skills and experience of the rest of his management team and it soon became clear that there was no "natural successor" from within the family or the company. Facing challenging economic times and tough competition, he also realized it was not financially feasible to recruit a "hired gun" to come on board and take over the ship.

THE BACKGROUND

Many family companies find management succession a challenging task. The reluctance to talk about the topic is so common that Ivan Lansberg, a leading family-business expert and author of The Succession Conspiracy, suggests that it's like a "conspiracy" exists to ensure the conversation never takes place or gets resolved. More often than not, the question doesn't get addressed until it's too late.

Sharyn, Jay's wife, suggested that the easiest way to avoid a family squabble was to sell the company. This was a sensible idea on one level, but Jay's commitment to the industry and his heritage, as well as his deep emotional bonds with Bornstein Seafoods meant he would prefer to cut off his right arm before he would sell.

Eldest son Kyle had worked in the industry for almost 20 years, including a stint as president when Jay was ill. But when Jay's health improved and he returned to the business, it became difficult for the two men to share the leadership duties. As a result, Kyle left the company. He is now enjoying success in his own business buying and selling fish; a related but not competitive field.

The middle son, Colin, had been with the family company for more than 15 years and he was now a senior sales manager. He worked hard and played an important role in the business. But he was primarily a "sales guy," and he didn't appear to possess the skills or experience to run the whole business.

The youngest son, Andrew, was about to graduate with his MBA and he was contemplating a career with the company. He is intelligent and well educated, however his interests lay more in real estate development than fish processing. Even if he was willing to join the firm, he definitely lacked the experience to be put in charge.

THE RESULT

Rather than trying to "jump to a solution," the family decided to be methodical and collaborative in dealing with succession. Over a three-year period, the family took the following steps:

1. It began to have regular family meetings to discuss issues and build unity.

2. It developed a clear, strategic direction for the company in collaboration with the whole management team, including family and non-family members.

3. With the assistance of an independent consultant, it recruited three independent advisory board members and delegated to them the task of choosing a successor.

The advisory board invited the three sons and all members of the management team to apply for the president's job.

Kyle and Andrew decided to support Colin in his application. Rich, one of the senior managers, also applied for the position. After interviewing both candidates, the board recommended that Colin be appointed as president on the condition that Rich serve as senior vice-president to assist Colin with operations and finance.

The family unanimously endorsed this proposal. In January, Jay moved out of his office and Colin took over the top job. It has only been a few months, but so far everyone seems happy with the new arrangement. A formal retirement party for Jay is being planned for next month.

More recently Kyle, Colin and Andrew signed an agreement to become equal partners and buy the company. Some people might think Colin got the best deal by getting the top job in the family business. That's certainly one way to look at it.

However, now that his brothers are each buying one third of the company, they will, together, become the majority owners. You might say Colin got the toughest assignment: He now works for his brothers!

Special to The Globe and Mail

David C. Bentall is an adjunct professor in the Sauder School of Business of the University of British Columbia.

This is the second of a regular series of case studies by a rotating group of business professors from across the country. They will appear every Friday on the Your Business website .

 
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