Businesses consider In the summer, when the children come to work for his family's wholesale and retail flower business, Russell Watanabe keeps a close eye on each of the kids.
succession
Watanabe Floral is one of many
approaching a turning pointFIRMLY FAMILY
Tim Ruel / truel@starbulletin.com
He's not watching for mischief. He's trying to find his next CEO.
Watanabe, president of Watanabe Floral Inc., is 51 years old. His parents, Ernest and Shizue Watanabe, began growing roses on Bishop Estate land in Koko Head just after World War II. Their fathers, first-generation immigrants Yonekichi Watanabe and Masaro Katashima, contributed much of the labor.
Since then, the business has survived several upheavals and transformations. Most of the Watanabe roses are imported now, some from South America, some from Holland. Revenues leveled in the mid-1990s, but are back in record territory.
Ernest, 90, still works for his son, between naps. Shizue, 83, manages the flow of roses between the company's distribution and retail outlets across the state.
Russell figures it's going to be a while before he must pick a successor. It's a good thing. "Nobody has come right out and said, 'I want to go directly into the business,' " he said. "But we have time."
Hawaii's family businesses are facing a major turning point in the coming years. Many local firms sprouted around the same time as Watanabe Floral, with first-generation immigrants making their stake in the islands. The offspring of the founders grew up within the company and saw the blood, sweat and tears required to stay in business. But the grandkids are different -- they see the privilege of inheriting the wealth.
Parents don't make their kids work as hard as they used to, Russell said. "I'm guilty of this. My children haven't had to work hard."The statistics tell the rest of the story. In America, more than 30 percent of all family businesses make it to the second generation, according to the nonprofit Family Firm Institute in Boston.
After that, 12 percent make it to the third generation. Only 3 percent survive into the fourth generation, the great-grandchildren of the founders.
Russell said he has watched other family-owned flower suppliers on the mainland -- ones that his parents had patterned -- fall apart by the third generation. "Just completely blew up," he said.
One problem: in-laws. People who marry into the family began treating their kids as political pawns. "The key to the problem is jealousy," Russell said.
Because of the daunting task of picking successors, and other reasons, most families put off deciding what to do with ownership.
"I think the majority of the small business arena in Hawaii is not prepared," said Steve Capone, president of Estate Planning Consultants of Hawaii Inc. His firm has 40 consultants, attorneys and paralegals who are helping about 5,000 businesses and families in Hawaii transfer their assets to the next generation.
"I hear businesses crying out all the time wanting to make the decision," Capone said. "I think most people think they're going to live forever. They don't want to think about an end."
George R. Newton, president of local medical supplier C.R. Newton Co., has good reason to linger on the big decision of succession: He does not want to run the lives of his children.
George's uncle Charles Richard Newton founded C.R. Newton in 1941. George and his brother David Newton took over in the late 1980s.
Both of George's children, Summer and Kaione, have gone into the field. Kaione graduated from the University of Washington last year and has started his residency with his father's firm. Summer manages a separate medical supply firm in Seattle. "They grew up around the business," George explained. "Your conversations are all about the business when you go home."
While George hopes both children would want to take on the reins, he doesn't push it. "I've never forced my children into making decisions," said George, who is 53. "We try to set a good example for them. They see how hard we work."
C.R. Newton now has 30 employees and contracts with major medical insurers Kaiser and Hawaii Medical Service Association.
If none of the children take over the company, George is not sure what will happen. Selling is one option. It's something to think about, but it's still no reason to pressure his kids.
Other Hawaii families are tackling the problem ahead of schedule. The Kamitaki and Mizoguchi families -- owners of Ben Franklin Crafts and Ace Hardware stores in Hawaii -- have hired consultants to help with succession. Their company BFS Inc. has prospered in the hands of the third generation. But because there are two families involved, many of the children in the fourth generation simply don't know each other. One option already under review is some form of outside ownership.
A fundamental solution, the Watanabes say, is keeping the family together, rewarding hard work with praise, and not necessarily with promotion. Not everyone is cut out to be a manager, said Russell Watanabe, who was the third of six children in his family. Clerks should receive just as much family support as the president, if they do a good job, he said.
"Those families that succeed are strong families, not necessarily strong businesses," he said.