Minnesota Wire & Cable Co. founder Fred Wagner (far right) has let his children tackle as much of the business as they can. Leading the pack are Joan Thompson and Paul Wagner.

By Phil Davies
Contributing Writer

Picking a member of the baby-boom generation to lead Minnesota Wire & Cable Co. (MWCC), a St. Paul-based manufacturer of customized wires and cables for the bio-tech industry, was a little like the Vikings' touch-down routine -- toss the ball as far as you can, and see who comes down with it. Founder Fred Wagner let the six of his nine children who were involved in the business find their own way over the years, filling roles that suited their individual temperaments and skills and taking on as much responsibility as they could handle.

By the early '90s, two siblings had pushed to the front of the pack: Paul Wagner, a born salesman with an appetite for operational detail; and Joan Thompson, a financial whiz who connects well with employees. Today Wagner is president of MWCC, and Thompson is executive vice president.

"The process simply evolved over the years, without any of us struggling with it," said Fred Wagner, 70, who retains control of the company as CEO, chairman and majority owner.

Every family business wrestling with a succession issue should be so lucky. The business of passing the torch to the next generation is

Often problematic, complicated by social dynamics and emotions unique to families. How does a parent elevate a son above his siblings by anointing him chief executive? How do you know that your daughter has what it takes to lead the company into the 21st century?

"All parents try really hard to be fair, so if there are several siblings in the business it becomes difficult for them to choose one to be the successor," said Allen Bettis of The Legacy Associates, a family-business consulting firm in Wayzata.

"Consequently they may postpone a decision like that, or they may make a decision without having good objective reasons for having done so."

Both errors in judgment can spell disaster for a family enterprise teetering between generations. Bettis and other family-business consultants make a comfortable living off entrepreneurs who waited to long to relinquish control, or handed the keys to an adult child who squandered the opportunity -- and put the firm in jeopardy. Bettis is currently advising a Twin Cities manufacturing firm that has lost 25 percent of its value because of poor leadership by a CEO who excels in finance but can't get along with his senior managers. His father is trying to decide whether to fire him or sell the business.

No wonder that, according to a 1997 survey by Arthur Andersen and Massachusetts

Mutual, fewer than 30 percent of American family businesses persist into the second generation. Fewer than 17 percent make it to the third generation.

Family businesses can tilt the odds in their favor by drafting a succession plan that allows the most capable members of the next generation to grow into leadership positions without ignoring the material and emotional needs of other siblings and their spouses. The key is getting started early, the experts say, at least 10 years before the senior generation retires.

The heir (or not so) apparent

The first step in succession is establishing a board of directors with outside members who can candidly gauge an offspring's leadership potential. Jounior's personality flaws or lack

of experience will be more apparent to business people who have never laughed at his jokes or marveled at his soccer skills.

Harry McNeely Jr., chairman of Space Center Enterprises Inc., an industrial real estate firm based in St. Paul, established Space Center's board in 1992, shortly after his son Paddy, now chief administrative officer, joined the company.

"It's not predetermined that [Paddy] will be CEO of the company," he said. "That's why you have a board; its most important job is to pick the CEO." Four nonfamily members provide a couterweight to the views of Harry, Paddy and daughter Irene McNeely on the board.

Likewise, Minnesota Wire & Cable Co.'s board features four nonblood relatives in addition to Fred, Paul and Joan.

If the latest sociobiological theories are valid, parents can't do much about a child's personality. But they can influence the educational choices of a child interested in carrying on the business -- "I always argue, spend too much on education, and not so much on the company car," said Randy Carlock, a professor of family enterprise at the University of St. Thomas in Minneapolis. And a parent can steer an adult child toward postgraduate experiences -- both within and outside the firm -- that will prepare him or her for the challenges of business leadership.

The proverbial chip off the old block - a kid with the same educational background, work experience and managerial style as Mom or Dad -- may not be the best choice to head the family business. Second - or third-generation businesses are

usually larger and more complex than their predecessors, Bettis observes. Today a CEO is more likely to function as one member of a management team rather than as an omniscient entrepreneur. Defining the skills needed to lead that team, and figuring out who has them or can acquire them, is a vital component of any succession plan.

Identifying the heir apparent can be a formal affair, in which the board makes advancement contingent on meeting certain performance goals or milestones. Or it can be a free-form, competitive process like the one that sucked the cream to the top at MWCC.

Thompson, 43, started out as a receptionist, climbing the organizational chart to human resources manager, vice president of administration and

treasurer before becoming executive vice president in 1992. Her older brother Brian Wagner rose through the ranks to become manager of the company's manufacturing facility in Eau Claire, Wis. Paul, 37, joined the firm as a salesman, earning a promotion to vice president of sales and learning the ropes in operations and shipping on the way to the president's office.

"It was like throwing all the cards on the table," he said. "Whoever picked up the good ones and really took responsibility for them came out on the leadership side of the equation."

It's a good idea for a son or daughter to work outside the firm for awhile before assuming a managerial position in the family business. Carlock recommends a voluntary exile of at least three years. "When a young person

works only for their parents, they think of themselves as being on an allowance," he said. "If they go work for somebody else, not only do they get the autonomy and self-confidence that they need, but they also bring back new and better ideas to the business."

Paddy McNeely, 41 worked for National City Bank in Minneapolis for a decade, attaining a vice president rank

in commercial banking. Paul Wagner managed the North Stars hockey team's personnel department for several years. And Michael Stanzak, general sales manager of Key Cadillac Co. in Edina, served a four-year apprenticeship as a salesman for a car dealership in Orlando, Fla. before returning to his father Adam's business in 1990.

"The whole idea of me going to

Orlando was for me to ... develop confidence in what I was doing, so that when I eventually came back to Key Cadillac I would be trained," said Stanzak, 40. "I didn't want people to say, 'The reason they haven't thrown you out on the street yet is because your father's the dealer.'" He is destined to step into Adam Stanzak's shoes as owner of the dealership.

But what about the CEO-in-waiting's brothers and sisters? Won't they resent being relegated to lesser positions in the family business, or none at all? Often it's not an issue; Stanzak's sister, a professional ballerina, has no interest in selling Cadillacs. When siblings are actively engaged in the business, as at MWCC, it's essential to talk to them -- as well as other nonfamily "stakeholders" such as senior managers, key customers and

bankers -- about what's going on.

A "family council" in which siblings and other relatives gather on a regular basis to air grievances and differences in opinion can help ensure a smooth transfer of power. One such council arranged by Bettis for a Twin Cities client revealed that a shareholder daughter who was constantly lobbying for higher dividends felt disenfranchised. Granted a forum where she could stay informed about business operations and express her opinions, she reduced her cash demands.

'Noses in, fingers off'

If nobody in the family has the experience or desire to carry on the business, an aging owner has three choices: liquidate, sell or bring in nonfamily management. Some owners hire "bridge" management to run the company

until a son or daughter is ready to take over. Family-business consultants or executive search firms can recommend managers with the appropriate aptitude and background.

Others, determined to maintain some form of family involvement, grant shares to adult children who are expected to instill their values in professional management but have little say in day-to-day operations. "We tell families that if they make this decision, then their new role should be 'noses in and fingers off,'" Bettis said.

Vern and Helen Olson haven't decided who, if any, of their five children will receive shares in their plastic injection molding company when they retire. Rolco Inc., a $7 million-a-year firm located in the town of Kasota 80 miles south of Minneapolis, seems destined to become one of those businesses that falls out

of the family fold in the second generation. All of the Olson's five children have left Kasota to pursue other careers.

In 1995, the board of directors hired Denny Maas, an executive with extensive experience in the industry, to replace Vern Olson as CEO. Olson, 58, stayed on as manager of new-product development.

Giving up control of the company was painful, said board chair Helen Olson. So was the realization that, in their case, worrying about which child is best suited to lead the company is not an issue. But the Olsons haven't given up hope, even as they contemplate a charitable remainder trust or Employee Stock Ownership Plan.

"Just because none of our

children wants to be involved in the company now doesn't mean that won't change," Helen Olson said. "The door is always open for them to come back in the future."