The BBC World News – Business Daily speaks with Palo Alto Software CEO, Sabrina Parsons about family succession.

The conversation touches on the topics of “good and bad nepotism” and the worry that if family-run businesses don’t pass down from parent to child, the outcome for the business can in some cases be quite dire.

Both Tim and Sabrina have talked extensively about this topic before, check out their posts Serendipity Succession, Father and Child and Nepotism vs. Family Business.  It’s nice to hear a refresher on the preconceived notions of a daughter stepping into her father’s shoes and how that has personally impacted Sabrina since taking over the company.

Sabrina’s interview starts around the 9:20 mark.

BBC Podcasts – Business Daily News with Steve Evans – Nanny State or caring government? Aug 13, 2010

‘Chelle Parmele
Social Media Marketing Manager

Small businesses, individually owned or family-owned, are really the backbone of this country’s economy, employing more people nationwide than the big-name giant corporations, and serving most of our daily living needs.

For many of these businesses, family continuity, the transition/succession of ownership/management from one generation to the next, is a huge issue. I’ve worked for four different family businesses in four very different industries, and have seen four different approaches to generation transition.

The most interesting I think was a local grocery store chain. The company was owned by several brothers, was a couple of decades old and had been holding its own, and expanding, in the face of pressure from the big national chains.

As a family business, it was not surprising that many of the brothers’ family (wives, kids, and siblings) worked there. What was surprising was the family employment structure. Each of the brothers managed different stores. When a family member wanted to work in the company they got jobs with their in-laws, as it were.

The short story is that the kids my age all worked for their uncles, not their dads. The process was interesting to watch as a young employee, and over the years I’ve become impressed by the brothers’ wisdom. These guys were shrewd businessmen and canny managers.

When their kids began working, they started at the bottom of the heap, waiting the bakery counter, stocking shelves, bagging groceries, etc. In working at their uncles’ stores, each of the next generation got to choose whether they would apply themselves, simply work for some cash, or screw off.

The uncles were able to objectively supervise their young kin, while listening to and supporting their department managers (who could give honest feedback without falling afoul of the “nobody-can-criticize-the-boss’-kid-trap”), and showed very little favoritism or preferential treatment that I could see. I don’t recall any of the kids who were my peers being jumped up to better jobs or inflated pay rates. If they worked hard, they were trained and tutored. When they slacked off they got chewed out, just like me, or they got canned.

A couple of the kids who were a few years older than me seemed to be genuinely interested in the business. After working in several departments at one store, one of the boys had been moved to the store where I worked to start his training as assistant manager, again, with his uncle. Having worked up from the inside and the bottom, this scion, as near as I could tell, encountered minimal resistance or resentment from other current employees and department managers, when he eventually became general manager. He was not there simply because he was the boss’ kid. He’d worked and earned his way there.

For this company, the conscious, planned, process of testing and training (and weeding out) of their children as participants in the family business paid off as the brothers, in their turn, handed off management of this successful grocery business to the next generation.

Steve Lange
Palo Alto Software

Don Barton’s family has been farming walnuts in the San Joaquin Valley for four generations. In 1912, his great grandfather, P.F. Barton, rode a boxcar west from Illinois and settled in Oakdale, California to grow prunes and walnuts on what became the Barton Ranch. Almost 100 years later, the walnuts are still growing in Oakdale, and his descendants have grown the family business to include processing, packaging, and shipping walnuts all around the world.

Don had left the ranch and moved to the East Coast after getting his MBA in Agribusiness, leaving his brothers, Brent and Gary, to manage the business. In 2002, Brent was approached by a neighbor who wanted the Bartons to take over his walnut shelling and packaging operation. Until then, the family had been involved only in the growing and harvesting of walnuts, but not processing. It was a logical step, but also a big one. Still, Don agreed when Brent suggested he come back to California and run the new arm of the family business, GoldRiver Orchards.

Securing Loans and Planning for the Future

While most of the funding for the new venture came from internal sources, the company did need to seek funding to purchase some new equipment. To write the plan the bank required for the loan, Don bought his first copy of Business Plan Pro. “It provided an excellent template to allow us to think critically about the business–not just in terms of the financial forecast, but also in terms of our intended markets, our competitive set, and how we would build a brand.” The business plan Don created using Business Plan Pro was presented to the bank and secured the loan in excess of $1 million. And business has been even better than he had planned. “I’m happy to report that our initial assumptions were conservative, but we never underestimate the value of planning.”

Don recently upgraded to Business Plan Pro Version 11. “We plan to build a new processing plant in time for the 2013 crop. As we begin the planning for the land purchase and build-out of the new facility, I thought it would be important to update our business plan with an eye on the new facility and its implications–both financially and in terms of sales volume–to our existing business.”

He quotes Dwight Eisenhower, when he says, ” ‘Those who fail to plan, plan to fail.’ We at GoldRiver Orchards could not agree more.”

There were a couple of challenges that came with writing the original plan for GoldRiver Orchards. One was figuring out how to incorporate “a long-established business culture on the ranch into the brand-new–and just evolving–business culture of GoldRiver Orchards. A second challenge was to cast our vision over the upcoming five-year period and try to envision where GoldRiver would be by the end of that five years. Many of the goals set in that plan have not only been achieved, but exceeded. Other goals have been set aside owing to the changing marketplace.”

Meanwhile, Back at the Ranch

Don Barton

In the years Don was away from Barton Ranch, he worked in marketing at several large companies, including Ocean Spray Cranberries, Inc. and The H.J. Heinz Corporation. He finds many benefits to working for himself. “You’re learning from your own mistakes and seeing a direct correlation to the cost of those mistakes. You set your own work schedule and work hours. You are able to establish the tone and culture of your organization, and pass those values along to your employees.”

Those values run unusually deep at GoldRiver Orchards, when you consider that it is located right next door to the ranch that has been home to much of Don’s family. Recently Don’s son Josh joined his uncles, Gary and Brent, on the management team at Barton Ranch, making him the fifth generation involved in running that side of the business. Among the mementos of family that can still be found on the ranch is the small house that Don’s father was raised in. “It has housed at least three different families of Bartons throughout its history and is a living testament to the family’s roots on this land and our heritage as farmers.” One of the largest walnut trees in the country can also be found on the ranch. It’s the sole survivor of the original walnut crop P.F. Barton planted. “It’s healthy, thriving, and still productive after all of these years. And, as you might imagine, it gets a lot of tender loving care and personal attention from our family members.”

In his final comments, you get the sense that the spirit of P.F. Barton is alive and well at GoldRiver Orchards, and in Don Barton. Talking about the rewards of entrepreneurship, he says, “Best of all, you have the unique opportunity of being a pioneer–of building something that you hope and expect your grandchildren and great grandchildren will someday be a part of.”

Yesterday Cale Bruckner had his 13th anniversary with Palo Alto Software. Vie Radek had hers on April 15, Connie Muller this Thursday, and Jake Weatherly and Teri Epperly next year.

So I know that 13 years is nothing compared to Microsoft or IBM or General Motors, but what’s cool about these anniversaries is that there were only 10 or so employees back in 1995, and most of them are still with us.

That, in small business, is an achievement. Their achievement, putting up with the ups and downs of a small software company; and ours, in keeping the good people.

There are 45 of us now. When Vie and Cale and Connie started, Business Plan Pro was in its first version, and was just barely making it in retail. Today it’s in its eleventh version.

The picture here was taken just two months shy of 12 years ago, in November of 1996, at a roller skating rink. The people shown here were more than half of Palo Alto Software’s employees at that time. The key people missing who are still with us are my wife Vange, who (I think) took the picture; and Jake Weatherly, who had just joined.

From the left, you have me, Luke Walsh (now with Right Media, a Yahoo subsidiary), Cale Bruckner, Connie Muller, Cristin Berry, Vie Radek, and Teri Epperly.

If you add Vange and Jake back into the picture, who were very much a part of it but not pictured, then the only people from back then that we’ve lost were Luke, now at Right Media; and three others, also not pictured, one who retired in his late 50s, one who moved to the East Coast when she married, and one who, well, didn’t fit. And he’s doing well on his own, in sales. Cristin, also pictured, was 13 when that picture was taken, but she’s also been a full-time employee since she graduated from Whitman College four years ago.

And I might add that it’s been more than 18 months now since the new management team took over, and Vie, Cale, Connie, Teri, and Jake are still with us. That speaks a lot for continuity, and what’s good about them, and us. That makes me proud.

Tim Berry
Founder and President
Palo Alto Software