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TIES OFTEN DON'T BIND FAMILY FIRMS

From the local hardware store to the Mars candy empire, family businesses have been fixtures in American commerce, but never have they faced a more pivotal time than now.

The wave of men who went into their own or their families' businesses after World War II are staring at retirement, and history shows many will not successfully pass the baton to the next generation.The outcome could have broad consequences not only for their businesses, but the economy too.

"The very survival of the business, the survival of the economic contribution of the business, the survival of the employment depends on successful treatment of succession," said Craig Aronoff, director of the Family Business Forum at Kennesaw State College in Georgia.

"Perhaps the current economic stagnation is because we are running in place," Aronoff said. "Businesses that were created are dying, and new ones are being created just to pick up the slack."

The dilemmas faced by family businesses will be addressed at a conference here this week, sponsored by the Family Firm Institute, a Brookline organization formed by family run businesses, plus professionals who study or advise them.

Experts estimate more than three-fourths of American businesses are owned or controlled by families, and these firms account for about half the nation's economic output.

These are mostly small, private businesses, but also include major corporations such as S.C. Johnson Wax or even the Ford Motor Co., which is heavily influenced by the Ford family even though it's publicly owned.

Yet only an estimated 30 percent of family firms make it to the second generation, and 10 percent to the third. In some cases, the company is handed over to outside managers, sometimes it's sold and in other cases the business simply shuts down and liquidates.

Examples abound of companies that failed to negotiate the critical issue of succession.

A classic case was the Bingham family of Louisville, Ky., where the father, after years of infighting, decided to sell the family's newspaper business in 1986 rather than pass control to the next generation.

Similarly, anyone studying the collapse of computer firm Wang Laboratories Inc. not only must look at product strategies but also the desire of founder An Wang to pass the crown to his eldest son, whom he later fired when the business soured.

While family businesses can thrive on strong working relationships, they also can face unique problems.

"If your father was tough on you in the office, then you have dinner with him that night, he might ask how was your day, and you say, `Well my boss beat up on me,' " said Wendy Handler, a professor at Babson College in Wellesley, Mass., who teaches a course on family firms.

"You're dealing with a lot of roles," she said. "It's a hard thing to keep straight."

Another problem is sibling rivalry.

Marcy Syms, 41, president of Syms clothing store chain in 14 states, said she met some resistance from her brothers when she decided to join her father's business.

While she's the oldest sibling, Syms initially chose not to work for the firm. She said it was also surprising for a woman to take control.

"The initial reaction was one of shock and dismay," she said. "It was like I was usurping their birthright."

But Syms said she tries to overcome any tensions by frequently consulting with her brothers.

For other firms, the succession is simple. Rick Hood, 35, president of Hood Enterprises Inc., said as the oldest son, he assumed he was next in line to take command of the Rhode Island-based boat maker.

"It wasn't really planned for," he said. "This is the only company I ever worked for."

Mars Inc. is in its third generation of family control since Frank Mars started making candy in his home in 1911. And a fourth generation is also working for the company.

In fact, some experts predict a better survival rate for family businesses. One reason is because many more specialists are studying these firms and the unique problems they face.

Richard Narva, co-founder of Genus Resources Inc., a consulting firm for family owned businesses, said he expects more members of the younger generation to return to these businesses. He cited the confluence of two trends: increased yearning for family ties and cutbacks by big corporations.

"The power of relationships is the pull," Narva said. "The push is getting canned, being forced into early retirement, or a woman hitting the glass ceiling.

"She can go to her father's business, and while he may treat her like daddy's little girl, he'll also make her chief financial officer," Narva said.