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All in the family
By Dan McCue
Staff Writer
There is a moment when a family business inexorably changes. That moment is when a venture that thrived in a basement or garage with a staff consisting solely of family members suddenly finds itself with its first outsider as an employee.
“It’s definitely traumatic,” said Janice Kromer, vice president of KFR Services in Summerville, a diversified company whose core division, Tele-Tech Services, creates and manages billing and routing databases for the telecommunications industry.
“You do a lot of soul-searching, asking yourself if this is really the way you want to go, but in the end it comes down to business necessity. If your company is a success, eventually it’s going to outgrow your ability to do everything,” she said.
Founded by Stephen C. and Janice Kromer in Ogdensburg, N.J., and thriving before it relocated to the Lowcountry in the mid-1990s, KFR Services is an object lesson in how a business can retain its familial flavor while growing and incorporating non-family members into the mix, experts in family business said.
That’s no small accomplishment, said Joseph H. Astrachan, director of the Cox Family Enterprise Center at Kennesaw State University in Georgia and a frequent lecturer at the College of Charleston’s Tate Center for Entrepreneurship.
Even more remarkable is the fact that as KFR Services diversified—in part because mergers in the telecommunications industry were shrinking its core business—added non-family employees, and it added two non-family members to its highest management ranks as well.
“That’s especially rare,” Astrachan said. “Probably fewer than 20 percent of the companies I’ve dealt with over the years have successfully brought in an outsider to run their operations.”
One thing that seems to have worked in KFR Services’ favor is that the family members involved in the business, which in addition to the Kromers include their daughters Kimberly Russo and Stephanie Fetchen, are on the same page about where the business is going.
“Any time you begin reaching out beyond the immediate family, especially when management positions are involved, everything is aided by the family being harmonious,” Astrachan said.
“If people have a history of communicating openly, they can jointly come to an understanding of why it might be much easier to bring someone in.”
And the flipside can get ugly.
“If the family behind the company is not harmonious and in sync with each other, the outside employee or manager can be eaten up by the conflict or the conflict can become worse,” Astrachan said. “Some family members will think the person is wonderful, while the others will think he is untrustworthy. It all depends on what ‘side’ they appear to be on when they arrive.”
According to Janice Kromer, the varied strengths of each family member made diversification and incorporation of non-family members into the KFR Service mix that much easier.
“In a sense we were super lucky because our daughters have always been talented in different areas,’ she said. “Kim’s background is in journalism and business, and she’s always been interested in sales and marketing. At the same time, Stephanie is our technical guru and very much an operationally minded person.”
Over the years, the company has added three distinct divisions. In addition to its telecommunications business, KFR Services also operates E-Presentations, a Web-based training manager for the health care industry; Atlantic Business Continuity Services, a consultancy on disaster preparedness and disaster response for businesses; Nan-Trak and Pac-Trak, software and database management operations; and its latest venture, the America’s Great Loop Cruisers’ Association.
Non-family member Scott Cave serves as director of finance and information technology as well as manager of Atlantic Business Continuity Services, while non-family member Linda Chugon serves as the company’s director of operations and customer service.
Cave was hired as an assistant director of finance and customer service in 2000, while Chugon worked her way up to that position after joining the company as a receptionist in 1998.
“To me, rather than finding non-family members joining the ranks of the management of the company threatening, I think it’s essential,” Russo said. “No matter how much you love your family, they’re still your family. You can’t get away from those dynamics.
“As a result, I think bringing ‘outsiders’ into the upper-level management of the company, into upper-level management meetings, adds an extra level of professionalism. Because you’re family, you might not want to raise an issue for fear of hurting someone’s feelings. Outside people give you that other voice, that perspective of this being business rather than something personal.”
Non-family managers who thrive in family-owned businesses recognize the dynamics to which Russo referred, Astrachan said.
“Those that succeed in that role recognize they’re not only there to run the business or a portion of it, but also to manage and guide the family as well,’ he said. “They fail when they exacerbate existing conflicts or adopt an attitude of ‘I was hired to run the company; I’m not concerned about family issues.’”
The next big issue the Kromer family will have to contend with is the question of succession. Janice Kromer said while she and her husband’s retirement is not imminent, it is something they’ve increasingly begun to think about.
They’ve always known they wanted their daughters to continue the business and, in another move lauded by Astrachan, have always made that intention clear to their non-family directors.
That eliminated one threat family businesses sometimes face—a battle between outside directors and family members, the very thing that can kill a business or result in a leveraged buyout of the family’s interest in the concern.
However, it hasn’t made the ultimate decision about who will run the company any easier.
After all, there are two daughters intimately involved in the business.
“Ultimately, Steve found he didn’t want to choose between our daughters, so we decided to have them work with a facilitator, yet another outsider, to work it out on their own,” Kromer said. “What’s funny is they’re not having an easy time of it either.”
Russo agreed.
“But what we’re finding is we may not have to decide. According to our facilitator, companies having co-CEOs are becoming more and more of a trend. Of course, we want to do what’s best for the company, but happily, given that we’re a family that very much respects one another, it looks like we can achieve that by being a sibling team that runs the company together,” she said.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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