Phil Clemens on what makes a “business family”

WILMINGTON – Philip A. Clemens, retired CEO of a hyper-successful sixth-generation family business, gave family-business owners tips on minding their own businesses on March 7.

Clemens’ secret to longevity: He suggested owners begin by thinking of themselves as “family businesses” rather than “business families.”

His own “business family” is Clemens Family Corporation, maker of Phillies Franks and Hatfield Bacon, the largest pork processor in the Northeast with $900 million in annual sales. Although only 30 percent of family businesses ever make it to the second generation, Clemens has been in business since 1895.

Clemens said you can tell a “family business” from a “business family” by looking at their goals:

• “The main goal of a ‘family business’ is family harmony, and profitability is always second or third in line. Eighty to 90 percent of family businesses follow this model,” he said.

• He said a ‘business family’ expects and respects profits, and no one gets props for lineage. “Leadership is always the most qualified,” Clemens said. “If it’s family, that’s great. If not, that’s ok.”

As he travels around the country advising businesses, the retired CEO said owners often give him a blank stare when he asks, “Do you know what direction your family business is going in?”

Some owners want to sell for the highest price; others think of their companies as heirlooms they want to present to future generations.

The 705 Clemens family members include about 300 family stockholders, aged 1 to 95, with an interest in making the company grow in value for future generations.They recently hired a new independent board and created a new culture of permanence and accountability. Family members were allowed to serve on the board only if they were as qualified and experienced as outside board members.

Since 2000, when the company revamped its food division, livestock division, trucking company and burgeoning real estate division with an eye to profit, the stock price for the privately owned company rose from $64 a share to $780 a share.

The company will soon open a plant in Michigan that will double the number of hogs it processes to approximately 5 million annually.

The do-over must have led to some awkward Thanksgiving dinners, though, because the company put everything – and everyone – on the table, including the Clemens family members who had jobs in the family business. Clemens said it was not fun.

“If you’re going to change paths, it’s going to be hard,” he said. “It’s not fun calling in your largest shareholder and telling them they’re terminated. It’s not fun calling in your second-largest shareholder and telling them they’re terminated.”

He said managers in family-owned companies scotch the idea that family members are entitled to jobs. “If I haven’t earned my way here, I deserve to get thrown out,” he said.

For business owners who fear they’ll ignite family discord if they change things up, Clemens said disagreements actually escalate when companies are allowed to stagnate.

He said seven words are engraved on the tombstone of every failed family company:
“We never did it that way before.”

One thing Clemens didn’t tell his audience. For years, he and his wife Linda have donated 70 percent of his salary to charity. They’ve recently upped that to 100 percent.

That’s in line with the mission statement for Clemens Family Corporation: “We aspire to operate in a way that honors the Lord Jesus Christ as demonstrated through ethics, integrity, and stewardship.”

The event at the University and Whist Club was presented by the Delaware Small Business Development Center and the Delaware Business Times.

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