5 principles to define and transition culture in a family business
Like most family businesses, the legacy and future of a dairy farm often depends on relationships linking multiple generations. Defining the business culture and keeping it intact are critical when transitioning the operation from one generation to the next.
During the 2022 Pennsylvania Dairy Summit, Ed Herr, chair and CEO of Herr’s Potato Chips, shared tips for defining a family business culture and identifying steps to nourish people as the company successfully transitions to third and fourth generations.
Herr’s Potato Chips has roots dating back to 1946, when Herr’s father, James, purchased a potato chip company advertised in the local newspaper for $1,750. At the age of 21, he made the difficult choice to leave the farm, near Willow Street, Pennsylvania.
“He said he wanted a job where he got to work with people,” Ed Herr said.
The business began with just two black kettle pots and a machine that chopped five to six potatoes at a time. Potato chips were sold door-to-door in 3-pound metal tins in Lancaster City. In the 1950s, James began to hire employees to make the chips and began a delivery route – and soon after moved the company to Nottingham, within distance to markets in Philadelphia.
Today, Herr’s remains headquartered in Nottingham, with branches in seven states and employing more than 1,500 people throughout the Mid-Atlantic region. Snacks are marketed across the nation and in 49 countries.
Ed Herr is part of the company’s second generation of family members, with members of the third generation involved in leadership roles and plans for the fourth generation to be involved in the future.
“In the business world, if you make it to the third generation, you have done better than 85 percent of businesses,” Herr said. “If you make it to the fourth generation, which we intend to do, then you’re (among just) 6 percent.” Herr emphasized that being involved in a family business “takes a lot of hard work, and it’s not something you can take for granted.”
Five principles to help with generational transitions
More than 75 years after its founding, Ed Herr seeks to steadily grow the family business while remaining true to the company’s founding principles of valuing people and culture. To help them successfully transition from one generation to the next, Herr identified five key principles.
There has to be a commitment to remaining a family-run business, as the close relationships can sometimes make operations more difficult. Family members must be willing to make sacrifices for the company while having opportunities to run the business how they see fit.
“It is a beautiful thing when you have a family business and you call your own shots and develop your legacy,” Herr said. “You can develop your reputation – you can develop your purpose in this world and why you do what you do.”
There must be intention with planning for the future, and it is important to hire experts to aid in this.
“There are many people who are experts in how you transition from one family to the next family. … We have lawyers and consultants, and they have helped us for years and years to develop a plan forward,” he explained.
It is important to ask the next generation to be involved, rather than just assuming they know their involvement is desired.
“If you don’t encourage someone to be a part of the family business, you’re actually discouraging them,” Herr said.
4. Family employment policy
This policy outlines factors such as expectations, responsibilities, compensation and discipline. This helps to avoid misunderstandings and highlights the importance of communication in the success of a family business.
5. Outside input
To allow for greater accountability of those in leadership, outsiders can be vehicles for innovation. This can ensure management teams do not become too close-minded to new ideas.
“We have developed an outside board of directors because we want an outside point of view. We feel that this is a big part of our sustainability for the future,” Herr said.
It is important to create a positive company culture and provide encouragement for your employees to be their best, according to Herr.
“When people are their best and you have a good culture and an environment where people feel safe to share and be transparent, you develop trust in that relationship, and you develop a culture that is an inspiration,” he said.
Herr said that culture is created and maintained based on values, including integrity, innovation, quality of service, accountability, and valuing people and teams.
He described a time early in the company’s history when his father embodied one of these values: integrity. After agreeing to buy all of a local farmer’s potato crop, heavy rains during harvest that year led to muddy potatoes, which all rotted within days. However, his father still paid the farmer the promised amount because he believed in the value of integrity.
“Leadership is really loving people and making a sacrifice,” Herr said.
Herr continues to create a positive culture by showing true care for family and employees. Through the J.S. Herr Family Foundation, the company has created a fund to assist cash-strapped people facing personal disasters such as fires, and another fund to direct money to other charitable causes. Employees can contribute to the fund, allowing them to not only help their co-workers but also share in the company’s culture and legacy.
“We try to show people that we want to do something for them,” he explained.