New Generation

Sepand Samzadeh, president of Valley Recycling in Chatsworth, believes you have to go after the client to get business. Samzadeh, 35, said his generation has a different mindset about how to run a business than entrepreneurs of his father’s generation, who followed the “build it and they will come” strategy. He says fresh thinking, combined with the foundation laid by his father CEO Sam Samzadeh, is helping to take Valley Recycling in prosperous new direction. The leadership structures of family-owned businesses today look much different than they used to, family business experts say. Younger generations tend to have more education than their parents. They have access to more resources for family-owned businesses, and they come from a generation where teamwork is more strongly emphasized. As a result, experts say there is some evidence of better and more structured governance among family-owned businesses. Since Sepand Samzadeh joined his father’s company a decade ago, Valley Recycling has seen its share of change. Samzadeh purchased a fleet of trucks and added pick-up, property management and paper shredding services to the company’s repertoire. He expanded Valley Recycling’s client base to include larger companies such as Nestle, The Cheesecake Factory, eBay and California State University, Northridge. Valley Recycling’s revenues are expected to exceed $6 million this year, compared to $800,000 in 2001. In order to help the company run more smoothly, Samzadeh is now reorganizing the business’s leadership structure. The move will give employees, including non-family members, new leadership roles and more specific responsibilities. For example, there are plans to create manager and other leadership titles in areas such as administrative services, equipment operations, plant management and purchasing, Samzadeh said. The company’s 21 employees have the opportunity to provide input about the organizational changes. “The culture is changing,” he said. “Now we take people who have been with us, make them leaders (and) make them accountable.” For many family businesses today, more attention is being given to corporate governance, said Kirby Rosplock, director of research and development for GenSpring Family Offices, a Palm Beach Gardens, Fla.-based wealth management firm for family enterprises. “There’s more education and awareness about the importance of decision-making and really understanding how to formalize it.” Samzadeh said he and his father last year recruited his cousin, Kevin Sedaghat to help prepare for future plant expansion. Sedaghat is learning how to run the business’s operations. Increasingly, family enterprises have more shared leadership between siblings and cousins, as the younger generation has a greater focus on working as teams, said Jane Hilburt-Davis, president of family business consulting firm Key Resources LLC in Cambridge, Mass. Valley Recycling was founded on Sam Samzadeh’s principles, and the company remains grounded by those today, said Sepand Samzadeh. He added that what makes working with his father a successful partnership — one that has helped the company to grow— is the CEO’s willingness to work on new ideas. “He’s very black and white … meaning if something is not profitable, we won’t venture into it,” Samzadeh said. “But he’s also open-minded and also wants to try new things.” Family business research shows that some changes are simply part of the natural lifecycle of a business as it passes on from generation to generation. Often, the founding family member tends to have higher entrepreneurial spirit but doesn’t necessarily have the most organized execution plan, said Robert Nason, who served for several years as the assistant director for Babson College’s Successful Transgenerational Entrepreneurship Practices (STEP) Project. “You have sort of this big, hairy entrepreneurial venture, but sometimes it’s unwieldy and built upon the intuitions of the founder,” Nason said. “The second generation kind of grows and professionalizes the company.” At Hoffman Brown Company, a Sherman Oaks-based independent insurance brokerage firm, the generational change has been to make the company more employee-centric, said Steven Brown, president of the company and son of the founder, Bernard “Bud” Brown, Jr. For example, the company now has glass offices to create a sense of openness, a parking rotation system that does not favor executives, as well as a café and a gym for employees on site, Steven Brown said. “There is a different skill set required to be founder of a business, versus being a perpetuator of the business,” he said. Second-generation family members often bring in their experience from college and other jobs to better structure the company, Nason said. One way of doing that is by introducing more organized and professional boards of directors or advisors. Another way is by organizing family councils, or groups of family members that meets to formally discuss issues relating to the business. In later generations, the entrepreneurial spirit usually tends to resurge, he said. “A way for the next generation to leave their mark or feel like they can have an impact is not only to grow the existing company, but to diversify the company with new products or processes, or an entirely new company,” Nason said. At Encino-based Inter/Media Group of Companies, Robert Yallen joined his father, Sydney Yallen, and helped expand the advertising business into what it is today — a company that consists of 12 business units and serves the advertising, media, communication and entertainment industries. The group’s flagship business is Inter/Media Advertising. Robert Yallen, who is now president and CEO of Inter/Media, said he played a large role in the company’s diversification. Some offshoots include a production business that creates advertisements, a post-production company, a digital group and the company’s own unwired network that carries all the national cable systems. That network has 70 million households using the platform, Yallen said. Yallen, 54, said he had a different business mentality than his father, who grew up in the Depression era and fared more on the cautious side. “I brought more structure, more management, better reporting and probably embraced technology a little quicker,” Yallen said. Yallen added that over time his father became more comfortable with technology, and often the two would meet in the middle on business decisions. Nason, who still conducts some research for Babson’s STEP project, said often the entrepreneurial spirit can diminish in the second or following generations of a family business. It’s important that the founding members intentionally instill some of that original entrepreneurial mindset to their children. One way of doing that is by giving their children company projects and some autonomy early on, he said. Yallen said he already taking steps to ensure that Inter/Media continues to grow into its third generation. His 27-year-old daughter, Lindsay Fontaine, soon will be transitioning from media buyer to network supervisor for Inter/Media Advertising. “It’s interesting to see her perspective of what she thinks what our brand is and what it should look like,” Yallen said.