The Fight Against Nepotism in the Family Manufacturing Business with Dietmar Goellner

Episode 185 | Challenges: Leadership Community Growth Workforce

Jason and Jim both felt the need to fight against the perspective of nepotism within their family manufacturing businesses by proving their merit within their respective companies. Growing up in the family business had its perks, but it also came with the need to overcome the stigma that they were successful simply because of their bloodline. There was a lot to prove - to both themselves and others as they mastered the manufacturing business and took on greater leadership and responsibility. Guest speaker, Dietmar Goellner - Nick Goellner’s father - shares his own experience and insight into keeping nepotism out of the family business, while also mentoring his three sons within the company.

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The family business is still a business

Dietmar grew up saturated in the heart and soul of manufacturing. His father immigrated from Germany in 1958 and founded Advanced Machine & Engineering (AME) in 1966. Dietmar is now the president, CEO, and co-owner of AME - as well as the president and CEO of Henning Inc. Dietmar was raised to become the next leader within his father’s manufacturing business, but he himself has taken a different approach with his own sons. Dietmar approaches the family business as a business - putting the needs of the company and team ahead of any desire to put a family member in a job where they may not need to be.

“Being in the family might get you a job, but it won’t keep you a job,” he says. Having a managerial role in the company with shareholding and voting rights is earned by merit alone. It’s not a birthright. Dietmar never pushed his kids to follow his footsteps in the family business, but when one by one they said they were interested in pursuing their careers within the company, he took them in and placed them where the company needed them most.

Each of his three sons joined the family business with unique talents, skills, and passions. Dietmar recognized this and placed them strategically within the company - where their aptitude met their passion and the need of the business. The needs of the company must be met - and that should come above the wishes of any individual. Treat the business like a business.


Less micromanaging and more mentoring

It is easy to micromanage any team - but especially a team made up of family members. Dietmar discusses the importance of fighting against the micromanagement of family members within the company. Coaching and mentoring are far more productive and impactful methods of training. Dietmar warns against ever forcing or coercing a person into a position that they either aren’t wired to take over or don’t even want in the first place. Not all family members who want a part in the business are going to want a leadership role.

Mentoring begins with assimilation. Dietmar explains that with his sons, he explained the opportunity to be had by joining the company, but he also explained that they had to earn the right to vote and own shares. He did, however, include them in board meetings so that they could watch and learn what would be expected of them in the future. He also explained the importance of allowing family members to make mistakes and allowing for communication to be two-way. Whether you are the mentor or the one being mentored, you have a responsibility to communicate well. For Jim, that meant booking his dad’s schedule with a time-slot just for the two of them to go out and get martinis together and discuss business needs. Be sure to listen to the entire episode for more great insight into what mentoring and coaching the next generation looks like and how to keep from micromanaging your business.


Fighting nepotism by sticking to your core values

Core values are a key component of any company’s foundation. Dietmar encourages family businesses to communicate their stance against nepotism through their core values - and the determination to stick by them. At AME, the core value of servant leadership is vital. Anyone not displaying the humility that comes through leading by example is not considered for a place within the business - whether they are family or not.

Arrogance and ignorance are two attributes that Dietmar doesn’t allow on the manufacturing floor. While he recognizes that everyone has flaws and that no one is perfect, he understands the importance of a humble and knowledgeable leader. When considering whether to promote someone - whether family or not - he looks to see whether the individual embodies the characteristics of a servant leader and also displays the manufacturing skills necessary to take the business to the next level.

Dietmar explains that another aspect of a successful and healthy family relationship within a family business is respect. He warns against losing respect for one another over business issues and by not treating each other with professionalism in the workplace. Yes, you are family, but that doesn’t mean you can get away with disrespecting one another.


Have a succession plan - but hold it loosely

Having professionals come onto the board to help navigate succession plans and other business dynamics is hugely helpful. Dietmar suggests having an excellent attorney on board to ensure that you are getting it right when it comes to the details. Beginning the conversation early with family members about how the succession plan will work for the family business is important.

Dietmar reminds listeners that arguments and misunderstandings will occur during the succession planning process. Be okay with that. Go in knowing that there will be miscommunication. Hold everything loosely and operate under grace. Be able to ask for forgiveness and forgive. Building a strong family connection while also making the right decisions for the future of the company can be difficult. Dietmar suggests that if there isn’t someone in the family who wants to take on the business, then look within the company for someone passionate and capable who does want the responsibility. Open communication and honesty should be the foundation of any succession planning.

Be sure to listen to the entire episode for more helpful pointers on how to navigate the ups and downs of working with family in the family manufacturing business and how to keep nepotism at bay.


Here’s The Good Stuff!

  • The birth of The Boring Bar at MakingChips.
  • Defining nepotism.
  • Dietmar Goellner: president/CEO/co-owner of Advanced Machine & Engineering.
  • Is it wrong to give your family jobs in the business?
  • The issue of reverse nepotism.
  • Placing family members in jobs that will impact them and the company.
  • Less micromanaging - more coaching.
  • Relating core values to the issue of nepotism.
  • The dangers of arrogance and ignorance.
  • Building strong communication between you and your family within the business.
  • Don’t lose respect for one another!
  • Having the succession conversation - and being willing to flex.

Tools & Takeaways

This Week’s Superstar Guest: Dietmar Goellner

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Jason Zenger: Welcome to MakingChips. We believe that manufacturing is challenging, but if you are connected to a community of leaders, you can elevate your skills, solve your problems, and grow your business. I'm your host, Jason Zenger and I'm joined by my cohost, Jim Carr. Hey man. Hey man, how are you?

Jim Carr: I'm good. How are you?

Jason Zenger: Yeah, you run a very nepotistic business, don't you?

Jim Carr: You think so.

Jason Zenger: Well, I don't know.

Jim Carr: I don't think so.

Jason Zenger: I mean, you've got family there. I got family on mine. I mean, I don't know. I guess people would think that.

Jim Carr: Well, I would and I was going to ask you when we started talking about this, because I felt this way when I was coming up in the ranks as a young man in the family manufacturing-

Jason Zenger: We in the family businesses definitely get accused of that, don't we?

Jim Carr: Without a doubt. And I really felt as though it was rampant back in the 80s when I was in my mid 20s.

Jason Zenger: It's probably still rampant.

Jim Carr: And, I had a lot to prove. That was the whole thing.

Jason Zenger: I felt the same way too.

Jim Carr: I had a lot to prove and I made sure that I worked extra hard and made sure that everyone saw me with my hands in the coolant tank and I wasn't going to be appressed about getting dirty. I went to the hospital a few times because I cut my hand.

Jason Zenger: You poor baby.

Jim Carr: And I almost pulled my thumb off.

Jason Zenger: I agree with you though. It does make you look at it differently and say, well how do I prove to everybody that I don't have this job because dad started the business or owns the business or whatever else.

Jim Carr: I worked harder than anybody else in the company.

Jason Zenger: Or mom.

Jim Carr: Yes.

Jason Zenger: Right, I agree.

Jim Carr: And my son is in business now too and I hope that he realizes that as well. I don't know. I don't know what is going through his head, but I hope that he realizes that he's going to have to work just as hard to continue the legacy of the family business as well.

Jason Zenger: There's a quote and I think a book with the same title, I haven't read it yet though. The title or the quote is, Family Business is Business, and basically what that means is you need to treat a family business like a business. And nepotism should never play any part in the family business. And, it does ring true. I mean, people should not get jobs because of any kind of favoritism, it should be based on the merit, based on whether they fit the values.

Jim Carr: Their credentials.

Jason Zenger: Their credentials and how hard they work and everything like that. And we have somebody on the show today that's going to talk to us about that, don't we?

Jim Carr: We do. And I look forward to interviewing him and hearing how nepotism or the lack there of-

Jason Zenger: Or just how you fight against it as a company.

Jim Carr: Yeah. Played a big role in the manufacturing company that he cones. But before we get into our guest for the day, do you have anything positive that you want to share with the metal working nation about what's going on at Zenger Black? I do.

Jason Zenger: Okay, good. Tell me what's going on in Zenger's and Black.

Jim Carr: Well, you're crazy busy.

Jason Zenger: Yeah, we do. We talk about that [crosstalk 00:03:03].

Jim Carr: Just like in another episode.

Jason Zenger: Go ahead and tell me what's going on with Carr Machine & Tool.

Jim Carr: But no, we [crosstalk 00:03:07] nepotism and I'm sure that our guest will enlighten me a little bit more on how to recognize the new generation of workers is actually doing stuff. But I saw in my own son last Monday we had a meeting with our large customer talking about a job that's in the pipeline. And we had them in for a reason to show them that all of the things that we were teeing up for them with regard to this new order and there was a lot of back end things we were working to get to, and one of them was a new ERP system. And I was controlling the conversation and I-

Jason Zenger: No, you controlling [crosstalk 00:03:45].

Jim Carr: I was controlling the-

Jason Zenger: No Way Jim. I don't believe it.

Jim Carr: I thought it was the right thing to do because he knows our ERP system better than anybody, but I handed it over to him and I was like, oh my God, I can't believe he's doing that well.

Jason Zenger: You didn't have to rip the microphone from your hands, you actually handed it to him.

Jim Carr: Well, there wasn't a microphone.

Jason Zenger: Oh okay.

Jim Carr: We were in a meeting, a business meeting, corporate [crosstalk 00:04:06].

Jason Zenger: I know, I'm joking.

Jim Carr: But no, he did great, and I was super proud of him, and I told him after they left, and we were still in the afterglow of the meeting that he did a great job, and I was really proud of him. So, I guess they eventually do get it. And, he spoke well, he didn't um and ah, he showed them exactly what they needed to see to show them the value of doing business with Carr Machine & Tool.

Jason Zenger: That's great. I would say I've seen from Ryan, he's definitely maturing and getting better in his job, which you would expect.

Jim Carr: I hope so.

Jason Zenger: I assume that you are mentoring him well, so that's definitely should be one of your focuses is to mentor him.

Jim Carr: I'm doing the best I can.

Jason Zenger: Good.

Jim Carr: Yeah.

Jason Zenger: Good, good. Yeah. To be quite honest with you, I have some things related to this subject matter for Zenger's and Black. I'm not quite sure if I'm ready yet to talk about it, so maybe in future MakingChips I'll let the cat out of the back.

Jim Carr: No worry, absolutely just ...

Jason Zenger: But there's some stuff going on in the background related to our family business that definitely will be something to discuss in the future.

Jim Carr: Absolutely. Well, I look forward to having maybe a full episode on that.

Jason Zenger: Great.

Jim Carr: And how that's all played out.

Jason Zenger: Great. So, do we have any manufacturing news for today?

Jim Carr: Well, that is Nick Goellner's responsibility. And Nick, I know you have manufacturing, it's good. I've already previewed it and I can't wait to comment on it.

Jason Zenger: Nick Goellner with a sweet goatee.

Nick Goellner: Oh, it's more than a goatee. If you can't tell, there's a little beard going on. I'm doing my best to grow a full face of hair. There's a little bit more than just the news. We've got the whole boring bar to deliver this week, which is what we call our newsletter. So, our listeners are probably getting familiar hearing my voice, talking about how we write an original article every week derived from the podcast. We bring in, chip in contributors in addition to that, which is like having a guest on the podcast, but we just allow a manufacturing leader to write for our site and publish it on our site, and then we share it on social media from there. And then of course we cover the news.

Jim Carr: Before we get on to that.

Nick Goellner: Yeah, go ahead.

Jim Carr: You know what I think it would be cool, why don't we share with the metal working nation, and our listeners how the boring bar was birthed and what was the concept behind that? I love the story. I think it's a great story and it's so relevant to how I believe that manufacturers talk.

Nick Goellner: It's a little bit of a satirical title. We always talk about, one of the reasons why MakingChips is successful is because it's not boring. And a lot of the media in this industry is very dry, very boring. And then we also talk about how in our conversations, it's almost like you're sitting at the bar with other manufacturing leaders talking shop.

Jim Carr: Having a beer.

Nick Goellner: So, Jason's like, hey, we should call the newsletter the boring bar. And I was like, yeah.

Jim Carr: And I visualized the boring bar as that small tavern in a very industrial area, maybe in a strip mall and there's maybe 25 seats at the bar and all the manufacturers in this particular urban area congregate there at 4:34 PM when they punch the clock and they go in, they have their bud light or their IPA.

Nick Goellner: Shot and a beer.

Jim Carr: Shot and a beer, and they go in and they're sitting at that bar together, and they're talking about their manufacturing job, all those things at the boring bar. And the name of the bar is the boring bar.

Jason Zenger: And they're talking about ink canal and stainless steel. I had a couple of different ideas, the boring bar being one of them, but my family almost had the opportunity to open up a bar restaurant. It's a long story, I'm not going to get into that.

Jim Carr: I never knew that.

Jason Zenger: It was far fetched, but there was an opportunity nonetheless, and I've got a couple of names. Another name that I thought of, and I'm not a big drinker by any means, but related to the manufacturing industry is that you can call it the spiral point tap.

Nick Goellner: Oh that's good.

Jason Zenger: So, I got lots of these Jim.

Nick Goellner: Like a tap, like drinking from the tap.

Jim Carr: Oh, the spiral point tap. That's good.

Jason Zenger: Or we can call it the Spiral Flute Tap, everyone would call it-

Nick Goellner: If you ever do that, you got two experienced bartenders here, both Jim and I have previous histories bartending.

Jim Carr: Yeah, definitely. I'll definitely get behind that bar. No problem.

Jason Zenger: So, the boring bar is going to be an actual bar that we're going to open up in Rockford and so maybe when we open up the Chicago studio-

Jim Carr: Be careful what you wish for.

Jason Zenger: We'll call that one the Spiral Flute Tap or the Spiral Point Tap.

Nick Goellner: Well, we're in the middle of remodeling the new MakingChips headquarters in Rockford and we're actually going to put a bar and-

Jason Zenger: It's going to be the boring bar.

Jim Carr: I love it, I'm down.

Nick Goellner: Maybe have one or two Kegs there and it will be the boring bar. Anyway, the news this week, it's from somebody who is familiar to us and it's definitely related to the topic for the week.

Jason Zenger: I don't know him

Nick Goellner: It's Terry Iverson.

Jim Carr: Oh yeah, I know that guy.

Nick Goellner: You guys have never talked about him.

Jim Carr: He's a great guy.

Nick Goellner: Yeah, so the article comes from the Chicago Tribune, the boss is retiring. The kids don't want to take over, family owned manufacturers confront a succession crisis.

Jason Zenger: That's bold to publish that before you actually have the succession plans.

Jim Carr: Yeah, that's pretty big that he told that to the media.

Jason Zenger: Right, exactly. It could be good, could be bad in the long run.

Jim Carr: Yeah, but quite frankly, I hear this all the time in our industry about how the second and third generation just isn't interested in manufacturing and they don't want to continue the legacy. And man, that's a tough one. That's a tough one to think about. I mean, I guess I'm lucky that I do have family in the business and they want to continue that legacy. But then on the other hand I think about, well, if Ryan wasn't in the business, maybe I could have done something else that I was really, really super excited and passionate about like being a full time employee of MakingChips. So, because I'm still rooted in with Carr Machine & Tool, but go ahead and tell me a little bit about-

Jason Zenger: Or you could be at Somalia.

Jim Carr: I'd love to be at Somalia. That'd be awesome.

Nick Goellner: So yeah, just a little bit from the article, Terry Iverson, president and CEO of Iverson and Co is a third generation owner of the Machine Tool Sales and Service company, his grandfather founded 88 years ago. Iverson wants to keep the company in his family, but his children aren't interested in running it. So, he goes on to say he expects he will have to merge or sell, but he's not sure to whom and will the buy take good care of his customers and his family's legacy. It's something I think about every day.

Jim Carr: I bet it's something I think about nearly everyday too. And, he's got a challenge in front of him. He doesn't know where he's going to put his baby, his grandfather's business in somebody's hands to take over and maybe it'll be successful and maybe it won't. We've all seen many manufacturing companies that have been acquired over the years, and the success rate of those acquisitions aren't very high, right?

Nick Goellner: Yeah. Actually that's one of the articles that I'm writing this week. It's about that third generation and how often the family business fails in the third generation.

Jim Carr: It's something very low statistics.

Nick Goellner: Yeah. We should probably remember the stats from my article, but they're not top of mind right now, but it's very low and it's something we've been hearing for our whole lives. Caleb and my generation has been hearing, hey look, these things tend to fall apart in the third generation, so don't screw it up.

Jim Carr: So, what does Terry say? So, what is the overarching theme of this article in the Chicago Tribune about Terry and his business?

Nick Goellner: Just the uncertainty that he has to face because his kids aren't interested in the business and how he's going to move that forward because there is a legacy there whether your kids take over or not there's still a legacy that he wants to protect. And like you said, Jim, we're blessed to not have this problem.

Jim Carr: No.

Nick Goellner: Ryan's very active in the business, some day he intends to take it over. My brothers and my cousins and I are very active in our business and we intend to take it over. Jason, I think your kids are a little young to make a commitment like that, but maybe.

Jason Zenger: Yeah, I already asked my daughter who's 12 and she said she's not interested. She wants to be a synchronized ice skater, so yeah, that's ...

Nick Goellner: What about the little kids? What do they want to be?

Jason Zenger: I might be able to convince them now, but right now they just want to be, one wants to be a ninja fire man, stuff like that. Mostly ninjas, three little ninjas, that's what they are.

Nick Goellner: Just to wrap it up, you can get all of the content from this week at MakingChips.com when you subscribe, we'll send you the boring bar directly to your inbox and you'll get the latest every week.

Jim Carr: Sounds great.

Jason Zenger: There's a couple scanning through it. Irmko is mentioned in here, Ace Metal Crafts bought them. They're both customers, Collin Cosgrove.

Nick Goellner: Collin Cosgrove, I know him.

Jason Zenger: Yeah, they're mentioned in here. Yeah, it's a pretty extensive article. So Jim, would you like to introduce our guests for today?

Jim Carr: Well, first before I do that I'd like to share with the metal working nation because I like definitions. I like to read definitions and what they mean because this is the theme of our show for today. So, I just like to take 30 seconds and read what the definition of nepotism is, and it's the practice-

Jason Zenger: Sometimes you take 30 seconds just to talk about taking 30 seconds to read the definition of something.

Jim Carr: Yes, you're right I do. Well, I just want to make sure I hit it home. The practice-

Jason Zenger: Sometimes it's 45 seconds to talk about 30 seconds to read something.

Jim Carr: Well that's because you always interrupt me. But anyway, the definition of nepotism is the practice among those with power or influence of favoring relatives or friends, especially by giving them jobs. It's a perfect definition.

Jason Zenger: You know what popped into my head right away?

Jim Carr: What's that?

Jason Zenger: The government.

Jim Carr: Oh definitely, that's rampant there.

Jason Zenger: The government, is definitely full of a lot of nepotism.

Jim Carr: It's all over the place.

Jason Zenger: [crosstalk 00:13:20], and give all your friends and relatives jobs. But anyway, so Jim do you want to introduce the guest or you just want to talk about introducing him.

Jim Carr: I would love to introduce him. He's a good friend of MakingChips. He's a good friend of ours and he is the father of Nick Goellner who is in the room.

Jason Zenger: Good friend.

Jim Carr: Good friend.

Jason Zenger: I thought Nick was cracked from an egg. No, apparently not.

Jim Carr: I look forward to hearing Dietmar's story and I'd like to share with the metal working nation Dietmar's bio. Dietmar immigrated from Germany in 1958 at two years of age, his father founded Advanced Machine and Engineering in 1966. Dietmar serves as the president, CEO and Co owner of Advanced Machine and Engineering Company and Hennig Inc. AME specializes in machine tool design, work holding systems, and metal cutting solutions. Hennig on the other hand is a global manufacturer of machine protection systems, conveyors, filtration systems and enclosures and facility safety equipment. And, he knows a thing or two about MakingChips. So with that, I'd like to welcome Dietmar Goellner to the MakingChips studio. Welcome Dietmar.

Dietmar G.: Thank you very much. It's an honor to be here.

Jim Carr: Yeah, it's great to have you here.

Jason Zenger: So, Dietmar for the metal working nation out there, if they own a machine tool, which we hope that most people listening own a machine tool, there's a really high probability they have a Hennig enclosure around it, don't they?

Dietmar G.: That would be our hope.

Jim Carr: So anyway, I want to kick this off because I've got so many questions here. The one is, I mean is it wrong to give your family jobs in a family business?

Dietmar G.: The answer would be maybe.

Jim Carr: Maybe. Okay. So let's elaborate on that. Tell us about your experience so far with bringing fam, because your second generation, Nick, Noah and Alex are third generation.

Jason Zenger: Caleb.

Jim Carr: And Caleb is third generation, so-

Jason Zenger: So, you've got cousins and brothers and that gets complicated.

Jim Carr: You have a lot of family.

Dietmar G.: Exactly.

Jim Carr: So, tell us how that experience has been at a 15,000 foot level.

Dietmar G.: Yeah, so it started out, I would say perhaps 10, 15 years ago, and I was drafted into the business by my father. I went to the university, I studied engineering. So, my life was somewhat laid out for me and it worked out to be the right thing for me. But when my kids started growing up, they were working as waiters and they realized it's hard to make any money just being a waiter. And I never pushed them into coming into the business, but the opportunity availability was there. So one by one they said, "Hey dad, I'd like to give it a go." And so I started with the oldest, Noah, and he came into the business and then it followed with Nick and Alex, and now my nephew Caleb. And soon, in about a year we'll have Caleb's brother Corey also joining the business.

Jim Carr: Fantastic.

Jason Zenger: Correct me if I'm wrong, but you've actually established some parameters from a board of directors level as it relates to what you need to do as family members in order to advance in the company, how exactly does that work?

Dietmar G.: Well, first of all, coming to the family business and having a high position is not a birthright. There's not going to be a coronation, you have to earn it through merit, through performance, through living our company values and core values.

Jim Carr: I love that.

Dietmar G.: And so, that is the premise.

Jason Zenger: And they should know that before they start way, maybe even when they're in high school and working there during the summer.

Nick Goellner: Yeah, one of the things that we always were told was like being in the family might get you a job but it won't keep your job.

Jason Zenger: That's a great way of putting it.

Dietmar G.: I've quoted that a number of times.

Jason Zenger: So how exactly does it work from a board of directors level? Because, I would assume that, you've got family that's eventually going to become owners, whether they own shares and are not active or they own shares and are active, how does that work?

Dietmar G.: Yeah, we did a lot of legal work with the state planning, buy, sell agreements, generation skipping, pretty much the tools that will help you to reduce your potential tax liabilities, but also communicate to the next generation there's opportunity. And so, you can be a shareholder. You can also then be a shareholder with voting rights, and to get voting rights, there's a certain progression that they need to go through. And one of the things we did to familiarize themselves with the philosophy of our company is they are now all coming to our board meetings. They may not have a vote, but they're coming into the meetings and to-

Nick Goellner: Just to get acclimated to how that-

Dietmar G.: Exactly.

Jim Carr: How that's playing through. Okay, that's a great idea.

Jason Zenger: Now, there's another notion that I never even thought of it in this way, that you brought to our attention called reverse nepotism and how would you characterize that?

Dietmar G.: Yeah, that's a really good question. So, everyone's concerned that you're putting somebody in a position that they really haven't earned. They may not live the core values, but what do you have in a situation where there is a family member who is doing a tremendous job and sometimes people are so paranoid that they would be elevating their family member, their son or their daughter into the business, that they actually hold back fearful of what the rank and file the rest of the workers in the company might think. And so, now you're taking a person that's very qualified and you're not advancing them the way you should. And then, the disillusionments sits in and you actually-

Jason Zenger: Or maybe they want to leave.

Dietmar G.: Yeah, exactly right, they may want to leave the business themselves.

Jason Zenger: Yeah. And Jim and I talked about that a little bit in the beginning of this episode where that whole notion of nepotism really propelled us to work that much harder, but if you do have that reverse nepotism that could cause and be like, well, I'm going to move out and I'm going to compete with my family's business. And that is not unheard of either.

Dietmar G.: Right. That has happened unfortunately.

Jim Carr: So, Dietmar you're talking about the succession of family members that are in line to take over your role for the future and so far so good. You've got one, two, three, four, five people in succession already. Have there been any failures so far with family members that have started into the business and found it wasn't a good fit? Because let's face it, manufacturing is not for everybody.

Jason Zenger: Yeah, you've got three kids and only one is in the business.

Jim Carr: Exactly. But has there been anything, would you like to share that with ... I'd like to know because I don't know that about you or AME or Hennig.

Dietmar G.: Well, I'd have to say we've been so incredibly blessed because all three of my sons got into the business and we were smart enough to make sure we don't put a square peg into a round hole. So, what we did was we looked to see what was the person's passions, their gifts sets, their competence, their education, how are they wired, and we put them in the right position. A great example would be my youngest son, Alex. He always had more money than his two older brothers Noah and Nick combined. So, we thought perhaps he should get into accounting and finance, and so he found his niche there.

Jim Carr: Good, good.

Dietmar G.: Whereas Nick, he just thinks marketing. He lives, breathes, sleeps-

Jim Carr: Content marketing.

Dietmar G.: Exactly.

Jim Carr: We know, we hear it all the time. He's educated me on that.

Nick Goellner: I thought like, okay, how am I going to fit into this family? I'm really bad at Math, it takes me a long time to fix things in my house, I'm not the most mechanical guy, but for me I grew up as an artist, and I was thinking, is there a place for me in a manufacturing business?

Jason Zenger: Yeah, you were like the black sheep of the family.

Nick Goellner: Pretty much, yeah.

Jason Zenger: But you found your way on how to help.

Jim Carr: So, you set them up for their own personal successes within the company.

Dietmar G.: That's exactly right. And sometimes you may have to move the people around just a little bit, but the key is to match up their passions with their aptitude for the discipline of the business that they're involved in.

Jim Carr: I think that's a great example. I think it's perfect way to do it, but you're lucky that your company is so big that you have all those layers. What would you advise a company like my size where we wear so many hats like one day I'm doing quoting, one day I'm doing sales and marketing, one day I could be setting up a machine. I don't do it anymore, but it wasn't too long ago that I was out on the shop floor MakingChips.

Jason Zenger: Yeah. There's a lot of the metal working nation out there that they don't have a couple hundred people in their manufacturing company, and they don't have the luxury of having a family member that can be the CFO and another that could be the CMO and so on.

Dietmar G.: Yeah, that's true. And a key as you move along in your business and let's say your business is growing. If your business is really growing now that creates a lot of opportunities, because there's more positions that you could fill. So, the key for the president, CEOs and family owners of the businesses would be less micromanaging, more mentoring, more coaching.

Jim Carr: I got it.

Jason Zenger: So, I have another related question to that. What if you have a family member who, they work hard, they come in on time, they're dependable, all that great stuff, but they're like, I just want a good job and I want to work for the family business. I don't have aspirations to run the company from an accounting standpoint, run the company from a marketing standpoint or engineering standpoint. I just want a good job. Is that acceptable?

Dietmar G.: Well, I believe it is acceptable because you never want to force a person or coerce a person into taking a position that that person's not wired to, or even has an interest in. Because then the rest of the people within your organization, they'll see it and they'll start to question, why are we doing this? Why are we doing that? So again, don't put a square peg into a round hole.

Jason Zenger: Do you think that there should be some constraints from say like a voting stock or any other place in the ownership of the company if that person doesn't aspire to maybe a higher level management or leadership role?

Dietmar G.: Okay, now that is a very good question and an issue that we actually dealt with. The way you get voting stock or voting shares to where you have more of a saying to the operations of the business, you need to be a manager.

Jim Carr: Oh so you need to be in a managerial role to actually attain voting privileges?

Dietmar G.: That is correct.

Jim Carr: Okay.

Jason Zenger: Because that shows that you have I guess, the knowledge or character in order to make those kinds of decisions.

Dietmar G.: Yeah, that's exactly right. There's a lot of people dependent on the decision making process, and there's many stakeholders involved, and you really want to get it right.

Jim Carr: Dietmar before you mentioned core values and we all know how important core values are to running a successful business.

Jason Zenger: And we've talked about that a couple of times.

Jim Carr: Yeah, a couple times. And believe me, I bought into it three times over, but tell me about the process of defining core values in your company with how it relates to nepotism and family members coming in because that's a big thing.

Dietmar G.: It sure is, and we have seven core values and the core value that I'm reminded of as it relates to the next generation business is the core value of servant leadership. And servant leadership is someone who leads by example. The trait of humility would be prevalent in his life. It would be someone that doesn't mind getting his hands dirty, it'd be someone where he doesn't make it about himself, but he thinks of the greater good, he thinks of the entire organization.

Jim Carr: That's awesome. I love that. That's one of your seven core values?

Dietmar G.: Yes.

Jason Zenger: That seems to be a characteristic that would lend somebody towards getting along with their fellow family members when it comes to making tough decisions or even when you're in a family business, you can't make it about yourself.

Dietmar G.: I mean, that's exactly right. And there's a Latin term, 'Primus inter pares,' which essentially says first among equals, and the key thing with the leader of the company, in my case for instance, there are very few jobs in our entire organization from a global standpoint that I can do that job as well as the person that's doing it. So, I for one, I'm just dependent on hundreds and hundreds of people that work at our companies for them to be able to do a competent job. And so, you got to let go and let them do what they're gifted in.

Jim Carr: You mentioned servant leadership, Dietmar and it can be really hard to do when you have a strong personality or many people reporting to you to remember to serve. And you also mentioned humility, arrogance and ignorance, tell me a little bit about that and what that means to you.

Dietmar G.: Yeah, from the negative side of servant leadership, if you have the two attributes of arrogance and ignorance, you have absolutely the worst combination you can have in business. At that point and time, you have no respect or trust among your fellow man, and it is an absolute recipe for disaster because we need to be open minded. I tend to have a strong personality, so I need to be intentional with how I communicate and most important, this is the thing I'm really working on is enhancing my listening skills. As we listen, we then tell the person that's talking to us that hey, we value what you have to say.

Jim Carr: I agree. I agree 100%.

Jason Zenger: The one thing that I could see myself struggling with in the future if I did have my kids in the businesses, you want to a certain degree control the outcomes of your kids because you want them to be successful, you want them to do good. And, I know now after raising several kids that you got to let them make some mistakes too along the way, and you can't control that because that not only teaches them a lesson, but it also probably more importantly builds character in them and allows them to really advance their learning. Is that much more difficult when you're dealing with family members? Could even be like your nephew, not necessarily your son, but it could be your son, how do you manage that whole notion of really trying to control I guess, and micromanage your kids?

Dietmar G.: Well, the tendency is that you want to control.

Jason Zenger: Right of course.

Dietmar G.: I tend to be a high control person, and you just have to recognize that.

Jason Zenger: Yeah, I always call myself a recovered micromanager.

Jim Carr: That's true. Put me in that camp as well.

Dietmar G.: Yeah, you just got to let go. And, I don't know if there's a 12 step program in how you do that, but start by talking to your-

Jim Carr: Coaching versus micromanaging.

Dietmar G.: Correct. Correct. Talk to your kids, find out what they have to say. What I have done with my kids, if they catch me during the day, Nick will know this. You're not really going to get my attention because I still have too many plates in the air and I'm just juggling. So, if we want to communicate, let's get together for lunch, give me a call after five o'clock and let's talk it over. Let's get together on a weekend, let's go on a hike and let's talk it through. That way, I'm most able to give the attention to my kids and to my nephews and other people in the company that they deserve.

Nick Goellner: Yeah. If I try to get ahold of you at work, you're super busy. But today we had this drive in to the studio and it's hard to get an hour and a half with you, so it was perfect. It was time well spent.

Dietmar G.: Yeah. And, we even had the nab working and we didn't get lost.

Jim Carr: When I think of me moving into the role of president, owner of Carr Machine & Tool, and all of the business succession that I went through with my dad, who I know we're going to talk about in the future, is I used to schedule my dad and we used to go out and we used to have a couple of Martinis and what that used to do is it used to bring the conversation down. We'd be a little bit more relaxed and that was the time that I could talk to my dad openly, honestly, and not have any inhibitions about saying something that I thought was inappropriate about me taking over. That's how we got through our whole, quite frankly, our whole business succession.

Nick Goellner: The Irish way.

Jim Carr: The Irish, right, exactly.

Dietmar G.: Well, I think that's really wise because when I get stressed, this is a progression what tends to happen. If I get stressed, I don't have the same level of tolerance or patience and I just want to move on to the next thing and get her done. So you start to act impulsively, and then if you act impulsively, you start making bad business decisions. So, it's important to recognize that and take the time.

Jason Zenger: Related to what you just said, Jim. I was on a factory tour of Lennox, it used to be called American saw. They make the man saw blades, and out in east Longmeadow, Massachusetts. This was 15 years ago when the original family that started it owned the company still, and now it's owned by Stanley Black and Decker. But, I think they almost had it in their bylaws that they ... There was this local German pub near the factory and they were a German family as well. And they never made any big decisions unless they had two pints of beer at lunchtime. So back in the day, that was more common-

Jim Carr: That's an [crosstalk 00:30:27].

Jason Zenger: More common than not, yeah. And speaking of the whole micro managing, so we talked about this a little bit, but Jim and I entered into a partnership with the goal in our family. We're now all third-

Jim Carr: We did?

Jason Zenger: We did. Oh Jim, I'll have you sign some papers [crosstalk 00:30:41].

Jim Carr: I don't like to read you know.

Jason Zenger: Yeah, that's true. So, we're all one third partners on this. And, I would assume that to the family, I mean Nick's on the line in order to make this successful representing your company, but I have seen that you're not micromanaging Nick through that process or anything like that. Which I think is a good thing. I mean I'm sure you're coaching him but you're not telling him what decisions to make or anything like that.

Nick Goellner: Okay. So, give an example of micro managing maybe when you were doing scheduling versus coaching, how does that change?

Dietmar G.: All right, so I'm in the process of going from micro managing to coaching. So, a prime example of that would be, I'd always go through the shop. I'm an industrial engineer by profession, that was my education. So, I'm constantly looking at are we improving our processes? And so, I'll get into the shop and the first thing I'll do is now why is that job being run on that machine? It could go on this other machine and then we'll be more profitable and we'll ship on time to our customers.

Jason Zenger: And, that was probably the way that your dad Willie taught you how to improve things, right?

Dietmar G.: Yeah, exactly.

Jim Carr: I think it just makes sense. Yeah, it just makes sense.

Dietmar G.: Right, exactly. And so, I would then go up to the operator and go, no, why are we doing it this way? Or, hey, after this job, are you going to put this job into the machine? But what I've now done as I've created an incredible amount of confusion because someone else has already done the master scheduling. So now the joke at both our companies is, I don't schedule, I might say, hey, have you thought about this? Or I might offer some advice, but then I [inaudible 00:32:16] say, but listen, I'm not scheduling you. Okay. So that has to be evolved from there as well.

Nick Goellner: I think you call it auditing now instead of fixing.

Dietmar G.: Yes. Now, I do more auditing and the key is whoever that person is responsible for that particular task, that's the person I need to go to and discuss it with them.

Jason Zenger: Yeah. Because the schedule means nothing when the owner questions something.

Dietmar G.: Exactly. That becomes the new schedule.

Jason Zenger: Right, exactly. I've seen that and in a family business that can become a bit of an issue because you cause a lot of stress with your team, so.

Dietmar G.: Exactly. And it's caused by the owner, by the CEO of the company.

Jason Zenger: And not even intentionally sometimes.

Dietmar G.: Right. And you have to understand the weight. When I say something, I don't think it's a big deal, but I've learned over the years that when I make a comment or make a suggestion it carries an incredible amount of weight. So, I have to appreciate that and be very sensitive to the fact that people are in position to do that job because they're competent to do it and I just need to let go.

Jason Zenger: So, Dietmar, my now five year old and now my 12 year old, I have this conversation with them often as it relates to parenting, my job is to make you a healthy mature adult. My job is not to be your best buddy or anything like that, I want you to be an adult. How does the parenting that you did for your kids relate to maybe how you manage them now? Is there a correlation between the two of those things?

Dietmar G.: Well, someone has said are your kids and you, are you best friends? And friendship is really, really important. But perhaps what is just as important if not more important is the respect level that you have for one another. If you try to run a business based on likability and you put that above respectability, I think you're making a mistake. Likability comes after you've earned the respect of your kids, of your peers, of other family members.

Jason Zenger: That is hard for a father, son relationship on the job, and I violated that before myself and I guess I could publicly apologize to my dad for on many, many occasions violating that whole respect thing. And it comes down to when you're that familiar with somebody and they're say arguing or they're making the decision on scheduling that is maybe you don't think it's correct, it's easy to lose that respect and you should never lose that respect with ... You would never do it with a boss who wasn't your father or mother or other family member, you shouldn't do it with your family members either.

Nick Goellner: Well, I'm glad you brought that up because I think when I first started to build my relationship with Jason and Jim, the two of you guys, it was like right in the midst of this time where we didn't necessarily like each other, my dad and I.

Jason Zenger: You could love your kids and not like them.

Nick Goellner: Yeah, we loved each other, we didn't like each other. And I think that's going to happen. There's going to be plenty of times where you don't like each other. But I wasn't very respectful. Maybe I was right about some things, I certainly was wrong about a lot of things, but the point is the respect thing is what fell off. So, push came to shove and there was about eight months where I didn't work at the company, so you could [crosstalk 00:35:17].

Jim Carr: So, that was a learning process, right?

Nick Goellner: Yeah, absolutely.

Jim Carr: So, I'd like to dig a little deeper if you don't mind into this-

Jason Zenger: I want to dig deeper into Nick leaving the company for eight months? Is that what you're talking about?

Jim Carr: We know the behind the scenes story.

Jason Zenger: We will leave that a secret for now, that could be a future episode.

Jim Carr: So, explain to me Dietmar how the board of directors works and these voting rights and you have to be a manager to have voting rights. So, eventually you're going to retire and you're going to move out of the business and your shares of the business are eventually not ... They're going to be transitioned down. I don't know if you're ready to talk about that now, can you just ... And you don't have to go into the granulars on how it works, but how does that work? I mean, I know how it worked at Carr Machine & Tool, but how does that process work at AME Hennig?

Dietmar G.: Well, the first thing you need to do is get a very good attorney who understands the state planning and business succession, because the tax laws are constantly changing. You have to be up to speed, and you really need that expertise on your team. Perhaps that person should be part of your advisory board, they'll help you to do that. In our particular case, I'm roughly a little more in the third shareholder and it's already stipulated that as I pull back, whether there'll be a gifting of shares or the shares are sold at a deep discount, that my three sons each will pick up a third and a third of the shares that I have. Now, my sister, she has three children, Caleb and Corey, who's going to be joining us, the same type of scenario. So, get it right.

Jim Carr: Right, I agree. And it's good to talk about it in advance because we get so caught up in our crazy busy work schedules that if we don't define this well in advance, there's going to be, people's feelings are going to get hurt. People are going to have false expectations of what their futures are going to be like and I just think it's good to get that out in the open well in advance. So, you define this with your sister and your family members before the kids started coming into the business, you figured a way to bring them in and become actual shareholders of the company before they even came into the company.

Dietmar G.: Yeah, it is better ... And, I have a couple of comments. It's better to do that ahead of time because you don't-

Jim Carr: What's ahead of time?

Dietmar G.: Ahead of time like-

Jim Carr: Is it 10 years, 20 years?

Dietmar G.: 20 years ahead, that's not too soon. It's better to solve those issues now than when you're under duress, or there's been a death in the family or somebody has left the business. And one thing I want to add, in a family of business, you need to hold things a little loosely.

Jim Carr: What do you mean by that?

Dietmar G.: By that you're going to have arguments, you're going to have areas where you're just not communicating and that will happen. It'll happen to any family business.

Jim Carr: Like people that they're going to think that there's unfairness going on?

Dietmar G.: You're going to get that. You're going to get interpersonal problems between family members and the key is you got to hold it loosely and then operate under grace. If you hold things too tight and you can't let go and you can't ask for forgiveness or you're not willing to let things go, those are things that take place that can cause a business to completely fail. So, you have to have the right attitude and that's where humility, especially in servant leadership is so important. If you make a mistake, own it, don't shift it on another family member, take responsibility and then you got to move on.

Jim Carr: So, if this has been well defined, well in advance set, everybody in the pipeline knows exactly the options that are going to be available to them in the coming decades.

Dietmar G.: Yeah, I would say that that's pretty much true but allow a little bit of flexibility. For example, there could be one family member who is moving this particular direction, but he's relatively young. He just got out of the university maybe a couple of years ago, and let's say he works in this area of the company, but then all of a sudden the rest of the family members in the management of the company sees that, my gosh, this guy has a passion to do this. He has a skillset. When we see him interact with the rest of the organization, he seems to connect. Well, then be smart enough to say, okay, well let's shift him over here because we think that he's going to get a higher quality of work life out of that and it's going to really benefit the organization.

Jason Zenger: So Jim, I have a related question for you.

Jim Carr: Yeah, go ahead.

Jason Zenger: So, you've got two kids, you've got one in the business, two not the business. Do those two have an understanding of what's going to happen with the family business or any false expectations?

Jim Carr: They don't know. It's funny-

Jason Zenger: You haven't talked about it to them, maybe this would be a good time.

Jim Carr: Yeah, we're going to talk about this at a future podcast, but no, I mean I think they have false ... They probably don't know at all.

Jason Zenger: Expectation.

Jim Carr: I don't know.

Jason Zenger: Okay.

Jim Carr: I will admit to the Metal Working Nation that I do not have a bonafide succession plan set up for my family business.

Jason Zenger: And you haven't talked to him either of them yet. All three are kids are almost 30 or 30 ish.

Jim Carr: 29, 27, 26, so yeah.

Jason Zenger: The two might think that they're going to be third owners.

Jim Carr: Well, it has to be fair and equal.

Jason Zenger: Agreed, but what's fair?

Jim Carr: I don't know.

Jason Zenger: Exactly that's the problem.

Jim Carr: That has to be defined in the future.

Jason Zenger: It's a tough situation.

Jim Carr: It's a tough situation.

Dietmar G.: Here's what I have done. First of all, I asked my nephews and especially my three sons, what do you want to do? You want to keep the business at the status quo, maybe turn it into some type of lifestyle business, you're throwing off a lot of cash or do you want to grow and build a business? And one by one they all said, we want to grow the business. So, we have some pretty ambitious goals in terms of revenue and free cashflow that we want to throw off in the coming years.

Dietmar G.: So first of all, I had a 100% buy in on that and that was really helpful. The other thing we wanted to do is, hey, we don't want to have a bunch of miscommunication within the family members. We want to make sure that everybody knows that everyone else has their back. And so, I'm focusing more and more on coaching and mentoring and every two months we're going to get together that third generation, we're just going to talk. We might have some case studies that we'll go over and an effort to help build that strong family dynamic within our business organization.

Nick Goellner: And the irony is that we're actually supposed to be doing that right now, but we're here recording a podcast about doing that. So, we'll have to reschedule that one.

Dietmar G.: Somehow, we didn't get the calendar invite.

Jason Zenger: So, this is a completely hypothetical question and we'll leave this as the last question for you Dietmar. And the reason that this came to mind is because I just had a conversation with somebody about one of my competitors who has children in the business. And those children happen to, I would say just to be nice about this, maybe not competent to run the company.

Jim Carr: Not everything's perfect, right?

Jason Zenger: Not everything is perfect.

Jim Carr: I mean, oh my God, no.

Jason Zenger: But, I think that they also at the same time maybe have an entitlement to run the company. What would you recommend for somebody that was in that situation?

Dietmar G.: I would say that if that family member doesn't get it, doesn't want it, doesn't have the capacity to do it, don't force him into that position. That is the worst thing you can do.

Jason Zenger: Sometimes parents have blinders to their kids' competencies.

Dietmar G.: They do, and sometimes it's cultural. In Europe and in Asia for instance, it's expected that the next generation, the oldest son for instance, will take over the business. And I think that's [crosstalk 00:42:47].

Jim Carr: That's a mistake.

Dietmar G.: I think it's an absolute travesty.

Jim Carr: Yeah, that's a mistake.

Jason Zenger: So, what do you do in that situation, sell the company?

Dietmar G.: Well, if you don't have somebody else-

Jim Carr: You better start communicating.

Dietmar G.: Yeah, if you don't have somebody else to take over, then you look within the ranks and you say, well who really is competent? And you can have that person take over the business.

Nick Goellner: Somebody internal, they could be a non family member, a manager, a director.

Jason Zenger: And that's tough in itself too because sometimes those family members think that they should be doing it.

Dietmar G.: You just have to be honest and transparent with one another. Have the conversation.

Jim Carr: It's not comfortable, but let me tell you, at the end of the day it's going to feel better. You know when it's less comfortable? When you don't talk about it.

Jason Zenger: The longer you wait.

Jim Carr: Yeah, I agree. I agree.

Nick Goellner: Well and it's also like you talked about stress, right? We had this episode on stress. You don't have to say, okay, I'm going to take this from $100 million company to a $250 million company, that's a lot of stress. That's a big commitment and a big cross to bear, so you're not less of a person if you're like you said, Jason, I just want a job.

Jim Carr: A lifestyle job.

Nick Goellner: That's fine.

Jim Carr: Thank you Dietmar, I appreciate.

Jason Zenger: Yeah, it's been great.

Jim Carr: We're going to be talking a little bit more about business succession planning in a future show and I'd love to hear your feedback and how we engage each other and the audience for that. But this is a very emotional discussion about business succession and family and nepotism and all those things. And it's been something I've been living with for a lot of my life. And I think the best thing that I did was just saying to myself, I proved myself to all the people within the company and to myself that I can efficiently, effectively and successfully run the company on my own.

Dietmar G.: Yeah, it's a difficult process, but I can tell you from experience its well worth it to put your time and energy and effort into making sure that the next generation is able to run the business and then you just let it go and you leave a legacy and you can take joy in the success that the family members are having taking the business to the next level.

Jason Zenger: Yeah, and I would say for the metalworking nation, if you haven't started having this discussion, probably the easiest thing to do at this point would be to share this episode with your family members and just say, hey, listen to this. We need to have a discussion about this, and if you learned something from this episode, please go to iTunes rate and review, it helps us to get the word out. Share it with other people in Metal Working Nation because if your family members aren't MakingChips, they're not making money. Baam!

Jim Carr: Baam!

Nick Goellner: Baam!

Speaker 5: Metal Working Nation, listen up, manufacturing is challenging. You need to think differently, the day to day whirlwind of urgencies, the pressure to grow, customer demand, workforce development, new machine tools and robots, the list goes on and on. It is possible to stay ahead of the game of manufacturer but you can't do it alone. We're here to give you access to exclusive content about the leaders as well as videos, blogs, show notes, and more resources designed to equip and inspire you on MakingChips.