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Editors Note: This article kicks off a series of how-to articles from industry experts with first-hand experiences.

These articles are meant to help you better your business and your day-to-day operations.

SURVIVE as a Third Generation Business Owner


Arkay Packagings Kaneff discusses how to successfully transition a business from father to son.
BY MITCHELL KANEFF | CONTRIBUTING AUTHOR

y story, and the story of my company, Arkay Packaging, began nine decades ago on the lower eastside of Manhattan where my grandfather, Max Kaneff, opened Ar-Kay Printing Co. in 1922. Arguably, however, the seeds of Arkay Packaging, and the inevitability of my taking over the company from my father, were planted in the tough, turbulent, and competitive landscape of Ukraine, where Max Kaneff was born and raised. Orphaned at a young age,

Max Kaneff opened Ar-Kay Printing Co. in 1922 in the lower eastside of Manhattan.

Max became apprenticed to a printer and thats where the ink got into his blood. It followed him to America and continued to flow through three generations of the Kaneff family. Maxs Ar-Kay Printing morphed into Arkay Packaging under the auspices of Howard Kaneff, Maxs son and my father, whose control of the company occurred when Max died suddenly in 1962. For my father and me, the transition was not as traumatic, but it was complex and difficult nonetheless. As tradition goes, the third generation of a family business is pivotal: It can either make or break the business I was well aware of this when I was growing up. I was committed to following in my fathers footsteps, but that didnt mean it was an easy road. My father was a very dedicated person himself and the company was his life. In that respect, the steps leading to my gaining complete control of the company in 2004, which included the eventual and seemingly unavoidable firing of my father, were not easy ones.

Proactive Business Leaders

Surviving as a third-generation family business is more than knowing exactly how to make the transition, as key as that is. Recently it was surviving the Great Recession, a true test for many companies. My grandfather, of course, had to survive the Great Depression in the 1930s. For Arkay, it was 2009 when the economic underpinnings of this country came unglued. A series of strategies helped us succeed, not the least of which was staying proactive, and confronting and

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managing issues as they came up. Transparency was key, too. Most family business leaders can be protective overly protective of their businesses. But at times like this, we needed to let our employees know what was going on so that rumors didnt spread. My executive team (always a powerful and essential resource) and I were hands on. We initiated frequent financial reviews and action plans regarding sales, cash flow, and payroll, all tools to accurately gage projections of where we were heading and how we were going to get there. Mitchell Kaneff is now the chairWe went outside for help. man and ceo of Arkay Packaging, This was a great tool I took ada 90-year-old, family-owned vantage of when I was taking over folding carton converter. the company from my father and it served us well again when the recession took hold. Family businesses can be insular and often dont seek outside help. But Ive found an expert, removed from the more blinkered day-to-day operations of a company, can offer opinions that are invaluable. Our accounting firm, financial planners, and commercial and investment bankers all had unique insights, which were vital to us (and to our survival). Last, but not least, we increased our marketing and sales expenditures. Counter-intuitive at first, it was a vital step in helping us through this uniquely difficult period of time.

As the decibel level increased, I knew the time had come to sever the cord and take over. On the plane ride home, I wrote a letter to my dad, basically telling him that the reigns of even the greatest kings end at one time, and this was his time. Our meeting was emotional, but my dad accepted my letter and, in his final gesture as head of Arkay Packaging since his own father had died, Howard Kaneff stepped down. Ironically, after our escalating differences came to a head in 2004 and forced my father out, he thanked me. My offering him the position of chairman emeritus was a wise and healing decision, and was very helpful in the transition. During those intermediate years, from when I became president in 1997 until my father officially abdicated in 2004, I relished learning from my father and used that time to glean everything I could from him about running the company. For the most part he was the wise guru to my eager pupil but our management styles were conflicting and discord was inevitable. Once the baton was formally passed, my father said Id saved his life and that hed now been given a chance his own father had missed the chance to enjoy retirement. And

A Difficult Transition

We went outside for help. Family businesses can be insular and often dont seek outside help. But Ive found an expert, removed from the more blinkered day-to-day operations of a company can offer opinions , that are invaluable.
enjoy it he has: My father is incredibly vibrant and active, he loves to ski, to travel, to stay socially active, to stay mentally engaged and challenged. Im grateful for his gratitude. My father is an inspiration to me and he is my best friend, my confidante, and my mentor. He remains my special consigliore at Arkay, advising me in the areas of technology always a strong suit for him and sometimes attending meetings with me and generally maintaining a productive role in my companys business. But it is now a peripheral role, which is key. Its important to note that we had a lot of help, too, in those years of transition that stretched from when I became president to when I took over the company. I unabashedly tapped into industrial psychologists to come to our aid and, although at times it seemed as if my father ignored their advice, I believe
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Of course this all occurred when my father was already retired, so the drama that unfolded when I was making the transition from president a position Id held since 1997 to chairman/ ceo had dissipated. But drama it was and for a while emotions ran rampant. My dad, as much as he loved me, was seemingly incapable of accepting me as truly running the company and I know, looking back, that (consciously or unconsciously) he undermined me. For him, the act of relinquishing control was painstaking and extended over several years during which he would alternate between being my coach and my nemesis. It took my coo threatening to quit because hed gotten into a disagreement with my dad while I was out of town that forced my hand and caused the ultimate showdown between my father and myself in 2004. I was in Las Vegas when I got the call from my coo and my subsequent call to my father was fraught, to put it mildly.

WWW.PACKAGING-ONLINE.COM | PAPERBOARD PACKAGING | WINTER 2012

at the end of the day our time with them was helpful. Taking over is a process at times enlightening, at times excruciating. But it is essential to navigate this transition in family businesses. If done correctly, the company thrives. If done incorrectly, it can lead to the demise of the entire business. Having a succession plan is essential and having the courage to follow through with that plan is crucial.

Family businesses need to support one another were not in this alone. Heritage is important: Each family business has a remarkable pedigree, a unique history, which should be preserved. As for my own sons, inevitably the question arises: Will there be a fourth generation of family leadership at Arkay Packaging? My twin boys are great but theyre 12 years old. I bring home cartons to them and we talk shop, but I cant know now what the future will bring.

Taking over is a process at times enlightening, at times excruciating. But it is essential to navigate this transition in family businesses. If done correctly the , company thrives. If done incorrectly , it can lead to the demise of the entire business.
I do say this, though: I know its important to dare to have a vision. Our legacies trump any petty differences. When it comes down to it, I celebrate both the differences and the reconciliations that occurred between my father and myself because they all brought me to this moment, to where I am today: Chairman and ceo of Arkay Packaging, a successful and flourishing business with three locations and 200 employees, utilized, respected and loved by our customers worldwide. Thank you, Max, for coming to America in 1922: your journey was very worthwhile. PBP
Kaneff, author of Taking Over: Insider Tips from a Third-Generation CEO, is the chairman/ceo of Arkay Packaging, a 90-year old, familyowned and operated leader in the folding carton industry. UnderKaneff s direction, Arkay continues to be a market frontrunner in providing companies, such asEstee Lauder,Procter & Gamble,Elizabeth Arden, and LOreal, withleading-edge productpackaging solutions. In addition to writing Taking Over, Kaneff is involved with The Young Presidents, his band that plays original rock music in the New York metropolitan area. The Young Presidents album, Freedom of Speech, was released in June 2011 and his new album will be for sale by years end.

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