From: Inc. Magazine January, 1991
Daddy Dearest Author:
Edward O. Welles Source: Inc. magazine -
January 1, 1991
Tama and Jonathan Starr set out to destroy the legacy of their father in order to save the family business.
Every family business contains the varied seeds of its own destruction. Hard work yields to sloth, genius to mediocrity. The world changes, and management doesn't. Family members multiply, and so do their ideas of how to run the business, not to mention their demands on the payroll. Family businesses are so programmed to failure that there has arisen a consensus from one culture to the next that it takes no more than three generations to kill one. In Mexico one maxim reads: Father -- merchant; son -- playboy; grandson -- beggar. The Chinese say, From peasant shoes to peasant shoes in three generations. And in the United States one folk saying goes, From sleeveless to sleeveless in three generations.
That hasn't happened at The Artkraft Strauss Sign Corp., though by all rights, it should have. Now in its third generation of family control, Artkraft has all the elements that often doom a family business. Its founder was an irascible genius and autocrat who built his company into a legend. His son, the frustrated heir for many years, was every inch the autocrat his father was but nowhere near the businessman. Under him, Artkraft declined.
His heirs, a son and a daughter, were more interested in riding motorcycles and writing rock-and-roll music than in reviving the family business. When they did return to the fold, they were confronted not only with the excesses of ego and harebrained genius but also with the burden of Artkraft's mythic past.
Since the 1920s Artkraft has been the dominant maker of spectacular outdoor signs in New York City. Its history blazed in neon, from Coca-Cola to Camels and, more lately, to Fuji and Sony, Artkraft has built virtually every sign that ever lighted Times Square. It has also been a force in lighting the Great White Way of Broadway. A recent reading of The New York Times revealed that of the 25 theaters staging Broadway plays, 23 hired Artkraft to build their marquees. That is one tough act to follow.
But today the company has about 175 employees and revenues approaching $17 million, more than double what they were five years ago. Somehow, in the case of Artkraft, the family-business pattern of third-generation decay has not held.
* * *
Artkraft occupies a two-story brick building on Manhattan's West 57th Street hard by the Hudson River. It is an industrial space of heavy metal doors, dank staircases, and scuffed walls, where workers muscle leviathan pieces of sheet metal amid the high-pitched whine of power tools. The spectacle of all this metal, glass, and wiring coming together is magical. "One thing my father always said was 'Make your trademark a landmark,' " says Tama Starr, Artkraft's chief executive officer and granddaughter of the founder. "You take something very small and make it surrealistically large and incorporate it into the architecture of a city. That's something transcendent. It's startling from an artistic point of view."
Tama is an engaging, spirited woman of 44. Her voice carries a gravelly edge from smoking too many Camels. Artistic and intellectual, Tama now spends a lot of her time sweet-talking New York City real estate magnates into paying their bills on time. In one notable case, a developer -- known as much for his yacht as for the declining value of his properties -- offered to pay Artkraft in gambling chips. Tama declined. Two weeks later a new deal came down --undeterred, he offered to pay in the form of tickets on a certain airline operating between major cities on the East Coast.
Jonathan, Tama's brother and four years her junior, is Artkraft's chief operating officer and decidedly more deadpan. He is soft-spoken and earnest, the foil to Tama's winsome nature. "I have a real love for this industry. It's in my blood." He uses the word destiny to describe how he came to work for Artkraft after years of rebellion and exile.
Two strong-willed siblings running a company like Artkraft at this point in its life would seem the kiss of death. Tama acknowledges the peril: "In a family business you are subjecting an emotional relationship to a great deal of stress. You've got to be really enlightened about overlooking what that other person does that bugs you."
Enlightenment seems to have prevailed at Artkraft thus far. The company is building more and bigger signs than ever before in its history. Tama and Jonathan's acquisition of other sign companies has revived Artkraft, broadening its base and making it a more vertically integrated company. The Starrs have aggressively modernized the business and hired a core of skilled managers, supplanting a past in which autocratic decision making and computer phobia held sway.
Artkraft's story raises provocative questions about what it takes for a family company to survive into the third generation. Do the qualities a family business is founded on -- genius, loyalty, hard work -- lose their power after 60 years of operation? Do rebellion and subversion become necessary to keep the enterprise vital? How can a company survive when bitterness divides one generation from the next? How can it possibly hope to improve on the legacy of a brilliant founder?
* * *
The genius and force behind Artkraft was Jacob Starr, known by all who did business with him simply as Jake. Jake started out as an ironworker in the Ukraine, but his talents exceeded banging hot metal. He built some of the first electric signs in his native country, and after immigrating to the United States, in 1902, he developed the first electric automobile starter, which he sold to Pierce Arrow for $500 -- a business giveaway he would not soon repeat.
In New York City, Jake landed work for a small sign company on the Lower East Side. At night he went to school, earning a degree in engineering. He saw the advantages of adapting assembly-line techniques to the sign-making trade while preserving the craft component of the business. He also understood the value in adapting new technologies to signs. One such technology was neon lighting, invented in France, and Starr acquired the North American rights to it. By 1930 Jake had risen to control his own sign company. His fortunes soared in tandem with those of the burgeoning industries of motion pictures and advertising.
To many, Jake was a quick-tempered tyrant, far tougher on his family than on his other workers. His nephew Philip Marshall, who has worked off and on for the company since 1954, recalls Jake as "a self-made man of the school that the only way to succeed is if things are not made easy for you; he went out of his way not to make things easy -- particularly for his relatives."
Jake's toughness toward his family was the flip side of the affection he showed his workers. A bare-knuckled manager and driven businessman, Jake nonetheless helped found the sheet-metal union local at Artkraft. "He felt very strongly about people who put themselves out for him," says Marshall. "Since we were so involved with the theater business, deadlines were extremely important. Many times, to meet a deadline, guys would work around the clock. It was not unheard of for them to work until 12:00 or 1:00 in the morning, then crawl up on the workbench and sleep a couple of hours before waking up and going back to work."
* * *
When Jake died, in 1976, his son, Mel, then 58, had already toiled for 37 years under his father. Mel at last had the autonomy he had hungered for. Whether he had the knowledge was another matter. As Phil Marshall notes, "The business was largely confined to one man -- Jake -- who carried it around in his head. That deprived Mel of learning certain aspects of the business."
The relationship between Jake and his son could be described as a family-business
archetype. Jake as the founder wasn't about to cede control. Mel as the
denied heir grew only more bitter with time. Tom Hubler, a Minneapolis
consultant to family businesses, says that the central issue between founder
and son is a contradictory one. "The founder has a tremendous fear of letting
go." On the other hand, "the founder desperately wants his son to take
over the business." Those two conflicting impulses lead to confusion and
bitterness. "The founder would feel betrayed and hurt if his son went and
worked somewhere else," Hubler
continues. "The son is not allowed to emancipate himself because he is told the business needs him. Yet he is not really allowed to grow within the business. Consequently, he gets frozen in his confidence and self-esteem."
When Mel took over at Artkraft, in 1976, the company employed about 75 people and had sales of $5 million. In 1980 Mel suffered a heart attack that would slow him down, cramping Artkraft's fortunes until his death. Under Mel, Artkraft suffered nearly a decade of no real growth. Tama Starr reflects wistfully on her father's ill fortune: "My dad did not have the physical energy or the hunger to take risks. I remember his saying, 'I'm sick and tired of being sick and tired.' "
Mel ruled the business with the same iron fist but not the same hands-on genius that had been his father's trademark. He had studied advertising in college; he focused on sales. Mel was Mr. Broadway, a walking neon sign, known for the Runyonesque figure he cut around town: the plaid suits, the gold chains, the gaudy wide ties, and the silver toupee. Mel even carried around in the breast pocket of his coat a trademark pair of chopsticks, with which he ate everything from filet mignon to ice cream.
Mel ran Artkraft out of his expense account. He loved doing deals in smoky nightclubs, sealing them with a handshake and a few numbers scrawled on the back of a cocktail napkin. Yet he lacked his father's acumen. As the business grew more complex, Mel tended to underbid big jobs just to close the deal. Then he would let people back at the office worry about how to keep the company from losing its shirt on the project. Mel lived for making the deal happen, not the details. Recalls Tama of her father: "Mel was kind of a romantic. He really did deal in abstracts, being a sales man and a designer. He was highly verbal, not the hardheaded businessman my grandfather was."
Mel steadfastly resisted updating the manufacturing process. He saw
computers as gimmicky tools. Any kind of financial analysis of the business
-- tracking how money was spent -- made little sense to him. Mel became
a stranger to his skilled work force, which his father had carefully cultivated.
Each of the three unions at Artkraft grew increasingly combative and less
willing to go the extra mile. Thefts of equipment and supplies increased.
The world and the sign business were changing fast around Artkraft and
Mel Starr by the time he died, in June 1988, at age 69. At the rate
things were going, the business would soon follow. "We were shrinking,"
says Jonathan. "At a certain point we would cease to exist. We had lost
our technical edge. We had an aging sales force. We were watching the world
pass us by." Despite a few good years in the late 1970s, Artkraft's sales
-- stuck at around $8 million -- had gone nowhere in a decade. Outdated
equipment and underbidding consumed profit.
All that would remain for Tama and Jonathan Starr would have been to close the place up. Sleeveless to sleeveless in three generations.
* * *
The constant in any business is change, yet in family businesses change is often resisted. "A lot of family businesses are in maturing industries," notes Dennis Jaffe, a family-business consultant in San Francisco. "They are not innovative, and they don't invest in the future. The business really needs to be transformed every generation, and in some businesses a generation is now as short as three to five years." Obstructing change are the unreal expectations family members develop. Heirs proliferate on the payroll. Beholden to the company, they fail to question its direction. To change that tendency, says Jaffe, potential heirs must liberate themselves from the business in order to develop a sense of their own competence.
Independence took different forms for Tama and Jonathan Starr. In summers as a teenager Tama worked for the company, starting out as the receptionist and helping to write sales proposals. After college, in the late 1960s, she went to her grandfather and asked for a position in the company. He growled back that Artkraft "was no place for a lady." Rebuffed, Tama moved away. From 1970 to 1982 she lived in Hawaii and in California. She built a house on Maui and powered it with a windmill. She scratched out a living as a free-lance writer and songwriter. She formed a performing-arts troupe.
In 1970, at age 19, Jonathan told Jake he was going to India. With a
male heir, Jake's impulse was to bind him to the family and the business.
Jake forbade such a venture. Jonathan defied him. He was gone for eight
years: seven in India and one in Africa.
Jonathan, who never went to college, saw to his own education. He became a master printer and a photographer. He also found work as a sound engineer and a software writer.
Jonathan believes his act of defiance earned his grandfather's respect,
perhaps because it stood in marked contrast to a similar family showdown
that had occurred some 30 years earlier. Then Mel, fresh out of college,
had gone to the West Coast to take a job with an outdoor-advertising company.
Jake had pursued him and commanded him to come back to New York and work
at Artkraft, and Mel had dutifully complied. "That was a major turning
point in my father's life," says Jonathan.
Tama knew she and Jonathan could probably run the company if called on. Setting their own course gave them the thick skin they knew they would need should they return one day to work with Mel at Artkraft. Tama recalls that relationship wistfully. "All the time I worked here, did he ever say I did a good job -- anything?" she muses. She shakes her head and says softly, "No, not once in seven years." Mel steadfastly refused to give her a raise -- until she finally went out and got another job offer. "Then he raised me $50 a week, up to $250, and that was after five years. He always spoke as if he were doing me a favor. 'I've got to keep her down. She'll get a swelled head.' That's what he would tell other people."
* * *
Families are resilient. They defy the internal forces that often work to tear them apart. They are by nature cohesive. The Starr family, with all its combustible personalities, was also tight. Jake had commanded the family to assemble at his house for dinner every Friday night. No excuse would do. "My grandfather was a very hard man to say no to," recalls Jonathan.
"Leaving a family business is tantamount to leaving the family," says family-business consultant Hubler. "There's a tremendous need in all of us to belong. There's a tremendous allure to wanting to get back in the ball game." Jonathan came back to Artkraft in 1977, the year after his grandfather's death. He cannot explain what drew him back, other than to ascribe it to destiny.
Destiny presented Jonathan with an imposing situation. Mel, with his own father gone, finally had some power. The heart attack in 1980 was a grim reminder of his mortality. On top of that, his son, with his quick mind and willing hands, loomed in Mel's mind as a haunting memory of his just-departed father. When Mel got sick, Jonathan got his chance. After Mel came back from his heart attack, a year later, the two clashed.
Jonathan, like Jake, was decisive. Mel was not. Jonathan cared about craft. Mel cared about sales and closing the next deal. "From the time my grandfather died, he never bought machinery or tools. It was frustrating for me," says Jonathan. "I used to take part of my salary and on the sly go out and buy tools for the workers. One time he caught me and got very angry." So angry, "he cut Jonathan's salary," says Tama.
Most galling of all to Jonathan were the visible signs of neglect -- especially Artkraft's decrepit trucks. "Half the time they never got there. They often broke down, stranding a team of $60-an-hour union workers in midtown traffic." Mel refused to institute anything as basic as a maintenance schedule for the fleet, let alone buy a new truck or two.
Meanwhile, the aging sales force resisted exploring emerging markets for the company. With Times Square on the decline and sign technology changing, the work space on 57th Street fell increasingly idle. "For three or four months at a time no new big jobs would come in," recalls Jonathan.
* * *
Jonathan's despair during the late 1970s drove him underground, turning him into a subversive. Periodically, he called Tama in Hawaii. "We had these long conversations, and we'd share our frustrations," she recalls. "We got very close."
Tama might have been far away, but she, too, had maintained enough of a tie to the company -- returning from time to time for a few months to work with her father -- to care about it. "It was our baby," she says. "There's a tradition here. It's crazy, and it's beautiful. I was very concerned that it might die."
Muddying the issue for Tama was her father's Jekyll-and-Hyde demeanor on his visits to see her in Hawaii. Suddenly the harsh taskmaster became the convivial philosopher. "We'd stay up all night talking," she says. "It was the romantic thing to do -- just me and him chatting all night and waiting for the sun to rise."
Tama finally returned to Artkraft full-time in 1982 and replaced
Jonathan, who eventually took off for Hawaii. "He needed a breather," she
explains. Now it was Tama's turn to call and confide in her sibling when
the yelling started up again at Artkraft.
The business was stagnating, and their father's health was declining. "Jonathan and I had a secret emergency plan that no one knew about, not even my mother." According to the plan, Jonathan agreed to return to Artkraft full-time if anything happened to Mel. They agreed on how to share power.
When Tama heard the news that Mel had died, one morning in June 1988, she didn't really believe it. "I had to go see for myself." After heading over to her parent's house, she called Jonathan in Hawaii. He caught the next plane east.
The funeral for Mel, on a Friday, was enormous -- an overflow crowd of mourners. The scene looked like one from The Godfather: Tama sitting next to her mother in black, introducing her to a succession of dark-suited developers and construction magnates as they respectfully approached to offer their sympathies. But even in death, Mel was still in control. Tama realized that she lacked the power to sign checks, and the payroll was due on Monday. To gain that authority, she would have to obtain 20 copies of her father's death certificate to present to Artkraft's banks and vendors. It normally takes three weeks to get a death certificate from the New York City Department of Health.
"I said to the director of the funeral home, 'I need 20 death certificates in one hour, or all these people who work for me are going to be out of work on Monday, and I'm going to cancel this funeral.' " She got the death certificates.
The next day, Saturday, Tama went down to Artkraft and spent all day rearranging the furniture, altering the perspective the employees would have when they came in on Monday. She stripped her office walls bare and tore down partitions. She put up a portrait of Jake. By midweek the place would be painted yellow instead of a muddy brown.
Mourning her father, Tama says, "was superseded by a lot of other feelings. We had about 100 people working for the company. I wanted them to feel secure. They are working people. This is the only kind of work they know. I wanted them to feel reassured. I wanted them to walk in and realize this was a new day, a new deal. I did this so everyone would not come in on Monday and start looking for a ghost."
* * *
With Mel gone and the furniture rearranged, his heirs could also look at the world and the company with a fresh eye. The business was weak, its base too narrow, its bottom line propped up by the past. In truth, Times Square and Broadway had been in decline for two decades. There was less demand for large display signs. Artkraft needed to be in other markets, using new technologies. There were things that Artkraft, so indomitable for so long, couldn't do and needed to in order to thrive.
At the heart of the malaise was the lowly status of Artkraft's highly skilled workers. "My dad was weak there. He was aloof," recalls Tama. "He treated labor as just another commodity." Tama and Jonathan knew that had to change. They addressed the work force early in the week. "We generously gave respect to our workers," says Tama. "Our aim was to see this as a new beginning, and we were not going to dwell on the past. With their help, the business would prosper, and everyone would become wealthy working for Artkraft." The urge to court the worker was, of course, a throwback to Jake, whom many of the workers remembered fondly.
The second nod to Jake came in the form of the company embracing advanced technology -- using the best tools it could get its hands on. Jonathan started bringing computers into the office and announced pointedly, "People will learn how to use these things or else." The company subsequently sent workers to school for computer training. Employees not interested in such efforts at self-improvement were let go.
The company has since invested in a lot of computer technology, primarily computer-aided design and manufacturing. That investment, Jonathan believes, has given the work force and management a new and common language. "We have project meetings all the time now. Everyone sits down together and figures out the best way to do a job," he says. "We are now more diverse and more flexible."
Those qualities derive from another key decision Tama and Jonathan made soon after their father's death. Knowing the world would no longer just beat a path to Artkraft's door, the company made three strategic acquisitions to complement its strengths and make it a more adroit player in the market.
It bought West Side Neon, which makes smaller signs than Artkraft does -- signs for elevators and automatic teller machines, for example. Those are high-volume, garden-variety jobs that can help smooth out the business cycles, as Artkraft, with its big display signs, had grown reliant on the very cyclical commercial-real-estate market in New York City.
It bought Calvano Erectors, the premier sign-hanging and -rigging company in New York City. The merits of that acquisition are obvious. The Starrs knew Calvano to be the best company of its kind. Its equipment was up-to-date. The embarrassment of Artkraft trucks breaking down in Manhattan gridlock would belong to the past.
Third, it bought another local sign company called Electronic Sign Products, which makes scoreboards that use changeable information displays such as light-emitting diodes, light bulbs, and flip disks to make signs, such as the digitized moving signs that banks display in their windows. That acquisition reflected an awareness that the sign industry was moving fast toward electronics.
In making those purchases, Artkraft borrowed money -- something Mel was loath to do. But the risk was worth it because they could see those acquisitions paying larger dividends than just broadening the company's repertoire. They turned Artkraft into a professionally managed corporation, as each of the new companies came with their owners' expertise.
Those were people who, like the Starrs, had grown up with their companies. They knew their businesses well. Whey they joined Artkraft, they retained much of the power to run those businesses as they always had. The effect was to broaden the knowledge base at Artkraft and increase the sharing of power. A company that for half a century had been run by a strong-willed individual believing in his hunches now had half a dozen managers, each bringing knowledge and experience to the business.
* * *
Family-business consultant Dennis Jaffe believes that for a family business to prosper from one generation to the next these days, each succeeding generation must understand that there is an almost exponential increase in the expertise required to run that business. It is faced with a task of almost entrepreneurial dimension. "Each generation really has to create a new basic business," he says.
That is what Tama and Jonathan Starr have set out to do, as is demonstrated most tangibly by their curious partnership. It is late on a weekday afternoon, and Tama is sitting at her desk, which abuts her brother's. Between them sits a shared computer. She drags on a Camel, picks up a piece of paper, and puzzles over its scrawl of numbers.
"Jonathan made a deal yesterday. I'm not sure what this means. I have to get this written in contract form by the end of the day." The moment is not without irony. Jonathan's scrawl bemuses her. Half the time when Mel did this, it drove her up the wall. The difference, of course, is that she has faith in Jonathan's ability to work the numbers. She knows he has Jake's head for business.
She is also reassured by the awareness that Jonathan has what she doesn't and vice versa. He is good at analyzing costs. He loves machinery, abhors paper, and barely tolerates small talk. She delights in reading the fine print on contracts, in the give-and-take of negotiation. She likes to talk.
Invoking the ghosts in Artkraft's past, Jonathan conjures up absolutes -- extremes. "My grandfather demanded perfection. My father demanded adherence to his own whims," he says. That has given way to the forces of moderation.
"The business had never been run as a partnership with two equal partners," says Tama with a note of wonder in her voice. "That means you have to let go of enough ego to yield to the other person." The sense you get about this company is one of balance.
Peace has broken out. In the old days, says Tama, Artkraft was a place
"where people did a lot of yelling." Things got done by brute force. That
is no longer the style.
Yet there is an homage to the past and all its pyrotechnic genius. You see it on the office walls hung with old framed photos of Times Square ablaze at night. You hear it in the oft-invoked ghosts of Jake and Mel and the small, reverential moments that pay homage to those who came before. Whenever Tama gets into a cab in midtown Manhattan, she asks, as though guided by family spirits, to be detoured through Times Square. Just to look. Just to make sure all is well. "I know every inch of it so intimately," she remarks. "I can name every address and tell you what sign is on that building. Going through Times Square always gives me a tremendous thrill, knowing that we've had something to do with this little, glittering corner of the universe."