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Why I Fired My Father From the Family Business

Last Updated Mar 18, 2011 2:41 PM EDT

By Mitchell Kaneff, CEO, Arkay Packaging, Hauppauge, NY
I started sweeping floors at the family company, Arkay Packaging, when I was fifteen. After I graduated college in 1989 I moved to a position in planning and customer service. Seven years later, my father made me president. But the promotion was in name only; my father was having a hard time giving up control. He remained CEO and continued to make a lot of the decisions.

My father and I have different styles of management. He is more interested in technology, equipment, and the practical work of making boxes than in cutting overhead and growing revenues. I am the opposite. He is very authoritative and prefers giving orders to listening to suggestions. I am interested in listening and learning from my associates.

When our company faced a crisis, it became clear that our two styles were incompatible. To lead our company into the future, I needed to take control -- even if that meant pushing my father out of the way.

The company was in trouble
In 1998, we experienced unprecedented growth of 33% and were having a hard time keeping up. Deliveries were late, the quality of our products was slipping and customer patience was growing thin. We were having problems with an acquisition, and were also expanding to a new location in Roanoke, Virginia. At the same time, my father was spending millions on developing a label press so we could get into the labeling business.

To make matters worse, competitors had circulated emails that falsely implicated us in an environmental scandal. Newsday published an article saying we owed the government $55 million dollars, which was untrue. Customers were calling us wondering if we were going to have to file for bankruptcy. The company was spread too thin, the chain of command was ambiguous and confusion reigned.

I took control
In 1999, I mustered the courage to tell my father we needed to stop spending money on the label press and focus more on our core business. To my surprise, he acquiesced.

I also knew it was time to change the company's management style. When I first stepped into a senior role at the company, I mirrored my father's behavior. When bad news arrived, I pounded on the table and screamed. It didn't take long before I realized that reaction intimidated employees and kept them from sharing information. So I tried a softer approach.

When my father ran things, only the C-level executives had access to the company's financial information. In order to make the company more transparent, I began to share that information with all employees. I also encouraged employees to share information with management.

Once a week, my employees gather and share vital company information related to sales, productivity and turnover. During one of these meetings, we discovered a glitch in our computer system. Our computers were counting deliveries that were up to seven days late as on time. As a result, we had been unaware that 66% of our deliveries were late. We also discovered by reviewing data collected in system that a when we did deliver boxes, orders were often incomplete.

Within a few months, 90% of our deliveries were on time and complete. It was my first major achievement at the company.

I fired my father
By 2004, things had gotten more or less back on track, and corporate culture had changed dramatically. But there was still uneasiness among management about the split chain of command.

One night I got a call from our COO. My father had called him into his office while I was away and ordered him to transcribe a dictation for a letter. The COO told me he didn't appreciate being treated like an assistant when he had a company to run and that he was resigning. I knew he wasn't the only one having problems: The entire staff was finding it impossible to work for two men with such different visions for the company. I knew I had to act.

I called my father. When he picked up, I berated him for his treatment of the COO and then I told him he would either have to buy me out, or he was fired. It was the hardest call I've ever made, and I was speaking through tears, expecting my father to be angry and hurt.

Instead, he told me, "I am so proud of you. You're right. It's time for me to leave." I was surprised, but I think he respected how difficult it was for me to make that call.

We're still friends
Since my father retired in 2004, Arkay Packaging has kept going strong. The COO stayed on after my father left, and our revenues have been holding at $50 million annually.

It was a difficult transition for both of us, but now we are able to laugh about our past differences. We go on weekend trips together and our relationship is stronger than ever. He is still my sounding board when it comes to tough business decisions.

Mitchell Kaneff is the author of the book "Taking Over: Insider Tips from a Third Generation CEO."
-- As told to Harper Willis

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