- Associated Press - Sunday, June 21, 2015

WAPATO, Wash. (AP) - Marty Verbrugge, father, grandfather and patriarch, was one of the strongest voices for change when it came to his family’s multi-generational fruit business.

Hire a boss from outside the family, he said.

“I think we’ve all been open minded,” said Verbrugge, 79, retired president of Valley Fruit of Wapato. “We don’t mind making changes that we think will be for the better.”

The Verbrugges serve as a recent example of Central Washington fruit packing companies turning over some control of the family business and reputation to an outside executive as a way to keep growing in an era of shifting regulations and booming global markets.

Each time, those family members inevitably ask themselves, “What would Dad think?”

That’s a good question, said an expert on family businesses, but not the only good question.

“We’re not in Dad’s world right now,” said David Sirmon, a University of Washington professor of strategy and entrepreneurship.

The Verbrugges conceded as much in January this year, when Valley Fruit hired Dean Gardner, an outsider with extensive management experience, as CEO after they decided the company had grown too large for the flat management structure of the previous generation, said Peter Verbrugge, Marty’s oldest child at 47 and the current company president. That structure left him little time to plan for long-term orchard growth while, say, visiting Asian countries to recruit new international customers.

“It’s impossible for one person to make all the operational decisions day to day,” he said.

Gardner, meanwhile, specializes in building new management teams and working groups that include higher- and lower-level supervisors and designing cross-training programs, bringing some of the structures and tools of corporate efficiencies to a family farming business.

Though they like the way things are going so far, the family members admit the decision was stressful.

“The hardest thing is fearing losing that familiarity with the people and the employees,” Peter Verbrugge said.

Mary Jacky, Peter’s 44-year-old sister, called it nerve-wracking.

“It was a difficult concept to accept or think would be successful because you can never really hire somebody as dedicated as the owner,” she said.

Sirmon lauded the Verbrugges’ decision.

“They must be insightful or being counseled,” said Sirmon, who has co-authored about six research papers on the dynamics of family-owned businesses.

In a 2008 project for Baylor University, he and his colleagues studied a group of family-owned businesses in France and determined that firms using what they called a “family-influence” model outperformed over time the companies keeping strict family control and those operating with no family loyalties at all.

He also calls the concept of family-influence a “hybrid governance” model, in which family members form a corporate board of directors to set long-term goals but hire a professional CEO or general manager to keep day-to-day operations moving.

The fruit industry’s competitive climate has driven consolidation in recent decades. In 1935, more than 44,000 farms in Washington grew apples, compared with less than 3,000 in 2012. Today, many Central Washington fruit businesses are no doubt huge corporations, hiring thousands of employees, selling fruit all over the world, owning orchards as far away as California and shelling out tens of millions of dollars each year to build massive warehouses with state-of-the-art electronics and robotics.

But they’re also family businesses, many of them approaching the third, fourth or even fifth generations of ownership, struggling to grow quickly enough to stay competitive while maintaining the culture and ethics their parents or grandparents created.

“There’s always a lot of tension when a business grows between doing what you love and the necessary functions of staying competitive,” said Jon DeVaney, president of the Washington State Tree Fruit Association, the Yakima organization that represents fruit packers.

Other fruit firms have made similar moves.

In 2007, Allan Bros. of Naches hired Miles Kohl as CEO while four Allan family members - Travis, Tom, George and Dave - sit on the board of directors.

Two years ago, Larson Fruit of Selah also hired outside the family for a CEO, recruiting Dean Gardner from a Portland-based network of corporate administrators. Before that, Gardner spent most of his career in the finance side of oil and technology companies all over the world.

Larson Fruit and Valley Fruit then formed a packing partnership called Legacy Fruit Packers earlier this year. At the same time, Gardner became CEO of Valley as well as Larson.

The restructuring doesn’t surprise DeVaney.

All companies are looking ahead. The fruit industry requires long-term thinking, DeVaney said. Orchardists plan 10 years ahead for new plots, knowing they will produce fruit for decades.

The Verbrugges are planning for the future in other ways.

They are drafting a succession plan for nine cousins - all of them Marty’s grandchildren - who will make up the fourth generation of ownership. Among the ideas is requiring them to earn a college degree or spend a few years working for another company before they get a seat at the board table.

Like many young people, Peter’s three kids, ages 16-18, are unsure of their career goals, much less if they want to pursue them at their dad’s business. All three of them are working for Valley Fruit this summer, either in the warehouse or in the orchards.

Tatum Verbrugge, 16, likes the feeling of the family business, especially when fellow employees on the packing line who have been with the firm for 20 or more years tell her stories about herself as a baby girl, she said.

She’s considering psychology as a major someday but also doesn’t want to completely leave the family firm behind.

“I do want to know what’s going on in the business,” she said.

Her older brother, Carter, 18, works on the box line in the packing warehouse. He’s glad Gardner, the new CEO, will be there to help the business move from one generation to the next, regardless of his own involvement.

“My dad’s stressed out even now and another generation would be even more complicated,” Carter said.

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Information from: Yakima Herald-Republic, http://www.yakimaherald.com

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