Bridging the Gap: Ruiz Food Products
A father isn't always the best person to teach business management skills to his successor. Fred Ruiz, 49, learned that lesson when he struggled with his father over differing leadership philosophies of Ruiz Food Products Inc., the frozen Mexican food company. From that day 29 years ago when they founded the Dinuba, California business with $400, a freezer and a stove built from junkyard scraps, Fred and Louis were at odds. Fred was the idea person, Louis the perfectionist. The two argued frequently and each threatened to quit more than once.
Despite their differences, they succeeded dramatically. Named Hispanic Business Entrepreneurs of the Year by Hispanic Business magazine in 1992, they expect sales to hit $94 million this year.
The transition from father to son took place over a five-year period, with Fred assuming day-to-day operational responsibilities as president and CEO by 1983. Louis, now 74, became chairman of the board.
Fred is determined to avoid conflict during the impending succession of his 27-year-old daughter, Kim Ruiz Beck. At 49, Ruiz may seem young to be contemplating retirement, but the succession of the family business is something he's been planning for many years.
Opportunity for Offspring
From the company's debut, creating an opportunity upon which his children could build was one of Fred's main goals. Fred insists he didn't select his eldest daughter, rather, ``She chose to be my successor.'
Kim's interest in the family business began in childhood. At age six,she stamped boxes after school. She worked as a part-time receptionist, helped with payroll, rolled burritos and attended food shows with her father while in high school. During college, Kim did an internship at Ruiz and wrote her senior project on the company. She joined the firm on a full-time basis after graduating from California State University-Fresno with a marketing degree.
Her desire to succeed her father surfaced about five years ago at a Ruiz family-in-business meeting, held quarterly to discuss business and family topics. No other family members shared her fervent interest in the family business. Younger sister, Kelly, an animal lover and college student, has expressed no interest. Hopes remain high that 17-year-old brother, Bryce,will someday join the firm. Fred's sister is employee safety manager,his cousin works in purchasing,and his step-sister, a high school student, holds a part-time position.
Learning of Kim's goal, Fred advised her to ``talk to your husband and get his support. The demands of this job will take a lot of time from your family and if your husband doesn't support you, it could cost you your marriage.' Once Kim got the green light from her husband, her formal succession training began.
Selecting a bridge manager, a non-family professional, to guide Kim and teach her the ropes of the modern business world is Fred's solution to the problems he and his father encountered. Recognizing that he is a better entrepreneur than professional manager, Fred enlisted Tom Colesberry, 45, the company's executive vice president and COO, to supervise Kim's managerial development. When Fred exits the presidency to become CEO and board chairman, which he estimates will be within the next five years, Colesberry will assume the vacant position.
Colesberry handled food industry clients as a CPA, then worked in management in the food industry prior to joining the Ruiz family business. His experience made him a valuable addition to the Ruiz management team which, when he joined the company, had no one on staff with an administrative or financial background.
Colesberry's job will be to teach Kim management and day-to-day operations. Fred is teaching her values -- business ethics, appreciation of employees' efforts, and leadership skills. Ruiz cites the intensity of relationships in a family business for his belief that a non-family manager can better direct a successor. ``He can evaluate her on a professional basis and keep the father-daughter thing out of it. I can't,' he admits.
He learned this lesson first-hand. Ruiz recalls interpreting his father's feedback as criticism, creating a situation he describes as less than professional. He's determined the same problems won't be repeated with his child.
Fred is dedicated to maintaining the annual 20 percent growth rate Ruiz Food Products has enjoyed the last several years. Much of that growth is coming from the introduction of non-Mexican foods as well as the company's Mexican labels: El Monterey, Rosita-Si!, Mexicatessan and Ruiz. A move to infiltrate new markets outside California is also on the agenda. The rapid expansion plans dictate a need for a new style of leadership at Ruiz Food Products, a highly professional manager.
Kim, 28, is well into the process of receiving the training that will ensure her ability to lead the fast-changing company effectively. She is responsible for a division with $40 million in sales, deals with the heads of major corporations and participates in strategic planning. Kim wears many hats: sales manager, marketing manager of the food-service division and manager of product development. To advance her knowledge of other areas within the company, Kim sits in on meetings among key managers where topics include policy-making and financial analysis.
Kim's preparation is far different from her father's. ``When I was 28,' says Fred, ``I was wearing rubber boots working in production and manufacturing.' But with the help of Colesberry, Fred believes his daughter is capable of taking Ruiz Food Products to a higher level of success.
Kim thinks her training will make her management style ``more organized, more detailed, more corporate' than her father's approach. Her dad agrees that Colesberry brings to the succession process formal, practical management experience. And as a trusted, respected non-family manager, Colesberry can instruct Kim unhampered by family or personal problems, in a way that leaves the father-daughter relationship unstrained.
Even so, Fred expects that Kim will espouse his core values: a commitment to customers, employees and the community; and a commitment to keeping the business in the family.
Although she's building a solid foundation, Kim admits, ``I feel like I have a lot more time to put in before I have the experience or knowledge to run the company.' Fred expects that time to come about five years after he hands Colesberry the reins.
With a succession plan now in place, Fred continues to grapple with another problem familiar to families in business -- transfer of ownership. When founder Louis Ruiz stepped down from the presidency to assume the consulting role he currently holds, he sold most of his stock to son Fred, who now owns approximately 40 percent. The company's ESOP, created in 1979, holds an additional 54 percent of the company. ``As it is, my estate plan is set up to distribute my stock equally among my children, but I'm not sure that's the best way,' Ruiz says. He's considering other options, including distributing stock only to the children involved in the family business.
The Ruiz's succession planning offers a number of insights for other family firms:
Consider a non-family manager to provide professional and managerial training to a successor. Fred Ruiz believes using Colesberry will smooth the process by averting emotional conflicts between founder and successor.
Select a manager trusted and respected by both generations. Colesberry helped transform Ruiz Food Products from an entrepreneurial venture into a professional organization. He instituted a human resources department, a customer service policy and a marketing plan. His business savvy helped the company grow from sales of $700,000 in 1979 to projected sales of $94 million in 1993. Fred and Kim both recognize and appreciate Colesberry's management skills and contributions.
Make sure the bridge manager understands that his position is temporary. Fred Ruiz and Tom Colesberry candidly discussed the ramifications of Kim's eventual succession. Such open communication eliminates false expectations and reduces the potential for resentment. At Ruiz, Colesberry knows that, should he so choose, he can remain with the company in a new position once succession is complete.
Plan early. Although only 49, Fred began planning for succession much earlier. Singling out Kim as successor and Colesberry as an interim manager allows time for the two to develop a solid working relationship,provides an opportunity for adequate training, and helps ensure a smooth transition of power.
Hold family-in-business meetings on a regular basis. The Ruiz family meets every three months (or as needed)with a non-family facilitator to discuss topics of concern to the family and the business, such as succession. The meetings are broken down into two parts. First, Fred and Kim clarify current business matters for family members and spouses who aren't involved in the business. Next, they discuss family and personal issues. The goals: keep everyone informed and strengthen familial bonds. "Once I'm gone,'says Fred,``the only thing that will keep the family from destroying the business and the business from destroying the family is the strength of their relationships with each other.'
The Ruiz family is addressing the succession issue well by planning early and by working to minimize emotional conflicts. Hiring a non-family manager plays a significant part in their process. With a true commitment to keeping the business and the family strong,the Ruizes are laying the foundation for a company that should withstand the test of succession.