Shopping Center Industry Illustrates The "Three Rs" of Family Business; Relationships, Reputation and Risk Management
Despite consolidation, the shopping center industry remains dominated by what are now second and third generation family businesses. Driven by largely local entrepreneurs, the â€œMalling of Americaâ€ began in the 1950s and continued through the 1980s. Today, family owners and managers face new strategic challenges but emphasize methods and values learned from parents and grandparents. The lessons are about what might be the â€œ3 Rs â€œ of family business â€“ Relationships, Reputation and managing Risk â€“ and about maintaining a long-term perspective. Relationships Family businesses are built on relationships. What begins in the family extends to employees, customers, suppliers and the community. Retailers are what shopping malls are about and relationships with them are key to success. Many family-owned mall developers report that they are relationship-driven, doing business across generations with retailers who lease space. These relationships result not only in steady income, but in the ability to identify and evaluate opportunities. New malls often grow from existing clients suggesting new locations. Acquisitions can be better evaluated with information from existing clients who may be in the targeted property. â€œWhat we talk about and what we think about is how we can keep improving relationships with our customers,â€ says second-generation president Richard Baker of National Realty & Development Corp. â€œWe donâ€™t talk about making money; we talk about building relationshipsâ€. Reputation Client relationships, of course, are built and maintained through focus on the customer, honesty and integrity â€“ the elements of building an outstanding reputation. â€œThe single greatest lesson the founding generation passed on is the commitment to building and maintaining our reputation. Our founders never set out to be the biggest developer or the largest owner of shopping center properties, they were committed to building shopping centers which would [reinforce] our reputation,â€ says James Ratner, CEO of Forest City Commercial Group in Chain Store Age. â€œThe word â€˜reputationâ€™ might as well have been carved above the door.â€ Risk Aronov Realty of Montgomery, AL, is among the southâ€™s largest shopping center developers, is run by second-generation brothers Jack and Owen Aronov. â€œOur father stressed,â€™ Donâ€™t worry about success, worry about doing whatâ€™s right. If weâ€™re serving our tenants and shoppers, success will follow.â€ Aaron Aronov also taught his sons another lesson echoed throughout the industry and in successful family businesses everywhere: â€œRisk only what you can afford to lose.â€™ We were taught to be aggressive but also to be financially responsible.â€ Michael Konover, Chairman and CEO of Konover & Associates, founded by his father in 1959, offers a cautionary tale on managing risk. When Ames Department Stores went bankrupt in 1990, 32 Konover-owned locations were hit. â€œIt happened at the worst possible time, just about the beginning of the banking crisis.â€ The company, however, was careful to maintain a solid financial structure, chose excellent locations, and build efficient, not overly specialized stores. What could have been a financial disaster instead allowed Konover to â€œcome out even better in the end.â€ Building and maintaining relationships across generations, holding reputation sacred and behaving in ways that enhance and protect the family name, and taking prudent risks which foster growth without endangering the enterprise are the ingredients of a recipe for long-term success. The family businesses that continue to dominate the shopping center industry are living proof. (Information in the article came in part from â€œMall in the Family,â€ Chain Store Age, May 1, 2001.)
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