Founding families: Auckland's fourth generation firms

John Eady of Lewis Eady Ltd. Photo / Kellie Blizard

Four men in old photographs gaze over the musical instruments in the store.

John Eady, whose photograph is the most recent, is sitting at his desk when The Aucklander arrives. He walks over with a smile, holding out his hand.

"Welcome to Lewis Eady's," he says.

Apart from his own image, the photographs are of his father, grandfather and great-grandfather. Each in turn ran Lewis Eady Ltd.

This year, the music retailer celebrates 125 years since its inception, and 125 years with an Eady at the helm.

John Eady knows success for fourth generation businesses is rare.

Dr Deborah Shepherd from University of Auckland Business School says there are no figures on the number of fourth generation businesses but there are plenty of second and third generation firms.

"New Zealand is still a young nation, but we are seeing a lot of second generation companies making the transition to third generation," she says.

This suggests we will see more long term businesses, says Dr Shepherd, and the lessons taken from fourth generation businesses today will become more relevant.

One survey states that only four per cent of firms manage the transition from second to third generation successfully.

Perhaps there is some truth to the saying that the first generation starts the company, the second builds it up and the third spends the proceeds.

The Aucklander went in search of the pitfalls and benefits of multi-generational companies and their secrets of surviving into that rare fourth tier.

As well as John Eady we converse with family members from Browns Brushware, Neville Newcomb Ltd and McCallum Bros Ltd.

Lewis Eady Ltd. Creating musical experiences since 1884

Lewis Eady migrated to Auckland from the United Kingdom in 1865. Nineteen years later, he opened one of the city's first music stores, then several more. Lewis Eady also set up New Zealand's first commercial radio station.

John Eady says his great-grandfather was obviously an optimist as well as an opportunist when he shipped in shortwave radios hoping to picking up broadcasts by the BBC.

When he realised the radios could not pick up the British broadcaster, he launched radio 1ZR so he could sell the sets.

The station heralded such old-time luminaries as Aunt Daisy, but was closed in the 1930s by Michael Joseph Savage's government when radio came under state control.

Seventy years later, John Eady, an energetic father-of-three and accomplished musician, took a fresh look at the family business.

"I could see my father was going to have to retire. I thought the business worth preserving. I didn't want to see it sold or closed down."

He joined the company in 2000, set up music schools across Auckland (currently teaching 1300 children) before buying his father out in 2006 to become the first sole shareholder.

John, who has four siblings, says it was difficult putting a value on everything to ensure a fair price. As well as the value added by the schools, he had to measure 125 years of goodwill.

With longevity, he says, the company's reputation and standing in the community improved because Lewis Eady is considered a reliable, savvy business with a proven track record.

This helped the company secure sole rights in New Zealand for companies such as the maker of the "Rolls Royce" of pianos.

"Steinway and Sons primarily deal with older, family-owned, multi-generational businesses," says John. "It becomes a major issue for them when one of the elder statesmen is getting ready to retire and someone is going to take over that business."

John Eady still sells the much revered piano. The transition from third to fourth generation has been deemed successful.

Browns Brushware. Brushmakers since 1879

Old pictures in similar style to those on John Eady's wall mingle with 100-year-old advertisements on the walls at Browns Brushware's New Lynn headquarters.

This year, the Brown family celebrate 130 years of manufacturing just about every type of brush imaginable.

In fact, the Browns believe New Zealand's first commercial brush was made in Gore by their great-grandfather James Fulcher Brown III, three years before the business was established in Auckland.

Browns Brushware is now run by four brothers, says Murray Brown.

"Like a lot of businesses that were purely manufacturing, we have evolved. Importing is now an important component of the business."

Browns has a strong reputation in the industry, says Murray, because "there's goodwill with any company that can show four generations of involvement. But that is not the key driver. In today's market you tend to be as good as your last performance."

Murray, who learned the trade, hands-on, when he was a child, says the company had to navigate through the generations with clear exit and succession plans.

"When dealing with human resources, it's difficult enough. When that human resource is family, it's a whole other thing."

He says the benefits outweighed the difficulties because some suppliers deal only with Browns because of the relationships built up over many, many years.

McCallum Bros Ltd, established 1904. Suppliers of building aggregates and sand

Alongside the old concrete towers on Auckland's waterfront are yellow diggers moving a pile of red metal. The metal comes from the McCallum Bros' quarry on the Hauraki Gulf's Karamuramu Island.

Callum McCallum is one of two brothers running the 113-year-old company.

Callum, who grew up doing the "s*** jobs" around the yard, went to university and started his own business before returning in 2005.

His brother, John, was taking over as managing director and there were a few staffing issues, he says.

"It was quite a generational change. Some of the staff had been here for 30 to 40 years. There was definitely some tension when we walked in. Some [of the staff] thought they might be running the business after dad retired. They were wrong. This is a family business."

The company's beginnings date back to the 1880s when Callum's great-grandfather bought Karamuramu Island from Sir John Logan Campbell.

Callum says the business's succession through the generations has had to be focused since four brothers began the quarrying two decades later.

"Grandfather bought his brothers out. My brother will probably end up with McCallums and I don't mind.

"We see the business like a heirloom. Small ownership is better. Otherwise, as the generations go on, you're left with multiple shareholders and it would be no different from a public company."

Callum says the brothers working alongside each other has worked well. "Me and my brother are tight. If we weren't, it would be a disaster."

He says the key to intergenerational success is having one person with the final say.

"You need someone in charge. Otherwise we would never make decisions. Companies need someone who the buck stops with. Thankfully, that's my brother and not me."

He says loyalty to workers also pays off, even during a recession.

"We don't lay off people so we can keep our lifestyles. Because there are no other shareholders, we can batten down the hatches and reduce our spending."

Neville Newcomb Ltd. Established in 1896

Print and copy company Neville Newcomb has gone through its share of changes over 113 years. It's had as many directions as its had generations of family members.

Mark Newcomb's grandfather launched the company in 1896 as a real estate business. In the 1920s, it branched into insurance brokering and shortly after WWII, diversified into photocopying.

Mark says that if he takes over he's free to direct the company in any direction he likes.

"If one of my offspring wants to form a Neville Newcomb Travel Agency, there is that opportunity."

The Newcombs' history in business dates back centuries and revolves around print. Their ancestors held the position of royal printers for three reigning British monarchs, including
James II.

In 1790, the family line launched one of the world's first daily newspapers.

"I guess you could say we were meant to do this," says Mark. "Print seems to run in the blood."

Amazingly, there has only ever been one person interested in taking over the business for each generation.

His son is the fourth generation to work in the company, but whether he decides to take over one day is up to him.

"He's going to give it 12 months and see if he likes it."

The name, he says, is the platform and brand for any business because it is "respected and trusted".

Family ties

It's critical more is done to understand multi-generational businesses, says Dr Deborah Shepherd from University of Auckland Business School.

"They generally look long-term, rather than making a quick dollar, which makes them more resilient to downturns like we are having now.

"They don't have the quarterly announcements that focus purely on how much was made. It is generally more about the long-term positioning."

Dr Shepherd says children who grow up in their family business are often astute business people when they are older.

"They grow up sitting around the kitchen table listening to business talk. They just naturally pick up on it.

"As each generation takes their turn at the helm, they have the challenge of holding the ship steady, keeping the businesses position- stable, driving growth and remaining
relevant in the market."