PUTTING BUSINESS BACK IN A FAMILY BUSINESS

Revelations happen where you least expect them.

For jewelers Bill and Kathy Sustachek, it was at a cocktail reception at the 1994 American Gem Society Conclave. A jeweler chatting about his successful store caught their ear. “He was in business for less time than we were, and yet was more successful,” recalls Bill. When they asked him why, he asked them a question in response: “How long have you really been working at it?”

“That started us thinking,” says Kathy. “What did we want to do [with the business], and how did we want to grow?”

The answers they determined have transformed their little family business – 98-year-old Rasmussen Diamonds in Racine, Wis. – and boosted sales 81% in four years. Today, the store does $1.2 million annually, with $2 million likely by year’s end, and has just moved to new quarters triple its former size.

What they did can be done by any family business.

How they did it took hard work, willingness to use good ideas from various sources, and strong commitment to their new vision for the store, which includes “empowering” their employees. Indeed, their commitment was so strong that they even risked firing their staff – all family members – to get them to accept those changes. Here’s their story.

Who’s in charge? Bill, a Certified Gemologist Appraiser and a director of the Wisconsin Jewelers Association, and his wife, Kathy, bought the store in 1988 – after managing it for 11 years – from his parents, who continued to work there part-time. Over the years, their two daughters, their son, Bill’s sister, and Kathy’s brother and sister-in-law have also worked there.

As one of a dozen jewelers in their market, the Sustacheks wanted the store to grow – but they realized that, like many family businesses, they had a problem.

“The family was controlling the business instead of us doing that,” says Kathy. “We had to firmly take control” and emphasize the “business” in their family business.

The spur was that comment at the conclave, and the first step was research. Over the next year, they studied industry reports on various aspects of business, such as the annual JCK salary guidelines.

“We learned we were out of whack in what we paid,” Bill says. “We let the family [members working in the store] tell us what they needed instead of basing pay on their productivity.”

They attended business seminars at trade shows, such as those by Tom Tivol of Tivol Jewels, Kansas City, Mo., and talked to other jewelers about their operations. One who was especially helpful was Mark Moeller of R.F. Moeller Jeweler, St. Paul, Minn., who had turned his own business around and was “a great mentor,” says Bill. Much of what the Sustacheks later did was influenced by what they learned from him and his store.

Lessons. Their research taught them several lessons. One is the value of a serious periodic evaluation. They reviewed their procedures for the first time and hired diamond sales consultant Shane Decker of Green Mountain Falls, Colo. Over three days, he taught the staff, reviewed operations, and provided specifics on such issues as employee incentives and how much salespeople should sell (answer: 10 times their salary). He was so helpful they’ve brought him back twice more in the past three years as they have updated their operations.

They learned the need for a clear chain of command. “Previously, everyone put their two cents in,” says Kathy. “But we can have only one visionary who leads and makes final decisions. That is Bill.” Her own role is store manager, overseeing daily activities.

The most important lesson, though, was the need for what they call “open and strong” communication. That was impressed on them at a religious retreat for married couples. The message was, “If you don’t tell me what you think, I won’t know or may think otherwise,” says Bill. “It’s the same in business. We must be sure [the staff] knows exactly what is expected of them and exactly how to do it.”

So, during the research process, they kept the staff informed and sought their input. When they began making changes, they detailed them (“after simplifying and boiling down everything we learned,” says Kathy) in four documents: a store handbook, a book of procedures, job descriptions, and employee job reviews.

  • The handbook was written by Bill at night over two months and reviewed by the store’s lawyer and accountant. It contains the store’s mission (“to be southeastern Wisconsin’s finest and most respected jewelry store”), history, policies (“what is expected of us,” says Bill), and employee responsibilities (“what we expect of them”). Changes included:

Salary. Wages now reflect individual performance. All sales associates get a base salary (initially $1,000 a month) plus 20% of profit on each inventoried item they sell. There are individual and departmental goals for the month and year based on the store’s overall annual goals. The more a person sells, the more he or she makes.

One result, says Kathy, is that “no one wants to cut prices to make a sale. Instead, now they sell quality.”

The base salary covers routine noncommission work, such as watch batteries or appraisal take-ins, plus individual maintenance, operational, and inventory duties. There are also guidelines on hourly wages and raises.

Store hours. When Moeller asked what the store hours were, Bill said 9:30 a.m. to 5:30 p.m. “Then you’re catering to the unemployed,” quipped Moeller. That comment and a Racine fireman’s description of the fire company’s rotating work schedule (a 24-hour day on, a day off, a 24-hour day on, three days off) led Bill to rethink Rasmussen’s own work format.

He changed store hours to 10 a.m. to 7 p.m. (9:30 a.m. to 4 p.m. on Saturday) and the staff schedule to four days a week, 11 hours a day (8:30 a.m. to 7:30 p.m.). Each gets two days off in the Monday to Saturday work week. Days off rotate (i.e., Monday and Thursday one week, Tuesday and Friday the next, Wednesday and Saturday the third), giving a worker a three-day weekend every third week.

The result: a noticeable effect on operations, performance, and paperwork. With a full staff every day instead of split schedules, salespeople have more time to assist or call customers. The staff telephones vendors or views new products from 9 to 10 a.m. There is more operational continuity and less leftover paperwork, and more repair jobs and computer data are processed.

“Everyone has time for what they need to do, instead of cramming it into before or after work [under the old ‘divided hours’ schedule],” notes Kathy.

Vacation time. Previously, staffers took individual vacation days as they wished. That made it difficult to prepare work schedules. In addition, some considered seven separate days a “week’s” vacation, instead of five. Now, employees take vacation as whole weeks, not individual days.

Meetings. “Previously, we never discussed anything,” says Bill. Now, the store has daily 15-minute staff meetings before opening, and longer training sessions every Friday between 8:30 and 10 a.m., after set-up. (Attendance is mandatory, even on days off.)

At the first staff meeting each year, Bill dresses up in his best suit and gives a “State of the Business” address – complete with graphs, charts, and dollar figures. He presents “the big picture for the new year” and details “where I see the store going [and] the part each has – and I thank them for their contributions.”

Kathy and Bill also encourage and talk with staffers individually throughout the year. “A pat on the back is important,” she says.

Attendance. Punctuality can fall away in a family business. Not at Rasmussen Diamonds. Everyone must be at work on time. A late employee gets a written warning the first time. The second time, the person gets a reprimand and loses an hour’s pay. The third time, a day’s pay is held; the fourth, a week. The fifth time, the employee is fired.

  • The procedures book describes every daily activity and operation to the tiniest detail. There are three pages alone on using the repair department envelope for various jobs.

“When procedures are known and followed, you don’t have to always put out little fires and misunderstandings,” says Kathy. “You can concentrate on bigger things, like customer service, writing notes to customers, or what merchandise to purchase.”

The book took a year to write, but since there are always changes, it is considered a work in progress and kept in a loose-leaf binder.

Employees have a big part in composing it. Bill asked those responsible for various activities to write them down “step by step, as though explaining it for a new employee, so anyone can do it.” He and Kathy then met with them to review and refine those procedures.

  • Job descriptions have two parts. One details what’s required for a

specific job. For example, a salesperson must make 10 customer calls a week, join a community group, provide customer service, and maintain customer files.

The other states maintenance, operational, and inventory duties for each employee. Each is responsible for some specific store maintenance (such as vacuuming), operations (such as reordering ring boxes or working with the ad agency), and inventory category (such as colored stones or watches). Everyone also is expected to do noncommission sales and service, such as watch batteries or appraisal take-ins.

  • Employee job reviews are done quarterly by Kathy in hour-long meetings with each person. They discuss job goals (educational, sales, training, and community involvement) and work performance (attendance and punctuality; conduct; initiative; “quality and knowledge of work”; adherence to procedures and policies; teamwork; use of time; and maintenance, operational, and inventory duties).

Reviews early in the first quarter are longer “to look at the new year’s big picture, and how to increase their goals in line with it,” she says.

“Bear of a year.” After 18 months of research and review, operational and procedural changes started going into effect in mid-1995. (There was a month-long break-in period so everyone knew and understood them.) Each person received a handbook and a procedures book (though both remain the store’s property) and had to sign a statement saying they read them.

The changes were intended to “empower” the employees, say the Sustacheks. But the staff’s immediate response wasn’t what they hoped for. “They resisted it. There was fighting, and even some crying, at every step,” says Bill. “It was a bear of a year.”

Some staffers and other relatives “thought we were being unfair to force them to earn what they make,” says Kathy. One or two thought changes pertained to everyone except them. “It was heart-wrenching,” she remembers.

Bill and Kathy “weren’t getting support or respect,” recalls Linda Michel, Bill’s sister. “Some people simply said, ‘We don’t have to do this.’ ”

“It was difficult for all of us,” says Kristin, their daughter. “Everything was changing. People had to adjust. There [were] a lot of hard feelings.”

“You’re fired!” Everything came to a head Dec. 1, 1995. Bill and Kathy came into the store at the usual time, locked the door behind them – and fired everyone. It was the business version of “tough love.”

“We were fed up and angry,” says Bill. “By doing this, they knew we meant business.

“We said, ‘You’re all on a month’s notice. You can come back only if you embrace this concept 100%.’ ”

The store remained closed all day, as Bill and Kathy met with staffers and set up job interviews for each.

“Firing everyone made it easier for me not to rehire someone, if necessary,” explains Bill, “and it also made the concept go the way it was supposed to.”

The firing was “a turning point,” says Calvin Sustachek, Bill’s father. “We needed strong direction and leadership,” and it forced everyone to rethink his or her role in the business.

“It was a bold move and made sense, in view of how we were all clashing and not making [the changes] work,” says daughter Katrina Remick. Initially, she was “a little incredulous” at her parents’ action. But for her, it was a chance “to start over.”

“As a daughter, I took for granted how easy I had it, but I learned this is a business and I must respect it as such. I had to decide if I wanted to stay with it. I found I did, and wanted to excel in it.”

Kristin, too, thought, “ ‘You’re firing me?’ But when I understood why, I saw the beginning of something wonderful at work and at home.

“[Bill and Kathy] have a vision of greatness for this store and knew their employees must have the same vision to achieve it,” Kristin says. “Doing what they did made that clear to us. Now, we work as a team with the same vision.”

“This put us back into a business mode,” agrees Bill’s sister, Linda. But it also “strengthened our families [because] we have greater respect for each other now, not only as relatives, but as friends and coworkers who truly like each other.”

In the end, all the family stayed except one – the store’s goldsmith. The Sustacheks helped set him up in his own business and still use him for repairs.

“Confident.” Since the summer of 1996, the new rules have been strictly followed, and effects on the business, the staff, and the Sustachek family have been positive.

Employees, both family and non-family, find that with the rules and policies have come greater freedom and involvement in the business.

Linda, for example, is responsible for the repair department and, assisted by Kristin, has reorganized its shipping, receiving, and daily operations. Katrina, meanwhile, has been given free rein to build up the appraisal department. “I’ve found a niche I enjoy and want to take it as far as it will go,” she says.

Learning the detailed procedures was “a little overwhelming at first,” says Jessica Jamieson, who joined last year. “But it is much easier [to work] when there is a structure and everything is spelled out.

“This isn’t a situation of one person dictating what to do, and everyone else following like clones,” she notes. “We all have input, our own departments, and the power to grow as much as we want. That makes us feel like a valuable part of the business.”

“We’ve become visionaries, too, [in building the business],” says John Landaal, who joined in 1996, “and we know what parts we play.”

Business and family. To keep family and business separate, the Sustacheks insist everyone call them Bill and Kathy, even their children. There is no favoritism or overt expressions of affection between relatives.

“Business and family don’t mix. I love my children, but when the [store] door closes, it’s business,” says Kathy.

In the past year, it has become easier to make the distinction, says Kristin. “The business is growing so strongly, we can’t focus on anything else except working as a team.”

The shared responsibilities also have made it easier for Bill and Kathy. “Once they started delegating things to us, we found, ‘Hey, we can do this!’ ” says Linda. “It isn’t necessary for them to be responsible for everything in the store or even be here all the time.”

“We all have departments and input [into] what goes in, new products, or how to do things more smoothly,” agrees Katrina.

In addition, to help their staff stay informed about jewelry and the industry, the Sustacheks pay their way to trade shows and take some of them on buying trips to Antwerp.

In effect, says Bill, “we’ve made our employees ‘owners’ of the business, with as much say as we have – though I make the final decisions – but without having to worry about the costs of doing business. We tell them, ‘We’ve given you the keys to a million-dollar store. Your only concern is making it grow [because] the more it grows, the more you get paid.’ ”

“By doing what we do, we have empowered our employees,” says Kathy. “To stay in business, you must expect exceptional things from everyday people.”

Choice. And they certainly have done some exceptional things. In 1994, Rasmussen Diamonds did $650,000 annually. Now, it is close to $2 million and should reach $5 million within five years. In May, it moved to a new 3,300-square-foot prime corner location in a West Racine shopping center and is adding more upscale brands like Rolex, Tiffany, and Mikimoto. Bill says he had wanted to move for 10 years but could not have done so before the changes.

Today, many family jewelers who hear their story tell them, “you’re talking directly to me,” says Bill, “but add, ‘We could never do what you did.’ ”

“We said that, too, once,” Bill tells them, “until we decided we really wanted to [change]. So, the question is, ‘Do you want to or not?’

“It’s your choice.”

10 TIPS FOR MIXING BUSINESS AND FAMILY

Here are 10 suggested ways to put your family store in the business mode, based on the Sustacheks’ experience with Rasmussen Diamonds.

  1. Assess whether you have a problem. Who controls the business – you, the owner, or your family (through issues involving pay, vacation, hiring, personal relationships, etc.)?

  2. Do research. Check industry reports and data to see how your store compares in salaries, procedures, and policies for matters such as work attendance.

  3. Consult other jewelers. Also ask businesspeople and specialists outside the industry for advice and examples of what works. Don’t be afraid to consider good ideas, whatever their source.

  4. Communicate with your staff. Let them know what your are doing and why. Keep them updated.

  5. Develop a clear chain of command. Who makes the final decisions?

  6. Meet regularly. Hold weekly staff meetings, if you don’t already.

  7. Do a detailed internal evaluation. Examine your operations and procedures.

  8. Put it in writing. Develop clearly written documents that detail your policies and procedures and give copies to every staff member. Expect them to adhere to those policies (no exceptions) and share store responsibilities among them.

  9. Don’t avoid hard decisions. If a family staff member resists your authority or changes, be prepared to use discipline (reprimand, even firing) to ensure the store runs in a businesslike manner.

  10. Empower your “family” of employees. Running a family store like a business doesn’t mean making it a dictatorship. Encourage staff input and ideas on products and procedures. Give them more authority. Make them feel their contributions are important. Expect much from them.