Kathy Sustachek still remembers shaking from the adrenaline on that bleak December morning as she drove apprehensively to work. Her eyes barely noticed the familiar streets of Racine, a neighborly Wisconsin city of about 80,000 nestled along the shores of Lake Michigan. Rasmussen Diamonds, her family’s jewelry store, had been a fixture in the city’s West Racine section since 1900, drawing on a potentially unbeatable formula—familiar faces serving customers from behind antique wooden display cases—to attract well-heeled local doctors and lawyers as well as executives from S.C. Johnson, the city’s most prominent employer.
Since 1977—the year her in-laws bought the store from the Rasmussens—Kathy’s husband, Bill, had seemingly transformed it into the ultimate family business, hiring ten members of the couple’s large extended families over the years. By 1995, when Bill and Kathy were both 44, the store’s eight-person payroll included Bill’s father, two of Bill and Kathy’s daughters, Bill’s sister and Kathy’s brother, in addition to Bill and Kathy themselves.
But somehow the family dream had become a nightmare. The store’s sluggish sales were hampering Bill’s plan to move the operation from its cramped urban location to a larger facility on a well-traveled road, where customers could park easily and feel safe shopping at night. For years, the store had lagged hundreds of thousands of dollars below the $1 million level, a critical milestone in terms of jewelers’ ability to stock high-end brands that appeal to an affluent clientele.
Since January, Bill and Kathy had tried to implement changes and new incentives to turn things around, only to be ignored or resisted by their relatives. Over the next 11 agonizing months, their powerlessness to control their business or their family had taken a heavy psychological toll: Rather than confront the daily evidence of their failure, Bill had virtually stopped coming in to work. The Christmas season—the make-or-break period for jewelers—was in full force. Almost instinctively, as she drove to work that day Kathy realized—without consulting Bill, let alone a lawyer—that something drastic had to be done, and right away.
It was Friday, December 1, 1995. Kathy, best known to her relatives as the loving mother with the curly brown hair, was about to fire her family.
Firing a relative, experts agree, may well be the toughest challenge a family business chief executive will ever face. Firing all of one’s relatives simultaneously—especially when the company has only one non-family employee—is simply beyond the capacity of most executives. The Sustacheks were pushed to that desperate point because they had overlooked one of the cardinal rules of family businesses: “Never use the family business as a public works program,” says Quentin J. Fleming, a Los Angeles consultant and author of Keep the Family Baggage Out of the Family Business (New York, Fireside Books, 2000). Before hiring a relative, Fleming says, a CEO should assess whether there is a legitimate business need for the position and whether the family member is the best-qualified candidate.
“It’s dangerous for parents to say to their children, ‘Some day you can come work for me,’” Fleming says. “Make them earn that right—and make sure they’re a good fit.”
The Sustacheks learned that lesson the hard way during the year leading up to Kathy’s mass dismissal. Hoping to turn their business around, in the fall of 1994 Bill and Kathy huddled with a noted retail jewelry consultant and visited a prospering Minneapolis jeweler to investigate the differences between their store and his. Their research led them to develop a plan that included extending the store’s hours and instituting across-the-board staff policies.
To motivate sales, they eliminated straight salaries for their employees and shifted everyone to a commission basis, effective in January 1995. The new policies, they explained to their employees, would help the business grow.
“We assumed everybody would be on the same page,” Kathy recalls.
It was a disastrous assumption. The Sustacheks’ daughters Katrina and Kristin, now 29 and 24, had joined the store as teenagers and had never worked elsewhere, so they didn’t perceive the connection between their behavior and the store’s success. When the new commission schedule suddenly doubled Katrina’s income, she celebrated by cutting her working hours.
“I thought, ‘Hey, I don’t have to work as hard,’” she recalls. Since Katrina was going through a divorce and striving to find herself, her parents had a hard time telling her otherwise. Other relatives similarly were arriving late to work and taking days off with alarming frequency.
At the other extreme was Kathy’s younger brother, Bob Slaasted, who had been the store’s salaried goldsmith for ten years. Bob, now 43, at the time possessed only limited bench skills and lacked sales training. When he suddenly found himself dependent on sales commissions and piecework rates for jewelry repairs to support his family, he scrambled aggressively for sales, causing concern among his colleagues that he was horning in on their customers.
Instead of pulling together, the relatives were fighting over commissions. They refused to follow Bill and Kathy’s new procedures. In the confusion, customer orders were misplaced. The employees didn’t know how to answer customers’ questions and had to refer them to the overworked Bill, who found himself making 75 percent of the store’s sales himself, even though he had seven employees.
Shell-shocked in the middle of this turmoil was Bill’s genial sister, Linda Michel, now 53, who describes herself as “a very noncompetitive person.”
Linda contends the employees continued to do their own thing because “they’d always gotten away with it, and they didn’t think Bill and Kathy would ever do anything about it. They didn’t give them the respect that they deserved. They didn’t ever have a picture of what Bill and Kathy wanted—to them it was just a job.”
Bill and Kathy “tried a lot of things” to get the family to cooperate, daughter Kristin remembers. “We had motivational meetings. They went to all kinds of different stores and came back with stories to try to get us to see that it could be done.” Their frustration was keenly evident to Kristin, who lived with her parents at the time. “They would go into their room and talk,” she recalls. “I remember them being alone and talking a lot.”
Bill, normally a focused and determined man who shares his wife’s solid Christian values, gradually lost his characteristic optimism. “I got to a point in my life where I didn’t even want to get out of bed, I was so depressed,” he says. Some days he came to work for only five or ten minutes, then retreated to his home.
Bill’s father, Calvin Sustachek, watched the debacle with a growing sense of helplessness. Calvin, now 76, and his wife, Marilyn, had sold the store to Bill and Kathy in 1988 and were reluctant to meddle in their son’s personnel matters.
“My wife and I discussed it many times and said, ‘What can we do?’” recalls Calvin, who worked in the store part-time. “We came to the conclusion that if we get into it, it will only create more rifts,” he says. “We prayed a lot. We didn’t have a lot to offer [Bill and Kathy] except an ear to listen.” Surrounded by relatives, Bill and Kathy were nevertheless alone.
Kathy had timed her arrival at the store that December morning to ensure that she would enter after 8:30 a.m., when the staff customarily arrived. Thus she would catch her relatives as they busily set out jewelry in the showcases in preparation for the store’s 10 a.m. opening. At about 9 o’clock, Kathy walked in the front door, then turned around and locked it behind her.
“I want you to stop what you’re doing,” she announced, according to most recollections. “We’re going to have a meeting.”
The steely resolve in Kathy’s voice caught her employees by surprise. “It was a hard thing for her to do, you could tell,” remembers Linda. Curious, the six employees gathered around a desk. Kathy stood in the front of the store’s office area, facing them.
“Bill is so fed up with all of this, he isn’t even coming in,” she began. “We are the owners, we are the bosses, and yet you still do not follow what we say. I am not going to see my husband run physically into the ground, or mentally into the ground, or emotionally into the ground because of this. We’ve given you ultimatums—so that’s it. You’re all fired.”
Kathy proceeded to give her employees one month’s notice: As of New Year’s Day 1996, they would be unemployed. They could reapply for positions at the store, she said; she and Bill would interview everyone and decide if any would stay. Anyone rehired at that point would have to adhere to the policies she and Bill had carefully crafted after months of researching operations at successful jewelers across the country.
With that, she posted a notice on front door reading, “Closed until further notice,” and left her dumbfounded employees behind while she drove home to break the news to Bill.
The reaction inside the store, Linda recalls, was “total shock.” The relatives “were taken by surprise: Was this for real? Is this a joke?”
For better or worse, many family businesses operate as Kathy did that morning: on instinct. But experts suggest Kathy’s instinct that morning was basically sound. Mass firing should be “a place of last resort,” says Marc Silverman, Ph.D., of Strategic Initiatives, a Providence, Rhode Island, family business consultant. On the other hand, “Avoiding confrontation causes resentment.” Family members who suppress their feelings “get more frustrated with each other, they complain to subordinates or customers, they work less hard themselves,” Dr. Silverman notes. If the resentment is allowed to escalate, “emotional energy will start to get wrapped up in this war” until family members begin filing lawsuits against each other. “Then it’s the end of the family and the end of the business.”
When Kathy returned home that morning, she found Bill still in bed; he hadn’t planned to go to work at all that day. But when Kathy broke the news of her purge to him, he jumped up excitedly and started dressing, exclaiming, “Oh, boy, I’d better get down there!” Suddenly liberated to openly address the problems that had been festering for a year, Bill and Kathy returned to Rasmussen Diamonds and set themselves up in the store’s basement lounge. Here they waited for family members to come downstairs, one by one, for job interviews. With everyone now fired, Bill and Kathy felt free to rehire only the relatives they wanted to keep.
Upstairs, employees silently went about their work. “It was very, very quiet,” Bill’s sister Linda remembers. “Everyone was on their best behavior.” An undercurrent of anger permeated the air, “but nobody talked about it,” the Sustacheks’ daughter Kristin recalls.
In the first round of interviews that morning, Kathy quickly rehired Linda; Bill’s father, Calvin; and Marcy Stanford, their only non-family employee. They were not the source of the store’s problems, Kathy reassured them, but she had needed to fire everybody for diplomacy’s sake.
Their daughters Katrina and Kristin were told that they would be rehired—but only if they agreed to shape up. “I was told that I had to be perfect,” Kristin recalls. “I have to be an employee and not a daughter; this is going to be a business.”
To her surprise, Kristin remembers “feeling kind of relieved. There was this thing in the air before that was gone. This was a new beginning.”
Katrina remembers “apologizing very much that I didn’t adhere to what they were saying.” She hoped to be rehired, “but I told them that I wouldn’t make a commitment for a long time.”
As for Kathy Sustachek’s brother, goldsmith Bob Slaasted, the Sustacheks encouraged him to leave and set up his own shop as an independent contractor; they would sell him the store’s goldsmithing tools and give him all their goldsmithing business. To Bob the prospect was “frightful”: With children to feed, a mortgage to pay, no health insurance and no entrepreneurial experience, he’d be starting from scratch.
Kathy understood her brother’s plight. “Who would want somebody to pull the rug from underneath you?” she reasons. “I sympathized with him, but I still had to do what I had to do.” Kathy also believed, perhaps even more than her brother Bob himself, that he would succeed on his own through the quality of his work. “I could see the bigger picture,” she says. “We really believe in him.”
In the months that followed, while Bob struggled to build his fledgling business, the Sustacheks frequently felt called on to reassure him that they would continue as his clients. Bob’s wife, Mary, meanwhile, took a job as a nursing aide in a hospital so Bob’s family again enjoyed health coverage.
The weeks after the firings were awkward for just about everyone involved. Bob at first “distanced himself a little bit more from our family,” Kristin recalls. Within the store, weeping became more frequent. “I cried with them in the beginning,” recalls non-family employee Marcy Stanford. “I was very close to all of them.”
Yet surprisingly, everyone worked together that December. “You would think that that month, things would be ugly,” Kathy says. “I was amazed at how beautiful things were.” Rasmussen Diamonds finished the year 1995 just shy of the magic $1 million sales mark, up sharply from $675,000 in 1993.
For the Sustacheks, the mass firing was “an incredibly smart move,” says jewelry industry consultant Shane Decker of Franklin, Indiana, who had advised many of the store’s original policy changes. “It made [employees] become disciplined, loyal, and responsible for their own actions.”
The Sustacheks’ daughter Katrina agrees. “I grew up—I didn’t just get older,” she says. When the two sisters discussed the incident afterward, Katrina remembers, “We both realized our fault in it. I knew I was late on a regular basis. I knew I wasn’t following the new way because I knew the way it used to be. My stubbornness—the way that I butt heads with my dad—was preventing what they wanted to do.”
Shortly after the firings, Kristin and Katrina each wrote personal letters to their parents saying they understood the toll the ordeal had taken on Bill and Kathy and offering to leave the store if doing so would help the situation. Kristin did leave the family business the following month to work at a clothing store, but a year later she returned to Rasmussen Diamonds.
Katrina stayed at her parents’ store for six months, then left. After trying briefly to work as a massage therapist, she realized that her abilities at jewelry sales and appraising made her better suited for the jewelry industry. A month after leaving Rasmussen Diamonds, she was back behind the display cases.
After the firings, Bill vowed never to hire another relative, but he later relented. Son Billy, 26, who worked in the store as a teenager, has returned to become Bill’s assistant. Father and son say the arrangement works because Billy, a college student who aspires to be a history teacher, doesn’t want to make jewelry his career. “I know I’m helping them out, and they’re helping me out by giving me a job while I’m in school,” Billy says.
But Billy is the exception. Today, the Sustachek family works alongside six non-family employees at Rasmussen Diamonds. Most, to be sure, were hired for their personal chemistry with the family: John Landaal, for example, was a longtime friend of Bill’s; Susan Boles was the Sustacheks’ travel agent; Jessica Genrich was a waitress at a bistro they frequented.
In 1996 Rasmussen Diamonds topped the $1 million sales mark for the first time. Equally important, in 1998, Rasmussen Diamonds moved from its 1,100-square-foot building to a 3,300-square-foot facility two miles west.
The new store, lovingly designed by Bill and largely built by family members, retains the old store’s antique showcases but within a spacious, upscale setting. Sales in 1999 exceeded $2 million—and Bill, now confident about the future of his business, talks of devising a strategy that will bring in $10 million to $20 million annually within ten years. The same determination that enabled him and Kathy to transform their business five years ago, he contends, will drive their future success. “If we can do this, we can go to the next level,” he says. “I’m a dreamer who loves to make my dreams come true.”
Amid these growth plans, the Sustacheks have put succession planning on the back burner. “Our business basically started four years ago, even though we started this business in 1977,” Bill reasons. “These are the formative years of the business because we threw everything out and started anew.”
That’s apparently fine with daughter Katrina. “I trust my parents to have the vision of where our store is going,” she says. “One thing that I want them to see is that I have a vision, too. I want to be recognized for that. I got my job because of my family—but I kept it because of me.”
Epilogue
- Katrina’s sister Kristin left Rasmussen Diamonds for a second time in July 1999. She moved to Arizona to be with her boyfriend and study holistic medicine. She currently works at a jewelry store in Phoenix.
- Marcy Stanford, the store’s only non-family employee in 1995, left less than a year later when her husband was transferred out of state. She now works at a jewelry store in Iowa.
- Kathy Sustachek’s brother, Bob Slaasted, is succeeding as an independent goldsmith. He now has multiple clients and is contemplating hiring another bench worker to help manage his workload.
“As the old saying goes, time heals,” he reflects. “I don’t have any hard feelings. Basically, that’s all passed. We’re still tight as far as family is concerned. We just don’t see as much of each other as we used to.”
“He’s done very well for himself,” Kathy agrees. During Bob’s painful separation from the family store, she recalls, “I hated that chasm that was there. But now, I’m close to my brother Bob like I was before. And I’m very proud of him.”
Tough love at a billion-dollar company
‘It’s better to get this out in the open now,’ Wawa chief Dick Wood told his teenage children.
Saying “no” to relatives is never easy (see accompanying story). Dick Wood told his children in 1985 that they would not succeed him as CEO of Wawa Inc., the Wood family’s $1.4 billion Pennsylvania-based chain of convenience stores. Now Wood is 62 and preparing to retire after 23 years at the top—and sticking to his word, much to his son Richard’s chagrin.
Wood gave his son and daughter, then 16 and 17, the bad news during a family weekend retreat at the Seaview country club in the New Jersey shore town of Absecon. Although Wawa is owned by family trusts established by his great-grandfather, Wood in effect told his children it was a business, not a job factory for family members, according to Philadelphia magazine (June 2000). The news came as a blow to Wood’s son Richard, who had presumed himself to be the chosen successor. Dick Wood—whose initial duties at the company had included helping Wawa’s previous CEO fire his eldest son—told Richard, “I figure it’s better to get this out in the open now, rather than have you graduate from college with false expectations.”
When Dick Wood steps down in 2003, Wawa will be led by someone whose surname isn’t Wood for the first time in its 135-year history. Eleuthère du Pont, 34-year-old son of Dick Wood’s sister Elise, first came to Wawa while on summer break from Stanford University’s MBA program and returned after graduation. Dick Wood announced to senior managers that he was grooming his nephew to be his successor when du Pont joined the company.
What about Richard Wood, Dick Wood’s son? He returned to the family business last year after a six-year absence and currently manages a Wawa store in Delaware. His father says he relented and hired Richard only after “a monumental change in terms of his maturity.” Dick Wood has a plan for his son to advance within the company, maybe to a management position.
“I admit that I was a little shocked and confused by what my father said at Seaview,” Richard told Philadelphia. “But that was a long time ago. I respect my father, but I don’t want to be himâ¦. I don’t want work to control me like that.”
—D.R.