It’s hard to repair the family business without offending the family

It’s hard to repair the family business without offending the family

Navigating complex relationships and understanding unwritten processes is one of many challenges in moving from family business to next generation. Len Schlesinger, Michael Raiche and Roger Zhu discuss the dilemma of a small Vietnamese restaurant in the case study by Pho Hoa Dorchester.

by Julia Hanna

Photo of Transition pho soup in the direction of next generation leadership in a family restaurant is a delicate recipe. Credit: andermiao
Harvard Business School case studies often take place in large companies, where the many problems that managers face serve as classes for MBA students. A recent case finds equally useful lessons in another setting: a small, family-run Vietnamese restaurant in downtown Boston’s Dorchester.

The challenges are managing complex family relationships, transitioning from first generation to second generation, understanding how unwritten procedures and procedures work, problematic financial accounting, and the risk of performance degradation.

“It’s a lot harder than anything I find in my big business,” says Leonard A. Schlesinger, Harvard Business School Baker, co-author of the case, Pho Hoa Dorchester, with Michael MBA. Raiche and Roger Zhu.

Pho Hoa and Pho Linh, a small restaurant in Quincy, Massachusetts, are franchises of Thanh Le, who emigrated from Vietnam to the United States in 1981. Opened in 1992, Pho Hoa was founded with few formal processes and no reporting, forecasting or budgeting on the profit and loss account.

Thanh, who is seeking a well-deserved retirement after 25 years of hard work, has appointed her eldest son, Tam, CEO and General Manager of both restaurants. However, the issue of ownership was not addressed, and the son fears that this would affect his business and personal relationships with his father.

At the time of opening the file, Tam Le struggles with a variety of operational issues at Pho Hoa, including poor service and variable food delivery times for the wide range of 150 items on the menu. While her father moved away, Tam’s uncle continues to run the restaurant staff and the front of the house. As the case shows, the uncle’s experience and institutional knowledge have great potential benefits – but Tam is not sure of his acceptance of the proposed changes.

“When his father made the feed flow, they were fast,” says Schlesinger. “Now they have terrible disagreements, how do you take the tacit and profound knowledge of the Father and a way to integrate it?

What does a manager have to do?

This is the nightmare of a professional manager. Because financial figures are not necessarily accurate, “one of the biggest problems is that we do not really know if business is doing well or not,” says Schlesinger. (An electronic point of sale that was purchased through a Vietnamese connection and installed in 2014 is rarely used, case notes.)

In addition, Than is more interested in protecting cash flow than improvements. “The son has this acute sensitivity to how he makes the restaurant better, without all angry,” says Schlesinger.

Another problem to be solved is that Pho Hoa pays $ 40,000 in annual licensing fees, though the franchisor does not contribute much to the restaurant’s activities. “These are cultural problems,” says Schlesinger; The case mentions the father’s longstanding relationship with Vietnamese franchisees and the common sense of purpose and responsibility of the Vietnamese community as a whole.

“None of these decisions is economically rational,” he adds. “But good luck getting people to change them.”

It’s because of alcohol

The co-authors of Schlesinger worked with Tam Le in the HBS Neighborhood Business Partnership, a second year of study led by Schlesinger and lecturer Kristin Mugford. (The case was the end product of an independent project after the end of the course.)

In their initial effort to increase Pho Hoa’s sales, the increase in spirits sales seemed a good start. But Raiche and Zhu quickly understood the problem: the waiters (mostly newer Vietnamese immigrants) assumed that the Vietnamese clientele would never order alcohol, so they did not bring along the list of wines and beers. Often, this behavior extends to non-Vietnamese customers, with servers rarely, if ever, ordering drinks. The solution seemed obvious: ask the waiters to provide the drinks menu with the food menu, add links to the menu of alcohol choices, and ask for beverage orders.

It did not last. “[The students] came into the restaurant two weeks after the introduction of this solution, sat down and did not get a drinks menu,” says Schlesinger with a smile. “Then the term [school] was over.”

“We realized that identifying the business problem is relatively easy,” says Raiche. “The minutia needed to get there was the hard part.”

Many cases studied at HBS show an existing system with processes, a hierarchy, and incentives that require modifications, he continues. “In a small business, these processes may not even exist – there could not even be a spreadsheet – you start the process with an empty chalkboard.

“It was a humiliating experience,” Zhu adds. “The relationship that Mike and I have developed with Tam has enabled us to better understand the typical challenges of a small business that I think will be useful for students attending this course.”

Change of contemplation in Pho Hoa

Like any good HBS business, “Pho Hoa” is not a clear answer to current business challenges. He notes that Tam Le has already visited Pho Linh’s Quincy Restaurant, reducing the number of menus, hiring new employees for higher wages, and renovating the interior of the restaurant.

While his father reduces his involvement in Pho Hoa, Tam recognizes that substantial changes are needed to the finances and operation of the restaurant to ensure sustainability, not to mention growing revenues – although he has many projects in this regard, including takeovers. away and deliver, and introduce a concept of “small plates”.

But why should the Harvard MBA interest students, most of whom are (probably) unlikely to find themselves in a small neighborhood restaurant?

“The viability of these companies is absolutely necessary for the stabilization and development of neighborhoods that can not be wholesalers,” says Schlesinger. “And the learning opportunities for students are unbelievably rich – this is the director-general’s experience of observation par excellence – telling students to look, understand and find the problem, then see if you can ask the owner to share your point of view In fact, see if you can get someone’s attention.

“No, it’s not a typical HBS rate, but most of all why Mike and I were attracted to the course,” Zhu says. “This is a segment, not an insignificant segment, which is an important engine of the economy.”

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