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Articles from DIAMOND JEWELLERY (983 Articles), DIAMONDS BY CUT - BRILLIANT (ROUND) (286 Articles), RINGS - WEDDING (260 Articles)

A family affair

Like retail dynasties, blood bonds many Australian jewellery businesses. Stuart Braun discovers how family jewellers nurture trust, integrity and success

In my school holidays I used to go in and dad would give me a mechanical watch and say pull it apart to keep me out of his hair; so I used to sit there undoing it all, and then I’d say dad I did it, and he’d say ok, now put it back together. Of course, I could never put it back together.” Steve Der Bedrossian, manager of Sydney-based Sams Watchmaker Jeweller, is describing his earliest days in the family business with his father Sam, an Armenian who founded the company in 1967, soon after he had a job winding the clocks at Town Hall railway station.

Der Bedrossian was born to follow in his father’s footsteps (though this was never obligatory). No one could ever know the business like he does. His clients are often the childrenf his dad’s clients. And his dad, with 40-odd years’ experience, is still there to give advice. No wonder that Sams Watchmakers is one of the best-trusted suppliers in the business.

Among Australia’s most reputable jewellery businesses, a large number carry venerable family names: Percy Marks, Catanachs, Kozminsky, Hardy Brothers, Paul Bram, to name a few. There is a reason for this, according to Michael Neuman, the second generation manager of Mondial Neuman Jewellers, a business started by his father Fred in Sydney in 1962 (then Karina Jewellery). “When clients are buying something that is of such high value, and there is such emotional currency attached to it, they derive a great deal of confidence when dealing with a multi-generational family business,” he claims.

“When you are in a family business it says something about you emotionally,” continues Neuman. “The fact that you are working ‘in the family business’ – it means that you’re a person that can relate to emotion. That’s a very important thing.”

But in an increasingly segmented and competitive jewellery market, is the traditional family business model still as relevant? Der Bedrossian cautions that family reputation alone will not ensure business success: “It does help; but at the end of the day it comes down to the product. It doesn’t matter who you are, who your father is, if it’s a family business or not; if your product’s not good they’re not going to buy it.”

Family name and reputation offers a fantastic vehicle for competitive advantage in a business that trades on emotion; but families need to work hard to cash in on this advantage, offering superior service, product, and, to an increasing extent, price.

Luckily, family businesses often possess the right mix of experience, foresight and new ideas coming from both older and younger generations, ensuring that the family’s good name is maintained. Indeed, a 2009 survey of family businesses produced by KPMG and peak organisation Family Business Australia, stated that family businesses are extremely “resilient and flexible in the face of adverse financial and economic events”.

Noting how well family businesses had, at the time, weathered the then precipitous Global Financial Crisis, the survey, based on testimony from 600 respondents, argued that  “family business is a vital contribution to the overall health of the Australian economy”, especially as around two-thirds of all businesses in Australia are family-controlled. This will not surprise those in the jewellery trade who have long survived tough economic times by building reputation, trust and goodwill around the family name.

Keeping it in the family
Many family jewellery businesses have long negotiated the peaks and troughs of the Australian market – some for more than 100 years – because they have maintained qualities of dependability and trust across generations. “An awful lot of what we do is all about trust. We do a lot to protect our position of trust,” says Jon Cox, third generation general manger of Adelaide-based GW Cox My Jeweller - a business founded by his great grandfather in 1898. “We’re very careful about how we market; we don’t get involved in this doubling your prices and then halving them.” Cox says he can’t afford to compromise established relationships by offering one price to one customer and another to the next. “I’d be very offended,” he says.

In the same way that this is a time-honoured ethos of the Cox family business, Neuman believes it is vital that subsequent generations maintain the business ethos established by the founder. “The business culture must be carried down from generation to generation,” he says.

Customers can trust in this culture when they visit a store and are served by a person whose name is on the business. “At any time in our shop they can see a Mr Neuman, they can see a business owner. We stand behind our product, our name is on the invoice and on the door. That should give the clients a huge amount of confidence,” Neuman says.

The Neuman jewellery business prides itself on a rich mix of father, children and even cousins who all help maintain the current family business. “To have someone like my dad that’s been in the business for 50 years and has a lifetime of experience in the business, and then to have myself who’s a gemmologist and valuer, and Jacob [his father’s cousin] who has been in the business for 30 years, and my sister Nadia, who’s an award-winning designer, who’s come from that culture where she’s grown up her whole life, as have I, surrounded in the business – that’s what the family business is about.” Indeed Nadia, a JAA design award winner, is the head designer for Mondial Neuman and has been entrusted to manage the latest family business, Mondial by Nadia Neuman, which launched in late 2009 in Sydney’s famous Strand Arcade.

Lonn Miller, of Miller Diamonds, a Sydney-based diamond supplier founded by father Des Miller in South Africa in 1971, points out that the diamond supply industry has a long history of family businesses that have been handed down through generations: “Traditionally in this industry – especially internationally – it was very difficult to be able to get supply unless ‘your father came before you. ” This was due to expectation that the next generation possess ‘in-built’ knowledge of the business”, vital to building customer trust in such a specialised industry, says Miller.

Dealing in fine-make superior and superlative diamonds, sourced from leading producers like De Beers DTC and Alrosa, and cut and polished by the world’s leading expert diamond cutters, the importance of trust is not surprising. With such a high-value, easily transportable commodity at the heart of the business, ethics and trust must be highly prized in employees.

Other suppliers agree that being part of a family business can make it easier to win trust in a competitive environment. “My father Wynn Sher brought a sense of hard work, ethics, and passion to the business which has now been handed down to Larry and I who strongly believe in these values, along with ensuring the business keeps up with technology and innovation,” says Darren Sher, managing director of Chemgold, a Sydney-based jewellery casting business established originally by his parents in South Africa, but which has been based in Australia since the early 1990s.

“When my father started operations in Australia, Chemgold was the only casting house to offer a one week turnaround time which then revolutionised the industry,” says Larry Sher, director of production at Chemgold. The two Sher sons have thus been able to build on this reputation for innovation, establishing themselves as one of the most reputable, and reliable, precious metal product and service providers in Australia.

“There is longevity and good flow on information from one generation to another,” says Miller of the reasons why multi-generation family businesses re-affirm a sense of trust with clients. Moreover, when retailers and wholesalers cement “deep and lasting friendships” over generations, this is of huge benefit to both parties, he adds. Darren Sher affirms the point: “As one of the few companies in our industry that have not had an ownership change since inception, maintaining a good rapport and reputation with our customers has been our driving force since the very beginning.”

Family reputations are also vital to retailers who depend on an established supply route, as Neuman explains: “Everyone in the trade knows my dad. He’s a legend. It helps our business massively because all our suppliers know we’re such a solid and good business, we never have any problems in supply,” he says.

Balancing act
For all the benefits of being part of a long-established family company, the mix of business and family can also create a number of challenges. The 2009 KPMG and Family Businesses Australia survey listed some of the most consistent concerns regarding the running of family businesses. These included, in order of level of importance: balancing family concerns and business interests; maintaining family control; compensating family members involved; resolving conflicts among family members; and selecting a successor.

These issues, which focus on the need to ensure that the interests of the business, and individual family members, are always in harmony, dominate opinion among Australian family jewellers.

“Sometimes in family businesses, you might have a sibling who wants to run the business the way they want to run the business. That can become quite problematic. All of the siblings in our family are very different,” says Ben Albrecht of Kozminsky Jewellers, which his father Kurt Albrecht, a jeweller raised and trained in Germany, purchased in the late 1960s after the Kozminsky family owned it for more than 100 years (it remains the oldest jewellery business in Australia).

Albrecht is among four siblings who have, at various times, been connected with the business. He believes it’s important to institute a professional management approach that doesn’t favour family over employees. “With my staff, I try to bring out the best in what they’re good at,” Albrecht says. Staff who work because they are right for the job anyway become a kind of “surrogate family”, he adds.

Albrecht especially wants to avoid nepotism. “When you think you’re going to be handed favours because you’re a family member, that’s one of the biggest no-nos of business,” Albrecht says. “When family members are put into responsibilities because they are a family member, and they might not be good at that job; that can be a big downfall.”

Darren Sher agrees. “When you work with some of the same people that you have dinner with, it’s easy to treat or talk to family-member employees differently than the rest of your staff.” But he believes that family conflicts will inevitably result if business and family life is not properly demarcated. “You can also appreciate the internal conflicts that arise from family members working so close together; it’s important to separate the personal relationship from the professional relationship,” he explains.

Miller confirms the need to avoid giving family any special treatment. He also, like Albrecht, says that other staff members need to be treated like family too, so that the aura of the family business is maintained. “Whether family or not, each person working at the company must prove their worth through the contribution they make to the company,” he says. “We have a very valued and highly regarded team of staff, several of which have been employed at the company in excess of 10 years. These individuals are treated like family.”

Albrecht also believes it’s important to have an objective mentor outside of the family. “You always have to have someone else you can turn to and ask questions and see if things are going right. You can’t always rely on your own best judgement; you have to seek a third party outlook on what’s going on, and it needs to be someone that you really really trust.”

However, Jon Cox believes he can express his concerns about business more freely in a family environment. “It’s nice to have somebody that you feel you can sit down and talk to. You can air your feelings. With my wife we often sit down and talk about the business.”

And does his father, who is no longer directly involved in the business, still give advice? “What do you think?” he says, laughing. “He get’s a lot of joy out of the fact that the business is still going and is still in the family. I think it’s good to have somebody who questions what you want to do. Certainly, if I’ve got a major decision to make I’ll make time to sit down with him and talk it through. He’s got a lot of experience to draw on.”

Close communication can also help resolve differences. “Marketing and advertising and packaging didn’t play a big role when Dad was in the business, says Der Bedrossian. “I remember when I told Dad we shouldn’t use hand-written invoices, and that we needed a computer system. I had to fight for a year to get that system in place.” Would it have been harder to make that change if he wasn’t the son? “It would have happened, but many years later,” Der Bedrossian admits.

New Blood
It might be argued that with a lot of traditional family businesses in the jewellery sector, there is sometimes a lack of ‘fresh’ perspective in a rapidly evolving market. Not according to Der Bedrossian. “I’ve tried to take the company to the next level,” he says. Now called Sams Group Australia, Der Bedrossian has expanded the original Sams Watchmaker business into pink diamonds, ring mounts, and a fashion jewellery brand called Tresor Paris, which will launch at the upcoming JAA International Jewellery Fair in Sydney.

This kind of diversity is a far cry from the way his father ran the business, and it shows how incoming generations can build on the bedrock of family name and reputation to implement innovations that keep the business extremely competitive in a rapidly shifting market.

Miller calls this taking advantage of “two-way synergies” across generations that combine tradition and experience with new ideas. Sher agrees. “The younger generation often use their skills and knowledge to ensure the company stays ahead when it comes to innovation and cutting edge technology.”

Still, the culture of trust associated with family businesses remains, in itself, a good point of differentiation in the current overcrowded market. “There’s so much value-add in it,” says Neuman. “If you buy something from us, you will never have a problem with it, even if it costs us money. It’s our name. Our family is tied up with what people walk out the door with.”

As the family businesses survey showed, succession is a fundamental issue across all commercial dynasties. One of the key insights in the report is that what is called the ‘family component’ is more difficult to manage as the business moves from one generation to the next. The survey advised that the changing roles and responsibilities of family members be better managed through the use of family councils, constitutions, boards, and the like. But it also noted that barely a third of family businesses have a formal family board or committee.

No doubt, many in the jewellery industry have also taken a relatively informal approach to how family-based governing structures should work. This is especially evident on the specific issue of succession. While Cox always wanted to work in the business, he has no expectations for his own children (though they are still very young) and no clear succession plan. “My hope is that they’re happy. If that means coming into the business then I’ll support that.”

While Der Bedrossian was shipped off to Switzerland as a youth to learn the watch trade, he will likely be less encouraging of his children than his father was. “I knew it was what my father wanted – it was his dream for me to continue what he started. But I am not having that dream; my kids will do whatever they want. If they want to join I would be very happy.” Does he feel a responsibility to keep the business going? “No,” he says, “but I wouldn’t move on – I love what I do.”

What happened at Kozminsky following the death of Kurt Albrecht in 1997 is a good example of why succession planning needs to be formalised, as the 2009 Family Business survey stressed. The business was left to four children who had different ideas about how it should be run. “It was a big thing; there wasn’t any succession programme with the business because Dad didn’t implement anything,” notes Ben Albrecht. After one brother left the business, and the remaining siblings couldn’t agree on how the business was to be run going forward, Kozminsky was put up for public sale before Ben and Kerstin Albrecht bought it in 2003.

In the end, it took six sometimes acrimonious years for the siblings to work out who could best take the business forward. “My sister [Kerstin Albrecht] and I – I am the youngest and she the eldest – probably see more eye to eye. We knew how we wanted the business run,” says Albrecht. “It was extremely difficult, and could have been dealt with a lot better. When things aren’t put in place there will be some hiccups along the way. I’ll make sure that doesn’t happen in the future.”

Moving forward
While family jewellery businesses have to deal with internal conflicts, the challenge of implementing professional management structures, and ambiguity over succession, the benefits of keeping businesses in the family are immense. “Being a family business is very important,” says Der Bedrossian. “Most of our customers are also family businesses. My dad dealt with the father and now I’m dealing with the son or the daughter. It’s a real family thing this trade. Jewellery and watches get passed down through the generations; so does the jewellery and watch business.”

But family businesses can no longer rest on the laurels of tradition. Most members of family businesses today will tell you that family and staff need to be treated as equals, and that new generations need to be given the opportunity to move the business forward. In this way, good family names will long continue to imbue jewellery customers with the sense of trust and reputation they require to make such a major emotional and financial investment.

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