How to Navigate the Challenges and Opportunities of a Family Construction Business

How to Navigate the Challenges and Opportunities of a Family Construction Business

Four Ghilottis Companies Compete
As Mike Ghilotti puts it, the history of his family is one of the most unique stories in Northern California construction. For a sense of what the Ghilotti name means to the region, you only need to flash back about three years. On that day, four separate companies were bidding on a public works project; Ghilottis owned all four companies.

“It was a smaller project—about $585,000—, and there are only four bidders,” says Mike. “We have a bid runner there, and they open up to bid results, as they do at 2:05 p.m. They read out the results, and of course, you’ve got to be low bidder. It’s all about bragging rights. There are four companies listed as bidders: Maggiora and Ghilotti, Team Ghilotti, Ghilotti Construction, and of course, there’s Ghilotti Brothers, the best, which is our company.

“They read out the results, and we’re low bidder by about $15,000, and we’re all excited. The bid runner goes out to talk to the lady there, the administrator, and he says, ‘OK, this is who I am, so please send the information to me, we’re ready to do the job.’

“And she says, ‘Well, hold on, we’re not ready to say that you’re the responsive low bidder. I’m concerned there’s collusion.’

“And the runner responds, ‘Do you know anything about the Ghilotti’s? Are you new to San Rafael?’

“She says, ‘Yeah, I just got here a couple of months ago.’

“He said, ‘Don’t worry, you just got the cheapest price you’re ever gonna get by having all four Ghilottis bidding on the same job.'”

A Rich History
The Ghilotti name in Northern California construction goes back a hundred and eight years. It originated with Mike’s grandfather, James, who came from Grosio, Italy, near Lake Como, straight to San Rafael, California. A stonemason, he’d heard about the 1906 San Francisco earthquake and could sense opportunities.

He worked in the area for a couple of years, but then felt the universal human desire for companionship. He hoped to find a wife with a similar heritage, which meant returning to Italy for the search.

James returned to California with his new wife and started a company in 1914. Over the years he brought his children into the business, and they grew to enjoy the work, and in 1950, as he was nearing retirement age, he told them that they needed to buy the business from him. He wanted a “401k” to help his wife if he were to pass on before she did.

The four brothers bought the company, and beginning in 1951, as Mike puts it, “They grew that thing like crazy.” However, the oldest brother, Willie, the acknowledged glue in the family, died in 1964 from a stroke. That left three other brothers. “One that’s absolutely crazy, wild, brilliant, but challenging to deal with,” says Mike. “And the other two brothers worked well together, so eventually, Babe, the challenging brother, starts his own company.”

Mike’s Uncle Dino was one of the other two brothers who worked well together. After he passed, his son, Dick Ghilotti, started his own company, which also evolved, and eventually another split occurred between two of the brothers.

As you can imagine, one of the most significant challenges facing the four companies is distinguishing themselves from each other. Developers often can’t make the differentiation between Ghilotti companies, assuming that it’s all one, big company.

Another challenge that Mike faces is planning for generational succession.
That planning, Mike says, starts with an excellent management team. “I’ve been blessed that I’m not on the front lines,” he says. “Many construction company owners start a company, and they’re the front line of everything. They’re taking the calls, going out and solving problems, or collecting money—taking care of regulation. I feel for them. I’m so blessed because as a third-generation owner, I’m insulated.”

A whole new set of four brothers is coming up in the next generation. Also, Mike’s personal history is informing the decisions he’s making for those brothers. For anyone facing or thinking about generational succession in their own company, Mike followed three steps that have paid off for him.

  1. Keep the Peace
    “I’ve lived through the experience of working with fractured companies that don’t have a plan for the next generation,” Mike says. “I started early when I was raising these kids. I wouldn’t even let them get in fights, because early conflict can lead to brothers arguing when they go into business together. It can go all the way back to when they were nine years old when one kid beat up on the other kid. So I’ve been working my whole life to make sure that they respect each other so that when they do have the opportunity to work together, they won’t have barriers to being good partners.”Mike started in the industry at 13 years old, working on a grease truck, and making his way eventually through the various positions. “When I graduated from college, I was never asked by my dad if I wanted to come into the business,” he says. “And I never asked him. It was a weird dynamic, but I just knew that I would do it. I don’t know if that’s how it’s going to work for my kids. It certainly did with my oldest. But for the other three, I’m trying to set the foundation so that it’s there if they want it.”All of that hard work of ensuring continued peace among his four sons is starting to pay off. Just the other day, his youngest son, who’s now a junior in high school, told Mike, “I’m so excited to be able to work with my brothers when I get out of school.”
  1. Tread a Fine Line
    Mike’s education in construction also informed his approach to succession planning. Three years after college, he pursued his MBA at night while working during the day. “I did a case study on the Coors Beer family,” he says, “and it doesn’t matter what your name is, with Coors you have to work your way up. If you were Peter Coors you still had to interview for a management position, and you had to earn it.”However, as Mike points out, not everybody knows what they want to do when they come out of college. “Many people, once they find a happy home, then they grow and develop, and mature,” he says. “If you worked your butt off, starting a construction company, do you want to give it to your kids? It’s a challenge to know where to fall on the issue. Maybe your kid’s not ready yet, or you want him to earn it.”I get frustrated with some owners that want to drill their child into the ground and make them earn it,” Mike says. “And by the time they do, they may say, ‘Hey, I’m out of here. I don’t want to deal with this anymore. All you do is beat me down, and I don’t even get to see the big picture.'”In terms of discipline and criticism, Mike considers himself an interesting breed. “I’m not a 100-percent diehard construction guy,” he says. “I grew up in an industry where if you made a mistake, you were yelled at. You learned the lesson the hard way. But I’m a fusion of a lot of different personalities and business approaches. So I consider mistakes to be learning experiences. Make sure that they understand, and that they improve, move on, and are successful the next time around. I’m a proponent of continuous improvement. Everybody makes mistakes. Just because your name is Ghilotti doesn’t mean that you’re supposed to be God’s gift. You’re human. Just don’t make it a second time.”Part of drawing the next generation into the business is to embrace openness and authenticity. “You have to be vulnerable just like any leader and be willing to accept the fact that you are only human when you’re an owner,” Mike says. “And sometimes the next generation looks up and says, ‘That’s too much risk. It’s too much responsibility. Too much stress.’ You have to demonstrate to them how to handle all of that.”Mike feels that he had an ideal mentor in his father, whom he describes as even-keeled. “Didn’t get too high,” Mike says, “didn’t get too low, used humor to break down the stress. You’ve got to be able to do that as the first man or as the older brother, or else your kids are going to think, ‘I don’t wanna be like you—you’re a mess; this is a crazy business.'”It all comes down to the quality of life. Mike advises avoiding bringing your construction life home. Frequently, as the next generation is getting ready to take over a business, they get put off by the effects of stress they witness on the founder. “Accentuate the positive things, the good things that come from being in business,” he says. “The joy of accomplishing things and having a business so that you can take care of your family and be a resource for their livelihood. So that they can grow and prosper.”
  1. Find a Niche for Every Type
    When it came to the next generation, Mike also gave much thought to his sons’ personalities. His oldest, Mario, just graduated from Cal Poly (“God bless Cal Poly,” Mike says. “A great out-of-the-ground program.) Mario’s been in the business now for three months. “Mario is exactly like my father: 100 percent energy, passion, and makes decisions,” Mike says. “He’s a go-getter who wants to take risks. And my other children, not so much. I have to work with Mario on being a consensus builder. I tell him, ‘Working with siblings in this business, you can’t just decide to go do something without bringing them with you.’It’s essential to help your son or daughter see all of the possibilities available to them in the company, to increase the odds of getting them hooked and eager to jump on board. This past summer, Mike’s second son, Gino, worked with the company. “He’s a six-foot-seven football stud,” Mike says. “He’s outside, working all summer. But, it hasn’t grabbed him.”Unlike his oldest son, Mario, who’s an operations guy that understands the building side of the business, Gino needed a different approach. “I talked to our vice president of estimating to have Gino give that a try,” Mike says. “We sent him in and gave him a job, cold turkey. He bid the thing. He is so excited about doing estimating now. In fact, his second job, he was low bidder, and he left and went back to college. Guess who ended up getting the job as the project manager? Mario.”It’s vital, Mike says, for companies with multiple siblings in the next generation, to find a niche for each one of them. Find their passion. With businesses, there are many different niches, so empower them to find their arena, which will also help provide some separation between the siblings and cut down on conflict.They may not care for construction, for example. But do they like business? With business, sales need to happen, costs and people managed, profits gained. Any business, including construction, has many different facets. “But even if only one kid goes into the business,” Mike says, “that’s great. If I end up with no kids in the business, then I get to start working hard on their grandkids.”

You may not have four brothers or four companies with a single last name.
However, you can still benefit from Mike Ghilotti’s business experience. Encourage peace and discourage conflict among your children from an early age, so that they don’t carry childhood resentments into adulthood business. Don’t beat them into the ground, and don’t bring work home to avoid scaring them off with unneeded stress. Also, work with your sons and daughters to find the best niche for each of them, to allow them to shine their brightest, and to give yourself the best chance at a smooth ownership transition.

When it is time for you to retire will your construction company be attractive to buyers or ready for the next generation to takeover – or are you stuck forever in a quagmire?

Which statement describes you best?

  • I’m secure. My hard work will pay off. My plan is solid; things are looking good.
  • I’m challenged. I need to keep working in order to achieve my goals.
  • I’m nervous. What if I have to work until I’m 70?
  • I’m scared. All my hard work might go to waste.
  • I’m sinking. My business is a ball and chain.

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