Scott Stern: [00:00:00] As the leader of the company is, one is to create opportunities for everybody within the organization. ’cause we want them to grow in their capacity. We want them to create opportunities for upward mobility. We want to improve their environments. So it’s better for their family. And I think, every day as a CEO or President, if you walk into your company and say, how can I make the people better in this organization today than they were yesterday? That’s a win.

Stephanie: Welcome to Family Business Connection, a podcast that uncovers the stories behind family businesses where business leaders share how they navigate the unique challenges of working with loved ones while building a lasting family legacy. I’m your host, Stephanie Larscheid. Of Prairie Family Business Association.

This episode’s guest is Scott Stern, the second generation of Stern Companies, a family business focused on selling. [00:01:00] As Scott says, anything that comes out of a barrel of crude oil started in 1976 out of his dad’s desire to stay planted and avoid big corporation moves. The family business now has more than six locations throughout Nebraska and South Dakota, and roughly 80 employees, including two of his daughters and his son-in-law who are already stepping up.

As the third generation. Scott talks about how important it is to encourage the next generation to learn from people who aren’t family members, including how to balance the historical approach a family has taken to running their business and knowing when to take a step back. In order to let new people and opportunities step into the frame, he talks about the challenges of taking up the mantle of leadership, as well as passing it on.

Scott also talks about using the EOS process and diversifying your portfolio in a business with family at this. Center of leadership. We start the conversation with Scott talking about the business’s [00:02:00] roots and what tools he has put in place to make sure stern companies not only reaches its 50 year milestone next year, but continues to the 100 year milestone and beyond.

Welcome to today’s episode, Scott Stern. We’re so happy to have you as our guest today. 

Scott Stern: It’s great to be here. Thanks for the opportunity, Stephanie. 

Stephanie: As we get started in our conversation about family business, start off by talking about your family business. Give us some context as to who’s involved and what you do.

Scott Stern: Well, actually we’re approaching a milestone. My father started the business in 1976, so doing the math we’re planning for our 50th anniversary next year in 2026, so that’s rapidly approaching. Just hard to believe that it’s been 50 years that we’ve been in business. Seems like it’s gone very, very quickly in that regard.

I give a lot of credit to my father. A true entrepreneur started out in the [00:03:00] utility industry working for a telephone company, and they wanted to move him around and he was not interested in leaving that little community that we were embedded in. So this opportunity came up and he bought, at that time, what was referred to as an agency.

It was an amaco agency. And it was evolving into distributorships or jobberships as they called them at the time. So he said “if I can buy gasoline for 25 cents and sell it for 30, and my costs are three, I can make 2 cents a gallon”. So that was really the business model by which that was started in 1976 with one other employee.

Stephanie: Fascinating. And you’ve reached the half century mark status with 50 years in business. I’m sure you’re in the process of aiming for that Century Club status to get that 100 year mark. Tell us who’s involved. 

Scott Stern: I won’t be around to see the a hundred year mark, but hopefully, the business will continue. [00:04:00] Third generation, to answer your question is already involved in the business. My youngest daughter and middle daughter are active in the business as well as a son-in-law that are active at Stern at this point. And we’ve got a great leadership team that’s just doing an outstanding job within the organization.

So, it’ll take the fourth and fifth generation to maybe get to that a hundred year mark, but, hopefully that’ll happen. That’s really quite a milestone. 

Stephanie: Yeah. And, and you’re putting some tools in place to certainly get there, and we’ll talk about that a little bit. Now, you had a journey where you were working for the family business, you left, and then you came back, and now you’re at another journey that we’ll talk about transition wise, but talk about your path.

Scott Stern: Well, I graduated from the University of South Dakota in 1983. And I had, when my father started the business in 76, I spent every summer there. I actually started driving the bulk truck when I was 14 years old, a 2000 gallon [00:05:00] tank wagon, making deliveries to farmers and construction companies and things of that nature, little gasoline stations. So I was embedded in the business. I really have kind of a passion around chemistry. So I liked bringing the lubricants piece into that equation. Ad then came back into the business full time in 1983 after I graduated from the University of South Dakota. Spent 29 years there in that role.

And, like every family business, you gotta make decisions about what that succession looks like. My dad was, you know, here again, it’s a serial entrepreneur. Didn’t not then think he was ever gonna retire, didn’t really want to retire for that matter. He, in fact, I tell the story, you know, he refered high school basketball for 53 years, so he was pretty much invincible.

So we got to 2012 and we’re discussing, “what’s this next generation look like?” And he really didn’t wanna make those [00:06:00] decisions about that succession planning and I had some family things with my wife. Her mom and stepdad were in Arizona. They had some health related issues, needed some care.

So we said, “well, I can leave the business. My dad doesn’t wanna transition or sell it to me at that point.” So we left and went down and I went to work for an oil company on the west coast. Spent four years down there, so, and then came back after a little stint in public service for that matter. 

Stephanie: And that’s part of your journey and how you’ve got to where you are today and probably why some of the work you’re doing on the transition to third generation.

And so now you have stepped away from a day to day responsibility role in the business. Who’s in charge now? 

Scott Stern: Well, Dan Roche is the CEO and President at Stern at this point. I was really lucky to encourage and convince Dan to come to work for our company. He had spent 20 plus years in the utility [00:07:00] industry.

In a CFO capacity. So I initially brought him in as the CFO, but he is really, brings a unique skillset because not just does he have the financial capacity, he’s really got a creative and innovative mind. So he really had great leadership skills that could really assume the role in a CEO environment.

And when I talked to him initially, I said, Dan, he’s in his mid fifties. I had shared with him kind of my vision about stepping away and, if he liked the industry, liked the company, couple years down the road after we’ve, he’s had that chance to acclimate, I would step back and then he would assume my role and responsibilities and, and he is really just done an outstanding job and I couldn’t be happier with how he’s managed and ran the company and my absence or my stepping.

Stephanie: So your transition has been taking place to a key non-family leader of your business, which we talk often about. It doesn’t always have to [00:08:00] transition in a family business, from family member to family member leading the day to day that some key non-family members who bring excellent talent and expertise can really fill those roles. 

It  doesn’t have to come from within the own family unit. So you’re an example of that happening. What I really like. Is when you describe when you knew it was time, when you knew it was time for you to step back from that day to day? Because so many of our current leading generations who are approaching their sixties, some even into their seventies, it’s really hard for them to let go and give up the reins or give up the title or give up meddling in the day to day on turning it over to the next generation.

How did you know when it was time? 

Scott Stern: You know, there were a couple things. You know, one, I think the older that you get, the shorter your patience becomes because you see this window of time, this restriction coming. And I think my patience level was diminishing. And I think [00:09:00] I wasn’t managing the organization very effectively as a result of that.

My family saw it. And I didn’t realize it was probably that apparent. That’s one. Number two, I think the older we get, the more embedded we are sometimes in our history and we don’t look for opportunities. We don’t look for creative solutions because we just keep bringing history into what solves those problems and sometimes those historical things.

Those historical solutions don’t solve current problems. And that was crazy. Raised a level of awareness with me that now’s really my time. And to step back, I had some other things going on outside of the company that was distracting me from being really present within the organization and that wasn’t fair to the organization. And then the final thing was, I think it’s important that your children learn from somebody else besides a family [00:10:00] member. And I think we learn, we can learn from so many people if we put ’em in that capacity to, to teach. And Dan really had that. I had that skillset.

In addition, my children that would be coming up probably, were not ready yet to assume some of those roles. So I think this gives them a chance to grow personally and professionally within the organization. I think it also removes some of the nepotism component, not that we had it, because I always held my children to a really high standard from a performance perspective, but just the optics of that.

So I think overall it’s been healthy. Time will tell if it is healthy, but I would tell you that something that, that I didn’t, that was, that I didn’t anticipate is, one of the reasons to step back why you’re have the capacity to still teach. It exposes where the gaps are. You know, I think there’s people that [00:11:00] die in the chair and people don’t realize what they had up here, that they didn’t transition.

So now because I’ve stepped back in a very regimented role, the people within the organization can say “Hey, Scott knows that. Let’s tap his brain now.” And so they can reach out and ask. And I have that ability to cascade and transfer that information that I wouldn’t have been conscious of when I just stepped out the door if I had died of a heart attack for that matter. 

So, I think there’s really a lesson there to step back when you have the capacity to do it. And then instead of these people that take over, if something tragically happened to me drinking out of a fire hydrant, they can then get exposed to the information that they need as they need it, when they need it from me for that matter.

Stephanie: Really insightful. Yes. And something that family business leaders need to hear and next gen leaders we need to hear. [00:12:00] You don’t have to have all the answers. The business is not you. The business is more than you. And the capabilities for what it can produce in the future, is tremendous. 

It doesn’t all have to involve you. Talk about how your structure is today, how you’re communicating with the business, how you’re communicating with the family. 

Scott Stern: So first of all, we use EOS as our operating system. Um, so I participate in all the quarterly, reviews and then also the annual.

So that’s the level of engagement directly with that leadership team. And then I have a weekly call with Dan. It’s set every Friday. And then that’s really kind of it as far as a regimented engagement. Periodically, they’ll reach out if there’s something that’s very timely. But that’s really been few and far between Stephanie, because they just have been able to manage that day-to-day functionality without my engagement.

And it’s really fun and rewarding for me because when I hear about some of the things that they’re doing [00:13:00] and even problems and their solutions to it would be much better. Than what I would’ve offered. So I’m “way to go guys. This is genius. I mean what a great idea.” ’cause I’m sure I would’ve not came up with that idea. So it’s really been healthy for the organization 

Stephanie: and you’re not meddling or looking over their shoulder or second guessing, or they’re not coming to you to say, what do you think? It’s really healthy to have that separation and to not be physically present all the time so that they can independently move forward with the business.

Scott Stern: Yeah. Every business owner will tell you that when you’re in it day to day, there’s just gut wrenching stuff that happens every day that you bring home and I know those things still go on. I mean, I don’t have that now. They’re, they’re carrying those burdens, you know? And I feel bad ’cause I feel like I should help.

But I think from a health, mental wellness [00:14:00] and health perspective, that’s been, that’s been good. So anyway, and they’ve insulated me from some of those things for that matter. But, I think I’m a much happier person as a result of not being embedded in that day-to-day stuff now. 

Stephanie: Those are really profound statements and something that I hope fellow leading gens who are working on what the exit from the day-to-day looks like, take to heart, because it does matter that stress does build up.

We see it with, with business owners on a regular basis. The weight of the decisions, the financial impact. The wellness of your employees, the safety of them, you take it home and it’s great to hear you reflect on that. 

Scott Stern: And they’re so good. I mean, you know, all of the key metrics. They share with me.

So I know things are going well. They’re not hiding anything from me. I know that, you know, for that matter. ’cause it’s kind of the good, bad and the ugly. They’re very transparent about, you know, what’s going well, [00:15:00] what’s not going well. But they shoulder the responsibility of resolving those issues. And most importantly, I pat ’em on the back and support them on, on all the great things that they’re doing.

So that’s really been, it’s really been fun for me just to take on that role. It really has been. 

Stephanie: And that fun word is also great to hear. ’cause work should be fun. Family business should be fun. And often the weight of it does have a big impact on us. Now that you’re on the other side, you’re not in the office on a daily basis, what is filling your time professionally, personally?

Scott Stern: Well, started another enterprise and business, which was outside of, which was outside of my scope of knowledge. So, got that kind of up and running here about a year ago. And then transitioning. As that moved off my plate, and you can tell I have a passion around family businesses because of kind of what we’ve gone through.

[00:16:00] So two things. One, I, I’m now on a couple of family boards, one’s in Indiana and one’s in California. And then I just recently, I’ve been recruited to be a study group facilitator, so I’m going to. These are primarily family businesses that I’ll be helping them at. I hate to say in a, just a facilitation role to extract information and help these companies when they come together, benchmark performance, kind of almost act like an outside board of directors for these other entities.

So that’s kind of taken on my responsibility and, and also being a grandpa. I love doing grandpa stuff. So that’s kind of what’s filling on my days and weeks. Now, for that matter, Stephanie, 

Stephanie: You’re, you’re not letting any grass grow under your feet, that’s for sure. Scott, all never a dull moment in your world.

Well, and in addition, go ahead. 

Scott Stern: I got busier. I think I even threatened to go back to work ’cause I was less busy than what I’m doing right now. The times. [00:17:00] But they didn’t want me back. 

Stephanie: It’s all about perspective. Yeah. When you, you also have taken an opportunity, two opportunities I understand, to serve on other family business boards as an independent member.

These are family businesses. Talk about that experience as you know. We’re such believers in board structure at Prairie Family Business Association. We know that’s an indicator of successful business and generational transition is when an advisory or fiduciary board is put in place as part of the governance structure.

So talk about your experience being an independent on those family business boards. 

Scott Stern: You know, here’s what’s, and you, I’m sure you know this because of your engagement with family businesses, but it it being in those boards. I’ve described family businesses a little bit like, I call ’em snowflakes, but here’s my description of a snowflake.

Compositionally, all families are made up of the same material. So a snowflake’s made up of hydrogen [00:18:00] and oxygen, right? H2O, it’s just frozen, but they’re all different. Every snowflake is different. So compositionally, while these family businesses are made up of the same, they are unique. So part of my learning in the family business and going through some of the things that I did has provided me with that capacity to kind of share with these other family businesses, my experiences and how they can avoid some of the mistakes that we made and how they can capitalize on some of the things that we’ve learned.

It’s been very fulfilling. The businesses have, again, they’re very unique, different parts of the country, different clients. But it’s amazing how similar they are in the challenges that they face within the family businesses.

Stephanie: And I’m sure you’re a valued member of that board with your own family business experience and some of the work that you’ve done [00:19:00] on the family business and transitions you’ve experienced.

We find that when family businesses are building their boards, it can be essential to have somebody who’s had direct family business experience as a family member. Serving on that board and can relate to some of the heart that goes into decisions and some of the background and your evidence of that.

At Prairie Family Business Association, we have a board member directory where you can access people who are interested in serving on your family’s board, their qualifications, and why you may wanna interview them. And that’s a huge asset to owners who are looking for somebody with some family business insight.

Scott Stern: Yeah, both of these companies, when I interviewed for the role, I said, “listen, don’t feel obligated to choose me. It’s important that I provide value to you, and at a point in time that I don’t, I want you to feel comfortable with firing me.” Because I want these businesses to be successful. And I walk in and I [00:20:00] tell these people “I’m a family business survivor.” So, and I’m, I’m very transparent about sharing the story about what I did.

When I left, why I left when I came back, you know the impacts to that. If they can learn from that, I’m willing to share it because I want every one of these businesses to be more successful tomorrow than they were today. 

Stephanie: That is such a true statement, helping ’em thrive through generations. Certainly.

When you talk about your transition generation one to generation two, yourself and now generation two to generation three, what are you doing differently and why? 

Scott Stern: You know, that’s a great question, Stephanie. I think, we joke that this is, and I think people can identify with this, gen one, we joked that my dad was the president and then everybody else was the same level.

I mean, there was two steps in the company. Gen two to [00:21:00] gen three, we’ve put more structure. Around the organization, we’ve created more hierarchy. Now, I know that can create some frustration, but it’s speed could be of communication. It’s speed to take care of customers. It’s speed to implement ideas.

But I think that’s probably been the biggest change that’s been made from gen one to gen two, and I’m sure that’ll carry on G two to G three 

Stephanie: I know it will because of what you’re putting in place and some of the lessons that you’re teaching your family and your senior leadership team. And that’s one of the things that we tell people when they engage in this, working on their business through a family business association, they’re going to experience maturing of operations and maturing of structure.

And that’s a great testament and example to what you’re experiencing, especially as you get to that third generation, fourth generation, the business and the family need it. And that’s great that you’re working on that. 

Scott Stern: Yeah. And our role, I mean, [00:22:00] As the leader of the company is, one is to create opportunities for everybody within the organization. Ccause we want them to grow in their capacity. We want them to create opportunities for upward mobility. We want to improve their environments. It’s better for their family. And I think every day as a CEO or President, if you walk into your company and say, how can I make the people better in this organization today than they were yesterday?

That’s a win. That is actually what we have to focus on. 

Stephanie: Very much so, the culture, the growth in, in your people, the investment in your people, and speaking of people, you have several next gens involved in your business entities. Talk about their roles and, and what the future looks like for your next generation at Stern.

Scott Stern: You know, that’s, it may be a little early to tell. Kaitlyn, you’re using the EOS model, she’s our integrator. Hillary is in the field [00:23:00] in sales, and then Trevor, my son-in-law is on the operation side of the equation. He’s the one that’s married to Kaitlyn, and then my other son-in-law is running Coaxis Energy, completely different company and separate from Stern.

I very rarely get involved directly with him anymore, except with Trent, but they’re all reporting to Dan and Dan’s the one that inquires on what assistance he can provide them if necessary. But the key too is, I think, participation in Prairie family business, the peer groups, Kaitlyn and Hillary are involved in those.

I think that gives him a lot of exposure to other families, other family businesses, what they can learn and from them has, I think, has been really, really a precious investment in time for them. 

Stephanie: And it goes back to your snowflake analogy. There’s some commonalities and there’s some differences. And when you’re in that peer group, it [00:24:00] really emphasizes we’re all in this together, working with family, trying to navigate what the business and family situations look like, and I’m here to be able to, in confidence, share my issues related to the business, to myself, to my family, and sort through that with a group of peers in a non-threatening environment where everyone understands we may have different business industries and different sizes of business and sizes of families, but that uniting factor is family and we’re all trying to figure it out for the next generation.

Scott Stern: Yeah, that’s really very true. You know, it’s, I think family businesses have to always ask themselves what their roles are. Is the family there to support the business or the business to support the family? And we have been very clear in our expectations that the family’s there to support the business, not the other way around.

And so people put that, not that we don’t, family’s important, but we’ve gotta [00:25:00] put the business first when we’re making decisions about how we’re gonna utilize our family’s resources and capacities. 

Stephanie: Really important differentiating factor, Scott and something that families, frankly should talk more about, “why is this, how are we trying to get this business to the next 100 years? or are we trying to take investment from the business? Are we trying to grow it, uh, and look for new innovations and avenues to expand our business? Or are we good with the status quo?” In which case that’s not gonna support the family tree as it grows. A lot of things to pay attention to when you’re working and navigating the family business structure.

Scott Stern: Very true. Very true. 

Stephanie: As a leading gen, you’ve given a lot of great insights into stepping away from the day-to-day. Certainly. What advice would you give fellow leading gens who are in your shoes? 

Scott Stern: Wow, that’s a great question. Um, you know, I think the first thing is hire the right people. One, number two, [00:26:00] truly assess your capacities and understand the capacities of the generation following you. Be very understanding of their limitations as well, their weaknesses and strengths. Augment those weaknesses and build on those strengths by providing the right information and resources and support system to help advance their capacities.

And then also, engage the entire organization about where you have, where the vision of the company’s gonna go, with or without family members for that matter. You know, the rest of the organization wants to be part of something bigger than just a couple of people or a person. So make sure that they all know that there is just as important as an organization, as any family member is, or in some cases even more important.

Stephanie: Those are great insights to give fellow leading gens as they navigate the future of their business and working with family and leading a business that impacts a lot of people. Right. Thanks for sharing [00:27:00] that, Scott. You mentioned earlier you’re a graduate of the University of South Dakota’s Beacom School of Business and Prairie Family Business is one of the key outreach centers of the Beacom School of Business and has operated in that way for 34 years.

You’re a part of our advisory board at Prairie Family Business Association. What does it mean to you that the University of South Dakota hosts an association that now reaches 280 businesses across a large portion of the upper Midwest and beyond? 

Scott Stern: Well, it’s kind of probably a bit of a cliche, with small businesses being the backbone of this country and the university does such a great job at supporting what I call a great product and output.

Very smart students, strong curriculum that helps these family businesses grow and be a resource for those family businesses to assist and enhance their [00:28:00] business. So, it’s fun on multiple cylinders for me to be a graduate of the university and see the work that they do to support Prairie Family Business is really rewarding and they just do an outstanding job with that curriculum to help us in this. 

Stephanie: Yeah, and the reach continues to expand and grow and the need for serving family businesses is certainly not diminishing at all , as we try and serve our mission of helping family businesses thrive through generations.

Scott Stern: Right, right. We’ve had a, oh, I’m sorry. 

Stephanie: Go ahead Scott. 

Scott Stern: I’ll just say they’ve got some great programs like that Kyle Business Consulting Program, just, they embed themselves to help family businesses with small, unique issues or problems, and that’s just a creative solution to help these businesses around the Midwest and the region.

Stephanie: Yeah, it certainly is some really insightful consulting activities that come out of that program. As we wrap up our conversation today, Scott, is there anything we didn’t cover that you’d like to mention? [00:29:00] 

Scott Stern: Gosh, I think you, you really hit it all, Stephanie. I just, I appreciate the opportunity to talk about families and family businesses and how we can help them and, it really is a mission for me to help any of these family businesses in any way that we can. 

Thank you to you and your team for the work that you do to help these businesses. ’cause they’re unique animals for that matter, and they need these resources to continue to grow and be successful and prosper.

Stephanie: And we’re here to help…

Scott Stern: Yes, you are. 

Stephanie: in any way possible. We’re here to help the family business live on to the next generation and beyond, help the business and the family and the individuals involved. So thank you for a great discussion, Scott. I know fellow family, business owners, leaders and next gens are going to learn a lot from this discussion.

So thank you very much. 

Scott Stern: Well, I hope so. And if I can help anybody just. Don’t hesitate to call. 

Stephanie: Thank you, [00:30:00] 

Scott Stern of Stern Companies has been a great example of the challenges of taking on a business as the second generation, as well as the importance of transparency when passing it on to the next generation. As a man of many hats himself, the advice he gives for transitioning them off can be beneficial for both those looking to establish a succession plan and those looking to step up.

If you’re interested in the resources and tools Scott talks about in today’s episode, visit our website at fanbus.org. That’s F-A-M-B-U-S. Dot org and follow us on social media for more stories from inspiring leaders like Scott.