Ask Ira: Advice Column
"Dear Ira" Fresh Air and Cold Water for the Perplexed Family Business (updated October 2013)
- Do your kids want your business for nothing, but encourage you to enjoy your retirement in high style?
- Did Mom always like you best, and now your siblings aren't speaking to you, and worse, not doing what you tell them to?
- Are your family members charging their vacations to the company card?
- Are you having trouble building a board because nobody wants to give you advice they know you won't follow?
IF SO, YOU MIGHT BE SUFFERING FROM FAMILY BUSINESS SYNDROME!!
That's where this column might come in handy.
Ira Bryck, director of the UMass Amherst Family Business Center, will attempt to lend you
some perspective and a fresh outlook on your family business problems. Simply email him, your question, at email@example.com
PLEASE NOTE: Your identity will not be disclosed, and Ira reserves the right to edit the question for clarity and some degree of general relevance. The UMass Amherst Family Business Center, the University of Massachusetts, Ira Bryck, and the center's sponsors, will be saved harmless from any reader's claim that their understanding or implementation of the advice in this column had an adverse effect. The column is for general informational purposes only. It is not intended as legal, accounting or psychological advice. Accordingly, readers should not act upon information in this column without seeking professional advice.
© 2002-2013 Ira Bryck - no reproduction or use without prior written consent.
I have enjoyed your advice immensely. Would you happen to know the answer to this question?
My husband is 1 of 6 siblings, who now share equal capital stock and equal special stock in their very successful, commercial mechanical contracting business. It was turned over to them at their father's death, 3 yrs ago. They have all been with the company for over 25 years. My husband is 3rd in line and although we have a grown son, we encouraged him to go in a different direction. The 2 other older brothers both have sons that work for the company.
The 2 older brothers have presented the other siblings with a buy/sell to sign. One of the pages requests signatures saying that "any new stockholder of the corporation must execute a copy of the buy sell and be bound by the terms which shall be a condition of ownership of stock of the corporation." Should my husband say that,"there are to be NO NEW STOCKHOLDERS of this corporation and the LLC that they created for Life Insurance and Payment of the rent for the property the shop is located on? The brothers do a lot of "voting on this and that decision". If the nephews are given special stock or any of their dad's stock.....my husband wonders if it will affect decisions that should not be made..... THANKS SO much.
No New is Good News?
Dear No New,
Buy sell agreements give legal protection that certain untenable conditions will not happen; especially if funded by life insurance (so you're not suddenly the business partner of your in-law); or irreconcilable differences can be solved by some other source of money (ie: annuity or cash value of insurance policy) to buy or sell your way out of pre-agreed upon bad-enough circumstances.
It makes sense that new stockholders should have to sign it. It also makes sense to have other agreements about who will be new stockholders. A family business that has a qualified, talented, passionate next generation of owners is usually a good thing. Those heirs apparent need to be taught how the current generation has thought through decisions, had peaceful, uncontentious votes, have reconciled difficult differences, so they will be a future asset, not a future disruption. Or have what it takes to do it better and different than it's been done.
Attorneys are needed for the proper structure and filing of these agreements; but open-minded discussion, including many "what if?" exercises, can be facilitated by a talented neutral person (and then put in legalese). If your husband is nervous, maybe he can start creating those "what if?" discussion prompts, but offer them in a calm and trusting way, so that he and his siblings and he can have the needed conversation about how the next generation will develop the maturity, absorb the good parts of the current corporate culture, and make the needed changes that must happen with every new generation's reign.
My husband is half owner with his brother in a business recently passed down. The executor hired my unemployed brother-in-law to help sort out the books (unpaid taxes, employee withholding, etc.) and now the brother-in-law won't stop trying to bill for hours. The business is out of cash but the brother is trying to claim payment for hours worked in sales.
He is losing money and selling inventory (probably pocketing sales since he is a Junior, with the same name as my deceased father-in-law). He won't stop. We see no profit, and the value of the assets is leaking away as he sells off product. How can we stop the losses?
His title is 'president' so he claims he can decide to work there are no other employees, and the business does not have a license. Are we liable for everything he is doing? Help!
Dear Going Broke,
There are several questions that need answers here, before you can arrive at the big answer:
What was the value of the business, when first bequeathed? What was your father's intention and hope, by leaving the business to his sons? Why was the one brother made president, and what authority was conferred with that management (not ownership) title? Are there any buy/ sell-like agreements in place? Would your husband's brother want to buy your husband's share? Can the business be divided in some equitable way, giving each brother an opportunity? Is there anyone the both brothers respect, who can lead them in a conversation about where they're at, and where they want to go? What power does your husband have to put his foot down, as 50% owner, and as family member? What can be done- legally or with a man to man intervention - to freeze what your brother in law is allegedly doing?
According to your story, this is a situation that needs to be discussed rationally, and if it can't be, halted legally. Your husband might act as a one man "good cop / bad cop" explaining that this can be done the easy way, or the hard way. If the 2 of them can sit down and explore the options for each and both of them, great. Otherwise, walking away, or salvaging what can be salvaged, might be your "best alternatives to a negotiated agreement" as they say in the world of mediation.
My great grandfather and his brother started a family business then my grandfather was basically at the helm for his adult life. Once he passed away my uncle started to run the company and stated no other family members would work there bc at this point the family was larger then there are positions. All of the descendants own small shares of stock in the privately owned company. Today my Uncle is still president and his two sons work there and soon his grandson will be provided a job once he completes college in a few years.
The hiring is not the issue I have it's the secretive salaries and perks that are given to my cousins and uncle. One wife has told me several times about the money my cousin gets paid and that she isn't supposed to tell me because my cousin does not want my mother (its her brother that is the current president) to know the salary he and his brother are making. Additionally they receive perks such as trips, cars, and country club memberships and the stock holders are unaware. I am in a quandary over telling my mother that this is going on. My assumption is the more they expense the less they have to pay out in dividends. It's exorbitant the fact that my cousin asks his wife not to share these details has obviously perked my curiosity to the legitimacy of their salaries and expenses.
To Tell or Not to Tell
Reasonable people can disagree, often because of the perspective they have, based on where they sit.
The managers of a company, who are also owners, see themselves as entitled to a fair reward for the success they have created, and might see owners (who are not managers) as a nuisance, to be kept at a distance, and in the dark. They might feel this way especially if the shareholders inherited their stock, rather than invested out of pocket (even though those owner managers also may have inherited, and possibly owe their current positions to their lineage, more than achievement).
Family owner managers might subscribe to the theory that if you don't work in the company, you shouldn't own stock.
Owners of that family business, who don't work there, but still are sharing the risk, and supporting the ability of the company to function, often resent those relatives who, through twists of fate and fortune, end up in the throne room.
They may adhere to the belief that a company's main purpose is to increase shareholder value.
What business families always need to do is engage in a fair and transparent discussion, well facilitated by a neutral party, to figure it all out. What is the correct return on investment for shareholders? What are the proper salaries? What are too many perks? Who is allowed in, and why?
Unfortunately, once the barn doors are closed, it's easier to stay in than get in. But those outside can start a fair and balanced discussion amongst themselves, lobbying for an inclusive process that those with the gold cannot refuse. I'd advise keeping it pleasant, even though you're discussing unpleasantries. "We aim to rethink how our family can best co-own their company, which is a very common situation, including owners who are not managers, who often are not adequately informed or rewarded."
Only if all else fails do you add "those of us who've been discussing it want you to come to the tableŠ we very much do NOT want to resort to a shareholder suppression lawsuit, which would be a lose/lose for our family. We also want you to know that we appreciate your efforts and talents as managers, and understand you should be fairly rewarded."
It always helps to create a formal discussion (again, well facilitated by a talented neutral person) where representatives from all sides send their most reasonable and personable family member, who will report back to the rest of you.
My father started a small business 35 years ago. My three sisters and I helped load and unload trucks during our high school years but his business is electrical supply and we were told we could not work in the business because it was a man's field. He did his own clerical work and there was no place for us to work in the business. About 15 years ago my younger sisters husband began working in the business. He first worked on the farm and made some deliveries for the business and now for the past five years he has been in sales also. My father is 80 now and can't drive the distances to call on customers like he used to. He built this small company into a multi-million dollar company. My father has always said the business and the farm would be divided equally between the four of us. This past week, by total accident, my older sister overheard a conversation between my younger sister and her husband with my father. They were discussing my brother-in-laws future in the company and this was a heated discussion. My brother-in-law felt he was owed more than just being an employee. My father told them that he had been working with an estate lawyer and the company had been divided equally between each daughter with the brother-in-law receiving a very large salary. My brother-in-law was less than satisfied with this arrangement and by the end of the conversation had gotten my father to agree to give he and my younger sister 51% of the company and each of the remaining sisters 16.33% of the company. He said he had to have control of the company and could not pick-up the phone and get permission each time a decision had to be made. I understand that and agree that he would need to have decision making power over the everyday items. Couldn't that be done with a contract or voting stock? There are millions of dollars in assests in the company name that vary from inventory to farm equipment(in addition to the business, he has a very large farm) that he had absolutely nothing to do with aquiring. Why should he and my sister get 51%? I understand that fair does not always mean equal and have no problem with him getting a large salary and profit sharing but don't feel like he deserves to own the company. After hearing about this, I asked my father about it and he said that he understood the son-in-law not wanting to be just an employee once he took over the company and the 51% seemed like a fair idea. When I questioned him about the fairness of giving that family 51% of all the inventory, equipment, buildings, etc... that they had no part in building he said he had not thought about that. What would a fair solution be? Fair does not have to be equal but 51% seems rediculous. I don't want family ties damaged but I don' want to sit back and let my younger sister manipulate my father either. My brother-in-law does a good job with the business and none of the three remaining sisters would have a problem with him running it. We do however feel like my younger sister and her husband were sneaky in the way they went to my father and tried to get him to change the percentages that each of us would receive. If my older sister had not overheard the conversation, we would have never known how that change transpired.
I agree that getting all relevant parties to sit down in an open and fair exchange would have been much better than having your father persuaded in a private and high pressure exchange.
And it's not too late for you to carefully lobby everyone to do so, and set aside (at least for now) what your father decided in the heat of the moment.
You are correct that a president of a company that is not majority owner can have all the proper authority to do their job. It's also very common that non employed minority stockholders often are frozen out of decisions and discussions, so he/she who has 51% can often control everything.
For the good of the family, fairness needs to be the Prime Directive. But along with fairness, a realistic discussion about what authority people have to make proper business decisions, and how those people are also accountable to shareholders. So not only fairness, but transparency and reality.
I find it helps to get people to buy in to values you can all agree on, i.e.: "Do you agree that for the good of our family- and the business our family owns- that we need to have a decision making process that is fair, transparent and realistic?" Then move on to define what specifics in the discussion will ensure those values. They are your constitution.
Once this meeting comes up with several criteria you all agree on enough to say you have consensus (or however you agree to decide), let a trusted accountant, attorney and other trusted advisors fashion what specific model can meet those criteria, to properly govern and own the company.
PS: ONE MORE QUESTION: "I find if helps to get people to buy in to values you can all agree on, I.e.: "Do you agree that for the good of our family and the business our family owns that we need to have a decision making process that is fair, transparent and realistic?" This is a great idea and I will begin our meeting like this. As for them asking for 51%, does that seem extreme to you? I don't want to be unreasonable, but what would an example of a better arrangement be? Thank you for your suggestions.
Some suggestions, without knowing your family, business, or anyone else's point of view:
Your father could distribute equal shares to his daughters, and your sister and her husband could buy the stock from you all that would give them 51%; but still, the 49% owners would not be suppressed or frozen out of agreed upon decisions (ie: major investments, amount of growth and risk the company is undertaking); that the company would determine, each year, its return on investment, and how much dividends will be paid (if it meets its goals)
Form a family council, that discusses what it means that the family owns a business – including entry and exit policies, being a good steward, and much more.
My grandfather started out hardwood flooring business in 1936. It grew to over 50 employees, my grandmother was really good with the books. However, my grandfather just knew the flooring end. As they got older my father grew into the business. His role started out as a general laborer and he worked his way up to buying my grandfather out. For all intents and purposes the business was bankrupt when my father took the helm. They discussed a buyout and worked everything out. He was 26 at the time. I began working in the business at 13 doing sweeping and small cleaning jobs. Eventually I worked my way up to driving my own floor sanding truck. My brother did the same, he is 2 years younger than me though. At 21 my brother moved to California and worked in a floor business out there on his own( not related to ours). I began to start working in the office and doing computer stuff(bills, invoices, and banking account stuff) eventually I built the business somewhat bigger than my dad had it. My brother came back to work with us. Then the crash happened with the economy and we buckeled back. My brother and the other sales representative went back to the field to work. My dad and I stayed for some time with 2 secretary's then ended up laying one of them off. It finally came down to me or my dad going back to the field. It was better for a young 28 year old to do the muscle work than my dad. So we continued this way. We agreed to put my brother and myself as a subcontractor to ride out the storm. The business was sick this we all thought was the best antidote. Throughout the hard times I did what anyone would do to survive. We ( my brother and I) both worked primarily with the floor business. However, I was not able to survive on the % the company paid me. My brother had it hard as well. We both used our companies to do other things as well. I started doing more construction to sustain the life I was trying to live. My brother used his business to do landscaping. My father continued to do the sales and provide us with a full time job at his company. As I got more and more into the construction industry, my father began to get upset because I was no longer able to work the full time he wanted. Also I as he said" went into competition with him" and picked up a few floor jobs to pay my bills. The economy seems to be getting easier here and my brother is pushing to get back into the office end. Here is where the problem is. While my brother and I were out doing all of the physical work to keep the company going. The last few years my father kept telling us that the business was doing bad. After my brother started to open the books he found all kinds of write offs as well as huge perks that he took (to what my brother and I feel we made for him) he never dropped his salary yet complained the entire time he had no money. Both of them want me back because I can do things they can't in the company. My issue is if he was hurting the business this bad and keeping us in the field so he could profit off of us why should I? Or am I wrong for thinking it was mine in the first place.
Out Standing in the Field
Dear In the Field,
Your story of you and your father and brother is about 3 survivors, each doing what they need to do to stay afloat.
Your father, possibly because he assumed the company was his, and its assets his to use as he needed; and because he couldn't physically take on the extra work, like you and your brother, benefitted from your efforts in a way that was not agreed upon. Had you discussed him spending what he did, you and your brother might have agreed, or might have made other life decisions. It was the lack of communications that blindsided you.
If you read the other questions and answers in this advice column, you'll see the vast majority are about family members thinking that others are unfairly benefiting from their work (including the perceived broken promises and agreements about who gets to own the company).
In your situation, I don't know what discussion is now going on. It may be satisfying and healing if your father could admit to, and apologize for, his offense. Getting him to pay it back might not be possible. Going forward, it may be useful to discuss exactly who gets paid what, for what work done. And who owns what, starting now, considering what each of you has brought to the table, including the sweat equity of each of you, and if what your father has taken for himself could count as him receiving payment for some company stock, that could now be transferred to you and your brother.
Owning stock in a company is only worth something if it pays dividends (which it often doesn't), or if you have a company to sell (in your case, you'd probably be able to sell accounts to a competitor, unless you and your brother wanted to work for the new owner). And the other benefit of owning a company is the owner thinks "he who has the gold, rules." If you all agree to rule together, then there's no advantage of someone being the sole owner.
The cost of being in a family business is that often the business kills the family relationships. The 3 of you could reaffirm your appreciation of each other, and commit to rebuilding the business in a way that is more abuse-proof, so that it only operates by paying each of you what you've brought to the bottom line. Plus, as your father built the company, and cannot contribute in the physically demanding way that you and your brother can, rewarding him fairly for what he built, and what he can now contribute.
I am the youngest of five children and out of the five, three of us work at our family business. I’ve been here for 6 years since graduating college. It’s great, working with family and watching the business grow. However, it gets difficult for me. Personally, I would like to have an actual family that enjoys each other’s company or visits one another on the weekends. I am sick of a sister that talks to me like a boss most of the time and when I voice my feelings about it there’s just a period of avoidance between us, as if my feelings are going to just dissipate. I’m tired of hearing my mother tell me that I couldn’t run the company like my sister and that she’s made the company what it is since our father passed away in 2000. I get all of this, I never deny it, but for some reason my mom thinks she needs to remind me of this here and there.
I’m not the perfect employee but I’m almost certain that I put a lot more heart and effort into my work and the overall keep and care of the company. Sure, sometimes I forget a task, but for the most part, I’d say I’m a pretty damn good worker. When I feel that me or my work is not appreciated or even acknowledged—most especially from my family—I become disengaged. Now, mind you, there are usually a handful of things that lead to disengagement, not just lack of acknowledgement or appreciation. I’m not that silly.
In my 6 years of employment here, I’ve probably felt this type of disengagement three times. Each time, “I hate my job and I want to quit”.
I know that these feelings eventually subside and are put aside for the moment, but what I’m coming to find is that the feelings do come back! I’ve told my sister that I hate the way she talks to me, as if I’m 12 and can’t comprehend simple statements (I don’t think anyone should be spoken to like this). Sometimes I think she’s just so “cold” that she seems to care when I bring it up but can very well keep up the same act.
This time, I feel a bit more serious about my thoughts of quitting. I’d rather have a real relationship with my family than stick around and deal with this. Not even the benefits will keep me here and unhappy, if leaving is what it takes to be happy. I love working here but sometimes it’s absolutely unbearable. I sit quietly at my desk for days and some days, I don’t come in at all. It’s disgusting and I want it to end.
Thank you for your time. Mine seems to be running out.
Ready to Leave
I’m sorry to hear of your continuing state of feeling mistreated. It is too common that families in business that manage to succeed operationally and financially fail so miserably to perform up to any standard of respect and consideration, not to mention family warmth and support.
There is no guarantee that your family will be more satisfying to you if you left their employ, but at least you might find a job where you’d be treated with more objectivity and professionalism.
Is there anyone in your family, whether or not they work in the business, that you could confer with about your need for better treatment? It may be helpful to build a coalition of people who could help you champion a code of conduct, where the family develops an agreement of how to treat one another. Another tactic to go along with this would be a job description that has very specific and measurable objectives that can be scored; so that you can point to your undeniable success at doing your job.
There is also good research by Gallup about what qualities of a workplace make for happy employees. You could try to get your family members to read the book, or at least an article about the book, and have discussions that could lead to improvements, including improvements in your outlook. http://www.umass.edu/fambiz/articles/just_business/creating_great.html
Furthermore, there is good work on what makes a happy marriage- though you’re not literally married to your work or family, you figuratively are- and I think the same rules apply- read up, and try your best to spread the word about some tools that improve satisfaction in relationships. The cheap way to find out some of this begins with this Wikipedia article (if interested, there are many good books by John Gottman): http://en.wikipedia.org/wiki/John_Gottman
You may have concluded, or might discover, that it’s unlikely that your family will change the way they treat you at work. You’re not alone. It’s a difficult decision to leave your company, as people often feel they are simultaneously alienating themselves more from their family. A new book discusses this dilemma: Trapped in the Family Business: A Practical Guide to Uncovering and Managing This Hidden Dilemma by Michael A Klein PsyD
I encourage you to be brave and sympathetic as you try all these techniques. It’s very possible that your family, as painful as their behavior feels to you, is not trying to hurt you. People act unconsciously all the time, often saving their most venomous tricks for family members. But they may not realize how vicious they seem. It may be helpful to sit them down, and explain that you’re beginning a one year trial period, where you need everyone to learn a few new methods, as I’ve suggested to you. Carefully track even small improvements, and decide after that if they are even willing to give it a try. That should help you decide what to do next.
My father has some very successful factories in India that he spent 30 years building. My brother works with him on the technical side and my father wants me to train to be the CEO (basically management). My problem is that I am in the USA. My husband is not interested in moving to India. But we are struggling financially, with my husband working temp for the last 4 years and day dreaming of his "perfect" job. He keeps talking of going back to school, but never has and if I say anything to him, he gets very angry and defensive - despite this I love him dearly. His parents hate me (his mother threatened to kill me), so I don't personally have any family ties, all my family is in India. I am depressed and cut off from my peers after having kids. I have just started a part time telecommuting job, where I am helping someone else build their business. I am thinking of moving to India and taking my Dad up on his job offer - even if it is for 5 years (my dad suggested that I try it out for 5 years and see how it goes). I know you can't give me an answer or make my decision for me, but I could be making a good amount of money as well as getting fabulous experience. My father says that in the end the business will be left to my brother and I 50/50, but what will I do with it when my dad is no more? I will not, at that time have the tools to do anything with the business. Am I wrong to want this move both for me and for my family?
The change I Need?
I can obviously understand the allure of accepting your father’s offer, which seems to solve several problems all at once. But you don’t mention answers to any of the following:
- Why does your father think you’re the correct person to be CEO?
- Even if you’re the perfect candidate, is that why your father is offering the opportunity, or is it to attract you back to India and your family there?
- What other solutions are there, in terms of your husband acting on his career dissatisfactions and hopes for the future?
- What are the reasons you and your husband are living in the US, and preferring to not return to India?
- What logic is there in you and your brother working together and eventually being equal owners, even as you are CEO and he has a technical position?
- What would need to happen in your 5 year trial period for everyone to decide if this is a success or not?
- What role would your father play, and what would need to change after his passing? (and why?)
You and your husband need to have a serious discussion that weighs all the factors, and examine why the things you need to change cannot change in other ways. Joining your family business in India could be the right decision, if all the factors point to yes; but maybe not, if it just seems like the path of least resistance or a magic solution (if you ignore all the factors pointing to no).
My question is complex as I am sure you are used to. I am a young married mother of 3 small kids. My family has a hotel/ restaurant/ banquet business in a fairly small town. My mom retired after 20 years in the navy, and went to work with my grandfather, who is the owner (my step-grandmother holds 25%). He has since gifted my mom about 20% of the shares, with another 4% coming when he feels like it (he is behind schedule, according to their verbal agreements).
I personally have worked in the business since high school and have done well. I put myself through college, after not doing so well when my grandfather paid for my freshman year; and have a BS and am almost done my MA in Elementary Education.
At one point when I finished my BS I got a job outside of the business and was making 45K. I liked the job okay, but missed working with family, so I put in my notice and went back to work for my family at only $12.50 an hour. (I held my degree and am also bilingual English/Spanish, which is a great commodity).
Finally, in the beginning of this year my grandfather approved me getting a raise to $15 an hour, and talks about me going onto an annual salary, but that the business can not afford more at this time etc. etc.
I was called to take a position in a school at the beginning of this school year and felt that since I would be making the same money I make at the business, and be paid to do my student teaching, at this time it was best to accept. With the blessing of my mom I took the job. I unfortunately feel very torn. My grandfather is upset and talks about me being in the business long term and getting stock and living off of the business and that it will be mine and my mom’s to run. I miss working with the family and am not sure if I will ultimately be happy in the classroom setting. I do like working with the students but I also feel there are a lot of drawbacks, and I am still adjusting to the hardships around having a strict schedule and other regulations that come along with working for an organization other than your own.
My grandfather tries to put the responsibilities on my mom or myself, but then criticizes us and also does not empower us enough. I do not know what to do to fix the situation.
Is it reasonable to stay in the family business even though it is somewhat dysfunctional, and I very well may not make near the same amount of money? Should I expect more pay? Should I try and have a written plan for my expectations as to my future in the business as part of my plan on being there? What is normal for a third generation family member?
My grandfather has lived a very nice life but has neglected to ultimately care for the business the way it needs to be cared or, so the concern is that unless things are changed the future maybe bleak. Maintenance and management are not held to high standards and there are no procedures or protocols that are regularly followed. This frustrated my mom and me a lot, but we are ultimately not able to change it without his approval. He has not written out a will with a lawyer to top it all off and is in his mid seventies.
Thoughts? Because mine are
You are describing a complex situation that might be easier to solve if you boil it down to its essence.
You can’t figure out how to compare your choices, because the family business needs care and feeding that you wonder if you’ll be able to administer.
In the “pro” column for working in your families business, you have
- The seeming control and work/life balance of owning your own company
- Your grandfather’s desire to see you work there (part of his mixed messages)
- Your seeming good feeling about working with your mother
- The possibility of earning more than teaching
In the “con” column:
- The other part of your grandfather’s mixed message: you may not have the authority and resources to fix the company, as needed
- Your grandfather’s unkept agreements on transitioning ownership
- The current state of the business, which has undoubtedly affected its reputation and earning potential
It seems to me that a logical course of action is for you and your mother to create a battle plan, of how you would improve the business, if you had the means and the control to do so.
Guesstimate the budget and time requirements as carefully as you can.
Discuss the plan with a knowledgeable person (every state has the free services of the Small Business Development Center, often located near a state university).
Create a clear and simple presentation for your grandfather, and show it at a meeting of the 3 of you, but also, bring along the SBDC consultant, to act as a facilitator (assuming that person is skilled at that).
Make a loving proposition to your grandfather: not “take it or leave it” but more “I love you, and would love to continue the business you built, but can only afford to do so with this plan / with your written commitment / with this funding / with this authority granted to me and my mother.
Keep the love alive!! Tell your grandfather: I have options, and have to decide. If you cannot get behind the plan I’ve created for the company, which does still require your input and feedback, we are all deciding that teaching is my “best alternative to a negotiated agreement” as they say in the world of negotiation.
I hope this is helpful. I’d be glad to hear how it’s going later on, and contribute more to your hopeful resolution.
We're wondering what your opinion might be. My father-in-law started his own business over 30 years ago. My husband and his brother have worked there since their childhood and have now become co-owners with their father. They have 2 sisters. One lives out of the state. The other lives locally and works part-time in the office, but shares no ownership. She and her husband are asking (and not being very nice about it) to be insured by the business because they have to pay for [medical] insurance through his employer and are paying $500/month. It seems like they want a free ride because her brothers get insurance, BUT her brothers are co-owners who work full-time PLUS. What's your opinion? They are basically laying the biggest guilt-trip on my father-in-law and putting him in a bad situation instead of being responsible for themselves. Is it better to just suck it up and insure them to not split family or to stick with policies and require her to work full-time to be insured?
Thanks for your opinion!
Unsure where to draw the line
There are certainly times where the ends (ie: family peace) justify the means (ie: insuring family not in the business), but it's a case by case basis. In this case, let's start by talking about the word "entitled." That term has often come to mean the opposite of the dictionary definition (authorized, eligible); because it refers paradoxically to those who are not entitled.
If working for your company entitles you to health insurance, and a non employee (family or not) is not entitled (the insurance company may even consider it fraud) then the feeling that one is not getting what one deserves is a misunderstanding. In this case, you're saying your sister in law works part time- so the issue is whether it's a benefited position or not (often requiring a certain number of work hours, and the position is officially entitled to benefits).
It behooves your father in law to explain this lovingly and reasonably to his children. It is then his perogative to give a gift of love that might cover premiums for them, on the outside. Or not. Or formalize some arrangement where they are beneficiaries of the business, even if not stockholders, even minority stockholders, which would still not make them employees, but could receive dividends. That's another kettle of fish, in which you may or may not want to add a few golden eggs.
These sorts of discussions (who gets what) are best had pre-emptively, even as the children are young, before there are pressing needs and seething resentments. At the dinner table, the senior generation could tell a story that illustrates how the family business is a meritocracy, where people get what they earn, and earn what they get.
Then, when this situation arises, the parent can say "Remember how I always described the company as a golden goose? And how we needed to be very careful about how we nurture the goose (ie: not tearing off a thigh), and who gets the eggs?"
This is why I agree with the sage that said "there's nothing as practical as a good theory."
My family has owned a western cattle ranch for over a century. Generation 1 created a C corporation in the 1950s to pass it along to future generations, and also created the "Privileged Few Partnership" to own the cattle. The Partnership has always felt entitled to lease the ranch from the Corporation at far less than fair market value, and then sub-lease it to a third party at full market value. Justification for this was to minimize taxes for the Partners. This may have made sense when the Partners and the shareholders were one and the same, but the Corporation now has 17 adult shareholders. The Partnership, on the other hand, is owned by two minority shareholders of Generation 2, Wannabe King and Don’t Rock the Boat. All efforts by the majority of the shareholders to transition to an effective corporate structure and to conduct business in a fair and open manner for the benefit of all have been repeatedly thwarted by Wannabe King, who most recently signed a five-year contract (acting on behalf of the Privileged Few Partnership) to lease the property to a third-party. He did this without the knowledge or consent of the Board of Directors, and without any sort of contract, verbal or written, between the Partnership and the Corporation.
The relationship between the Corporation and the Partnership has always been a verbal agreement, typically renewed annually, however the Board of Directors has not voted to renew this agreement in three years. State law requires that any 5-year lease must be in writing, but no written contract between the two entities has ever existed. The Partnership has continued to make payments to the Corporation under the same (ridiculously low) rates agreed to years ago. In other words the Partnership grazes their cattle for free on Corporation land, the shareholders subsidize the Partnership to the tune of tens of thousands of dollars per year by leasing it to them at far below market rates (at the Partner's insistence), and the Partnership feels free to completely ignore the Board of Directors. Any suggestion that this arrangement needs to be revised is met with an angry outburst and dismissed with, "We've always done it this way."
Unfortunately, most members of the Board of Directors have little outside board or business experience, and have been historically reluctant to confront the angry and argumentative Wannabe King.
This is not the first time Wannabe King has misappropriated the property of the shareholders or committed fraud against a third party by leasing land without authorization to do so, and the situation has simply grown worse over the years. I believe the time has come to put an end to this nonsense, but given past experience I doubt that the Board of Directors will be willing to effectively deal with it.
I wonder if you have any advice on the best way to resolve this crisis in a manner that doesn’t require a hemp rope and a stout cottonwood branch.
Lost My Patience
You may note, in the many complaints on this page, that family businesses are often embroiled in a struggle between classes, be they voters versus non voters, gold-havers versus gold-wanters, and who got their first, versus who came later.
In your case, like many, rights need to be re-asserted continually. I say continually, not continously, for an important reason: continous means without interuption. Continually means needs to be restarted after an interuption.
Even if there was a method to your family's original madness, it clearly is serving a privileged few. You need to gather more than a few unprivileged, to make your point that fairness and transparency are about to rear their gorgeous heads.
I don't know if there's any Rotarians in your family, but it could be a good time to apply the famous 4 way test, known and loved by Rotary. Approach your like-minded siblings and cousins in the same boat as you, and ask them if the current arrangement passes these criteria:
- Is it the TRUTH?
- Is it FAIR to all concerned?
- Will it build GOODWILL and BETTER FRIENDSHIPS?
- Will it be BENEFICIAL to all concerned?
It's a hard test to disagree with, especially since there's no specifics attached. If you were to get several family members to agree that your family business structure is not true, fair, goodwilled, or beneficial to all, you could make a very principled claim, not just for a share of the fortune, but a renewed vision for your family.
Approach the 2 privileged partners, and a smiling but firm group of family, proclaim that you want this four way test to be the litmus test for what happens for all family members. Our country is based on the simple concept of "life, liberty and pursuit of happiness" and people that objected that it has never been done that way had the choice of staying away.
I wish you luck; and even more, the courage of your convictions, and even more, the persistence to spread your convictions.
I enjoyed going through your column and look forward to your advice regarding my situation. About 10 years ago I began working for my step-father's construction company in the field as a carpenter. Within 4 years I showed initiative to be part of the office staff and I began training as an estimator. When my step-father saw how efficient I was working with computers and my ability to read blue-prints he gave me a salary position in the office as an estimator. Since then I have grown into the role of a project manager and I'm learning in leaps and bounds each year. I'm in a good scenario where I constantly see opportunity to fill needs within the company and my boss/step-father usually backs any initiatives I take if he sees that it will tighten profits or cut losses. I have a good relationship with my step-father, he has been a huge helper throughout my lifetime and he's given me a great job. I've worked hard to earn His respect, the respect of the other project managers in the office that are not related and also with the field staff whom I manage on certain projects.
So here is where I'm getting stuck. I've expressed interest in ownership of the company for a couple of years now and the discussions between me and my step-father used to flow more frequently than they do now. He is still only in his mid 50's but he has expressed to me several times that he would like to retire soon yet he never brings me in to discuss how it will all go down. Part of me thinks he may not know how to pass it on or transfer ownership yet. I have 2 younger siblings that are both blood to him and I'm not. I know he sees me as his son and I'd be content with not having a majority stake in his company but I want some of it. My younger sister is just now going to college for a business degree but nobody knows if she will want to work at our company. If she does I know she will be an asset at whatever level. I just don't know what to do. He has told me he wants to see more drive out of me but that always leaves me guessing what more I can take on. I work well beyond 40 hours a week and I always bring my jobs in with substantial profits. I know he came from nothing and built this company to what it is, it is an amazing story…he sacrificed a lot to get what he has…and I don't think it will ever be easy to give up any of it for him but due to his recent bonding policy change they want him to have a plan of succession. This may be forcing his hand to make a decision on what to do soon and I just need advice on what steps I could take to best position myself. I have an incredible opportunity here but I'm not sure how to grasp it.
Some of the questions I have are related to how a potential buy out would even work. Do I first need to become a member? How would I get shares in the company and at what cost? My current financial situation is ok, the only debt I have is in my house and a rental property but I maxed out my home equity to buy it. Do I propose a partnership plan with a phased buy out? I guess what I'm saying is that this circumstance is beyond my experience. I'm currently 30 years old and maybe I'm rushing it, maybe I'm not…I do see myself running this company someday. Any advise would be greatfully received!
There are several questions and issues within your letter, some of which I'll address, and others I'll suggest the expertise you and your step father need to consult, at the appropriate time.
One factor that may be giving your stepfather pause is that he's still a young man, and there are several children who may or may not have an interest and a role in the company; so it may be premature for the 2 of you to cast anything in stone.
But you could begin a theoretical discussion, listing the various places where you agree. It might be good for both of you to understand this is a safe discussion, in pencil, containing theories and leanings that could change over time.
You could include in this "living document" the values you both agree on (hard work and initiative demonstrate next generation leadership qualities; the range of conditions that may define retirement, including scaling back without stopping completely; a fluid situation where younger family members could enter and even participate in ownership, if certain criteria are met; that your stepson status is not different in his eyes that his other children (if this is the way he feels, or at least how he's committing to treat you all equally).
I don't know the strictness of the bonding company's need for a succession plan, but generally, the best succession plan can't be cast in stone, either. It would be good to find out if this statement of values and intentions would suffice; or if they need to know the current person who would step in, if a crisis were to strike.
Several experts need to contribute to your total plan. When there's an understanding of how ownership and control might flow under various scenarios (only you are interested, others are interested, your stepfather plans on selling, and would give you right of first refusal) you could have a business intermediary come in to advise how an insider sale might look, and what shares would cost with a minority discount (meaning family members generally pay less than outsiders). Add that report to your memorandum of understanding, and get comments from your attorney, accountant, banker. You are adding more and more reality testing to this plan, as the relevant experts add their perspective. All the while, you and your stepfather understand that you're building a theoretical model, and not committing to a deal, so that you can bring up all the important hopes, fears, what-ifs, when you can give it your best thinking.
After the experts add their perspectives, it could be time for a family meeting, bringing in all the players, including offspring that are potential business members, and other family members who should be in the conversation. You might want to hire a skilled facilitator to run that meeting, so nobody has to simultaneously act neutral, while expressing their non neutral interest.
It's not a simple discussion, and deserves the time, patience and openmindedness that's required to build something that will accomodate the complexities and realities of your family and business.
My father is 60 years old. He has been managing his business since 30 years. The business is in an industry that I don’t have a passion or any interest for. We have been facing financial problems lately because of the mismanagement of the business. My brother, who is older than me, mismanaged the business with my father, and my father told us that the way he managed the business is wrong. My father is no longer want to depend on my brother. My father at his age should be thinking of retirement, but he can’t because of the business. My question is that if I don’t have a passion for that kind of business and every time I try to focus on our family business, it only last for sometime, and then I lose the focus because I think of different things. At the same time, I feel if leave the family business, and the way it is, they are going to lose it. I feel without me, the company will not function properly, and it will close. My guilt is killing me. I always tell myself that what I want in this life is completely different than what I am doing now. I want to continue my studies in the university as an undergraduate because I still didn’t join the university. What do you think I should do?
Betwixt and Between
If you ask 100 people what you should do, you might get 100 answers. How will you decide? You could do what you want, and suffer the guilt of not helping your family. Or you could do what you think you should, but you’re not interested, and it’s not clear about whether you have the talent to try to fix the problems facing the business. What would be the best contribution you could make, that would not make you feel like a prisoner of the business, and forfeit your personal goals? Could you help your family in a thorough and serious discussion, that examines all the options, including: hiring the talent the business needs, bringing in a skilled partner with a cash infusion, selling the company, you taking on an advisory role for a limited time (again, if you have the perspective and strengths that could help), having the business fail in the least damaging way, and so on?
You also need to sit down with your family for the heartfelt talk about your deep desire to help, versus your deep need to educate yourself and find a path that calls to you more. The shame you are feeling demonstrates your loyalty to your family, but if you could apply an equal dose of reason to the situation, might you express that loyalty without shame, and do what you must?
I hope this helps.
It has opened different ways to view the situation. Thank you. It really helped me. I'm trying to help my family, but when I do, this specific thought comes to my mind "You've got to give 100 percent of your energy and time to what you really want to achieve the success you desire." What is your opinion about it?
It certainly is true that achieving your goal takes everything you can give it. But if you give that 100%, will there be enough left over for the other important parts of your life, not to mention the many minor details that need attending to?
My hope for you is that you can express yourself fully and sincerely to your family, about how much you love and care about them, but you cannot sacrifice your dream to save a business that is failing through no fault of yours. It's not neglecting your family to decide not to join the business, in my opinion.
I'm sure you will do this with love, from how you seem.
My parents own a dry cleaners, which for the last 7 years i have been working. My salary has not increased in those years, so without discussing with them i had been taking money out of the business account to make up for the wages i have needed to survive or better yet live.... Any time i bring up my salary or how the business would not run without me, my parents only look at the fact that i was stealing, and are forgetting the hours i put into this business , which i'm sure are the same for any family business!! It really just seems like the family business thing is a lose/ lose situation. i feel if iwas being paid what i was worth, then there would have been no reason to steal if it's even called that since i was a signer on the banking account. How is it considered stealing, and shouldn't there be a line that states i really am part owner? Please clarify if at all possible.
At the Cleaners?
There have been surveys of convicted criminals, where, more often than not, they acknowledged that there was a line that one not ought to cross; and that they went up to that line, but didn't cross it. Judges and juries obviously disagreed. Did you steal? If you define it as "take more from the till than is agreed" than Yes. After the Civil War, supposedly, freed slaves were routinely underpaid, assuming they were stealing the difference. One could make the case you have a bit of slave mentality, then. And are you underpaid? It depends. I deleted your name and actual income from your letter, but it's possible that someone in your job function in a business like yours should make what you're making. If research indicates you deserve more, that's a discussion that you and your parents need to have, maturely and professionally, where you present the evidence (there are good surveys available- call your local chapter of Society for Human Resource Management to find them in your area). You are feeling a heavy dose of "power imbalance" with your parents- not unusual in a family business- but need to step up, realize you're an adult (even if an adult child, which all adults are, until they're orphaned), and claim your rights. Also, as an adult, show some remorse for deceiving and breaking the trust with your business partners aka your parents, which may be hurting them more than the missing cash. I hope this helps.
I'm hoping you can help me find ways to best approach my situation. My father is a retired professor. When my sister and I were young he purchased 3 small apartment buildings - 14 apartments total. He has a trust agreement set up that upon his death the business will come to my sister and I.
The problem is that my sister has, shall we say, a very volatile personality. She knows very little of the landlord/tenant laws of our state (I have 17+ years in the property management business) and has done several things recently that we were lucky the tenant didnt file a lawsuit for. She gets angry at a certain tenant and is relentless in pestering my dad to evict that particular person (which has happened twice - he evicted on grounds of non payment of rent). She has some knowledge of the maintenance end of the business, but her people skills are atrocious. She has episodes where she lashes out at my dad, mom and I and anyone else who she perceives to be her enemy of the week. She steals things from local stores and starts drinking at 10 a.m. He has a pickup truck he uses to haul things for the apartments and when she drives it she drives very recklessly (I believe he has the truck titled in his name and not in the business name) - my concern is what if she hits someone and they sue us for more than the insurance covers?
The thought of running a business with her almost turns my stomach and I honestly can't envision being able to run the business effectively without wondering what kind of "stunt" she will pull next. I plan to sit down with my dad and have an honest open talk with him about the business, and what's best for it. Can you give me some advice on how to diplomatically tell him of my concerns about my sister having a hand in running the business?
How to Fight Fire?
I make my life as a family business "expert" easier by taking the stand that working with family is not a given, or a default. I feel family members should work with each other if they have enough good will and a strong enough relationship; the talent, passion, and ability to make money that qualifies anyone to do any job with any one; and the stomach, heart and brains to deal with the inevitable differences of opinion and style.
If you can't pass this simple, yet complex, test, consider selling or dividing the company, and/or moving on to greener pastures.
It is unlikely that your list of your sister's faults will change in your lifetime; but it seems that you accept this. I don't know how much your father sees it, or wants to see it. But you don't have to make your discussion with your father a complete Win/Lose.
It may help to create a list for yourself of your sister's positive qualities, skills, traits, even if you have trouble appreciating them effortlessly, and have to see her through more objective eyes.
And then state to your father the behaviors that your sister displays that you feel hurt the business (behaviors, not attitudes or beliefs- stated as objectively as your can!! don't embellish, don't pretend to know her intentions) and how they are so different than the way you feel things need to be approached, that after careful consideration, you've concluded the 2 of you cannot be business partners.
List for your father the couple of options you've come up with for going forward. They might include: divide the company (3 is an odd number, so not sure how this split would be even; or if you'd sell one and split the 2); create a maintenance company that your sister heads, and give her whatever business she wins on quality, price and service (and she could still own half the stock, but not work for the company); and whatever else you think could work. Give him time to add to the list of options, but be clear on what your terms are.
No parent has the right to make children work together if the children don't want to.
Do your very best to stay tactful, calm, mature, generous; but stick to your guns.
It goes without saying, but I'll say it: your sister may have a totally different version of the story, that needs to also be considered. In fairness to all, all sides need to be heard. Possibly mediation between you and your sister could create an agreement, including my favorite alternative job description: "what my job ISN'T."
Great Column & Great Advice!
I have a situation for you that-although I am sure it is not unique- I still cannot find anything similar to compare it against.
My mom was married to my step dad over 50 years ago. I was under three years old & he is the only father I have ever known. Older sisters and I are from my mom’s first marriage-her first husband was an absentee/dead-beat dad.
My step-dad raised us as his own - but never adopted us. After many years of marriage to my step dad my mom gave birth to my brother, and two years later, my sister. We were all thrilled, and are an extremely close family. I thought.
I started a small side business, in my teens, in my parents’ home & eventually it became a good-sized family business. After a few years my father quit his job & began running this business full time. I got married, and worked outside this business, as well as in this business-during any free hours I had. Slowly the business became more and more successful-due to my dad’s efforts and expertise-and everyone's hard work.
My younger brother & sister earned summer wages at the business-and I helped run the business on the weekends. (Since I was married and my husband and I had good jobs, I did not take any pay-we just helped build the business as much as we could in our free hours). Eventually (ten years later) I had a child & quit the 9-5 outside working world & went to work in the family business. Bringing the knowledge and experience I had gained from the outside world helped me grow our family business. A few years later (about 5 years) my baby sister got married, and a year after this, her husband got laid off from his work. My father hired him to work with us, and my brother decided to come to work with the family at the same time, as well. Both men were barely 24 years old.
The boys were made partners- after working side-by-side with my dad and me for more than six years. My dad came to me one day and told me he had made both boys partners. He completely excluded me from the business partnership because he said, "I had a husband who had a good job". This hurt me, and I felt betrayed-especially because my dad had told all the involved members not to say anything to me until it was a done deal, and neither my mom, my brother nor my sister said a word. Angry and hurt, I left the family business-however I continued to work there on weekends-and tried to come to terms with this betrayal. Less than four years later my dad and the boys were struggling to maintain a decent margin and I could see the business losing sales. I came back to work in the family business and dedicated all waking hours to, once again, growing the business. Every couple of years I asked to be added to the partnership-since it is the only way I can be assured that I will ever be part of the family business, permanently. Always my dad said, "I'll look into it".
Now, here I am ten years later & last week I asked again if I could be added to the partnership-my dad said "no, because my brother in law would quit if I was added to the partnership". I was told that I was a valuable and important part of the business - but it was a rock and a hard place. So, I find myself working for my younger siblings and their children's futures-completely giving up my own and my children's future at the same time. I know if I leave - this will leave the family business in a tremendous hardship-as I run most of the sales/production/purchasing and day to day management of the company-but I am needing to leave before this destroys my relationship with my family-I am feeling very bitter and worthless-and if I leave I will feel guilty too.
I have experience in a completely different field that would grant me a great job with wonderful benefits-but that I cannot stand the thought of doing on a day-to-day basis. I obviously love what I am doing. I could become a partner in one of our competitors businesses and be happy doing what I love-but that would seem like a declaration of war against my family. I love my family and no matter what I do it would seem that I am going to lose out in the end. Any advice? Even if you were to say, "I hear you, and feel for you" it would help me with this struggle.
Am I a Rock or a Hard Place ?
Dear Am I?,
I do hear you and feel for you, and hope that helps; though I doubt it will get you one step closer to partnership.
This is another version of the great family business story “If I Knew Then What I Know Now.” If I understand what you’re saying, YOU started this company, and contributed largely to its success through the years. Looking back, don’t you wish you did the legal groundwork to make yourself the sole owner of the company, and had contracts for all the employees, even if they were family members, even if that included your stepfather, who raised you “as his own”?
You don’t say who owns the company now, or who officially has the authority to make the decisions that are being made. Technically, the decisions going forward should be made based on business sense, but also, it seems like much of what has already been decided has been based on the circumstances of family, and traditional assumptions: this person needs a job, that person has a successful husband, if I leave the business I’m leaving the family, we can’t do the thing that will anger so-and-so.
At this point, you need to decide the cost of exercising your rights in this business you started and repeatedly repaired (as I always say, there’s probably other sides of this story). Will it cost you your family relationships? Will that expense make it impossible to work with family? What conversation with which family members will increase the understanding of your position, even if it doesn’t get you what you want? If you choose to compete, how can that happen with any better outcome than option A (demanding your rightful place in the partnership)?
Ideally, you could all- at a planning retreat, or at least over time- examine your contributions to the company, and do some sort of rebuild, looking at who does what based on what the company needs to best succeed, and who gets what, based on what they bring to the bottom line. You founded the company, but your step father steered it for a long while; and it doesn’t seem clear, from your telling, about who is most responsible for past success- but in this exercise, it would be more future focused, anyway.
I’d also be very careful about how you communicate all of this to your family. If your goal is to maintain healthy family relationships (a close family doesn’t mean a group of excellent communicators), you might want to stress “me wanting to be a partner does not mean I’m taking anything away from you- I think together, we can make the pie larger, and all enjoy more success together” etc).
I wish you luck with it all. I also suggest, as I often do, that you bring in a skilled facilitator to keep the conversation clean and productive.
My father and I are manufacturers' representatives. We are essentially brokerages for tangible items.
My father also owns a store and has a manager run it. He uses his financial leverage to keep his side business afloat.
My concern is verbal IOU's and promises of making me in control of the company. My father does not want to let go of the reins or communicate any financial issues.
This year will be a good year we have a lot of good opportunities which I don't want to sour our future.
What resources would you recommend to get everything in writing? I am now also worried about tax consequences if transferring the family business to my name is not done correctly. We are currently financially strapped but I anticipate the next couple months to bring some windfall in our favor.
Need It Done Right
Knowing what you need to know is a good start. Your father may not have the answers, but hopefully has the expert advisors that could, or should.
You might make the point to your father that you need to tighten up the terms of your working relationship, so that you can sleep at night, and take the measured risk of investing your future in the family business.
You sell an invisible service (brokering) for tangibles. And your needs, going forward are both intangible (trust, communication) and tangible (clearly written agreements, tax consequences). The resource to get in writing what needs to be in writing could be a mediator, who hands off your agreements to an attorney for translation into legalese, and a tax accountant, who clearly outlines how to keep you in compliance.
Those agreements might precisely outline each of your responsibilities, contributions, expectations for financial return, risk tolerance (how to identify an opportunity you both are willing to take a risk on), and ongoing company policy.
But you should also have a written agreement that defines the boundaries you each need to respect, including that the purpose of this business is not to bolster a side business; but rather, to be a sustainable and profitable freestanding business that pays what it should to owners. And then, what your father wants to do with his fair share, he can.
In my opinion, you need to be ready to insist that this process provide you with the communication, officialization, and commitment to deliver on promises you need to be comfortable. If it cannot, how could you justify still proceeding along?
Q: In the "Incumbent-Generation Leadership: Governance and Resolution of the Past" of Poza's chapter 13 it explains how important it is for the next generation of a family business to focus on building the future of the business. But, building the future cannot begin until the problems from the previous generation have been resolved. To tackle these problems the new family members sometimes have to "prune the family tree." This must be a very emotional situation that could have devastating effects on the business and the family. Are there any known tactics that the current generation can use for "pruning the family tree" that neutralize the situation?
A: A family business entering the next generation would be helped by a discussion that is somewhat philosophical, but with very practical consequences. Have a facilitated mini retreat where family members of all generations have prepared, and will now deliver, a short talk that answers the following questions: What is the work ethic of our family business; and is it a match for my own work ethic? Does our family business attract workers with the necessary talent, passion and ability to make a profit? and I a good match for that, or can I improve our meritocratic profile? How is our family business a great match for who I am and what I can contribute? If it's not, what would I be better off doing for work? Why work in my family's business if it's not a good match? How can we create employment policies that attract the talent we need, and allows family to work here only if they are a good fit? How do we ensure that our family is welcoming to all of us, whether or not we work in the family business? After a well constructed exercise that covers these issues, you might find family members feel liberated to leave, or can be released from the family business prison (even if they were willing prisoners), with less shame, anger, and confusion; not to mention, clear and proud about why they are there, if they do belong there.
My family has been in the dairy business for the last 28 years with my father in law. My husband has always had the understanding that the business would continue and our middle son is interested in keeping it going, there are only verbal agreements. We are at a point where MAJOR rebuilding needs to be done (new dairy barn) in order to keep business going and now my father in law says he will sell out and basically keep everything.
Over the years we have made huge mistakes in trusting this man to do what would be right for all of the business and us. My husband has worked everyday for 28 years running the dairy and allowed his dad to take care of the “business” side of things. We have cows that we bought through 3 different lenders but somehow when borrowing more money they got lumped in with my father in laws without our say so or knowledge.
When the discussion of selling out my son asked “what about my dad and the 28 years of labor and management that he has put in every day” and the answer was “well if you work at Wal Mart for 30 years and leave or retire or move on they give you a party”
We have been naïve. His father is not and never has been a reasonable man. He has convinced us that our cows, home, every thing except our personal vehicles and household items be in is name. He has made the comment that those things that are ours are really his. This man has no respect for right or wrong and common decency. He will screw over everyone to be number one and come out on top.
There is so much more to the history and we feel this man hates us and will stop at nothing.
My husband asked me last night “why does my dad hate me?” and after many years I realize its because he is nothing like his father. He is a good man, husband, father to three sons, and would never screw someone over.
We are in danger of losing everything and have no idea where to start, but it needs to be fast. My husband and my family know that this is the end of any relationship with his family and we will be better for it. What should we do?
Down on the Farm
I am sorry to hear the degree of pain you and your husband are in, not only from the threat of losing your investment of time, money, and love; but also the betrayal by a man who seems, from your telling, to have no remorse in exploiting his son and family.
It does go back to the old "verbal agreements are as good as the paper they're written on," though painful to realize that a family, especially a family that prospered from each other's efforts for 26 years, cannot count on one's word as bond.
Your options are few, I regret to say. There is the option of hiring a sharp and aggressive attorney, to help convince the court that what's yours is yours (or possibly, what's your father's should be yours). As you say you're ending your relationship, no matter what, this would just be icing on the cake, to go out with a bang, not a whimper.
There's walking away, and applying yourself to the healing process; of forgiving yourselves for your naivety, and maybe one day finding a way to make peace within yourself, enough to even forgive your father, for he knows not what he does. Picking up the pieces, economically, might be easy, compared to the forgiveness work.
Perhaps there is some way to strategize in some clever (but legal) way to buy from your father what is yours. I don't know from your telling exactly how you bought your home, or the cows, and if what your father did was illegal. If there were just shaky agreements made, and now you'd have to pay for what you expected to be gifted to you, you are at a square one that is common, when the agreement in a family business is that the next generation needs to pay for the company. Typically, though, there's a minority discount, or reasonably, legally favorable pricing for an inside sale, that you are not getting, it seems. Or consideration of how the value of the business was, in some large part, the sweat equity of the buyer, ie: your husband.
It seems clear that there will not be a friendly resolution, barring an epiphany on your father in law's part; or another family member or trusted soul, who can come in and talk some sense into him. You cannot force an unwilling party to mediate; but maybe there's an intervention possible- someone he trusts and respects.
But often the most likely answer is the best answer. In this case, it may be that you and your husband are learning a very painful and expensive lesson, again, sorry to say: Trust your father, but cut the cards.
I love your web site, column, stories and advice. What a great find this past week giving me some hope for the following problem
My son has recently “quit” our successful 15 year family manufacturing business … again. He is 37, divorced with two children and no source of income now but has borrowed enough to keep them going for about 3 months.
He wants to be in “control” of his life. He is extremely talented and wants to do his own thing now with out my influence. Your statement about General Patton and Albert Schweitzer really hit home. He calls me GP but of course I don’t see it that way at all! But he is more a Schweitzer than a Patton for sure.
How do I manage moving forward, keeping the business going and being prepared for the financial problems for him, us and the business when he runs out of money?
We need help.
Generally Concerned Mom
Dear GC Mom,
Thanks so much for writing, and for letting me know you enjoy the website.
As I frequently remind people that write the advice column, it's hard to make an accurate diagnosis hearing from one party in a complex situation. It's also difficult to hit the bullseye when you hear everyone's perspective, as you are limited by how much people understand their own motivations, and live under the constraints of fear, finances, family loyalty, hurt, regret, and a million more.
My sense, from your explanation, is that your son is risking a lot by leaving the business, reportedly successful, to face a dire economic burden in less than stable circumstances. He must really want to not be in the business.
What does he really mean by wanting to be in control of his life? Are the conditions of the family business stripping him of any sense of control? That sort of powerlessness is always said to be a major cause of job stress. Can conditions in the business change to increase this sense of mastery? Or does he need to make it in the "real world," in the sense that many successors in family business think the family business is a humiliating safety net, for reasons real and imagined.
Besides seeing you as the command and control leader, and himself as reflective and altruistic (assuming these are true, or at least his impressions), it's quite possible that his talents, however fabulous, are not what the business needs, in which case he may feel he is squandering his potential in the wrong venue.
I'd suggest a discussion, together, if that's in the cards, facilitated by a neutral and creative person, where you do a needs assessment and a skills assessment: of your company, of him as an individual and worker (for your company or another employer or sole venture), of you, as an individual and as an employer. Trying to be as objective as you can both muster, see where the skills and the needs intersect, and where they don't. Agree that there is no benefit to putting square pegs in round holes. This may lead you to conclude that a replacement for your son as a worker in your company may be a blessing in disguise, and maybe you can have a more fruitful relationship as mother/son, than employer/employee.
Be prepared to give him some distance, so that he can achieve what seems quite reasonable for a 37 year old man. Though a man that age may be closer to the stereotypical "mid life crisis," wanting new and more meaning in their life, they still may be struggling with very elementary questions, pondered even in childhood, to develop autonomy and self-esteem, but often not answered till much later: Can I make my own decisions? Can I control things? What if I can’t handle things well?
I'd suggest, for the greater good of your relationship with your son, to set a ground rule that the family business is no prison sentence, and if he doesn't want to be there, he shouldn't be there. Do what you need to do to keep the business operating properly. Consider a loan or gift, if you can afford it and are so moved, to keep him afloat. Buy the book for him "Now Discover Your Strengths" by Marcus Buckingham, and tell him it's your gift of love, hoping he finds his true passion in work.
Also consider if the business, seen strictly as an investment, is better sold to someone else that operated by you; especially if your hopes and dreams relied on you working with your son. But don't make rash decisions on this matter. Figure out how to weight the pros and cons of your various options.
Find a trusted person to help facilitate the conversation between you, if you're having trouble communicating.
I wish you all the best. Feel free to write again.
I have been working for my father's business for 24 years. He is 83 years old does not want to quit. He recently has decided to give all 100 shares of the company to my sister. My sister and do not see eye to eye. I have decided to move on to another job, of course it is in the same line of company that my father has. Knowing that this is going to really be a bomb for him but all I have ever done is sales in this industry. I have 3 kids, 2 in still in the university and one getting married this year. How should I approach this matter when resigning? Please let me know. Thanks.
Doing What I Know
It's easier said than done to advise you to be sensitive, logical and empathic, but also determined. I don't know you or your family, so there may be no avoiding feelings of betrayal and ingratitude, or proclamations of "this town's not big enough for the two of us!" But if you can think through the reasons you cite, and get your father (and sister?) to listen (or read?) your reasoning, including you forsee a lack of chemistry in your business relationship with your sister (may you both grow and prosper, but not under the same roof) and that you have a pressing need to make a living to support your family (aka his family), so you need to get up to speed quickly, doing what you know; and that you promise to be a ethical and professional competitor, who will do no harm to family relationships; and you fully expect to remain a fully vested member of the family (work is work, and family is separate). You may also throw in "I understand if this hurts or confuses you, but I hope and trust you will realize that I am merely being realistic and finding work that is lucrative, and avoids certain conflict with my sister (I'd rather have a good family relationship with her than a bad business relationship, which will also create a bad family relationship.) If your father (or sister, or others) don't understand your thoughts and feelings on the matter, don't get mad. Just do your best to remain clear and calm. I wish you all the best in handling this delicate matter.
To cut a very long story short - my friends are involved in a family business with their elderly mother at the helm (father died some years ago). Very successful it is, but in grave danger of breaking down completely.
Mother will not allow the sons to have a say and constantly belittles them. One son has walked out (seems no hope for return). The Mother is not in communication with another of her children. She seems to think he is not being supportive to her with this issue (he does not work in the business); he doesn't want to take sides. She is quite well known for this behaviour both in business and privately. Can someone like this be reasoned with? If not, can there be damage limitation? She has no contact with grandchildren and is in danger of losing those left (she has had long periods in past of not talking to people) What is going through someone's mind when they take action like this and how can she be reassured ? How can the family at least have a reasonable relationship with her?
Watching from the Sidelines
There are definite personality types, but no two people are alike, so I can't recommend some instruction manual about how to best interact with your friends' mother. But if she's elderly and has gotten this far in life with her particular styles, and this is how her children and grandchildren are still reacting, I am not so naive to think there are major improvements in store. Also, not knowing if, for instance, she is talented and demanding (and her children are bailing in response to her demands) or if she is unfairly belittling capable children, also hard to referee. I will say this: if the business is very successful, why? Somebody/something is contributing to that success, and that can probably be assessed by objective outsiders. If it's the kids, they can take their marbles and go home, and maybe establish a more workable relationship with their mother once they are not business partners. If success is the result of their mother, and they can't work for her, it probably also means there's a business divorce in their future. If it's the sibling partnership, best to have the siblings meet together and decide if they can build something without their mother. This is all to say I can't know the "true story," if there ever is such a thing, from a distant perspective.
Thank you for your reply, it is very interesting to get an objective view and it is a very concise answer - it is true - the full picture is difficult to observe as everyone has their own angle on the situation. There is a lot of raking up the past, where Mother points out how much money she has given and sons think the money was earned anyway. The son who has left, I think, might be a permanent situation and the relationship will have broken down completely. Mother is also not talking to the son who does not want to take sides. The siblings are fine between themselves but the son who is not in the family business and is not being talked to would like a relationship for him and his family. How to achieve this whilst not getting dragged in to the mud slinging?
Watching from the Sidelines
It takes some flexibility on all concerned to follow some rules of decorum. It could be as simple as everybody brings $100 singles, and whomever curses, blames, uses the words "always" or "never" needs to put $1 in a jar. Set a limit for the meeting, short of the time it takes to usually misbehave. This could be 3 hours, or 20 minutes- you decide. At the end of that time, end the meeting, and whoever put the least money in the jar, wins the whole jar.
I have been dating this great guy for 8 years. He has 2 children - divorced - and has been living with me for 5 of those 8 years. My income is considerably more than his. He works in a family construction business for the past 11 years. His dad started the company 35 years ago and his brother joined forces about 15 years ago when the parents sent him to technical school to get a degree in construction and paid his tuition. My boyfriend was the 1st born - the family did not have the money - so he joined the air force and married shortly upon his discharge. This is the issue. He has been making $12/hr for the past 9 years and they recently raised his pay to $15/hr. He is considered VP of the company and his brother is President with dad still functioning as founder of the business and receiving weekly stipends from the company. His brother makes considerably more - $20/hr and draws a straight salary as a partner - my boyfriend is paid like an employee because they don't want his ex-wife to get her fingers into any of the company's profits. Well...years go by and nothing changes. My boyfriend refuses to rock the boat - actually feels he is getting paid ok (has low self esteem) and the brother's quality of life continues to soar. His brother's spending habits are questioned by everyone in the family - but no one addresses it. His sister-in-law does the books and many times they are paid cash instead of checks. I know what I make is considerably more than what his brother makes - and I can't afford to do anything close to what he does. My boyfriend gets treated as an employee - but works 50+ hours a week all these years - BUT NO OVERTIME! He is in the office doing the SAME job as his brother - getting jobs and doing appraisals. This situation has hurt our relationship - on my end. I continually ask him to speak up so that the quality of life we have improves. He refuses to do so and always say that things will change down the road. It has been 7 years and nothing has changed. He told me had a 401K and when I asked him the details - he had no idea. It turns out the company put $1000 into an account 6 years ago - but no contributions have been going in since then. The writing is on the wall and he won't do anything about this. It is very frustrating to me when I work hard everyday and am always looking for a way to improve our quality of life and he just accepts things the way they are. I am very resentful towards his family for allowing this to happen. Even though I love this man - reality does kick in and I don't understand why he does not speak up for the sake of our future and well-being. I can take care of myself - but I should not have to baby-sit someone else. How can I get him to face the facts about what is going on instead of him sticking his head in the sand and pretending it is not there?
Writing on the Wall
I am continuously amazed that a large percentage of the world's economy is based on the performance of companies with this exact dilemma. The industries and dollar figures change, but the unlevel playing field is just the same. I've only heard your side of the story, and there are no doubt others, but still: There is no reason or excuse for family members to get paid less than non-family, or in any amount less than in proportion to their contribution to the bottom line. Being older, mom loving you best, you getting there first, are all lame compensation strategies. And family businesses need to be operated with more openness, less secrecy, and no deception, and most importantly, family members should not stand for unfair or unprofessional treatment. I am amazed at how many stories I've heard where people won't leave (meaning quit), believing that half a stale loaf is better than none, where they could do at least as well, even down the street in somebody else's family business. Or in a career not dictated by what you were born into. It could be that your boyfriend and his brother are each making exactly what they deserve on the open market, but at least they should be able to test that theory by putting all their cards on the table, telling nothing but the truth, doing some solid research, and not endangering the family relationships, as well as the business, with less than total professionalism. I'm sorry for your boyfriend's predicament, but like many people, they need to decide where their line in the sand is drawn. ON THE OTHER HAND: an owner of a company is not compelled to share the wealth with employees or non-owning family. A sibling who wholly owns a company and underpays a sibling is within his rights to say "this is my company, and if you want to be an owner, go open your own." However, that owner/brother might wake up one day without employees or invitations to family gatherings. Hope this helps.
I am a fourth generation leader of a private family business who is beginning to accept that I will be the last in the family line to hold this role. Neither my adult son nor daughter is interested in taking over,
though I believe both are up to the job. I am in my late 60s and would like to retire. Obviously I can sell the business, but I don’t want to lose my connection entirely, or see it go in a direction I’d be unhappy with.
What ideas do you have for keeping a hand in?
Throughout 4 generations of your family business there were surely those who could not let go, who may have “semi-retired,” working only 5 days weekly, serving as board chair, second guessing successors, or enjoyed being the subject of “What would (your name here) do?” If they’d sold the company, continuing consulting or serving on the board, they would not release their hand from the steering wheel, remove their foot from the brake. Very understandable, very satisfying for you, but what did the new owners pay for? I vote to cut the cord, and make your unique mark in fresh ways! Join a think tank, becoming an industry futurist. Start a provocative educational industry newsletter, inspiring the best and brightest from all who’ll listen. Found a “20-group,” and facilitate great thinking between non-competing colleagues. Teach entrepreneurship to the offspring of your peers. And consider: you accepted a very old baton, luckily enjoying it. But what aspect of it did you most relish? Maybe focus in on that, heading off to greener pastures and sunnier sunsets.
(my answer to a reader's question, reprinted from Worth Magazine, July 06)
My husband works in a family cabinet making business with no outside employees. He is one of 6 children involved in the business begun by his parents years ago,
and the one slated to take over the business when his parents die. Both parents are in their 70's, active in the business, and still making most of the decisions. The rules and
structures once instituted by his father have been let go as the years have passed. As he considers how he will run the business, my husband needs some resources to help
him put together an accession strategies and strategies to address the lack of structure in the business. Any suggestions?
All the Family In
Dear All In,
At best, they could start with a facilitated discussion about the strengths, weaknesses, opportunities and threats facing the business in the 1,3,5,10 years ahead (aka SWOT analysis). You could find a local facilitator through your state's Small Business Development Center, or ask your local chamber or family business program). From the SWOT, you could form a strategic plan that gears your objectives and goals to the longer term mission and vision of the company. This will lend itself towards the job descriptions, performance evaluations, compensation strategies, goals for return on investment, etc., that are the proper policies for any company. Each of those items is an interlocking big step towards creating a system of doing business that will take a lot of conflict and heartache out of the mix. A more advanced step is to form a board of advisors, made up not only of family members, but also interested outside experts, ranging from some of your service providers to local owners of other companies, business faculty, or people expert in some area in which you are looking to perfect yourself (customer service, quality, internet marketing). I am continuously amazed at the number of companies that do all of this very little, and still manage to muddle through, often making small fortunes (and often making small fortunes out of large fortunes).
If your husband and his family started down this road, there would be no looking back.
I finished my MBA in California last year. I came back to Turkey to start in my parents' company. I grew up with my parents' company. My parents always push me to work in their company. I have been working in this company for one year and half. My parents' company produce machines for house hold companies and automotive companies but I am not interested in their business at all. I feel like, if they passed away, I cannot do anything. Currently, I am just killing my time in their business. I try to talk them but they do not want to understand why I am not interested in this business.... So I stopped talking with them about my ambitions. I am like secretary at work. I just send emails, send offers. I am not putting any efforts to my work. I do not know what I am going to do. I do not want to be nothing when I become 30. Thank you for your help and time.
Not Talking in Turkey
Dear Not Talking,
You may feel that you have no choices, and are obliged to continue on this unsatisfying path. But I urge you to consider that if this is not a win/win for you and your parents, it is everyone's loss, not just yours. Whether or not your parents can see that they have an obligation to allow you to pursue a meaningful career, whether in another company, or in an improved situation in the family business, it is incumbent on all of you to make it happen. You might consider making them a very sensitively but assertively worded ultimatum: that your long term plan is to pursue a career that is rewarding, either in or out of their company. This will not happen overnight, so discuss with them a Plan A and Plan B. Plan A would be a process of discovering what aspect of the family business might be a match for your strengths and interests, and pursue that for one year, and reassess. If at the end of one year, you are as pessimistic as now, consider Plan B, which is you pursuing other jobs, or a venture of your own. If they will not speak with you about it at all, consider that a big clue that Plan A is not likely to occur. You have no obligation to be a prisoner of your family business.
This all assumes that there is a type of work out there that would excite and interest you more, and that is something you must honestly contemplate before leaving. There are good assessment tools for this sort of reflections, among them the book "Now Discover Your Strengths" by Marcus Buckingham.
I am hoping you can help or at least point me in the right direction, as my research on the internet is yielding no progress. Let me start with some background. I don't work for a typical family business but I do work with both of my parents, they are my bosses. My father left his job and started an environmental consulting business 15 years ago, when I was 10. My father has been sole owner and president since the beginning and my mother has always been the office manager/accounting manager (most consider her to be as much in charge as my father). The business started from our family basement and now has over 15 employees and my father has started a sister company on the side. I took a lot of pride in my father and his dreams so I enjoyed helping out from the beginning by doing little things like filing and answering phones. While growing up I would work after school in the office, helping with office management and small projects and eventually during college and high school I would take time to come into the office so that my parents could take vacations together. My parents were able to leave the business because I would handle day to day operations (we are a consulting firm so managers needed little help from my father to keep their projects running). I went off to college but was very unhappy and ending up leaving to deal with some personal issues. For about a year after that I bounced around in temp jobs trying to figure out my path in life and school but keep working at my father's company when needed on a part time basis. Let me also say that at no time was I ever considered an employee of the company, my parents paid me as an office expense - all very legal with the accountant and lawyer. After a while, I moved out, finished my college degree and found a temp job that wanted to hire me full time. At the same time, the same week actually, my father asked me to come in for an interview at his company. I interviewed at both places and decided for many reasons to take a full time position with my father's company. I am very happy working for my father and for the company and although the company's field does not interest me, I do work here in an administrative management arena that does interest me greatly. I enjoy what I do. However, I don't enjoy who I work with or the attitude toward me as a family member. You see, since I started here about three years ago some of the other employees (all non family) have felt resentment toward me. They have not (to my knowledge) spoken out against me to say that I was only hired for who I am related to but they make me aware of their feelings in other ways. For example, part of my job is to contact clients who owe us money after a certain time has passed to make sure they received the invoice and to find out when we will get paid. I handle this work for all of the project managers except one. He asked me not to contact his clients but did not give a reason. He has made it clear to me in certain requests (or lack there of) that he does not trust my work nor does he agree with me working here. Financially speaking, according to our accountant and my father, I have become indispensable at work because I keep our aging down significantly and I was single handedly responsible for implementing new procedures and programs that saved us over $500,000 in the first year alone (for a $2M business that is a big chunk of change). I can honestly say that at first I expected a somewhat hostile environment; I expected to have to work extra hard to prove that I was hired on my own merit and not based on my DNA and so I approached my work with confidence. To be fair, some employees (mostly those in my generation) have changed their attitudes and have begun to see me for my abilities, not my family ties. My father does not give me special treatment: my wages are not inflated, I do not own stock, I am given my share and no more during profit sharing bonuses. Actually, to his credit, my father has made a very conscious effort to make me just another employee. However, it seems as though those who do not see me for who I am are making things worse for me at work. The comments, attitudes and behavior is getting to be a distraction and is causing me to not want to come in each day. When I attempt to speak to my father about it he tells me that I should understand how they feel. He thinks that since most of the older managers knew me when I was little that it is hard for them to accept me as an adult in the workforce but that with time they'll come around. He says I should grow a thicker skin but it seems as though some of this behavior is getting worse each day, not better. I kept a log of the behavior/comments I was getting and discussed them with my father. He spoke to the employees in question but so far he hasn't held them to any of the consequences he outlined for their behavior. I don't want to force my father to take action but I no longer feel comfortable at work. I find myself emotionally torn between my love for my family and this business and the hostile attitudes I face when I come to work each day. To make matters worse, I have discovered some financial problems that the two vice presidents are bringing upon the business. It is not anything secretive or illegal, just some things that if fixed would help us yield more profit each year. I have come up with some things that would help the company turn these financial issues around but it is hard to get my father to stick to his consequences with his employees. My father likes to run both the management (president) and be an active project manager himself, so getting him to sit down and make decisions abut the management of the business is hard to do. I guess in reality I have two issues I would like advice on. First, other than leaving this company that I have watched grow and feel such strong personal ties to, is there any way to confront the employees in question and get them to take me seriously as an employee, not as the daughter? I feel as though I have tried every approach from being passive to being aggressive, nothing seems to work. And second, if I can't affect their behavior/thoughts regarding me, is there some way to resolve this issue with my father to get him to take action on my part. I think he is afraid that if he takes action it will look like favoritism when in reality, it will be normal consequences. I don't want special treatment, I just want to feel comfortable coming to work each day.
Side note, we did have consultants come in and give us advice for the business (including having my father set up a contingency plan for retirement and setting guidelines for my role here) however, not one of their ideas has been implemented yet by my father!
Thanks in advance for any advice you can offer.
Daughter in a not so family business.
Dear Not So Family,
You have described a situation where everybody's point of view is completely understandable, yet not all are at all acceptable.
This could be a happy story except for the disregard you are receiving from what seems like a minority of your father's employees. You like your job and are succeeding in a measurable way. Your father is paying you what you have earned, and not treating the company like a safety net. You have discovered talents that are certainly transferable to many sorts of companies. You have survived a trial by fire, and earned the respect of several people who were skeptical.
Many adult children working for founding parents face exactly what you're facing, and live with scorn, jealousy and resentment. And many of those adult children don't do enough to disprove their reputation (harder to disprove in cases where it's deserved).
To cut to the chase, I would hope that you can clarify for yourself and your parents how disturbing it is to be treated badly by people who owe the business owning family more respect and diplomacy. Would these irritated workers treat any new employee like they're treating you, or are you being discriminated against because they think you are being favored? Are they so unaware of how they are creating a hostile work environment? Are they unaware of how this hostile attitude reflects on them as workers? Are they so unable to restrain themselves and act professionally?
I 'd suggest you sit down with your parents for a serious discussion of the conditions you need changed with all due haste. While it's admirable your father has not discriminated in your favor, he needs to "have your back" to ensure specific fairness to you and to protect the greater good in your company. If he will not defend his daughter from this behavior, he might not defend a non family member who will sue for a hostile work environment.
Also, it would be good if you and your parents could focus on a set of principles and policies that are necessary to sustain a professional and profitable company. If a salesman insists that you not contact his customer, he could be protecting a customer that is not paying promptly. He could be protecting himself from the due diligence that your company is entitled to perform. In an exceptional case, if that salesman would agree to comply with appropriate measures to monitor accounts receivable, you'd be achieving the desired goal. But to allow your employee (whether technically consultant, contractor, or hourly earner, no matter) to bluster his way around policy, say no.
And if there are problems caused by even Vice Presidents, work to create policies that indicate that the highest goals of the company are to increase shareholder value, eliminate waste, and become as sustainable as possible. These practices will create long term employment for all, not short term avoidance of confronting key managers.
I would suggest you have some responsibility here to grow yourself as a leader. There are various ways in which the next generation needs to "step up to the plate," either financially, managerially, or to deal with the 800 pound gorilla. If you take the gorilla by the horns, it may surprise everyone that the owner's daughter has what it takes to be the next boss. (and if not, it will make it clearer that this is not the place to come every day).
You can do all of this with a smile, and the satisfaction of knowing you have improved the company that provided for you, your family, and your employees.
Hope this helps.
From Family Business Magazine's "Ask the Experts" Column
Reprinted by permission of the publisher from Family Business Magazine, Summer 2004, www.familybusinessmagazine.com
The Niece Who's Knocking at the Door
Q: We own a manufacturing operation with about 160 employees. Dad is not active now, and I'm the person responsible. My sister runs a small branch distribution office. Her husband works out of that office as a salesperson. There are two other people in that office. We are reorganizing and plan to eliminate the two other office functions by moving them to the home office. My sister wants to hire her 23-year-old daughter, who has a two-year degree, to fill the soon-to-be-created position of office assistant. From everything I understand, this is not the right thing to do. However, my sister can't understand why. I have two sons about to exit college. My other sister has one son, now out of college, and three daughters still in school. The ex-husband of this sister used to work in our company before their divorce. We are not yet sure who else might want to join the business, but one of my sons, who will graduate with an industrial engineering degree next year, has expressed some interest. Is there a list of do1s and don1ts regarding employment of family members in a family business? I have not gotten around to documenting a family employment policy yet. I hope it is not too late. Any help along those lines would also be greatly appreciated.
A: While there is no "etched in stone, gifted from above" list of do's and don't's, many experts and wise owners suggest a set of professional policies that - while not ignoring the family relationships, set them aside- and raise the hiring bar enough so only the very fit will clear.
But blindly submitting your family to this rigor does not guarantee the family and business the health and wealth that is the implied reward.
Rather, there needs to be deep understanding and appreciation of the meaning and purpose of whatever rules and policies your family business sees fit to abide by. To deny a relative a job because she does not have a business education or prerequisite outside experience could seem biased and discriminatory if she could get a similar job in someone else's family business.
But if family members understood, through a deliberate and complete education process, that your company is a meritocracy and not an employment agency for family members; and that deserving relatives might have a leg up in landing a job, all else being equal in the hiring process (affirmative action for family, in essence), then you will attract the most talented of your family's talent pool, and maintain the morale of non family employees. By preemptively stating that your business has standards not bent for family, you may maintain the dignity of unskilled relatives, by warning them to not apply for jobs that are beyond them.
Great care must be taken to explain the wisdom of paying market wages, and separate from an owners ROI or worker's merit bonus; or family members will suffer the consequences of too little pay ("Someday this will all be yours"), equal pay ("I won't discuss that one child is more capable than another.") or too much pay ("Here's a huge allowance - I hope you love me."). Properly done, your family members will respect the rights and responsibilities of the company, which is a sacred Golden Goose that must not be slaughtered to feed gluttons.
If your family belief is "family members must be twice as good to get half the credit" it should not derive from a lack of appreciation, as much as going a bit overboard to define the work ethic required by all. If you see the benefit to make decisions that are strategic, fair, and objective, you might see the benefit of outside boards, search committees, performance evaluations, compensation policies, even if you're sure you could do it all on the fly.
The time spent to aculturate family members into the values and beliefs that will help sustain the business is a valuable investment that will increase profits and respect, and protect against heartache and red ink.
This "Dear Ira" Q&A is reprinted from Family Business Magazine, which offers our readers the special discounted rate of $57 (new subscribers only—not for subscription renewals.) This special pricing (regularly $95 per year) is a value-added benefit of our newsletter and/or center membership. See www.familybusinessmagazine.com for more info, or call (800) 637-4464, Ext. 6072. YOU NEED TO MENTION YOU WERE REFERRED BY THE UMass Amherst Family Business Center TO RECEIVE THIS SPECIAL PRICING!
My father was born in 1925, and started a restaurant in 1954. He died in 1976. He attained sales of $600,000. He left me, my younger brother, and my mom equal stock. I was accepted to college to study biology, but ended up staying to run the store. I saw excellent potential. At the time my half sister was a manager who worked 15 hrs a week, and was paid a big salary. My mom was great with customers but had no clue about the food, and costs. My sister just sat at the bar and partied with the boyfriend of the week. I learned every position until I knew I was the best. I worked 60 hrs a week cookiing, bartended, hosting, serving and so on for over eight years. My grandmother was paid $30,000; my sister $30,000 my mom $100,000, plus all on insurance. My brother graduated high school in 1990, then moved to the west coast
to attend the community college. He started calling me very late, talking gibberish. At this time I already had a very small home that I owned, and was engaged. Sales were over $950,000. He was involved in drugs, so I flew to L.A., rented a car, and made him come home with me. Rehab and so on. My sister would have me cook on a nightly basis, very late, for her and her flavor of the day; and after they drank all night. Shortly after, my brother started working in the office with my mom, grandma and 2 office women. My mom paid him what I make after 7 years of work, for doing nothing. I learned all my fathers baking and cooking skills. I could run our ovens alone on a Saturday night. He never learned these skills then
- and still doesn't know - or ever ran our ovens on any day, much less a weekend night. He never worked for the company. I took us to $1.7 million, catering corporate meals, schools etc. Ten years ago I opened a carryout delivery store, which I set up, staffed and designed. When we opened we did $600,000 out of a 1500 sq ft old gas station. Six years after - against my wife's feelings - I agreed to open another with him, though sales were drastically slipping at the first carryout (down to about $420,000, plus costs were horrible). He never worked or rarely spoke with his employees. We had an agreement he would run the small stores, I would keep running our golden goose. Then he said he was going to be a millionaire with these carryout delivery joints. I cook all the sauces, bake all the bread and ship it - on my payroll - to his
stores, with a van that I have to pay upkeep, gas, etc. His costs are still horrible, and he always has an excuse. While I annually exceeded revenue, lowered costs, he and my mom were MIA for years. While I never made more than $12,000 from both his stores combined, I had to split my profits with a partner I never saw. My mom always said he is my equal. I would have to give raises to my mom behind his back for years, he forbade my single mom to make more money after 1996. Every 6 months he would invade my office to add up how much more my family's health insurance compared to his single policy. (In 1998 I had a child, and in 2001, another). He would cut himself a check, or buy a 60,000 truck, which by the way he sunk in a river when it was two months old, and filed a $46,000 claim. He announced that he is shutting down our first carryout store. He fired our bookkeeper that would police the 2 smaller stores that I cook for; she would always reimburse immediately invoices that were owed to our main store. Now its like pulling teeth with him. One year after 9/11 we lost $10,000 a month in revenue. I immediately told my mother how worried I am, she blew me off, thinking I was over-excited. All she cared about was her house in N. Scottsdale, and my brother's purebred dog in training. Now here we are in in the kitchen again, hands on catering, cooking etc. My mom and brother paired up to oversee the front of the house and the office-payroll; a complete joke. They don't know how to book a buffet party, and never check the reservation book or schedule. My brother has been working on our bar. He fired a gal that worked for us for 10 years, and is now proud to be stocking Spotted Cow beer and Sammy Hagar tequila. I hired an attorney, and asked to be bought for a very low price any way they want to set it up. They know they can't run it without me, and don't even want to try. My mom raised my bro $900.00 a month, and cut off my gas write-offs. My brother is nowhere to be seen, and I'm threatened daily with wage reductions or being fired if I don't work to their expectations. With a 6 year old and a 2 year old, and no buy sell, I'm dealing with non-sane people. I went to a bank to get a loan to carry us through our decrease in sales. The loan is justified based upon the company being positive approx. $500.00 a mo. With all my family costs, added back. But still avoiding the situation. My brother built a new house. Mom doesn't want to deal with this. I offered to buy my brother out for the same deal, he and my mom laughed. What do I do?
My Momma M.I.A.
From your telling of this tale, you are very hard working and talented, and full of both devotion and resentment to your mother
and brother, who (according to your perspective) contribute nothing, are destructive, demoralizing, disrespectful, and know
that they could never create or sustain what you have built, but are confident that they can get you to keep the gravy train
moving right along. So the ball is really in your court. You have somewhat examined the options of selling your share,
or buying theirs. They don't see the reason to buy or sell the cow, as they are getting the milk for free. What are your other
possibilities? You could walk away, and start something new without them. I would recommend having your speech memorized,
on how you've given them all you've had to give, but no more. You could try to get them to sign on to many policies dictating
more professionalism and ethics- from your narration, I can't see it succeeding. You could convince them to quit the business,
remain stockholders, and define what sort of distributions will be paid, based on the performance of the business. They would still
be a drag on the business, but not actively.
It is very possible that their side of the story looks very different from yours. In their letter, they'd be hard working angels,
and you'd be incompetent and ill-intentioned. If you don't know their side of the story, it might be helpful to hear them out,
in front of a talented mediator. In the best of circumstances, a mediator could help you all arrive at what is know as a
BATNA (Best Alternative to a Negotiated Agreement). If you all go into a mediation session agreeing to abide by the results,
you might discover more solutions than you now imagine.
If you can agree to a solution in principle, than good information is needed. If, for instance, there is a sale between you or to an outsider,
you need to agree to bring in the best qualified, objective appraiser, and a good commercial realtor, to handle the transaction at arm's length
from any of you. If you agree to pay them as stockholders, with them out of active management, get a great accountant to do your books and
clearly explain to them how their slices of pie were measured.
I wish you all the best of luck- and if there is some way to fix or dissolve your business relationship, good luck in keeping
the best possible family ties.
I do hope this note finds you to be well.
A year ago I was hired by this small company to work with another outsider to begin the process of growing the company.
The owner(an 85 year old know it all) mentioned that he wanted change to become a better run organization back then.
He even wrote a letter upon my hire motivating me to take on the responsibility. The long and short of it is that he won't
allow us to change anything, has to make all of the decisions and takes no responsibility for his actions (he hired 10 people
in 6 weeks with no business backlog to justify it because he thinks the Global Economy is about to takeoff).
This business is in Vermont and has 140 people employed.
My question - is it typical for this scenario to play out like this until he is no longer on the scene?
I appreciate your input in advance.
The Big Company Guy in a Family Business
Dear Big Guy,
This is just one more variety of shocks to the system of the newly hired. Many times, in either family business or public company, it is much easier to hire someone to accomplish a task than it is to let them do it. Many new employees find themselves in a rut or back office, with promises made on the back burner.
You may sit down with the owner and all concerned to review what you considered your agreed upon goals, and what it will take to get there. Remind him of the cost of bringing you in, and what you left behind for this opportunity. Compare and contrast the road maps of achieving these goals, versus not, and ask him if he truly prefers to end up where he seems to be headed without the agreed upon changes.
Explain to him that you took this job for the challenge of making changes and improvements, and preventing what you both saw as the result of doing nothing. Decide together whether the terms of your hiring would be met, or not. Be prepared to leave if he is not prepared to keep you on your terms.
Is it typical? It's probably typical of this company and this man. Not of every company or everybody.
My husband joined my father's company 3 years ago and has been running it with little assistance from my father, my brother or
myself who also work in the company. I have only one sibling and neither of us is qualified to handle the financial and
administrative end of the business. Even though my husband is clearly the best employee suited to run the company, he has
been given nothing in writing that states he will make most decisions. My father wants his son to be president when he leaves
and for my husband to clear all major decisions with his brother in law. The problem is that my brother is not very understanding
of business practices or capable of making financial decisions and spends his time working in production running equipment and
avoiding management responsibilities. He is supposed to be Production Manager but my husband who is Operations Manager
does his job and my brother's job as well. My brother wants to be President despite his abilities to perform the president's roles
and responsibilities. My husband is quite uptight over the lack of acknowledgement he is given for his true roles. My brother and
father seem to be in denial over the obvious. Again, my husband wants my brother to be the president of the company because
he is his son. My husband is paid less than my brother because he is not the son. My husband puts in far more hours and
makes most decisions for the business. Our business has been around for 16 years and my brother has been a part of it the
entire time. My husband joined the business 3 years ago because my father wants to retire as soon as possible. My question is:
who should have the title as president? My father and brother think my brother should. My husband and myself think my
husband should. They are happy with my husband's performance but feel the title should be given to the true son. Another
question is: should my father complete a succession plan since he is 60 and in bad health and should he make us aware of the
contents of the succession plan? My father comments that he is going to make myself and my brother Co-Presidents with equal
ownership when he is gone. There is an extreme amount of bitterness in my husband about the situation and he may quit
someday due to lack of respect toward him. He says he will not work for and answer to my brother. The company would then be
forced to sell. Please advise as soon as possible.
It is understandable that the founder of a company looks forward to the day that his blood relative will have that fantastic title of
president. And why not?, if that person is the most qualified person to preside over the company, accomplish its mission, is a born
leader who can persuade and motivate stakeholders and stockholders.
Many people think that magic powers come with the donning of the title, only to find the job is just a job, and not one they are
suited to, or enjoy. The Peter Principle (getting promoted to your level of incompetence, often the job where your people skills are
inadequate) is never more obvious than in the Office of the President.
I think your family needs the services of a consultant who can assess all the candidates' talents, the needs of the company, and
determine who, if anyone, has what it takes to lead the company. It is possible that their recommendations will objectively show
that there is a most qualified leader related by blood or marriage, or that there is not, requiring an outside search, or possible
In the end, wouldn't everyone in your family be happier if each of you had the job you were best suited to, making the money you
knew you earned, were respected for a job well done (rather than scorned for a job you were born into). I'm sure your husband or
your brother would be prouder of themselves, if they were objectively assessed as qualified and talented, putting to rest any
griping about who didn't deserve what.
Also, to make your children co-presidents might not be as strategic a solution as making them co-owners. There are many happy,
successful owners of companies that have no managerial power whatsoever.
Hope this helps,
FOLLOW UP FROM LOYALTIES:
You gave advice on hiring a consult in my last communications with you. I had not revealed that we have already gone that route and
ended up with a policy and handbook and $40,000 further in debt. The importance of solving our issues without adding additional debt is
imperative to the survival of our small family business. We pay high salaries to 3 family members (3 family incomes) but do not have a working
cash budget for the business. We have tried to use a budget but the money runs out before the month does. The owner will not reduce his
extravagant wages and the son takes home the pay of a production manager but does not manage. The son-in-law takes home 1/2 of what he
would if he took the same position with another company in the same industry. Problems: 1. Sales need to come up. 2.Production mistakes need
to decline to reduce the number of lost customers and revenue. 3.Owner needs to step back to give children chance to communicate. 4.The son
(Production Manager) will not communicate with brother-in-law-due to personality. (Son having extroverted personality) 5.The son makes same
mistakes repeatedly but will not change. Question: What kind of accountability systems is there for future heir to work from. His pocketbook is
barely affected and he never has to speak with a client re: mistakes made in his department. He feels no pain when revenue is lost so the
mistakes continue to happen. I am his sister who will inherit 50% of the company as well. My husband manages part of the business. The other
part is supposed to be managed by my brother who basically works with the production equipment because he can't manage. So his department
goes unmanaged. It is infuriating when my husband and myself must lose out on commission because of these mistakes. My father who can no
longer manage the business due to health issues stands up for his son and does not make him change his work style. Hiring someone to do the
job as production manager is financially unattainable. I spend hours everyday feeling ill over what is taking place. My husband and myself have
other job offers that would reduce our stress. But if we were to take those job offers the business would go under hurting my parents and my
There are "accountability systems" but I predict they will sit on the same shelf as the policy and handbook you paid dearly for.
And there are assorted solutions, each with pros and cons:
1) Split the company. Most companies are comprised of several component businesses, including a production business, delivery business,
sales business, administration business, and so on. And then there are companies that decide that some aspects of their business are not their
core competency, for instance L.L. Bean is not in the delivery business. They contract with delivery companies, who know how to be efficient and
profitable, letting L.L. Bean do what they do best. You might consider the benefit of taking your 50% and running a separate division, leaving your
brother to run a production company with his 50%. Each of them can be president of their separate company, and do business with one another if
it is in their best interest. If the brother proves to be as incapable as you claim, your husband can do business with anyone he chooses. In the
best case, they will both have their cake, and can eat together.
2) Create an office of the president, comprised of your husband and brother that is separate from their operational job titles and roles. Each of
them should have detailed job descriptions, along with measures of success that can be evaluated periodically, with specific goals and action
steps to lead to those goals. It would be good if each of them recognized what their job isn't, to end the supposed protection of your brother's rear
by your husband. What might hurt the business in the short run (your brother's job getting done very poorly) might shine some vital light on a
problem that can be solved for long term good. 3) You and your husband leave, taking other jobs, or starting another company. Many people
stick around in losing situations for that 50% pot at the end of the rainbow. Though completely understandable, you will only get your hands on
that pot after a sale (which could happen too late, for too little), or a buy out. Would your brother and father buy you out? If not, when you left,
would you still own the 50%, so if the company were sold later on, you'd get the cash? You can have these discussions between you and your
husband, exploring the various roads you might travel, without betraying your father and brother. If you decide on a Plan A or B, you can explain
to them that you love them as family, but cannot continue in this business situation and feel good about how you spend most of your waking
hours. Be ready to act on your proposal (which they might call a threat), but also be ready for them to be shocked into a more realistic discussion
when they see how unhappy you are.
There is no one right answer. I would suggest, however, that most people try to see themselves as reasonable, moderate, and correct. It's
unlikely that your father and brother will ever see themselves as acting unfairly, performing incompetently, etc, even if they suspect in their heart
of hearts or mind of minds.
Hope this helps.
YET MORE FOLLOWUP
Things have changed since I last wrote you. Your advice was helpful. My brother has been removed from his position as production manager because he could not do the job. He is very bitter. He is now vice president with the same pay as before. A production supervisor has been hired to do his job. My brother can do technical set up on equipment but is training the new hire to take that over. My father, with much coaxing from my husband and myself, has decided the company is better off to pay him but keep him out of way of harming the company and losing more customers. My husband runs the company and is about to launch a new area of profit for the business. I am in sales and help make management decisions--currently on maternity leave. My father's role is: looking at the company checkbook a few days a week and sometimes taking care of accounts payable. He knows he can't sell the business because it has far too much debt to income ratio. He takes a huge amount of money from the business to support his and my mother's extravagant buying habits. My husband as general manager, makes half of the amount the market demands which is equal to what my brother is paid. My husband and I realize the company can not afford to pay him more right now. My question is this: my father is discussing a buyout plan to release him from bailing the company out. He wants to keep the ownership between my brother and I equal. What are your thoughts on this? I feel that my husband may also deserve ownership in the company. I have witnessed the lack of communication my brother has with my husband and know they will come to an impasse repeatedly. My brother does not get involved in most business decisions because he does not understand nor have the ability to understand. ( I do feel for him but these are the facts) When he does get involved it is pride driven. For example: he is afraid someone in the company will look more important than him. This keeps him sitting at his desk (feeling important) reading up on sports for hours.
How can I own 50/50 with a brother that despises my husband, doesn't pull his weight and would never agree to my husband getting paid more than him.
Do my husband and I want to own this company if it is economically controlled by my father.
My father has promised us a succession plan in writing for 2 years but has not followed through. He repeatedly changes his verbal plans.
How do my husband and I protect the financial security of our family at the same time be fair to my father.
My husband and I have no collateral and much credit card debt--limiting us to buy out options.
Thank you for your wisdom Ira,
Loyal but Stressed
I have more questions than answers. Your answers are more helpful than mine, in getting you and your husband to do what is best.
What are everyone's goals? Are they in conflict with one another, or can most of them be achieved for mutual satisfaction?
How would you feel about buying into this company if you had no history, and were not family? What is the costs and benefits of being family?
Are you staying in the business to keep your family relationships intact? Is that the best or only way to accomplish this?
Do the numbers show that this business is viable and profitable, or at least could be in a "most likely case" scenario?
Could your brother be happy and productive elsewhere, or is the company a nest he is not capable of flying out of, if he so chooses?
If you could look 5 or 10 years in the future, would you prefer to see yourself in a totally different situation? What do you have to do today and very soon to make this happen?
There is a good reason why most businesses fail, and most of those failures (like most businesses) are family owned and operated. Many that don't fail are kept artificially alive on the life support system known as throwing good money after bad. Ask yourself the tough questions to determine if this is your situation, and if that is a life you want to live (maybe it is!!).
Best of luck.Ira
I have been reading your advice column, and was impressed with some of your suggestions. I hope you can help, as my
situation is a bit different than the ones I had read.
My husband and I have been together going on four years, but were only recently married about six months ago. He is one of
four boys raised by a single mom. I should mention he is a twin as well. A little over a year ago, he had started his own
company. This company requires about $30k tools, work vehicle, etc. During this time, I helped him financially, so he was
able to save more money for the business. I have quite a bit of clerical/human resources experience, so I worked out the
paperwork and payroll, got him licensed and bonded, helped with setting up an accountant. It is a small business that is
building up, and eventually will be very successful.
His other three brothers have little-by-little gotten into the same line of work over the past few years. They teased and made
fun of him for buying these tools, and for not going out to party like most mid-twenties guys. When he finally got all that he
needed to start the business in full swing, they all three wanted a piece of his business, for nothing. A little background on his
brothers is that they have all been in trouble with the law, have had serious drug problems and do not agree with running a
legitimate business (paying taxes, etc.). There were many arguments on running this business legitimately. His mother has
said numerous times that she would like to stay home from her very well paying job to "run their business". She has said that
she wants to be sure all four of her boys are treated equally in the business. She has forgotten that this is my husband's
business, and that he alone has sacrificed for it. She had told him that he should put the business in her name, so that it's
protected, in case of a divorce.
My husband had tried to draw up business proposals to give his brothers different routes of earning their way into the
business, but none liked that idea. Finally his twin brother had agreed that he would work with my husband to earn a place in
the business. He has been doing so well, and I am happy about this possible partnership. At this point, my husband still owns
100% stock in the corporation, but eventually plans to share a portion with his twin brother to begin with (He will keep majority
though). The other two brothers would still like to be part of this business, and my husband feels obligated, as they are his
brothers. He realizes that they are not very hard workers and do not have a lot of motivation for the business, but this
"obligation" drives deep in the family. One of these brothers does not even have a junior high education, and the other
doesn't have a high school education.
Now that his brothers are getting involved at all, my husband doesn't share anything about the business with me. I know they
would prefer that, as they look at me as the "wife with too many morals". He only asks for my assistance when he can't figure
the computer out. He recently said that he may have his mom help with the paperwork eventually, if she loses her job. This
upsets me, as now that his family is so involved, it has pushed me to the outside. My concern is in the future. I am worried
because this business is hard on his body as long as he is laboring it as well as running it. He is in pain every day when he
comes home. With so many people involved in the start, he will have to do the labor for many more years before being able
to set back and run it. I am worried that if something were to happen to him, his family would not have any support towards
me and any future children, and he doesn't understand the legalities involved in partnerships. My husband has not spoken to
I do not want to control his business, but feel I have earned a right to be included in it, even in a small way. He has told me he
trusts me to do the work, but yet his brothers don't like the idea now that they are getting involved. I am concerned with the
fact that all but his twin brother do not see eye to eye with him on how to run a business, and the fact that they manipulate him
to feel sorry for them, so they can have something for nothing. I want to know that he is thinking of protection in the future for
our family as well. How can I get him to think about the future of "our" family, instead of all his siblings. I'm afraid this will end
our marriage before it really ever begins.
From your telling of the situation, it sounds similar to that classic tale wherein your husband is the one who built his house out
of bricks. But in that family, the obligation was to protect the family from a hostile outside force. Your fear is a twist on the story:
what happens to the house once the siblings are given access.
You state very clearly the conflict you face, wondering if your in-laws have the good intentions and talent to build the
company, reputably and legally, to feed all those extra mouths, and acknowledge - in word and deed- your husband's and
your contribution to the careful foundation building you both have done. For you to be too outwardly suspicious and
angry is to force your husband to take sides against his brothers and mother. Aside from that ugliness, you wonder
if you'd win that contest.
So you must be clever. You must figure out what are the best chess moves, and how to sell your husband on the wisdom of
those moves. How can you get your husband to buy in to the idea that the company must be run according to sound policies
and principles, and that the ways in which people abide by those policies and principles must be specific and measurable?
You must be able to clearly sell the benefits of making this company a meritocracy, so that only the talented, hardworking, well
intentioned will prosper. Stock in the company will only be bought with hard earned cash, not given away based on blood ties.
The price of that stock will be determined by an objective expert appraiser. There will be well moderated discussions on what
it takes to make a partnership succeed, and under what terms it will be dismantled. The dissolution of the partnership will not
be catastrophic, because the partners have funded buy sell agreements. Salaries will be determined based not on financial
needs, but on each person's contribution to the bottom line, informed by good research into appropriate salary ranges.
No stealing. Treat the business like the precious golden goose it is. And so on. (Pigs, geese-- whatever helps people not act
It would be very fortunate if you could get your husband's attention through his respect for your thinking, rather than a threat
about your marital satisfaction. But certainly you are entitled to express your concerns about his unquestioning loyalty to his
brothers and mother, at the expense of the company's health, and the future of your relationship and possible future children.
Whatever pressure or guilt he feels to be ultra loyal to his family of origin can be handled by sensible business practices. For
any brother or mother to question his loyalty, they would have to be able to explain why they are entitled to what they have not
earned. Your husband would have an easier time separating business from family once he has built his business policies out
of bricks, not straw.
Hope this helps.
I have been working for the past 22 years at our family business, which was primarily owned by my father and now is primarily
owned by my 2 brothers and I. (my non-working sister has a small minority share as well.) My father has retained 10% of the
stock, but 100% of the vote. He has grown the business from under 1 million in revenue to over 500 million. Under his
leadership the business thrived and was very profitable.
My older brother has assumed the leadership of the company for the last several years. As owner managers, my brothers
and I are fairly compensated. In my opinion none of the three of us is overworked or works incredible hours. All of us have
the vast majority of our wealth invested in our company.
But we are losing money. Each of the past several years, we have seen our equity decrease as our earnings have
disappeared. When suggestions are made to my brother, he dismisses them as a diversion from his plan.
My father is still somewhat involved in the business and disagrees with my brother on almost everything, but allows him to
continue to do things his way.
There is no buy sell agreement, so selling doesn't seem to be an option.
To further exacerbate matters, my brother, also unhappy with the financial results is constantly looking for ways to divert
company revenues to himself. So far he has been unsuccessful, but only because my father forced him to allow the other
owners to participate in a leasing company which will lease equipment to our floundering business. If we don't participate we
miss out on a temporarily guaranteed 25% return. If we do participate, we need to inject cash into this leasing company
whose lease rates will damage the viability of our diminishing golden goose.
While I generally love my role at the company, I find myself spending much of my time unwinding schemes. I would gladly
step down if we were willing to allow someone proven and competent to run this business. As it is, I see millions of dollars
disappear on an annual basis. Our competitors are kicking our butts. It is not just a case of a floundering industry.
How can we become accountable?
At board meetings my brother paints a rosy picture by focusing on operational details while glossing over the financials. My
parents refuse to confront reality. When I confront them with it, I get little or no response. When I confront my brother with it,
he makes it known that he does not intend on working a 50 hour week and that he has a family he needs to attend to. While I
respect his desire to raise his children, I believe he has accepted the responsibility for the company's success and that may
mean fifty hour weeks. In his mind, the least he is entitled to is the CEO job where he hires someone to run the business and
they report to him while he pulls the strings.
In my opinion, it is no longer a business run for an individual, as it was when my father owned 100% of the stock. It is now a
business run for the stockholders and the CEO must succeed or be replaced.
Owning 0% of the vote and couching my language in much less dramatic rhetoric, my voice is lost in the din of paternal wishful
In the mean time, as our assets get older they are wearing out without being replaced. Our banks are satisfied because they
are being paid out of depreciation. But our equity is going down a little bit every year.
You not only sign your letter "Cornered" but you emphasize just how cornered with a period. You need to remove
the punctuation, and think differently.
There are several kinds of power in a family business. You do not have the power of controlling the checkbook,
and you do not have the power to lord it over your father and brothers.
But you do have the power of the squeaky wheel style shareholder, who insists that plans make sense,
that CEO's account for their actions, and that everyone stays focussed on the task at hand: increasing shareholder value.
It is my guess that by not listening to you, your family members hope you will eventually get tired and
stop complaining. And since you feel you have no authority, your arguing must be as tiresome to you as it is to them.
But re-evaluate your chess game. If you got a lot better at asking the right questions, i.e. "How do you think your plan
is on target to increase business and a sensible return on investment?" "What exactly do you see as the parts of my
suggestion that do not accomplish the goals of this company and its owners?" "How is this company going to stay
profitable and sustainable if our assets are wearing out?" "What is the job of a CEO if not to steer the
company to profitability?" "How does it serve the long term interests of this company and its owners to
cannabalize itself with overpayments for leased equipment?" you would find your family cannot escape
a discussion with you on the proper issues.
You do not have the authority as the highest executive of the company, but if you assume the authority
of the most concerned stockholder, you will find all the officers of the company have an obligation to answer to you.
These questions should be "strategic questions," not veiled criticism. They should aim to help, not wound.
Do not let up. Do it with confidence, integrity, and having done your homework. And do it with love. Stop focussing on the power
you don't have, and start using the power you do have.
You may win converts, or you may receive an offer to sell your stock. Either solution may suit you.
Best of luck in becoming uncornered.
I'm so glad I found you! Very difficult situation when my son married his girlfriend of ten years, who all
through those years was very possessive. Son has l6 year old daughter from first marriage, who always
has been close to her dad, but as of late daughter is intimidated by her stepmom and does not want to be
in her company. Same feeling with the rest of our family. Son's wife is a counselor at a middle school and
is convincing our son he should estrange himself from getting together socially with his sister and family
and his father and me. Getting to the business situation: our son is 43 and worked in company for 20+
years before and after college. He has recently put pressure on us to gift company stock and has told us
for the years he has worked in company it's unheard of that he doesn't have a share (we think it is his
wife's idea). His wife comes into company and never greets my husband and basically ignores our
existence. Many hurt feeling in past, but I recently called and asked to meet and try to resolve issues. I've
been turned down and my son tells me if I truly care about him, I should let things be at this time.
However, as close as we always have been and the fact that we are soon retiring, I'm uncomfortable with
selling to him with a wife that is possessive and controlling. His wife hasn't even made an attempt to reach
out to his daughter. The last thing my son said to me is if he has to make a choice, it will have to be his
wife. I asked why there has to be a choice. Again, he is a good son that his wife has helped through some
difficult times, as he did have a gambling problem, but has been recovered from that for five years and has
been running our business with our appreciation and support. I hope I haven't gotten off the track for you
to help me. Basically my question, with all the family difficulty intertwined, is are we taking a big chance if
we sell to son with all that I have explained. At this point, I don't see a light at the end of our tunnel. Hope
you can help.
On the Outs
As I've said before, and any advice columnist should repeat repeatedly: there are more sides to the story than there
are characters involved; so it's pretty impossible to say who is right and who wrong.
Add to this that your letter is the mother in law's side of the story that often is sent by daughters in law (see below for many
examples). I'm sure you and your daughter in law each have a long list of reasons why to be angry and unforgiving.
And what does it gain you to win that battle, and lose the war over your son and his family? I would advise making a fierce determination
to make a list of all the good your daughter in law has done, and focus on that.
Then make a list of all the reasons your son is the most likely successor of the family business. If you think he can successfully grow the business,
eventually buying it from you so you can afford to retire (if you gift the whole thing, what will you live on?), and draft a strong document that outlines
the conditions of the sale, and can feel that the likelihood is as good that this buyer will make the payments as well as a non-son buyer, grin and bear it.
It seems like your son's wife either has a strong dislike for your family, or feels threatened. To threaten her more will not likely win her over. I'd
suggest small doses of kindness and appreciation, to allow her to let down her defenses. Your granddaughter might pick the certain occasions
where she can see her father and his wife for manageable pleasant occasions. You and your husband might also see them in short bursts, parting
company before the tension builds (if things usually goes downhill after 3 hours, leave after 2).
Do not make your son choose between his wife and his parents. There is no win in that at all. Time to be strategic, patient, and generous,
using honey instead of vinegar. If there is any chance of success in this, do what is needed to improve your odds.
Approximately 8 years ago my husband was asked by his father if he wanted to come and work for him
at his Insurance Agency. He had built the Agency from the ground up and it brought in very good money,
around $600,000 in profits per year. At that time my husband was a Claims Adjuster for another insurance
agency and made around $26,000 with a company car. His dad offered him $24,000 with no company car and asked
him to take an Aptitude test. When the results of the aptitude test came back, his dad said that it probably wouldn't work out
but that they could give it a shot. My husband declined stating that we could not afford to do it at the time.
About 1 year later, my husband's father asked my husband's younger brother to come and work at the agency.
He received a bit more than he was currently making and also received a company car and did not have to
take any aptitude test. About 1 year ago in August, my husband's father and brother approached him and asked him
if he wanted to come and work at the agency. The lady who ran their dental department was retiring. They agreed on a
salary and a company car but could not agree on ownership. My husband told them that at some point he wanted
ownership in the company. They left it at that and nothing was put in writing. There have been multiple occasion
in the past year in which my husband has told his brother and father that he wanted ownership and they blew him off.
His brother has been slated to purchase the family business. His father however has promised him on several
occasions that he would make sure that he had some ownership. About 2 weeks ago my husband and
his brother met over dinner. Basically his brother told him that he and his dad had a contract (that they signed 8 months
after my husband starting working at the agency) that states that his brother would purchase the Agency 2 years from the date of the contract for the amount of $2M to be paid out to his dad over 15 years. No mention of my husband
anywhere. My husband's brother told him that he would not be selling any of the Agency to him but that if he worked hard
and became invaluable to the agency in time he might sell him some of the Agency based on his Book of Client's.
My husband is hurt and angry more so at his dad than anything but trying to put emotion aside and
figure out whether to stay and work hard to try to earn some ownership or move on somewhere else. He is meeting
with his brother soon and would like to know what questions to ask, what to get in writing,
how to approach getting what he wants out of this working situation. Thanks!
Again an example of the most classic situation to this column: the daughter in law making the case
for her sincere, eager husband who's parent(s) started a company, and are acting in bad faith about promises
(real or imagined; written or implied); setting siblings up in win/lose struggles, and destroying family relationships
in order to not have awkward conversations about the family business. I am stunned how often
this drama is enacted in family businesses worldwide. And so beginning after the answer to this letter,
I am making a new policy for this column, which is: Please read the questions and answers already posted,
where a close variation of your scenario is answered repeatedly.
This will not only give you practical direction, but hopefully some solace: You Are Not Alone! But as far as what
questions the husband in this case should ask the brother in the upcoming sit-down:
1) Will you be completely honest and direct with me in this conversation, even if it hurts my feelings,
makes me extremely upset about my family, and maybe cause me to not enter the business?
(if answer is not a believable yes, my advice is to end the conversation, not enter the business,
and state that you will try to maintain good family relationships in spite of the deceit and secretiveness to this point)
2) Do you -and/or our father- think I am not competent to succeed in this business, and is that the reason
I have not been dealt with honestly till now?
(if answer is an honest yes, or a dishonest no, follow advice from question 1)
3) If I come into this business, into a position that we agree fits my potential and interest, and succeed
according to specific, measurable goals that we both agree appraise my success or failure, will I be able
to buy into this company and be compensated according to arms length appraisals of company value
and market driven levels of compensation?
(if answer is not "absolutely", follow advice from question 1)
4) Is there a reason I should come into this company, rather than begin something on my own, maybe
competing with this company in a fair and professional way?
(if you do not hear anything sincere, thoughtful, loving, realistic, professional in this reply, and still
decide to enter the business, don't blame me- I warned you)
I wish you and your husband the best of luck- and hope you give this the thought to make the right decision,
despite what you are hearing from your family, or from me. Please choose what will provide the most self respect,
personal satisfaction, and reaching the goal, even if the path is rocky.
My husband helped his father start a family consulting firm thirteen years
ago. He was eighteen. His father was unemployed and his mother quit her job
to move the family at her husband's request. He has a history of poor
decision making. My husband has shouldered the responsibility for this
business for thirteen years. Through college, he wrote reports for clients
and tried to make sense of his father's jumbled finances. He continued to do
this while living eight hours away but flew back and forth once a week. He
has pushed to company to grow and change.
His father has a gambling problem which is controlled only because my
husband and mother-in-law give him limited access to money. His father
mismanages projects and we lose money consistently because he doesn't
believe in contracts, billable hours or specifying what services we will
deliver (i.e. reports, resources, drawings). He just wants to be the
clients' "buddy." He believes we are persecuting him and these problems are
not his fault. He has refused to change his business practices. Recently,
he has simply stopped working. He plays computer games or just reads in the
We moved to shore up the business and keep a closer eye on his dad. We live
with his uncle and all of our things have been in storage for over a year.
My husband urges me to just wait it out until his dad retires in five years,
and then we can do whatever we want with the company. I don't believe his
father will just "retire". His parents have threatened never to speak to us
again if we leave. And, if we left, they could never sustain the income
levels needed to keep the office open or pay down debts. There's no money
to hire our replacements. So, we'd be the reason they lost their jobs,
house, etc., and we'd have a 40% share of the office debt in addition to
our own. They believe we are the problem because we won't change to suit
his dad, and accommodate his artistic temperament. And yet, my husband
doesn't want to give up the company.
I know it will be bad if we go, but doesn't it sound worse to stay? I want
to do the right thing, but I'd like to have a family too (not just this
family business). Thanks for your help.
Tired of Family
I am reminded of the Woody Allen story : "Doctor, my wife is crazy- she thinks she's a chicken!" "Then why don't you
bring her to a psychiatrist?" "Because I need the eggs!"
But you are not alone. As I told "Hanging in There" (next letter down), there is a pattern emerging in these letters,
to the extent that you'd think no family businesses differ from the competent, suffering child who is building the
company, which in turn overcompensates the non-functioning founder. If only people looked at this column
(not even my answers-- even just the complaints!) before they agreed to come in and save the day!!
My advice to you and your husband is to figure out what needs to be done to ensure that the company will be
run professionally, with policies, guiding principles, consequences, so that there are no abused employees, family or not,
and ownership does not guarantee a free ride. Even an owner has obligations to the company: to be a good steward,
to increase shareholder value. And even if he/she is the only shareholder, increase stakeholder value-- stakeholders
including employees, customers, community).
It may seem too late to close the barn doors, but consider what ultimatum you might make: "We all need to go back
in the barn, close the doors, and figure out how to make this a win/win, or we're leaving the company. If that happens, we still
consider ourselves your loving family. We hope you can see that, and don't conclude that by not accepting this
unsatisfying situation we are rejecting you as our family."
And if they can't make the distinction, it's your decision whether to continue on this course. Nobody can make you a
doormat without your permission.
I found your website and found it fascinating reading. I hope that you can help with some concerns.
Where to start....
About 5 years ago, my father and a retired wealthy friend of his met an inventor
with an idea. They decided to form a company where my dad and his friend
invested money and the inventor was supposed to be the main operator
of the company. My dad's friend was supposed to be the president part time
and oversee the company.
The inventor and my dad's friends (the president) were the 2 employees of
the company and I consulted on the side to them. After a few months, I left
my good job in Public Accounting to be the CFO because there was more work
than I could do on the side. The pay was very below market (but then I was
only expected to work 1/2 time and could consult the other 1/2 time). The
consulting work paid the bills and the work at the company gave me a great
equity position in the company. Things looked great then.
Over time, we hired a sales manager who is not a family member but treated
pretty well considering his overall lackluster sales performance. In
addition, we hired (by no choice of anyone's) the president's son to manage
some sales as well. Upon hiring the son and the sales manager, everything
that went wrong became the fault of the inventor (regardless of who actually
screwed up). Of course, the president and the presidents son could do no
wrong. For example, the president's sons markets are well below forecast,
but the president can make every excuse as to why his markets are doing well
regardless of what the numbers show. The president can make every excuse to
my dad as to why the company has not turned a profit. There is always hope
on the horizon to the president. I am not so sure. In addition, the
president himself is much less qualified than one could ever imagine someone
who made so much money in a prior venture could be. However, he does not
realize this. In his mind he is the king of deal. Finally, both him and
his son can say whatever they want to anyone without any consequences. We
have a board of directors, which I am on, but it seems worthless to try to
exercise some kind of action.
In addition, the president began to work less and less, but wants to be
involved in every decision. So now, its impossilbe to make a decision
because the president is on the golf course. Of course very important
decisions are constantly delayed (and our possible merger was ruined)
because of these delays. All this while my work load has increased to the
point where I can't work part time and do the CFO function. However, my pay
did not increase when my full time status came into play. Nor have I gotten
any raises. The excuse generally is that the company is still not cash flow
positive, which I can understand. However, now I feel like I bet on the
equity in the company and now the promise of equity does not seem too
promising and the pay is terrible. I feel like I am being used here.
All this is building up to the point where I am really not happy in this
business anymore. I really don't think there is potential in this business
anymore. If there is, I can't afford to stick it out to find out what the
pot of gold is at the end of the rainbow. My father puts a lot of pressure
on me to stay. He has about $500,000 invested and believes that something
has to turn.
How do I make things better?
Hanging in There
I notice certain recurring themes in all these letters, and one more is that the afflicted family business
member asks what can be done to remedy a situation that has gotten so uncomfortably out of hand that
they can't stand it anymore, and must leave to stop the string of broken promises, investment going down
the tubes, misbehavior and poor performance (of others), and excusing of that misbehavior and poor performance (of others).
The two part problem is often (1) how to I fix it? and (2) why bother, if I'm leaving?
So in your case, too... if you've had enough, will you bother fixing? In describing the problem, you seem
cognizant of what must be done.
But it's all Monday morning quarterbacking. Unless you stay and can somehow persuade others to do
what is required; and then enjoy the fruits of your labors.
Those labors are: questioning what has been done, why it was done, and making everyone understand
why it must be undone, as follows:
- What was the return on investment for the investors?
- What in a business plan led them to believe they could achieve that return?
- What was in it for the inventor? What did he/she actually own?
- What was the job description and continuing role of the inventor? Why would poor sales reflect on him, making him the scapegoat?
- Why was your father's friend made the president? What did he bring to the table?
- What were the expectations, terms, measures of success for all involved? How were those factors derived?
- What equity position was promised you? Was it described in a legally binding agreement?
- How was it determined that the company needed the specific people it brought in as sales manager and other salespeople?
- What was the feedback mechanism to evaluate performance, and determine continued employment?
- What strength does the board of directors have to stem the bleeding, replace management, make major decisions?
- How big is the pot of gold, and how does one get their hands on it in a way that is good both for the company and its shareholders?
- How is that pot of gold protected from those who should not have access?
- How do you get everyone to sit down and discuss all these questions?
I wish you all the best, and strength to do what will make you proud, resolved, and fruitful.
I discovered the UMass site today and found much useful information. Thank you!
Here's my question:
I am married to a man who works for his father's business. My husband is 40 and has worked for his dad since he got
out of school. His older brother has never worked for the family business, except as a computer consultant. Brother has
been laid off and is considering joining the family business. This part is fine -- everyone agrees that B is a hard worker
with solid skills who will be an asset to the place.
However, in deciding whether or not to take this option, B discovered that his dad has never incorporated the business
and has very little in place in the way of succession planning. We had all assumed that my husband would inherit the
business, but it turns out that the business is left half to my husband and half to his wife, saying he wanted to "provide
for her." She is over 70 and even if she wanted to be actively involved in the business, her health would not permit it.
All of this has become more urgent as my father-in-law has been diagnosed with cancer. From where I sit, he needs to
consult a good accountant and lawyer to devise a succession plan that cares for his wife without making her his sons'
boss, and keeps the IRS out of everyone's pockets. My own father is a business consultant and former commercial
lender, and would be willing to offer his services for free based on the family connection. So far, my father-in-law is not
willing to listen to any suggestion that touches on the possibility of a) him dying or b) him ceasing to run the company.
Do you have any thoughts on strategies for convincing a business owner to attend to these issues? We recognize that
it's his business and he can do what he wants with it, but what he says he wants doesn't match what he's actually got
down on paper.
Leading Them to Water
There are many parts to this puzzle, and yet the picture formed is very familiar. You're in the good company of many a
company in transition.
There are some pieces that you don't bring up as problems, for instance: you don't state if your brother in law is OK not
being named as an inheritor of any part of the business; or whether your husband and brother in law can work well
together, or whether there is enough business to support another family member (or whether it can be grown to that point).
But your two questions are:
Q: Should your father try harder to be heard with his professional advice?
A: I'd be surprised if your father's advice could be seen as impartial. Perhaps he could recommend a couple of arm's
length colleagues of his, who- even if they charge- might be seen as more authoritative, not being family.
Q: How to convince a business owner to face death, or worse: not working anymore.
A: Though a loving intervention. If your husband and brother in law can come to a common understanding of how to
achieve their many goals: business success, a healthy working relationship, professional policies towards ownership,
compensation, etc; plus a realistic look at elder law and elder care issues, they can sit down with your parents and spell
out for them what they need to happen in terms of parents having all the appropriate conversations, plans, legal
documents. (I'd suggest they also sit down with your father's referral, for a "walk through" of the process your father in law might face).
In discussion with your parents in law, the sons should make it clear that their priorities are business success, proper tax planning, the
satisfaction, comfort and security of their parents, a legacy based on good strategy, foresight, and facing facts.
Will this go well? Who knows? But this is the preparation that will increase your odds of people doing the right thing.
Reprinted from Family Business Magazine Case Study Column (Spring 2003)
My family suffers from what you might call a "Pritzker Problem." Like the Pritzker family of Chicago, my brother and I inherited a
family business years ago and built it into a major company. Now we're both in our early 70s and thinking about succession.
Each of us has four children, virtually all of whom are actively involved in the company. Some of our grandchildren are involved,
too. Among our eight children the only exceptions, for obvious reasons, are my brother's two youngest children, who are still
teenagers in high school. They are children of my brother's second marriage, and age-wise they're a generation younger than
their half-siblings and my children. In fact, they're younger than some of our grandchildren. Here's the problem: My brother
wants to treat all eight of our children equally in terms of passing on our equity. He feels it's a slap in the face to treat them as
"second-class siblings." I feel they should be treated as members of the third generation, which effectively is what they are,
both in terms of their ages and contributions to the company. Who's right? And how can we resolve this disagreement without
breaking up the business, as the Pritzkers were forced to do?
Answer from Ira Bryck:
There are no "right answers" to many family business challenges, proven by that this column asks for feedback from several
"experts," all sporting a point of view. The question that needs to be answered, always and in your case, is "what solution is
most professional, in line with the values and visions of the owners, helps sustain the company's success, and takes into
account the need to increase shareholder value?"
So faced with similar circumstances, one business family might see breaking up as the only out, while a twin business might be
fine spreading ownership among many relatives, according to age, merit, risk tolerance, love of the game, or whatever factors
are deemed most important by the current leaders, family traditions, and so on.
It may be helpful for you and your brother to begin a facilitated discussion to help clarify your values and priorities, and
brainstorm every conceivable possibility for continuing into the next generation. As the conversation progresses, develop a
score sheet where all solutions can be evaluated by how well they achieve your objectives, which may or may not include
fairness, inclusivity, strictly business meritocracy, cashing out "other" family members.
The highly scored factors should be used to establish policies about family members' involvement in the company; and be wise
and timeless, as opposed to impromtu and reactive to the current conditions. You can sharpen your policies by taking a look at
how other companies have handled comparable scenarios, using your policies to measure how well those families met your
You can then present all of this to your family members at a facilitated retreat (where you are sure to hear a variety of
reactions), explaining that while there are "different strokes for different folks," you have come up with the best possible,
customized solution for your family.
Nothing is perfect, but this is sure to fit better than something off the rack.
I'm sure my dilemma is nothing new, since as you state, seven family members in a business will have eight different perspectives of reality, but here goes. Reality is not a big deal in California, but I think I might be honest to my own detriment.
I have worked in the "family business" for twenty years. I am the youngest of five children, none of whom was ever interested or otherwise promoted to management level, except for me. I was put in charge of Dad's Southern California operation, and he lived in Arizona, managing his operation there, and a third operation in Northern California. My father is an angry tyrant, who bullied customers, secretaries, suppliers, and production workers into submission. Ocassionaly, I was his victim, but not too often. He depended on me for quite a lot. And he depends on alcohol quite a bit, too.
My father has had one calamity after another in the last few years. One company went bankrupt. Partnerships ended in flames. A "Malice, Fraud and Oppression" verdict finally clinched his fate: he had to sell his prize crown company to his competitor in order to payoff the MFO judgement. I stood by his side, trying to keep my finger in the dike. The Southern California operation was the one business left standing. My husband and I were convinced that the company had the potential to be turned around, if we could only buy him out. It seemed like a good idea at the time, because the company was going south quickly, and needed to be rescued.
My father came to the office every day, full of rage, embittered by the failures of his business career. My husband and I approached him, and said that we would like to buy the business. He said ok, and then proceeded to extract an appraisal that was ludicrous from a business valuation hack. Our sales at the time were $900,000, and annual profit about 1-2%. The deal was a stock redemption, secured by the assets of the company, which were less than $500,000. The contract is several inches thick, and contains an absurd debt-to-equity ratio requirement that we failed to comply with on day one of the agreement and into infinity. The terms of repayment were fairly reasonable, considering the enormous valuation of $1.7 million. We pay interest only at a decent rate for fifteen years, but it's still a ton of money, and it's inhibiting our ability to fund growth and even sometimes seasonally just plain survival is threatened. We have a second to die life insurance policy that would partially fund the balloon payment. He told us at the signing that the note amounts were high, just so that he could receive a level of income that would be satisfactory, but that we could pay my sisters whatever we wanted with the life insurance benefit. He does not expect to outlive the note term.
So, we got the business. We have owned it for four years. Our sales are more than $4.0 million. Our profit is more than 4.0%. We have the same CPA as Dad. This year, I noticed that in our financials, an old footnote read: The debt-equity ratio has been waived for FY 2000. I pointed it out to the CPA, and he asked me if it had been waived this year. I said, No, not to me. So, the CPA wrote in his opinion letter that we might not be a "going concern" because the ratio was not waived, and the seller might foreclose on the assets. My husband and I flipped out. We pleaded with the CPA to change it. He refused. We toyed with the idea of not giving the statement to Dad. But that would really steam him up! We decided that we would certainly get a response from Dad, and maybe we would have an opportunity to gird our loins and attempt to negotiate a better price.
We have now a mean old letter from the old man's attorney, threatening foreclosure, unless we let him run the show. Needless to say, if he runs the show, the company will go under and our four years of effort will go down the drain. One recommended advisor told us to appease the old you know what for a few years, and basically convey the assets and customers to a new entity and screw him. We don't want to do that.
Our attorney attempted to get our CPA to redo his sloppy mess, and he has refused. Our atty recommends that we get a new CPA to do an accurate statement, excluding the seller financing from the debt equity ratio, and keep the new statement for evidence in any possible foreclosure proceeding. He thinks we should appease a little bit and have a friendly meeting, but gradually wean Dad off of meeting with us. I think we should follow the attorney's advice, but bring along two buy-sell alternatives to Pop: He can buy us out in cash, or we will agree to buy him out in cash, but at a more reasonable price tag that will bank "financeable." What pray tell do you think, Ira?
From the Land of Fruit and Nuts
Dear From the Land,
While I appreciate your concern with the issues of treating your father fairly, I can't see where you have been dealt a fair hand (as always, assuming that there is another side of the story with all sorts of different facts and figures, perspective, thoughts and feelings). Whether personal or business, relationships and transactions need a certain amount of good faith. If you were sold a business that you have more than quadrupled, and still cannot make the payments, and the seller (father or not) is chomping at the bit to come back in on a default on impossible terms, something is seriously amiss.
Furthermore, I cannot imagine what good is served by you still using your father's accountant, who seems to have more loyalty to him than to you. In the end, any CPA has the same master: the IRS and Generally Accepted Accounting Principles. But how about advisors who can help you watch your back? If I was in your situation, I'd be shopping for a new CPA tomorrow.
I agree with the concept of weaning away from meeting with your father- from your telling, he is no supporter. Whether or not you have the stomach or ethical flexibility to move the assets into a new corporation, you have to admit that you are playing poker with someone who tries to win at any cost.
While you may be very good at the business, and love every waking minute of building it up, your success is based on what you get to keep. You are still working for your father. If he wants to buy it back under similarly oppressive terms, you'd get to keep much more.
I wish you lots of luck in your dealings with your, but I caution you to be well represented in the negotiations by someone who has no vested interest in being loved by him.
Thank you very much for your response, and for the follow up. We have hired a new accountant, as of yesterday, and he assured us that he would not, under any circumstances, represent my father. One clarification, which only makes the situation worse: We have been able to make all of our payments, in full, to my father on a timely basis. And he is still trying to foreclose. I called a BK lawyer this morning, who I will consult with tomorrow. He asked how much our arrearage (sp?) with the father amounts to, and the answer is $0.00! Our accounts payable is running about net 60 days, and our creditors are not too rough on us. But we're out of cash, personally, to put into the thing....We have a couple of very important opportunities, and think that one new customer could be a potential buyer of the company. But you are so right, that we should be trying to keep what we can and move on if we can. I'll keep you posted about the resolution. Believe me, we are going to find an ethical solution that doesn't jeopardize our faith, which is our primary treasure.
My parents seem to think nothing unusual about the fact that their sons were not included in the family business.
How can I make them understand the connection between "family legacy" and business? They seem to believe that the business has no bearing on the family, that it is this "other entity". Are they right?
Dear Left Out,
I think they are not right or wrong. There are many factors that go into a decision to include or not include family members, and
become multigenerational. There is no one thing called "family business," just like there is no one configuration called
A few of the questions your parents might ask themselves are:
- Do we have a company that can support more family members?
- Do we enjoy working as a couple in a way that becoming multigenerational might disrupt?
- Are our children talented in a way that will make them successful and satisfied in our business?
- Do they get along with that "all for one; one for all" attitude that is so rare and so vital to siblings in business?
- Do we want to continue the company, thereby deciding to not sell it, and cash out?
- If we did pass on the company, would we have something else to do with our time; assuming our children would one day want their turn at the wheel?
- Is the idea of having a family business a turn-on or a turn-off?
After spending much of my life in business with my parents, and getting a pretty up-close look at many others, I would conclude
that the main reason to work with family members is that you enjoy their company and are greater than the sum of the parts. If
this is not the case, I'd ask myself if this is the best place to spend most of my waking life.
Hope this helps.
My Father and brother started a small business while I was away in the AirForce. During the first 6 or 8 months of the
company, I had gotten out of the AirForce and had married while living in the UP of Michigan.
My father died and my Mother (president) and brother asked me to come work for them. So in 1988 I began working for the
company. (Lets call this "company 1") Company 1 was a very small company with 3 or 4 employees and of course my Mother,
brother and I.
I earned about $300 per week at this time.
The company was having problems keeping the machines running. Because of the nature of the machinery, they require a
knowledgeable person to repair them. Over the course of about 5 years I became very good at fixing these machines and was
solely responsible for the proper maintenance and repair. I was involved in almost every aspect of the company with the
exception of the financial end. The company grew from a 5000 square foot facility into 10,000 square feet during this time and
we needed even more space.
At, or around 1993, my brother approached me and asked if I was willing to use my skills to help him build an electrocoating
line. I agreed and about 6 months later the construction began. We purchased an old 50,000 square foot building on 5 acres of
land and began construction of a single machine process that would require about 25,000 square feet of that building. Lets call
this "Company 2".
A little brotherly history is needed here.
My brother and I have never gotten along with each other. We are 2 completely different types of people with different
outlooks on just about every subject there is. Even while I worked for Company 1, my brother was very abusive to me and often
displayed this abusive attitude in front of employees and non-family people.
During the construction of Company 2 the proverbial water boiled over one day and my brother and I had it out. I remember
him actually holding up his fists in the parking lot and threatening physical violence while a customers truck driver and most of
our employees watched us. I left the company and told him I was quitting. I had an opportunity to get into a computer software
start-up company about a month before this and I decided to give it a chance. I informed both my Mother and brother of this
and that the reason I was leaving was because of his abusive behavior towards me.
Because of the large financial investment required to build Company 2, my leaving the company would most likely have put
them out of business and they openly admitted to this fact. They made it very clear that they were depending on my technical
skills to complete the project. If I would have left, the banks would have taken both Company 1, and what existed of the new
Company 2. The banks even required that an insurance policy be taken out on me because I was considered a "key
A little about me:
I possess an unusual array of skills that range from those of a master pipe fitter, master electrician, welder, hydraulics,
computer aided drafting (CAD), machine design, and I am an efficient at programming computer database applications for use
in almost every type of situation.
My mother and brother clearly understood that if I left, they would loose both companies and they begged me to stay. We had
a meeting and during that meeting they asked me what it would take to get me to stay with the company. I told them that they
would have to make me a full partner with all the rights and privileges they both had. My brother immediately disagreed with
this and I got out of my chair and started to walk out the door. My mother spoke up and suggested that instead of 50% of the
company, if we would agree to 25% instead. We agreed to this and I suggested we make it all legal.
My brother quickly spoke up and said that transferring company shares in that way would require a lawyer and a few thousand
dollars that we did not have. He also said that a tax attorney may be needed because the transfer could impose new taxes on
both me and the company. (The company(s) was very tight on money at this time because of the large investment it just made
to build Company 2) They said that when the company(s) was doing better, we would get the legalities taken care of. I agreed
and we shook hands on the deal. To clarify, this deal was for me to become a 25% owner in Company 2. I had no stake in
Company 1 other than that I worked for it.
I went back to work and was not concerned at this time about the legalities. (After all, this was my family I was dealing with)
About two or three years later when the company was just starting to get off its feet, I asked my mother for the financial
records. I was given an excuse and told to ask again next week. A couple of weeks later I made the same request and was
given another excuse. Nothing alarmed me because both times the excuses seemed plausible. I was very busy with the
operations of the company at this time and it was a good 3 or 4 months before I made the same request again. This time I was
told they were not available because the CPA had them and was processing the business taxes. Another 4 or 5 months down
the road I made the same request once again and followed it up with another request just a few days later. I was questioned as
to why it was so important to me and why I was always asking for these records.
At this point it became clear that something was going on and the danger flags began to go up in my head. Right around
January of last year I told them that if we could purchase brand new $30,000 trucks, we could spend a few bucks on getting the
legalities taken care of. My brother agreed and said he would take care of it. When asked what was being done about it, I was
given several excuses about making appointments with the lawyer, then the CPA, etc.. etc.. In November of 2002, I threatened
to quit again if the legalities where not taken care of by December 25, 2002.
On December 20th, my brother produced a stock transfer document to me that contained about 16 pages of text and forms.
The document was for the transfer of 10,000 shares of "Non-Voting" stock. As agreed, this was 25% of the companies shares
but they were not the same shares as he had. He hired a lawyer to draw up these documents so I had a lawyer review them.
They have been signed by him, but I returned them to him unsigned by me and told him I wanted normal voting shares. (I did
make copies of them however)
Once again, I requested the financial records for the company and was given another excuse.
On April 3, 2002 I wrote a letter demanding certain criteria be filled or I would be leaving the company.
As of today, I am unemployed. I have had a couple of conversations with my mother but nothing has been resolved. They feel
that I keep asking for more and more. I do not feel this way as I have never asked or demanded money from this company. I
make a good living of about $85,000 a year and I get another $20,000 - $30,000 in perks. In the 15 years I have worked for
these 2 companies, I have never demanded more money in my paycheck. It has only been the last 2 years that I have started
making big money. Its not about the money with me, its about family openness and honesty and I feel they are hiding
We had an agreement and they are not sticking to it. I feel very betrayed and I feel that my brother has used me all this time
and has taken advantage of my trust. When this all started about 3 years ago during the time I began asking for a key to the
filing cabinet, I was told that they did not want anyone else's hands in it and they feared I would "mess it up". This is complete
non-sense as I am the one who has organized most of this company and built the machines with my own two hands. I have
automated most of the companies functions from the front office to the maintenance department. I think this is just their excuse
to enable them to hide money or other things from me.
I have, and have always had, complete access to the accounts receivable, payable, and all other computer systems. I wrote all
the software that controls these functions myself! I have spent not hundreds, but thousands of hours creating custom programs
at my home for use in this company.
What should I do? I have the knowledge and power to do just about anything I want. I have in my possession all of the
database records for the account receivables, all of our shipping and receiving records, and all of our prices that I am sure one
of our competitors would love to have. I don't want to do this however. I am not this type of person but the people around me
are telling me to "Take off the gloves and fight dirty if you have to".
After writing this letter, I should also include this fact: Our company was having a environmental issues and we were fined
several times for exceeding our limits. Getting these problems straightened out required thousands of dollars, and time that we
did not have. My brother asked me to "tamper" with the monitoring devices that were installed and I performed operations on
them that would give the monitoring agency a false reading that would keep us out of trouble. My brother would even get angry
at me when I would fail to do this at 4am when no one was around. Do I fall under the Whistle Blowers act ?? Or would I hang
myself out to dry if I brought this up with the legal entity doing the monitoring? The company is now within its limits because of
the quality of design and automation I created on our waste treatment.
Thank you for your time!
Screwed By Family
If there is one type of family business problem that rears its ugly head more than any other, it's this: lack of trust and
appreciation between family members, leading to hostilities, and mixed feelings about how much more abuse is required
before walking away.
I got 2 letters within an hour, yours: with a subject line "Screwed by my Family," and another "Who Screwed Who?" I thought
they were related- 2 sides of the story from the same family. No- just two more cases of family at it's worst.
From your telling (the other side always has their side, often coming off as equally abused and justified) your mother and
brother brought you into a company, needing your expertise, but not ready to open their arms to a partner who would want any
information or ownership stake.
Your experience with them has shown that they would suffer without you, but you will suffer with them. They are willing and
able to string you along, deceive you, keep you in the dark, and collude against you.
What would be your reasons for staying in this situation, except partaking in what you have helped build, hope to improve the
unhappy relationships and bad behaviors, seek vengeance by turning all of you in for illegal tampering to pass environmental
muster (what are the odds you'd be seen as a whistleblower and not a collaborator?), or sabotage the company (I understand
the appeal, but not you'd be any prouder of yourself in the morning).
From your telling of this story, I don't see your family sitting down to mediate your financial share of the family fortune. Your
mother and brother seem perfectly capable of the "what fortune?" approach. A good lawyer might find that fortune, and an
understanding judge might agree that you deserve a certain slice of it.
I don't predict any major changes in personality, generosity, openness. You don't state your age, but I'd urge you to explore a
new situation, using your talents and energy to build something you can call your own.
Being big about it might be your best revenge, and the most profitable.
I'll bet you don't have an easy solution for this one...
I've been working in my family's business (Aviation) since I was thirteen years old. The corporate officers are my father, the president;
my uncle, the general manager; and my grandmother, kind of a treasurer and bill collector and cleaning lady. Back then I swept up, vacuumed,
cleaned airplanes, you name it. I'm thirty-one now. Not much has changed.
Out of high school I obtained an associates degree in general sciences at the local junior college. None in my family ever went to college
and managed to make a living. I figured that since the corporate pilots I grew up watching go in and out of the airport had nice cars and big houses,
it was a no-brainer that I simply stick with my family business, learn how to fly, build hours and experience and either run the place one day or get a
different corporate flying job. Alas, insurance requirements for pilots have gone out of control and the flight hours I would need for a decent job ten years
ago are quintupled now. I am nowhere near that in the logbook. It will be some years before I can leave the family business and "make a living."
I find I am on another of several breakdowns in my drive, ambition, and self-esteem. The reasons these have occurred at all are too many
to mention but let me share with you the most agonizing factors. I spent the high school years working on the "line," The job description
goes as follows: aircraft refueling, aircraft relocation, service, passenger gopher, ramp and grounds keeper, toilet plunger, electrician,
landscaper, aircraft lavatory service, aircraft fuel truck and tug mechanic, customer service, interdepartmental coordinator, complaints
department, employee training, etc. You think of it, we do it in any weather, day or night, 365 days a year, for a fry cooks wages. I did that for
twelve years and flew on the side with my dad and uncle as copilot on a twin-engine Cessna we manage and fly for another company.
I burned out on the "line" job eventually. I demanded they reposition me. They were going to make me the parts department manager.
It got me a raise.
I'm a family member. And I have a family of my own. An ex-wife and child support on one child (I'll get back to that one). A new wife and a new baby
now bless my life. I have an 850 square foot house on two small town lots and a car payment. That's right now. In between was all the slaving. I get
some perks for sure, like a gas card and having my medical insurance paid and some vehicle maintenance. If they paid me any more, I''d just have
to pay those things myself and be right back in the same hole. Without those, I cannot afford to drive or fix the cars or insure myself and family.
And the perks come with a price ... guilt and the constant reminder that I should be grateful. I am grateful, as long as it isn't thrown in my face
when I desperately need a raise. The cost of living goes up but my pay does not. I do not shop frivolously. I have to be frugal.
I now make a salary of $32,000 a year. I've worked for and with my family for eighteen years. Not all bad, I guess. I come from a bunch of hard workers.
I clean airplanes on the side to make up the difference. I also have supplemented my income with groundskeeping at my grandparents house. By the way,
My grandmother had to cosign my house and every once in a while cashes out an old CD and splits it up among the family. This one was a hundred grand
and I got ten grand. That will help keep me in my house until about March. By then, I should have my tax return if I file early enough. My wife will have
another installment of her student loan for the spring semester.
For the latter twelve of eighteen years I have surely been working for that flying career. The hours in my logbook have crept up very slowly having
relied on the family to bring in the business. The flying just never boomed like I thought it would around there. I am a corporate pilot for our company,
but have no job title because I do many other things. I still fill in on the "line" from time to time, I manage a small merchandise shop, test fly repaired
aircraft and transport those respective customers back to their home airports when needed. I build crude tools and gadgets from wood or metal to solve a
plethora of problems... Still do building maintenance and I still wash planes and cut grass. I could better explain all this but there is something
I must move on to. The reason I have an ex-wife is because she had an affair with the general manager.
Yeah, he is the uncle I mentioned before. I suspected it for a couple years but was in denial. Besides, I couldn't believe that my blood would do that to me.
But I confronted her eventually and she fessed up. I did nothing so as to protect the family from scandal amongst our 30+ employees and worse,
the customers. She was warned never to be alone with him again. I say that because they had group airport business meetings that, at the time,
she was still involved with as another business' secretary. I carried that secret for another year until I caught them.
I divorced her and have to pay the standard 20% of my net. I have remained at the same job for three reasons: 1) I haven't got the education to go
changing careers at this time to a job that will pay the bills. 2) I haven't got enough hours built up to get a decent paying job in aviation. In fact, I'd
have to take a drastic pay cut, believe it or not. Pilots don't make much. 3) I'm scared.
This place is killing me slow. There is no room to improve or ascend. I have little interest in the work anymore except to show the employees
that I should actually be paid something. I was told by one close friend and employee that everyone knows this "secret."
I confronted the general manager once and orally forced an apology. I couldn't sew him though. Wouldn't have gotten anything. He and I function
in the work place as if it never happened, but all know the truth. The rest of the family knows and were confronted as well. They simply go on
as if it never happened and assume I will forget about it eventually since I put on such a good face at work. I'm about out of story here.
This place brings in a couple million a year. It also has an overhead of almost that much. It is not a lucrative business to be in. I personally
think it has been completely mismanaged. The uncle and my father pay themselves about 85,000 a year. My grandmother pays herself less than
I make but she has Social Security and much in savings. I'm not the least paid, by far. But They have groomed me to be a pilot. They knew what I
wanted. But flying only lately accounts for about half of my time there. That is a bunch compared to years past. I am hoping for a raise but don't
expect more than another thousand per year. Business is starting to improve around there but I'm about to pack the family up and run.
My wife is all for it. She doesn't want this destroying me anymore but it will only be more difficult financially.
Any boom in the business now could never improve my heart and outlook as long as I am completely bound to it without choice. The fact that
compared to all I am enduring, the years of work and hardship, the emotional abuse that can be involved with an overbearing family and their
constant proximity, and the proximity of someone who has not paid enough, this pays me next to nothing.
No matter what you tell me, Mr. Bryck, I need to hear it.
Ready for Takeoff
While I could analyse and offer solutions about all you have shared about your family and work situation, it sounds to me like you have
already concluded that you feel hopeless about your financial and personal prospects in your current setting. While you may wonder
if life would improve if you stick it out there, eventually becoming a happy and profitable pilot and/or business owner - and sharing in
the proceeds of the company in a way more fair and generous than now- you describe the company as unprofitable, unsustainable,
mismanaged, and not showing great promise for the future.
On the other hand, you have a wife who supports you trying to make a better life, and a baby who needs a father who feels good about
himself and his living. I don't know where you live, and if another area of the country could replace the $32,000 salary doing something
you either have a love or talent for; but it's not like you're unskilled, or trying to replace $1 million income.
If I was you (note: I'm not you, and you need to decide for yourself), I'd try to gather up the bravery to get out of the frying pan,
and gather up the wisdom to not move into the fire. Take some time to make yourself a practical battle plan, which covers your
basic expenses for the short term, and makes use of your talents and skills, and fulfills your dreams for the long term.
It doesn't sound like your sweat equity has resulted in any sort of nest egg that makes sticking around a good proposition.
It's possible that your family is secretly mentoring you to take over the company, but that is not the way it sounds. You may consider a frank
conversation with your relatives in the business about where they see your best prospects in the company, just as a reality check.
My advice to you is if they use this as an opportunity to make you feel bad, in order to justify your unhappy history there, call the meeting
to an end, and consider that the reality check.
Better luck elsewhere, if that is what you finally decide.
We have a small family business. We have been in business for 43 years
and it was started by my father. There are 4 brothers and 3 sisters who
all are shareholders. We each have 6 shares of stock. Two years ago
we were having problems with a union and my father (who is 71 years old)
did a buy-out to protect the money in the company. My father, mother,
and our attorney are the board of directors.
The four brothers, my husband, and myself are working for the company.
My two sisters do not work for the company, but they have worked there
in the past. Our family was always close until the past year. My
brothers have decided that they want to buy my sisters stock. The only
problem is they do not have the money for the buy-out.
My mother does not want this to take place because she knows that it
will split the family apart and she feels that things should stay the
way they were in the past. My father says give the boys what they
want, but he has told my brothers that the only way we can stop what is
going on is to leave things alone. In the past my sisters have gotten
a small pay check every week and at the end of the year they were given
a nice bonus. My brothers decided that he did not want my sisters to
receive anything, so the pay checks stopped and my two sisters and I did
not receive a bonus this year. So now my sisters will only receive a
My father has always been a very generous person and tried to be fair
with everyone. My brothers want more. They do not want to share with
their sisters. I have tried to tell my brothers that their sisters
were given a small pittance compared to what they were receiving. None
of my brothers are struggling. I do not know what to do. I am the
oldest in the family and have tried to work with by brothers. We had a
disastous meeting last January. It is now up to me and my one brother
to straighten all of this out. I am torn between my mother and my
father. Is there any hope for our problem?
I enjoy reading all of your articles. There are so many emotions that I
need someone to make sense of all of this. Thank you.
Many Hands on Deck
Dear Hands on Deck,
You say you've read many of the articles on this site, so you no doubt
have observed myself and many experts warning business owning families
to not confuse family issues with business issues. The slogan of the
UMass Amherst Family Business Center, "Treat Your Business Like a Business, and
Your Family Like a Family" is the one liner answer to your situation.
Without knowing any of your family members personally, or knowing their
abilities in business, or the financial status of your company, the
value of your stock and whole company, or the reasons why your brothers
want to buy the stock without you, a co-worker, and many other aspects
to the story, I can't give a fully wise answer.
This is the shortcoming to any advice column, mine or Abby or Ann
But I would suggest your family asks themselves many questions, to be
answered honestly and thoughtfully, so as to discover their own answers,
or at least be understood by one another, if you are going to make
life altering decisions that have any basis in good business sense,
moral and ethical strength, and hope of maintaining good relationships.
So please consider:
What is the guiding principle within your company about who should own
stock and benefit from the company's success?
What is the guiding principle within your family about getting a salary
from a company that you do no work for?
How do interested buyers of company stock take an investment risk if
they have no money to buy shares?
What is keeping the family whole and loving if not partaking in company
How should family members discuss issues that are "just business"
without personally offending and hurting one another?
What is the proper manner of rewarding employees, versus shareholders,
versus family members for their involvement in the family business?
The old saying "those who fail to plan, plan to fail" seems to apply to
your situation. Your family members need to discuss a grander, sensible,
sensitive, workable plan , including policies and philosophies of family
involvement and ownership. There will be no success, only hurt, if
seem impromptu and self serving.
I would suggest a talented facilitator to moderate a meeting to handle
all these issues.
I am 25 years old, single, and have a job earning 75k a year with an
upcoming promotion, but I am not happy with the hours or the type of
It is an intense environment in sales/client service for a
pharmaceutical research company, which is an industry that I am not
passionate about. While I am close to the city, I do not have much free
time and I am not very happy.
My father has been discussing with me the option of returning to the
growing family business as head of marketing. I am responsible for the
initial business idea and started it with my father in 1997 while in
college. The company is an Internet/catalog retailing company that I am
very passionate about, located in my hometown. He's offering me a small
reduction in salary with a current 11% ownership in the company.
Furthermore, I have the potential to eventually receive an equivalent
portion of the profit and my father's 58% portion of ownership as well.
In addition, the job would be flexible in hours and allow me to set my
own course. The success of the business would be greatly impacted by my
performance, while reporting to my father. I would be under a lot of
pressure to succeed and at the very least would need to generate the
revenue to support my compensation and marketing investments. We have
had a serious amount of money invested into the business over the last
four years and we are just now reaching profits.
Settling into a focused career that is challenging and rewarding is
important to me. With that said, I believe I have two
options. Option one, do I continue with my frustrating job and return
to school to finish my few needed credits for my degree, and eventually
find another more rewarding job? Second option, do I move near home and return to the
family business an hour from the city, finish my degree, work hard, and
risk the increase of a difficult working relationship with my father as
I am often micro-managed? My father and I have had numerous
difficulties working together in the past, but we each respect our
This is not a simple question, but any sound direction and suggested
questions to help me find the answer would be helpful. Any specific
research or case studies on young adults as successors to a family
business and the associated difficulties would be helpful. Any articles
or summaries of family arrangements around legal ownership agreements
would provide me insight as well, including all the issues that should
be addressed first, prior to any family arrangement.
Thank you very much for your help. I am looking forward to a thoughtful
Tempted but Cautious
To quote from my wise father (and my latest play, about working with my
wise old father) "The best job stinks, and the best boss stinks; but at
least if you're your own boss, it's your own stink."
Of course, in a family business, it's often the mixed aroma of family
members in too close quarters.
I would suggest formalizing some of your thinking into a list of pros
and cons, but make a column for weighted scores for each factor, as well
as extra spaces for remedies for the cons, giving a mitigating score
for the remedies.
The exercise would be to arrive at a score around the question: "Should
I leave my current situation to join my father in business?"
Any factor in support of this idea would be a pro, including: flexible
hours, ability to grow company and receive return on my effort and risk,
someday it will all be mine. Use your best judgment to assign a score
for each of these factors, ranging from zero (no real benefit) to 5
Any factor counter to this idea would go in the con column. For
instance, your $75000 salary might be a con of you joining your father,
being a pro of your staying put. However, you would add the mitigating
factor of increased stock ownership, earning its own score. Ability to
finish your degree might end up in both columns, phrased and scored
differently in each.
And so on.
The con column might include your father's micromanaging style.
Underneath that you might add the mitigating factor of "could create
precise job descriptions that clarify responsibilities, measures for
success, rewards for good measures"
This exercise will help you sort out the many issues and possibilities.
It will also show you, in the end, that the pros win, or the cons win.
If the pros win, meaning join with your father, causing you great
distress and nausea, add to the con column "I get nauseous thinking
about joining the family business" and give that enough points so that
the cons win.
Play with this score sheet for a few days, show it to a few trusted
friends, who can help you think of more factors, examine the numbers you
have assigned to various factors, etc.
In the end, you can even sit down with your father, asking him if
there's anything you left out to make the case for joining the business
more compelling. For instance, if in the con column you list "will my
father really give my stock, as he promises?" he might suggest "father
will put precise stock transfer plan in legalese, and sign it"
Just a suggestion.
Here's a loaded question: Do I have to have a passion for the product we
sell to really be successful?
We own a tap and die business. We make the little holes that
screws go into, a meaningless service, in my book. If there is anything
I don't have a passion for, it is digging holes and getting screwed at work.
But before you ask why in the world I would move back here from another
state and get involved with a living I don't have a passion for, here
is the answer:
I saw this as an opportunity to help run a business, and I do like
business. I was 24. My dad was 66 and my mom was 65, so their active
years in the business are numbered. My brother was 32 and he doesn't
have the desire to handle the administrative end of the business.
I figured; here's an opportunity to move up to the top of the business
chain fairly quickly, help out my family, have a fairly secure future,
and use my business degree.
Now it's ten years later and I am very demoralized. Dad has always run
the business by the seat of his pants (and done very well at it) and the
idea of formal budgets, projections, and strategic planning are anathema
to him. He seems to think that that stuff is unnecessary if you just do
business by common sense.
My brother has a very critical disposition. I think he has spent most of
his adult life trying to get my dad's approval and never felt he did.
Most of the time he tends to make most of us (one of our other
mechanics, his wife, and me) feel that he thinks we are incompetent by
second-guessing and talking down to us. (Although he does have the best
interest of the business at heart in his own way, and he can be very
thoughtful at times. He's not black-hearted, just annoying). However,
this makes it hard for me, the baby of the family, to feel comfortable
bringing up these new ideas of sound business practice and changing
Recently I started going to therapy to deal with my lack of
assertiveness and that has helped me see that I can bring these issues
up and I can champion my ideas for improving the business without
feeling guilty or caving in to resistance, but I also realize that I
have no passion for tap and die (an dying, tapped out industry, even if you love it).
(By passion I mean really enjoying the product. Tending to want to use it yourself,
reading about it forenjoyment.) Is having a passion for business enough? Or is my
disinterest in my industry a major indicator that I am in the wrong
vocation. At this point, I'm 35 and at a crossroads. Do I dive into this
business wholeheartedly or do I start to develop an exit strategy with
the best interests of everyone involved?
Digging My Own Hole?
Let me start off by saying: I don't know. And neither does anyone else.
There is no definite right answer, nobody knows what the future holds,
and it's not over till it's over.
But aside from all the cliche wisdom, it's time to take inventory of
your situation. On the plus side, you have a liking for what goes into
running a business. But your family doesn't seem to share that passion.
You feel a historical lack of assertiveness in forwarding your ideas and
opinions, which may be, in part, due to the negativity and disparity
coming from your family partners.
I would advise seeing this as an opportunity to learn and improve,
personally, and as a member of your family business team. Start by
defining, in your own mind, what it means to assert yourself. It doesn't
mean being aggressive. An assertive person can gently stand their
ground, not being pushy, but refusing to be pushed; can confidently
express themselves, but still recognize the need for compromise; can be
tough, yet vulnerable. When your brother is annoyingly condescending,
tell him respectfully that he needs to speak to you (and others) with
more respect and thoughtfulness. When either your father or brother
reject your ideas for structuring the business, gently insist they
examine with you the pros and cons of doing it your way vs their way.
Get good at making lists of pros and cons: Pros of budgeting: knowing
how much money you can spend. Knowing you've had a good /bad year. Cons:
Running the business incoherently, maybe heading for insolvency without
even realizing it.
If you could become more expert - even develop a passion- for
strategically persuading your father and brother to see the wisdom of
running the business well, you would find yourself in a more prosperous
and meaningful situation.
(I would suggest that you add into the process the granting of the
proper responsibility and authority to do a given job, and a way to
evaluate if it's being done right, both to hold people accountable and
correct improper procedures and policies.)
I worked for many years in my family's children's clothing business,
wondering , "If not for me, would children run around naked?" After a
while, the question was inconsequential. What I enjoyed about the job
was the relationships, the ability to make a living doing some honest
work that I felt competent at, that we built an institution with a
legacy and a good reputation.
Now I do a job- working with family businesses- that I feel is more
stimulating and meaningful. I'm proud to tell people what I do, and the
response is often "Wow- you sound like you're having a lot of fun." But
at the end of the day, my real satisfaction of the job is the
relationships, the ability to make a living doing some honest work that
I felt competent at, that I've built an institution with a legacy and a
This is not to tell you that you should be satisfied making screw holes,
and you are sentenced to work in an unsatisfying situation.
There's a lot of careers out there, and every possibility that you'll do
at least as well not working for your family business. The satisfaction
you get from turning around your present situation may or may not be any
more rewarding or important than using your skills for something that
really does excite you. Loving what you do for most of your waking hours
is a pretty good motivator to get out of bed in the morning.
Treat your business like business and your family like family. That
My dad and 3 partners incorporated and operated a paint store. There was
no particular place for me or my husband in the business. Dad had a good
bookkeeper, couldn't fathom having a woman on the sales floor and the
business partners would have had a cow if the son-in-law was brought
into the business. His bookkeeper moved, left town and he asked me to
come back to work. At the time I had 2 small children, but I said OK.
Between working at the store, taking care of my family and helping my
elderly parents I've been worked to death for the last 20 years.
Although Dad is 10 to 20 years older than his partners, he outlasted
them. One by one, they have retired and cashed in their stock. Dad is
now 88 years old and I am 48. About 3 years ago he started giving me a
little of his stock and he says that he wants me to run the store. He
continues to micro manage everything I do. He butts-in to all of my
decisions, reminds me when statement day is coming-up (like I don't
know) and reminds me to fill the postage meter...He doesn't like what I
do with advertising, but refuses to take care of it himself. When he was
out of the store for 3 years taking care of Mom and then having some
healthcare problems of his own, I took care of the store. While he was
out, I computerized the sales floor and inventory. He has come to accept
the computers as necessary in today's world, but he continues to
nit-pick my work.
I think that I've been used as a cheap bookkeeper and secretary for the
past 20 years. My opinions were never valued, I wasn't allowed to buy
company stock, and I had an enormously high responsibility level. When
the delivery man says he needs to take tomorrow off, it's "OK". When I
need time off, it's "Who's going to take care of your work?...have you
done this?, what about that?" Many years I've only taken 1 week of
vacation. My salary has only been half of Dad's partners' salaries.
(What does a secretary do? Everything that the boss don't wanna do.)
It's not easy being the "boss's daughter". If I leave early, an employee
might say, " Must be nice being the boss's daughter and getting to leave
early." Nobody notices that I ate lunch at my desk and didn't get a
lunch hour. There is resentment from the employees because they perceive
that I get extra advantages. I think that the employees are treated like
human beings while I'm treated like the farmer's plow horse. The
partners treated me with disdain because they couldn't treat me like
other employees; couldn't fire me, couldn't chew me out. And the
partners wondered if they we just being strung along, that Daddy was
saving the store for me.
Because of the way I've been treated all these years, I never envisioned
myself running the paint store. I thought that the partners would
eventually take over and replace me. Then with the partners out of the
picture, I thought Dad would sell his business.
My Dad is 88 and a widower. He loves to garden, but he's too old and
weak to push a garden tiller, etc. He can still drive his car, so he
comes-up to the paint store and stays all day. We eat lunch together, go
to the doctor, grocery store, pharmacy. The paint store has become a
senior care retreat for my Dad. Since Mom died, I've become his primary
My children are in college now at a local university. I'm very pissed
that I've spent all their growing years working at the paint store and
now they are almost all grown up and gone. I can't get those years back
and I've been poorly compensated for that loss. Dad thinks that I just
won't have the children as a distraction anymore and I can concentrate
on him and the store.
Do I have siblings? You bet. A brother (64) that left town after high
school and lives 500 miles away. 2 sisters (59 & 55) that got their
college degrees and teach school and they moved away too. They all think
that it's great that Dad has something to do with his time and they
think that the paint store is nice. I am the youngest, a "bonus" baby,
that came along after they got rid of all of the baby stuff and the
youngest had started school. I had built-in babysitters and was treated
well by my siblings. I wasn't as smart as my siblings; I didn't leave
Inheritance? You bet. When Mom died, her money went into a trust to
avoid taxes. Dad has a house, 99% of the company stock, owns the company
real estate outright, no debts, and liquid investments. He apparently is
sitting on every dime.
I'm fed-up with the whole situation. My husband makes good money, I
didn't need the job. I used to love my Daddy dearly. There was a time
when I would do anything for him, and I did. I put him and his paint
store before my family and husband. Now how can I extricate myself from
this? He's old, maybe he won't live much longer? Have I told him that I
don't want the store? I've told him, his friend-accountant, my siblings,
my kids, my husband. My kids and husband thinks that's fine. My siblings
think I'm mean, selfish and stupid. The employees don't want to see the
store close, but why should I continue to do something that makes me
unhappy just so they can keep their jobs? Dad just pretends that I'm
blowing-off steam and that I don't really mean it, or he's just trying
to ignore what is unpleasant to him. And yet, there is an elephant in
the room that nobody wants to talk about: Dad is Old. When he dies,
somebody will have to clean-up the mess--Me. I think that some old
people reach the point where they cannot make up their mind, they just
do what they've always done and hope for the best. Dad is on auto pilot.
Painted in a Corner
As they used to say on TV, there are a million stories in the Naked
City. What's so fascinating about a good family business drama is that
if there are 7 people involved, there are 8 versions of reality. One can
imagine, just as you describe in your letter, that each member of your
family sees the situation completely differently.
Who are the heroes? Who are the villains? Hard to say- did anyone force
you to work for peanuts all those years, regretfully missing out on the
joys of more devoted parenting? Down the block from you is a woman who
was never allowed to join her family's furniture business- she regrets
being a full time mother. Next door to her is a man who can't understand
why his daughter doesn't express more of an interest in signing over her
house to take over the family's restaurant.
Fact is, we're all somewhat on "auto-pilot" and wondering how other
people get all the breaks. All our lives are full of opportunities and
threats, and we need to be alert to take advantage and avoid,
Sure, it would have been great if your father was more appreciative, his
partners less threatened, the employees less resentful, your siblings
more proactively fair-minded. It would have made this story more
storybook. But the story's not over. It's not too late for you to figure
out what you want to say and do, and act on it.
You might start by figuring out exactly how you feel about everyone you
mention in this letter. Assume for a moment that none of them are
actively trying to rip you off- maybe they're all just on auto-pilot,
doing the best they can with what they've got.
Try to see each of their points of view. It's possible your father knew
he was getting your best efforts for less than he would have paid an
outside bookkeeper, but couldn't see clearly that his attitudes about
women, daughters, his "baby" kept your check too small. He may not have
realized that he was aging, and one day would wake up 88 years old.
Your siblings may not have thought enough about how your years of
sacrifice, devoted service, and missing out on mothering entitled you to
more and faster gifting of company stock. They may not even realize that
you were underpaid, overworked, resentful, etc. They may not realize
their 48 year old sister didn't enjoy the last 20 years in the business.
And so on. And if you can get past your anger at everyone, it may be
time to speak with them about what you want: what you think you deserve,
what you want to do with the next chapter in your life. There are many
choices, including: buying the business at an appropriately friendly
price, selling the business, and dividing the assets in a way that
compensates you for your years of hard labor, closing the business, and
doing what you want to do with the next 48 years of your life. The list
goes o, and each choice should be judged as more or less viable in its
fairness, appreciation, good business sense, and how it serves your
goals, going forward.
To be sure, there are things you'd like to say to an elderly father you
felt held you down, and to other members of your life. But just as
important are the things you say to yourself, and hope that you are
I'd close with "living well is the best revenge," but hope you see
revenge is not what is called for.
I really enjoy running my family business with my eldest sibling - my
sister, but I do not get along with my older brother, who is the middle
child. I am the youngest of three kids.
My main problem is with his violent temper. There are always recurring
scenes of violent exchanges of word between me and my brother. Usually,
I would order him to do something and he would be resentful and react
with a violent outburst of foul language directed at me. He would
usually say things like-- Shut the "f" up you "f"ing "b" or I will kill
you. Today, for example, I finished packing merchandise for a customer,
the box was heavy so I "told" him to move the box over there. I
recognize that I always have a bit of contempt in my voice when I speak
to him and that just sets him off. He resents taking orders from me
since I am younger. My sister always has to come between and stop things
from getting out of hand. He never hits me, I think partly because he is
still afraid of my father, and also because I always never back down
from a confrontation. I am not stupid, I would not dare him to hit me or
anything, but I do take the verbal abuse. He often ends up punching the
wall and one time put a hole into it and likes to punch boxes.
He is over 37, have been trying to graduate from junior college for well
over 10 years now, is obsessed with sports, sleeps, eats, talks only
sports, and probably has an IQ of a child. He wakes up late, drives a
junky, dirty, car to the store late, leaves early, and really resents
helping out with the family business. His main duty is to carry heavy
boxes into the store. About ten years ago, he thought we were holding
him back from his dream of becoming a professional baseball player. Back
then,he would often become verbally abusive to his older sister and
often times scream at her. I was at school most of the time and did not
help at the store much and avoided him. One time, the manager at Dodger
Stadium threatened to have the police arrest him if he didn't stop
calling them. Now, his new obsession is to become a professional runner.
He told my brother in law that he wants to just be a pro-runner and not
have to do anything else in life. Again, he is discovering that he is
not good atthis sport either. And I believe he is frustrated as well as
You see Ira, this is no ordinary problem I have, I was molested by my
brother as a child, so there is a lot of animosity towards him and it is
still very much alive. I had sought psychological counseling while in
college but could not find peace of mind. I finally found relief from
this burning hatred of him when I prayed to God and told him that I
forgave my brother. Only in recent years did I begin to understand that
he has a mind of a little boy. I always must be half awake when I take
my 30 minute nap at 3pm since he still will try things to this very day.
I am 35 years old, still single, have yet to find a man I can tolerate.
I do not sleep well and must always have a dead bolt installed on my
bedroom door to feel safe and will wake up fully at the slightest of
noise in the night. I become uncomfortable whenever my brother comes
into the room and get really paranoid when he stands behind me.
When I first graduated from the university, I told my mother that I do
not believe I can work with my brother but she asked me to try. The
business is very important to my parents, it is profitable and
successful, and we all have put our sweat and tears and gut and
everything into building it for well over 15 years now. Ever since high
school, my dream has and still is to be in the stock market and to own
my own business, maybe a nice franchise.
My parents recognize that their son is not normal but they feel like his
place is with us and that if he were to go out into the real world, he
would get taken advantage of. I talked to them about this problem over
lunch at a restaurant out of earshot. My father just says the usual,
"What can I do, I can't tell him what to do either, he doesn't listen to
me either. If you are smart, you will leave him alone, not boss him
around, because one day, when I am no longer around, he WILL KILL you.
My mother just says that the older the kids get the more problems.
I told them I do not think I can work with him anymore. That my sister
will just have to work a little harder and take over my responsibility.
She does sales, I do sales and in the past 3 years the buying also. My
parents are semi-retired now; they have pretty much relinquished the
control but still control the kids. My father does not want to hire any
extra help. For this, I got a hernia from lifting some very heavy boxes
up and down the stairs. My sister has problems too.
I want to leave the company, but at 35 and no work record, who would
hire me. I really like dealing with my suppliers; we have a good solid
credit history and reputation with them. I like many of my customers and
have always felt a great sense of gratitude and appreciation for their
business. What is my outlook, especially with the recession? What do I
do? Should I stay or leave? I do realize now that my brother is a good
kid but that the family has problems and issues that are never and
probably will never be resolved. Mixed in with the sibling rivalry,
greed, economic dependency, jealousy of who is the favorite, and other
major flaws is my deep dislike of him and likewise for him of me.
It took my family and I 25 years of struggle to get to where we are and
I really am crying when I look at what I have to leave. When we first
came here to the United States of America from SE Asia, we did not have
a home and just lost our country to the communist, and the only thing we
possessed was the clothing on our back and what the U.S. military gave
us. I can still remember what those items are to this day. It was a gray
wool blanket, a tube of toothpaste- we still use Crest today, a
toothbrush, and a Milky Way bar. My parents worked more than one job to
feed the kids. Today, we have a nice home but it is very heavily
dependent on all our combined earnings. I wonder what price I must pay
in the future to keep what we have.
Please, any advice will be much appreciated. And please do not think to
tell the authority about my brother, for I will never turn him in. In an
Asian family, shame is worse then death.
Dear Yellow Carnations,
Your situation is very tense, and I can see you have thought through
several possible responses, none of which seem realistic for you. That
doesn't mean that one of them isn't the best alternative to doing
You feel that between loyalty to your parents, the shame of exposing
your family's problems, financial necessity, and the fact that the
business is the fruit of years of labor after leaving your country of
origin, you are trapped into accepting your explosive and possibly
dangerous relationship with your brother.
I suggest to you that the effort you need to make to stay where you are
is not less than what is needed to start something new, move somewhere
else, or, at least, confront the situation with the help of some trusted
friends or relatives in your community.
The shame that you feel your culture imposes on exposing your brother's
temper, abuse, and violence fades in comparison with the threat to you
everyday, and the pain which has already been inflicted. There is a
difference between having the situation on the front page of the
newspaper, and confronting your family with the ultimatum that certain
people need to commit to better behaviors or you be forced to leave the
business, and expect that part of what you helped to build will be yours
to take, to start something new.
At the very least, your family needs a strongly worded Code of Conduct,
with consequences for your brother, and others. It seems to me there is
a need for you to regulate your own communications, as well; as you say
you often speak to him unprofessionally, with an understandably angry
tone, but one that aggravates him, doing you no good.
Though you say you've been through therapy and that it hasn't helped, I
would urge you to do more work with skilled professionals, at least to
resolve and heal your personal pain. It may also be helpful for you to
realize that you are more capable to start something new, different, and
far enough away from the threat of violence and abuse; and that you have
more chance of gainful employment that you may realize. A therapist good
at discussing practical options, along with dealing with your mental and
emotional distress would be very helpful. If you feel trapped, it's very
unlikely you'll be able to come up with good alternatives without some
It seems to me that the history you have with your brother makes it
unlikely that you can achieve a healthy working relationship, but that
doesn't mean you should be the one to leave the company. I think you
should also insist your family consider finding another situation for
him. If his job is really limited to lifting heavy boxes, he certainly
is underutilized, and easily replaced. He may find more satisfaction
working for a friend's business, or finding other work. In the end, more
meaningful and satisfying work will help your brother achieve some
self-esteem and emotional balance. Your parents help support him, if
this is truly necessary and they are able, with a gift of love, rather
than a salary. There are ways to fix family problems that are not
A family business only works when the family relationships add to the
value of the business, not when a poorly functioning family is serving a
life sentence. I cannot imagine how your family is creating something
that is more than the sum of its parts. I would urge you to gather up
your courage and creativity, and consider how you can't save others if
you don't save yourself.
Thank you for your advice. And for this timely response.
I have already talked to my mother about these two things you suggested.
Whether I should leave and find a new working environment or whether my
brother should leave. Her suggestion is old fashioned. She wants me to
find a man, get married, and she believes that will solve everything. My
father, meanwhile, locks himself in the bedroom and threatened my mother
with divorce if she doesn't control her son. Father has never really
enjoyed being around his son and actually resents him a great deal, even
as an infant.
My mother states that it is out of the question that her son leave for
other employment. Her first priority has, is, will always be to keep the
family "together" at any cost.
I have been seeking a job online but without any success. It is only a
matter of time. I really am seeking a job where I can learn new
management skill and expand my expertise in my product line and my
industry. I am in the import and wholesale business. Can you give me
some suggestion about where or how to look? Thanks
(BTW, yellow is for friendship, and flowers are pure)
PS To give you a better picture of him here are some of his usual past
activities. He has gotten into trouble many times when left alone for
too long. Here is a short summary of some things he has done:
• Set a trash can on fire, set a commercial building on fire • Threw a
cat into the water • Heated up a salad bowl on the stove top and thus
giving me a burn. Kind of a sick sense of humor • Used to take cute,
little grade school girls to school until some elders in the
neighborhood notified my family that he is not supposed to do that •
only plays with kids, even now • often when interacting with other male
adults, they end up trying to cheat him, make fun of him, or just
While I can understand your mother's good intentions, I quote humorist
Al Franken, when he asks: "you stay together for the children, but will
they stay "together" for you?"
Does she not have a greater obligation to make sure your brother is
getting the help he needs, then just keeping him close? And while the
squeaky wheel gets the grease, why punish the wheels that are not making
as much noise?
As for you, you may be open to a wider type of search. I can heartily
recommend taking a very simple assessment included in a great book, "Now
Discover Your Strengths." The book comes with a code that you enter into
a website designed by Gallup Organization, and the results explain your
most dominant strengths, that can help you expand your thinking on what
type of work you may find exciting, energizing, fit your talents, and so
Obviously, you may also need to expand your geographic borders to find
more potential employers; or maybe consider beginning some sort of
business or consulting yourself.
While I certainly have nothing against getting married, I can't see how
that's the either/or you must face at this time. Balance is very
important, and your mother may not be realizing all that it may take for
her daughter to lead a fulfilling life.
If you want to let me know the general vicinity you live in, I may be
able to steer you to a good counselor to help sort some of these issues
Your advice is very good.
I had given some thought to opening a business of my own. I am competent
and capable and really do enjoy my work. But, I also realize that this
is a recession we are in. My industry is in an upheaval with this awful
recession as I am sure many industries are being tested now. Only the
strong survive, and I know this to be so true. Fortunately for us, we
are not suffering too much since we run the business very lean. No extra
help, minimal expenses, most of us live very frugally, and it is nice to
know that not having a social life really does help save money.
So, this leaves me with getting a job or better yet as you have
suggested becoming a consultant. I do not know where my search will lead
me but I do know that I have a very strong faith in God and I do not
believe I will turn bad, as my parents fear. They believe that
interacting with an open circle of people is not good for a person.
As for psychological counseling, I tried that once and did not like it
at all. I just cried to the counselor most of the sessions. After about
two weeks of "therapy", I decided that I do not like myself very much
when I am weak. I resented my therapist for knowing my secret and I
always sensed that she dreaded my telling her my problems. In addition,
it was really tough going to therapy then to class directly then to
work. Very difficult and awkward to hide something so private. So, I
never went back. Besides, crying never does any good, for anyone. And,
honestly I have forgiven my brother, I just can't trust him nor stand
the sight of him, that is all.
And lastly, I would like to give you an insight into why Asians have
kids. So that someone will take care of them when they grow old. It is a
very bitter truth and one I do not wish to perpetuate.
Thank you for all your advice and God Bless you for being there for
people like me.
Dear Yellow Carnations,
In the end, the decision to change, either personally or your situation,
is yours alone. But if you stay in your current situation, you need to
figure out how to make things tolerable, even enjoyable. Despite the
dictates of your culture, you have every right to insist that people
treat you fairly and respectfully. Cultures change slowly, but often due
to individuals sticking up for themselves.
Your best bargaining chip might be the truth. "I have been treated
badly, and despite the risk to me, I have no choice but to leave if
things don't change." What has worked for people includes creating a
code of conduct, assembled with or without help from a facilitator (help
is better, though that involves telling outsiders what is happening).
One way to enforce the code of conduct is that your brother agrees to
pay you a painful amount of money every time he curses at you; an
excruciating amount of money if he threatens you; and is fired from the
business, and agrees to enter serious therapy, the very next time he
touches you. If he does not agree to conditions such as these, and if
your family members think they are pointless, that may be interesting
information for you, in deciding whether your family is worth investing
your time and energy in. Life is short, but might seem interminably
long, if you live according to rules that never let you win. I would
urge you to question your assumptions, assess if the greater risk is to
jump ship or stay put, and realize you have much to give, and much to
I wish you good fortune, and am thinking of you.
Thanks again for your thoughtful insight.
From your advice I have just come to realize a few very important things
that I never thought about before. Please do not take this the wrong
way, but while your suggestions are good ones for an American family
they are really irrelevant for Old World Asian culture. I would be
ridiculed by my parents- I know it even before trying. Why? Because they
think the problem is in the past, and when ever I so much as broach the
subject, they cut me off and tell me that I am trying to make my brother
"lose face". My mother would say "it is in the past" and my father would
say, " you are trying to peel the skin on his face off", in other words
I am trying to make him "lose face". They will insist it is irrelevant
to the current situation.
Only in America is a women equal to a man...and then again maybe not.
I do care about the well being of my family and hope that my decision
will not impact them negatively.
As I have stated in my original letter, I hope my leaving will not be
the end of the business. But, somehow, I feel like I am taking away one
of the crucial wheels of the engine. But, then again it is a five wheel
car (business), and perhaps I am the fifth wheel after all. Like a
troublemaker, doing more harm then good. Let's just hope so.
I will not take up your time anymore as I am sure there are some really
valid family business problems out there that need your attention.
Here is a parting thought; I am stronger because of my pain. And I have
more character and a stronger faith in God then ever. Without this
problem, I might not have really, really found the Lord.
Dear Yellow Carnations,
I think you have the guts, the soul and the brains to succeed; whether
to survive and improve your family business dilemma, or venture out to
greener pastures. I'm sure that even within the constraints and values
of Asian culture, there are avenues to greater safety and fairness. You
have emerged from an intolerable situation already; you can do it again.
Becoming the most fulfilled you can possibly be is an honorable gift to
My father has built up his business over the past 25 years from a
$12,000 investment with $100,000 worth of sales to $1,700,000. He wants
to retire in the worst way. The problem is the following. His accountant
says the business is worth $450,000. My Father wants to sell it to my
brother and me for $250,000. His accountant says the Canadian government
will not allow this to happen. They will tax it higher. The business has
made money for 25 years (not much- $10,000 to $40,000 after expenses,
typically). However, due to a loss of demand for one of his four main
retail areas, he has lost $30,000 each of the last two years.
My brother has just started out in life new wife, new child, new house;
so has little or no net worth. I have approximately $325,000 in net
worth, however $180,000 in rrsp's, and $80,000 in real-estate (our
house), that balance is in vehicles and some cash ( $10,000).
How can we make this happen before his health gets worse????
Timing of the Essence
I plead ignorance to the particulars of Canadian business appraisals and
tax laws, and even in the U.S., would refer you to a good accountant and
business appraiser for their piece of the puzzle.
But a good start would be to sit together with your father (and mother,
if she is alive and involved in his finances and life decisions), and
you and your brother, to determine:
1) A theory of how the transition of ownership and management should be
structured. Will you and your brother be equal owners? What will each of
your positions be in the company? Are additional investors needed and/or
practical? Are their sources for lending that would even out you and
your brother's investment? Are there gifting strategies that make sense
for your father's estate planning, and his income needs in the years
2) What are the prospects for the future success of the business? Is it
a good investment for the next generation? What return on investment can
you expect? Are you and your brother uniquely talented to deal with the
struggles ahead? Do you get along well enough, and make decisions
rationally? Are you open to outside, objective advice to guide the
company through rough waters, and take advantage of opportunities?
3) Put your expert advisors to work for you. Begin a discussion of the
guiding principles that will determine the best way to achieve your
goals. Brainstorm on the most creative ways to achieve them, to the
benefit of all involved. Let your strategic goals drive the discussion,
then figure out the best course from a legal, accounting, banking point
of view; rather than have boilerplate solutions drive the plan.
Many families have major misconceptions about what is possible, and
getting several expert advisors together can make many obstacles
I work for a family business (I am a non-family member) that is in a
difficult growth period. I am currently in the situation of trying to
help the managing family member grow and strengthen the business while
also dealing with the family's complex dynamics. I am in the unique
position of understanding and working well with both family members and
employees and being able to act a bridge between the two when necessary.
My problem is, is that I need to learn more about how to fix the
problems that exist and find information that will help me better
understand what needs to be done to help the business achieve better
structure so it can grow.
If you have any advice I would very much appreciate it.
Both Sides Now
You are in an enviable but difficult position: fortunate, because you
can be an important catalyst for growth and change; unfortunate because
so much may rest on your ability to mediate between family members and
non, between ticklish relationship challenges and fleeting business
And this in addition to doing your job!
Change in a business is often possible through the efforts and talents
of people who neither own nor preside over the company. You describe
your ability to relate well to both employees and owners, and the odds
are good that comes from the trust they have in your ethics,
perspective, and competence.
These qualities are important capital for you to use in taking the lead
in discussions about growing the company. You may consider leveraging
these strengths, convincing the owners that you are the proper person to
lead a discussion on the company's goals and criteria for success. This
can't occur without the change to a more professional structure, and an
understanding among family members (whether managers or owners) that a
business can only flourish where they know the difference between a
conference table and a kitchen table.
You don't mention what level of management you are in, but you can be
effective, no matter what. If you were, for example, non-family
president (or general manager), you might communicate that even though
you are accountable to the family members in their role as owners, they
are accountable to you in your role as company leader. If you have a
more middle management position, you can still lead the family and
employees in a discussion of how fruitful the company will be if all can
buy into a corporate culture of strategic planning and professionalism.
In this brave new world, all members, family or not, would know how they
can participate in the company's achievement of strategic goals.
Once an organization starts down this road, it is hard to stop
redesigning every aspect of the operation. A strategic plan must talk
about budgets; budgets must talk about projections and earnings, which
must talk about return on investment, which must talk about the
ownership feeling of even non-owning employees, which must talk about
compensation, which must talk about job descriptions, performance,
attracting and retaining the best available talent, creating a great
workplace,and so on.
As far as outside resources, I would consider beginning some serious
reading and discussion with a small circle of owners and employees with
leadership potential. Contemplation of the ideas expressed in such books
as "Good to Great" (Jim Collins), "First Break All the Rules" (Marcus
Buckingham of Gallup), and "A Stake in the Outcome" by Jack Stack will
give you all much to mull over. Become a Learning Organization, in the
spirit of Peter Senge ("Fifth Discipline"), and you will be too busy
managing profound growth and enthusiastic workers to get stuck in the
usual mess of family problems dragged into the workplace.
There are many excellent consultants and advisors to assist along the
way, and a talented company of learners will be able to utilize them to
Thanks in advance for any help you're able to provide. Here is my
situation. About 7 years ago, my brother opened a restaurant. My father,
brother and myself each put up 1/3 of the money and organized a
corporation, each of us owning 1/3 of the stock. My brother ran the
restaurant. We held annual meetings where we were updated. My father and
I would sometimes offer ideas (none of which were taken), and we were
generally dismissed as "not knowing the restaurant biz" and that we were
"silent partners." It was not an ideal situation but the restaurant was
making money, which we were banking. A few years ago, we sold 10% of the
biz to Bill, a guy who had been with us from the start, co-running the
restaurant. He bought 3 1/3% from each of us.
Last year, we took the money we had saved and opened a second
restaurant, about 15 miles from the first. My brother had been in charge
of this, and Bill in charge of the first. The second restaurant is it's
own corporation, with the same 30/30/30/10 ownership.
The situation with my brother has deteriorated. He has financial control
of both restaurants; and virtually refuses to disclose any information.
He has to at year's end for our taxes, but basically not otherwise. And
he still refuses to listen to any suggestions from any of us- even
screaming at my mother for suggesting that a dried out plant might need
watering. (none of these suggestions are particularly material to the
running of the restaurant, maybe something like, "why don't you take an
ad out in a particular paper at a cost of $300?")
Basically he says, "it's my business, my baby. I built it from the
ground up, so leave me alone." Bill, my father and I want to build the
business. Since my brother left the first place, Bill has added a full
liquor license (we only had beer and wine previously), and happy hour
specials. Sean says the business is good enough and wants to be left
Also, my brother and Bill earn nice salaries from the restaurant. My dad
and I do not. We would like to start receiving dividends, but my brother
says there's never any money to pay out, and says we are not entitled to
Our latest issue involves the bookkeeping. Restaurant #1 has made about
$50m/ year for the last few years. Sean has not told us how Restaurant
#2 is doing, but we all think it is losing money. The accountant just
told us that for 2001, #1 made $5m and #2 made $5m. Bill knows that's
not accurate and we now have no idea how either place is doing.
The situation is rapidly deteriorating on a personal level. My brother
spends most of his time trashing Bill, who it seems he's threatened by.
He's barely speaking to me or my parents, and wants us to "stop
interfering, and butt out of his business." It is taking a huge
emotional toll on Bill, my parents, my brother, and me.
I have proposed that Sean buy us out of one place, and we buy him out of
the other. My father is somewhat interested to be in business with Bill,
without my brother's involvement. I am in the Northeast, and the
restaurants and my parents are in the South. I am reaching a stage in
life where I would soon like to be spending more time there. Frankly, I
could easily envision working with Bill...certainly not with my brother.
Thanks again for any advice. Looking forward to hearing back from you.
PS Today, my brother's wife, a new mother, called my mom and said that
she would be leaving him, because he is so stressed over his father's
and my involvement in "his business" and is causing an unhappy home life
for him. The message was, get them off his back or I'm out of here.
Obviously, his wife has only been hearing his version of events. I do
not know if she is aware that Sean owns 30% and the rest of us own 70%.
This obviously creates even more family pressure.
If you read the other questions and answers on this advice site, you
will notice some commonality in the problems faced by family members in
business. Your family's disputes, concerning the rights of owners versus
managers, whether family or not, are sticking points for many, due to
the difficulty in seeing others' points of view.
As a consultant to family businesses, it is impressive how one
"situation" can have multiple interpretations. It makes me hesitant to
draw any conclusions, at least until I've heard from all the parties,
something an advice column doesn't afford me.
From your perspective, your brother is unappreciative of the investment
his partners have made, which has enabled him to own a business.
Assuming this is not something he could do without your involvement, he
is, at the very least, acting un-strategically in alienating you. While
it isn't clear from your letter if there was any agreement on return on
investment, your right to sell your share of the business, your right to
fire the management (the same person as one of the owners, but 2
distinct roles), your right to see financial information and have it
studied by your own advisors, it should be obvious that you didn't
contract for your current relationship, which is threatening your
sibling and parental relationships, your brother's marriage, quite
possibly the operation of the restaurants.
There is some evidence from your telling of the story (again, only one
perspective) that your brother tends towards manipulative behavior:
ranging from screaming, to non-reporting, to instigating his wife to the
point that the marriage is over if she can't make you go away. Though
I'd like to recommend a pleasant sit down meeting where everyone could
state their goals and visions, it sounds like too little, too late; and
not something that your brother would ever cooperate with.
I would do some research into your legal and viable options, and present
them in a carefully worded letter. If I was you, I'd state regret that
the relationships have deteriorated this much; that you are disappointed
in the disrespect he shows to partners and family members; how he has
acted badly in his non-communication with majority partners. State
unequivocally that the status quo is unacceptable, and for financial and
family reasons, major changes are inevitable.
Examine what you are willing to do, and to what end. If you offered him
realistic and fair terms to purchase your stock, and he doesn't accept
it, would you be willing to sell to an outsider who would force his hand
more than you? Would you consider buying his 30% and then selling the
whole thing?; and with your brother cashed out, he could search for
partners who will accept him as he is.
You might also consider getting both restaurants appraised by an arm's
length expert, and work some sort of swap so that he becomes sole owner
of #1 and you, Bill, and your father are free to enjoy and prosper in
#2. If you cashed him out of his share of #2, he would have some money
to get you out of #1, owe you the difference, and so on.
But some healing of the family is also in order. You don't say if you
all have children, but if this is the case, how many cousins suffer at
the hands of the disputes of their parents? Even if you manage to get a
business divorce, it would still be healthy to gather family members in
a mediation/ counseling session, for some good old fashioned acceptance
of a fair share of blame, apologizing and forgiving, stating some goals
for the future of the family (and maybe a code of conduct). It would
help your larger family to state plainly that adults sometimes act
childishly, and that it shouldn't hinder the relationships of children;.
There are people who specialize in this sort of family business
counseling, and I'd be open to discussing how to find them in your area.
I wish you luck and persistence in a hard job ahead.
I am the operations manager for, and son of, an entrepreneur. I have a
brother and a sister, neither of whom are involved in the business. The
business has grown significantly since I joined my father 6 years ago.
My father has taken the following steps to keep the business healthy
after his passing:
I will get 40% of the ownership stock, with my brother and sister splitting 60%
I will get 51% of the voting stock, and my father clearly stated in
legal and informal documents (letters etc.) that I will make all
Finally, my compensation, for as long as I am with the company, will be
tied to a published governmental salary such as a GS-15, Step 10.
My father thinks he has covered any source of potential friction, and
obviously any system depends on the good-will of the participants. But,
do you see any looming crisis if this system is adopted?
I applaud the preemptive thinking your father has undertaken, hoping to
institute a structure that is clear cut and fair.
As you state, good will is the wild card that can make this arrangement
fantastically smooth or horribly explosive. And good will is not evenly
distributed through the population. If your family is lucky enough to
have a high degree of good will (and trust and generosity), your
arrangement may be good enough.
But as an added measure of security, some additional formality may
increase the chances for success.
I would suggest that you not wait till your father's passing to enact
several governance and communication strategies among the siblings /
future owners. It will not only be gratifying for your father to see,
but build momentum that may not be possible to build later, when you all
may be grieving, or less connected as adult children.
Though you'll have 51% of the vote in managing the company (which is too
often seen as 100%, though a president elected by 51% is often thought
to have "no mandate"), your siblings together will own the majority of
the stock. That's a delicate balance, fraught with all sorts of
I would suggest you build a peaceful and creative mechanism for reaching
consensus and dealing with differences of opinion when discussing
growth, change and risk. At the minimum, a "family council" that has
ownership discussions about goals of the business, shared visions of
future direction, return on investment, and so on. Better yet, or in
addition, consider creating an outside board of directors, with family
representation, but not family majority, that would enable an expert and
informed examination of the many issues facing the company.
As far as your compensation being tied to salary surveys, I would add a
level of merit pay, not only for you, but for all employees and managers
who succeed in achieving the company's financial goals. I would
recommend you and you siblings (and father or parents) participate in
some learning about how these systems work; for instance, The Great Game
of Business is one good model to create a team of people thinking like
The ongoing discussion between you and your siblings needs to be both
practical and theoretical, to discuss the many "what ifs"; for instance:
"What if the company grows wildly under your charge?" If you decide
ahead of time what reward there is for the chief officer, versus the
owners, there won't be resentment about the subjective,
seat-of-the-pants decisions you may make when there's a mountain of cash
to be divided. Or "What if we are approached by a very enthused and
wealthy buyer?" Again, helpful to have worked out all these scenarios,
so you can all think with cool heads in the heat of the moment. An
openminded discussion that creates an insurance funded buy sell
agreement would certainly be in order.
Owners should also understand that the company cannot grow without
reinvestment, and there is a responsibility of owners to see themselves
as stewards, not simply investors. As an owner and manager, you will
have to be particularly good at seeing things from various points of
I've been in business for 29 years. I am 67 years old. I have a daughter
and son in law that work full time with an admitted non-ability to run
our business, as well as a daughter that works 2 days a week. They have
all been with us for 20+ years. My youngest family member, a son, joined
the business 3 years ago with a degree in computer systems and no
management background. At first he was welcomed with open arms by all,
and it was thought he'd eventually run the business. But since he's been
under fire from my other children, causing me great heartache and
frustration. I still think he's our only family member with any chance
of succeeding me. What to do?
Concerned Father and Boss
A family business frequently attracts several relatives who find many
benefits there, including that they are hired without many of the real
world successes, business degrees and experiences that satisfy the needs
of the company. Your children and son in law, admitting that they don't
have what it takes to run the business (in whatever form this admission
actually was communicated) should have no expectation of executive rank,
authority, or compensation. A job in a family business, like any job,
should promise nothing more than a competitive salary and healthy
working conditions for a job well done; too often the promise is unkept
on both sides of the table.
If you've not yet told your family that you are on the lookout for a
competent successor, it's time for a serious discussion. It is necessary
to take inventory of what talents and skills are needed to run the
company, and to separate those from what personal qualifications your
family members may have that have earned your love and respect, not to
mention the unconditional love that families are known to provide.
Lead your family in an analysis of the pros and cons of competent family
management, versus unqualified leadership, versus selling the company,
versus bringing in outside managers (for the long run or during a
Explore the faulty notions of a leader being chosen based on age,
longevity in the company, popularity, etc. Describe your discomfort in
acknowledging that you must, for the good of the company, decide who is
the most competent to lead; and your hope that this decision can be made
without taking a large toll on the family relationships. Ask them
whether they can buy in to a process where an outside management
consultant helps determine if there is, in fact, a competent successor
in the family ranks.
Family members must accept that if they cannot support and cooperate
with leadership by most competent heir (meaning it will be disruptive
and ineffective) they should discontinue their work within the company.
In the rare case where shared leadership may be an option (i.e. "Office
of the President") it is also essential that there are no saboteurs in
the coalition, or bomb throwers on the outskirts.
You don't explain why the initial support for your youngest son turned
sour. Possibilities that come to mind are jealousy, lack of confidence
in his ability, or conflicts- whether current and relevant, or historic
childhood squabbles- that you are not privy to. Sibling relationships
have a life of their own; from their point of view there may be
perfectly valid reasons why they could not work under their brother,
One more reason why an outside expert may be clearer and more effective
in judging presidential potential.
The extent to which you can set goals and principles to guide you in
this tricky process may determine your family's success. You'll be doing
them no long-term favors by making an arbitrary decision. Even if they
don't remain together in the family business, they will still have to
live with the repercussions of how this was handled.
Please help me think through a situation I'm facing with my business and
family. I began in '93, after West Point and some years in the Army;
starting in Engineering, Project Mgmt, and progressed through the
company. In '94 and '95 the business lost $600K each year and was on the
brink of bankruptcy. I took over the operations in late '95. From '96 on
the business has done much better. We have reduced debt from $1.2M to
$500K, and have had consistent earnings of ~ $200K - $300K per year on ~
$6M in sales. My Dad passed away in June '98, but was not really
involved in the operations since '97. I am now nearly complete on my
purchase of the company from the estate, paying $600K with a purchase
money note. It's a good deal, but based on where the company was 5 years
ago I feel I've earned it. I am very frustrated because I have 3 sisters
who say it's a "sweetheart deal" and it concerns me that they don't
appreciate where the business was and is now. Had the business been
liquidated 5 years ago, when then bank almost called the note. We are
close to closing but I told my family that I'm not sure this is what I
want, as I sense that my sisters (all older) will always feel that I
"stole" the business. Two years ago we tried to get offers on the
business to arrive at a fair value, and the best offer we could get was
$400K due to the very competitive and cyclical nature of the business.
Also, the 9/11 tragedy has had an adverse impact on the business. I have
always settled for a modest salary based on the business size, but have
held out for the upside potential. The estate probably has another $2M
in assets, excluding the business. Please give me some honest feedback.
Don't Call Me Sweetheart
Dear Don't Call Me,
I agree that you have legitimate concerns about your sisters resenting a
sweetheart deal. But not so much to kill the deal, if you work toward
increasing their perspective and ability to make businesslike decisions.
It would not be a win for your family or anyone in it to have a kneejerk
reaction determine the outcome.
If your family has a frank discussion - best done with a facilitator who
can maintain calm and organize the information- you could assess the
strengths, weaknesses, opportunities and threats of your purchase of the
business. This might enable the family to conclude whether the deal is
fair and the estate division is equitable.
Strengths might include that the family company will be continued,
sustaining a legacy all may be proud of; and the business being run in a
manner that gives back to the community, more so than a competitor might
manage. Weaknesses might be the risk inherent in running a business,
rather than cashing out to an outsider (but then there's risk in taking
that cash and buying Microsoft stock). Opportunities include the
satisfaction and gain you will receive sustaining your apparently
impressive track record; and implementing your own brand of innovation
and leadership that reversed the trend of some bad years. Then there is
the threat of your strained family bonds, with your sisters thinking you
have deprived them of the higher sales price an outsider might agree to.
Not to mention the threat of you feeling deprived of a fair deal in
order to not damage your sibling relationships.
It appears that your family needs more objective expertise. Rather than
trying to ascertain the company's value by getting bites from
prospective buyers, hire a professional appraiser, who is aware of
purpose of the evaluation, since the magic number is flexible, based on
whether the appraisal is for estate planning, a planned sale, or
leveraging for growth. The more arms length information you can gather,
the less your sisters can assume the deal is in your favor.
It would also help to establish guiding principles, to ensure that your
family's behavior and decisions will adhere to shared values and
priorities. If you agree that "Our family relationships are valuable,
and need to be nourished," you might not be as prone to damage them for
a bit more income. If you all feel that " business decisions should be
based on strategic and logical factors" you might conclude that the
business is worth what it will fetch on the open market, whether the
buyer is family or not. Such preemptive agreements will assist you to
make decisions without feeling shortchanged or favored. It should be
understood that a deal that is good for you is not necessarily bad for
Your family is fortunate to have another $2mm in assets in the estate,
since most family business founders have 90% of their assets tied up in
the company. Remember that the business has a certain stock value,
another value in terms of assets; and both of those figures need to
consider both the earning potential and risk. A company dollar is not
equivalent to a U.S. dollar. If you sell the business to an outsider,
the proceeds would be part of the estate. If you buy the business, your
purchase price would also go to the estate.
The discussion needs to be bigger than the price of the company, and who
gets how much. Strive to act with fairness, generosity, and faith that
there's enough to go around; and to be satisfied with your slice of
intelligently divided pie.
I am president of a family owned subchapter S Corporation. I own 30%, my
brother owns 30% and my sister owns 40%. We inherited this company 15
years ago. My brother and I manage the business and make all the
decisions. My sister, who lives 400 miles away, has no involvement in
the company. My brother and I are paid a salary plus some benefits. All
the profits are distributed each year. These distributions have been
substantial until business year 2000 when a combination of events caused
us to distribute only about 15% of the usual amount. My sister came home
to see why the money was short and while looking at the financial
statements, discovered our salaries. (This should have been no surprise
to her as we mail financials to her each year). She has gone back to her
home and talked to her "financial adviser" who suggests that she draw a
salary also! I need some advice how to handle this situation because I
don't think we should pay her a salary.
Dear Subchapter Sibling:
Your family finds itself in a classic struggle, and there is hardly ever
one "right answer" for these dilemmas. My motto in thinking about this
type of issue is "treat the business like a business and the family like
a family." This is easier to do when you are proactively building the
policies and objectives of a business; harder when trying to unravel a
confusion, to separate appreciation from compensation, and when each
family member collects their own "expert testimony" to support a
You don't state why the shares were distributed the way they were, with
your sister owning more than the two working siblings. This split may
have itself been the result of a well meaning but unclear intention of
your parents; or maybe a method to justify her not drawing a salary
(though salaried employees- family or not- presumably earn their keep in
the company). In any event, your sister is the major shareholder.
So your sister is somewhat correct when she feels entitled to a return
on investment, though the diligent manager - and owner- will understand
that the company has financial needs for reinvestment. Rather than
resort to paying for No-Show jobs, it's time for the family to sit down
and discuss some large issues.
The complex, conflicting relationships that threaten a family business
are often represented by three partially overlapping circles, indicating
the family, ownership, and management spheres. Where they overlap, there
is confusion about roles and rules, so very important to understand
"what hat you're wearing." With a talented and knowledgeable facilitator
to mediate, you should have a meeting of all owners, to discuss what are
the reasonable expectations of Owners (a fair return, that the company
be run responsibly and sustainably, that there might be lean years and
fat years, and owners will notice those phases in their bank account).
Owners need to realize that they do not have the right to get paid as
managers; so in my opinion, it is inappropriate for your sister to draw
a salary. Her golden eggs are dividend checks.
At the same time, you should be discussing the proper understanding of
the role of management. In your case, some research into building a
compensation policy based on (1) industry standards as reported in
surveys available from universities and industry groups, including
Society for Human Resource Management (www.shrm.com) (2) Merit Pay,
where a percentage of profits are pooled, and distributed to employees
and managers based on Performance Evaluations, and (3) Return on
Investment for Owners. And then there is family, where your family makes
some effort to build good will and momentum with all the normal sort of
activities that families enjoy. This may sound unnecessary for the
business, but important ingredients of the healthy family business
include trust, generosity, and an "all for one, one for all" attitude-
easier to build where work and money is not involved.
Back to business: the ROI issue is important, but widely ignored. One
compensation expert pointed out how many business owners know more about
the 5-10% of their assets tied up in the stock market than the 90% tied
up in their business. Owners need to set a goal for the ROI, which would
include, pre-emptively, how much reinvesting would be necessary that
I don't know what sort of communication goes along with your annual
distribution of financials, but a more elaborate annual report- better
yet, an annual meeting where all these issues are discussed cleanly and
with an eye to your agreed upon goals and principles.
This is a general answer, and without knowing more and hearing the
various points of view, difficult to fit perfectly. But is sounds like
you are in a situation where money talks louder than family members, and
that you have to change.
Hope this is helpful. Feel free to write again.
Here is a follow-up report. My brother, sister and I met yesterday and
the following was presented to my sister: I told her that when wearing
my "family hat", I wanted to find any way to accommodate her with more
income but when I put on my "business hat, I saw many warnings about
paying her a salary. My brother and I then offered for the corporation
to loan her some money on a demand note with a very low interest rate
for her to live comfortably for the next 18 months until the Sub S
business returns a good distribution. My sister would be put on the
Board of Directors of the Sub S and we would commence to pay a board fee
that she could use to repay interest and principal on her note. At least
2 meetings will be scheduled with one requiring her attendance at
distribution time (pick up her check in person) and the other meeting
could be presented in a conference call. Furthermore, my brother and I
would cease drawing a salary and take our income as distributions. We
would Keep our medical insurance and vehicles in the company. This
arrangement seems to be very satisfactory to my sister and my brother
and I are also pleased. Let me know what you think and if you have any
Thank you for your reply,
I'm glad to see that you were able to come up with a creative
scheme to deal with your issues that satisfy all sides financially and
in terms of treating the business with professionalism and respect. What
I would add to the mix is an ongoing discussion that is provoked by the
right questions. A few examples: What are reasonable expectations of a
stakeholder of this company? What sort of objectivity do we need from a
Board of Directors? What is the philosophy guiding compensation, both
for family and non family employees? What ongoing topics need discussion
and clarification among family members, so that decisions are made
Comments from a Reader of this Published Q&A:
I enjoy reading
Related Matters and thank you for having it sent to me. I do have a
comment about the letter from Subchapter Sibling and his follow up. It
has been my experience that when parents leave a business to children
where some continue the business and others are only stockholders , the
additional stock that goes to the non-involved child is to make up for
the salary and other perquisites that the operators will receive. In
this case the brothers are clearly in control and are entitled to
compensation for their efforts from which the sister will benefit.
Leaving aside the devotion of the boys for their sister which can be
shown in many other ways I think their solution is not a wise one. The
plan that they have come up with is clearly a sham, not for the best
interest of the business and with tax exposure that may well cause an
unfavorable tax audit. Also in these modern times why are they still in
a subchapter mode which in my view is not better than some of the llc
types. Also their problem may be solved as part of a recapitalization to
have a A stock and B stock format or a preferred stock. I hope that you
do not mind these comments but the problem involved activates my memory
of these situations which are so often present in family businesses
large or small.