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All-in-the-family

JAMIE HERZLICH

March 31, 2008

Running a family business can be challenging, but that doesn't make it unpopular:

At least 80 percent of all businesses in the United States are family owned, according to family business experts.

Still, only about 12 percent of family businesses survive into the third generation, and just 3 percent make it to the fourth generation and beyond, according to The Family Firm Institute in Boston, Mass.

So if you're involved in one of these businesses or contemplating launching one, it's important to know how to resolve conflict and work together as a family to increase your company's chance of survival.

"It's really complicated to not only be a family member but also a family business member," says Wayne Rivers, president of the Family Business Institute, a consulting and educational organization in Raleigh, N.C. "Being in a family is hard enough, and this adds to the complexity of their roles."

It may be difficult to combine family and business, but success is possible if you keep a few key pointers in mind.

For starters, don't force family members into a business against their will, experts say. That would only create more stress.

On behalf of the family members, parents often make decisions as "benevolent dictators" in a business, Rivers says.

"Your adult children ceased being children a long time ago, but parents never cease being parents," he adds. "Why not go to the people who have to live with these decisions and find out what their dreams and ambitions are?"

Also, assess whether the family members you bring into the business are capable of doing the job. "You need to make it part of your mission that you're going to fill every job with the most qualified person," says Ira Bryck, director of the UMass Amherst Family Business Center, who once stood at the helm of his own family's 90- year-old, fourth-generation children's clothing store in Freeport. "It's not possible [that] the most qualified person is always in your gene pool."

The bottom line: Treat your business like a business and your family like a family, says Bryck, who closed the family store in 1993 when he decided it was time to move on.

If you have trouble separating family and business, he says, it pays to get an outside perspective.

Hold regular family meetings - at least every quarter - and bring in a neutral outside facilitator to help run them, Bryck suggests. It also pays to have an outside board of advisers or directors.

David Friedfeld, president of ClearVision Optical, a family-owned and managed business in Hauppauge, has come to rely on such a board.

The 59-year-old eyewear distributor, started by David's father, Fred, has five non-relatives as advisers in addition to four family members (David, Fred and David's mother, Mimi, and his brother Peter, who serves as ClearVision's executive vice president). In addition, two family members and two nonfamily members belong to a business advisory group, Vistage, made up of local CEOs and senior executives. "It provides us with a lot of good feedback," says Friedfeld, 51.

Good communication and a clear delineation of roles are essential if a family business is to survive, he says. ClearVision has a formal organizational chart to clarify everyone's responsibilities, and the brothers try not to step on each other's toes.

This is valuable, notes Stewart Austin, senior vice president of information technology for family-owned Austin Travel in Melville. "You have to know your responsibilities and trust each other," says Austin, 45, the youngest of three siblings who all hold key roles at the 53-year-old firm started by their dad, Larry.

He doesn't tell his brother Jeff, the president, or Jamie, senior vice president of sales, how to do their jobs, and they don't tell him how to do his.

"There has to be a line in the sand," says Austin, who concedes that at times working with family isn't always easy.

"We definitely have fights, but we always work it out. You know they've got your back."

SOME RULES OF THUMB

Have a succession plan. Start work on it up to 10 years before turning over the business.

DON"T pay siblings equally, but according to their levels of contribution to the company. (see correction below)

Hold family members accountable.

Don't take out family problems at work.

Periodically reassess the strengths of the business. Your business model needs to reflect changes since the business was started.

SOURCE: IRA BRYCK, WAYNE RIVERS

Pay siblings equally despite their levels of contribution to the company. [CORRECTION: One of the "rules of thumb" in a box with Monday's Small Business column about family businesses was incorrect, because of an editing error. It should have said that family businesses should avoid paying siblings equally despite their levels of contribution to the company. (A15 ALL 04/02/08)]

Business Week SmallBiz -- Families February 20, 2008,
Boomerang CEOs
More entrepreneurs are coming out of retirement to help run their children's businesses

Steve Bernard figured he had cashed in all his chips—that is, Cape Cod Potato Chips, the company he'd founded, sold to Anheuser-Busch (BUD), and repurchased after the brewer shuttered its snack-food business. Along the way he'd also started Chatham Village Foods, a maker of fancy salad croutons. In 1999, Bernard, then 60, sold both companies for good. "I thought, all right, I'm free at last," he says. Bernard spent the next few years in Florida and on the Cape, happily paring his golf handicap.

Then his daughter, Nicole, called with a request. Nicole, who had worked at both of her father's operations, told him she wanted to start an organic-snack company—with him as her partner. Steve's first reaction was to say no. He assumed her business would have a lot of relatives on staff, as his startups had, and he wasn't sure she understood what she was getting into. "I don't think people have any idea how difficult it is to work and stay close as a family," he says. "When you throw in the financial pressure and problems of a startup, it's just incredibly hard."

But Nicole, 34, persisted, and in 2003 they launched Late July, the 15-person, $12 million maker of organic crackers and sandwich cookies in flavors including peanut butter and vanilla bean with green tea.

No one can say for sure how many veteran entrepreneurs have started companies with their kids, but family business counselors expect this sort of enterprise to grow more popular. Today's young adults are comfortable having their parents as mentors, coaches, and advocates throughout their lives. As for their parents, Lloyd Shefsky, co-director of the Center for Family Enterprises at the Kellogg School of Management, points to all the folks reinventing themselves in their 50s and 60s. "More people are starting businesses at this age," says Shefsky, "and if you want to come out of retirement, this is one way to do it." Many entrepreneurs, too, thrive on the startup phase and lose interest as a business matures. A partnership in which they pitch in during the hectic early days and pare back while their child takes over can be perfect for both.

But transforming a parent-child dynamic into a business partnership poses emotional and practical questions, from how to address one another in front of clients to who makes decisions when you disagree. The occasional dramatic flareup seems inevitable. Running Late July with her father has been like "the Steve Bernard MBA program," Nicole says, which is what she'd hoped at the start. Still, her father admits the transition to business partners was a little rocky. "I love that I'm able to work with Nicole and we're getting to the point where things are starting to smooth out," he says. "But there have been times when we've wanted to kill each other."

Every family and business is different, so there's no right way to address such concerns. What matters, says Shefsky, is that communication be fluid and frank—often a challenge when family is involved. Both partners must aim to agree on major issues such as mission, responsibilities, and exit strategy.
MONEY TALKS

Given Mom or Dad's prior success, chances are the parent has startup capital or access to credit that the younger partner lacks. Before launching, talk about this financial inequality and its implications for control and responsibility. Some parents think putting up the money gives them additional rights. "They feel the buck stops with them, and if it doesn't work they can pull out and walk away," says Ira Bryck, director of the Family Business Center at the University of Massachusetts at Amherst.

Such has been the model at Petlane, a $500,000, six-person company in Concord, Calif., founded by Tara Nemeth, 32, and her mother, Lane Nemeth, 60. Lane started her first company, Discovery Toys, when she couldn't find worthwhile educational playthings for Tara. She sold it to Avon in 1997. Her daughter inspired Petlane as well. Five years ago, Tara bought a puppy, and Lane saw an opportunity to develop safe and healthful pet products and sell them via Tupperware (TUP)-style sales representatives, the way Discovery had sold toys. Tara was in graduate school studying psychology, and abandoned her search for a job. The two founded Petlane in 2004.

Theirs is clearly a mentor-protégé relationship. Lane brings money, knowledge, and experience, while Tara contributes mainly a willingness to learn. "If we have a disagreement we can't resolve, I'm the CEO and I have the final say," Lane says. Tara rotates from job to job, learning all aspects of running a business, from inventory management to bookkeeping, and figuring out what she does best. Currently she's director of sales: Her background in psychology makes her an adept coach of new reps. She's also the company's product guru and its face at trade shows. Tara says of her mother: "She gives me room to make decisions and run with them but will help me when I need it. I've never had that balance before."

Other parents expect their young partners to ante up at least some startup capital. At Late July, Steve told Nicole that although he'd contribute most of the funds, she would have to "put in to the point where she can't put in any more." Says Steve: "I wanted to make sure her interest level was where it should be and that she saw it as a real endeavor." The financial structure has helped them forge a partnership based on consensus decision-making. Steve calls his daughter Nicky, even at work, where she refers to him as Dad. But they both admit to being strong-willed and competitive. A situation in which her opinions carried less weight or where both didn't feel free to go at each other toe to toe probably wouldn't have worked. "In my personal life I always defer to him. At work I don't," says Nicole. "He is CEO and I'm president, and if I feel strongly about something I will fight for it, and so will he."
MOM'S NOT ALWAYS RIGHT

Kicking in cash is one way for a child to gain equal footing. Having special knowledge is another. That's how it works for Sondra and Allyson Ames, founders of Wonderland Bakery, a $1 million Newport Beach (Calif.) novelty retail bakery chain with 22 employees. Allyson, who was gleaning tips from the Food Network while her schoolmates were still watching cartoons, went from high school to culinary school, where she dreamed up an elaborately themed retail bakery—think Willy Wonka meets Alice in Wonderland—that would sell bright-colored confections along with gifts such as baking sets and aprons. The 22-year-old asked her mother, who earlier had founded and sold Global Exchange Network, a business-to-business bartering service, to help turn the imaginary store into a company.

Sondra, 53, borrowed against her house to raise startup capital. But Allyson's creations, from cupcakes topped with candy martini glasses to Manolo Blahnik shoe cookies, make the business special. So the two have a partnership in which Sondra, as CEO, handles functions such as hiring, training, and lease agreements, while Allyson rules the kitchen as president and executive chef.

Making the move from mother and daughter to partners was challenging nonetheless. "At the beginning it was difficult to have my mom tell me what to do in a business environment," says Allyson. "We had to develop two different relationships, the professional relationship and the fun one." And Sondra had never had a partner before and found working together to be harder than she expected. "We butted heads a few times at the start because we both wanted to be in charge," she says.

Mom finally loosened her grip when she saw she didn't always know best. Bottom-line-oriented by nature, Sondra typically looked for moves to save a few dollars. But she didn't understand how a professional kitchen works, and some of her decisions backfired. She purchased lemon flavoring in quantities that the business would never be able to use, and over Allyson's objections insisted on buying a $5,500 dough-rolling machine. The device turned out to be a temperamental space hog that took more time to roll dough than Allyson needed to do the job by hand. Allyson resumed her low-tech ways, and they sold the machine at a $1,000 loss.

From that point on, Allyson demanded that Sondra respect her expertise. "She had to get used to not having the final say about everything," says Allyson. Sondra agreed, and they set a new rule: Any purchases over $1,000 must be approved by both. They codified their professional relationship, too. At work, Allyson calls her mother by her first name. They have a ten-minute chat by phone or in person every morning and touch base again in the evening. Each takes the lead in the part of the business where she's stronger, but only the smallest and most routine decisions are made unilaterally.

Dual-generation companies must also have a plan for managing emotional eruptions. When the Ames women feel a confrontation looming, they'll wait to hash the matter out until employees aren't around. The Bernards are used to boisterous dealings and expect their staff (which includes relatives) to roll with the tide. But they will put an issue on hold for a few days if tempers get too high.
AGE-OLD ISSUES

As with any startup, the founders in a family business should plan for the unexpected—say, if sales grow faster or slower than anticipated or if a buyout offer materializes. They must also plan for the time when one party wants to leave the company. Parent-child businesses have an extra layer of complexity because the partners are at different stages of life, with widely divergent lifestyles and financial needs.

Those disparities are apt to grow with time, notes Bryck. A parent itching to do something new at 60 might not feel so comfortable with financial risk ten years later. And children at 50 are likely to have different desires than 40-year-olds, perhaps wanting to take charge once and for all or bring their own kids into the business. The reverse can happen, too: A parent who had intended to step aside might have a hard time leaving, or a child who thought running a business would be a lifetime passion might change his mind after starting a family. Bryck suggests agreeing on an exit strategy and then figuring out what to do in case of an unexpected illness or problem. His favored approach is for the child to gradually buy out the parent. "This way the parent is covered and the kid is free to do what he wants with the business," he says.

At Wonderland Bakery, Allyson's youth has always been a factor in the company's long-term planning. Sondra worries her daughter will regret trading the social and educational pursuits of youth for a baker's long hours. Indeed, while Allyson calls the bakery her baby, she can tick off other things she'd like to do in her 20s, like traveling or furthering her culinary training at Le Cordon Bleu in Paris. So the two have settled on a way to let each of them either wind down or stay fully engaged. Plan A, says Sondra, is for the pair to work really hard for five years, then sell part of the business. Both would then withdraw from daily operations while staying involved in some manner, perhaps with Allyson as spokesperson or executive chef and Sondra as a consultant on branded products. But there's also a Plan B: a buyout agreement if mother or daughter wants to keep running the company after the other is ready to ease off.

The Bernards don't have that sort of formal arrangement at Late July, but they have discussed the future. At minimum, they know they want to keep the business in the family. "My plan would be to step back eventually and pick and choose what I do," says Steve. "But Nicky would like to continue growing the company. If she wants to buy me out over time, I wouldn't have a problem with that." The Nemeths might face a tougher transition. Neither mother nor daughter can imagine Petlane without Lane. "My mother will retire when she's dead," Tara says. Both say Lane will take an advisory role in 10 or 15 years, when Tara becomes CEO. Whether Lane will want to stay away from day-to-day operations is another question. "I cashed out once, and it was not very fulfilling," says Lane. "It's more fun to run things." And she adds frankly: "I haven't thought at all about how the money would work." She'll only allow that, if she does trade in chew toys for golf clubs someday, the two will arrange a buyout or take the company public. "I'm just confident we'll work it out," she says. Lane's confidence in the future may reflect no more than her best intentions. But her faith in Tara is the kind you can have only in a partner you've raised from a pup.

Working for Your Kids

More and more retirement-age executives are taking jobs at their children's companies. How families are becoming co-workers without anyone having to take a time-out.

By Anne Fisher, Fortune Magazine senior writer
June 21, 2007, 12:42 p.m. EDT

(Fortune Magazine)—Imagine you're the 64-year old retired CEO of a manufacturing company. Would you carry a pink business card with a tiny photo of a pug named Wheezie on it? What if your boss said you had to? What if, moreover, your boss was your 28-year-old daughter?

Robert Shipman carries that card. The pug in question is the mascot of a cosmetics company called the Balm that his daughter Marissa, now 33, started in 2003. At first Shipman - who had sold his clothing manufacturing company that had $130 million in annual sales and retired in 1980 - balked at both the pink and the pug, but then he relented.

"We disagree on a lot of things, but I usually give in, because I'm amazed at her talent," he says of his elder child. (Her younger sister, Jordana, now works for the Balm too.) "She's created a product line with a national market. That isn't easy to do. I bow down to that."

Smart move. Going to work for one of your kids, as more and more retirement-age executives are doing, is a challenge. It requires a huge psychological shift on both sides, and experts say that many an enterprise has gone down in flames because parents and their children can't shed old habits and adopt new, businesslike roles.

"The biological model is, the parent instructs and makes decisions for the kids. Reversing that is swimming against the tide of 10,000 years of human evolution," says Wayne Rivers, CEO of the Family Business Institute, a research and consulting firm in Raleigh.

For a grown child, managing Mom or Dad can be fraught with issues too: What if you have to (gulp) fire a parent?

Most entrepreneurs with a parent in their employ admit to experiencing déjà vu, especially if the employee is also a stockholder. Because her dad owns 25% of her company, Marissa Shipman says, "sometimes when I need to spend money to launch a new product, it reminds me of being a kid asking him for my allowance."

When Laine Caspi started a baby-products company called Parents of Invention in 2002, her father, Doug Harmon, had recently retired from a 37-year career as a systems engineer and IT manager at IBM, Citigroup, and Merrill Lynch. He pitched in to help Caspi get her books in order.

"When Dad got into the business, I sent him a big box full of eight months' worth of sloppy financial records with lots of important documents missing," she says.

Harmon straightened out the mess with nary a word of complaint, but, Caspi recalls, "I felt like a bad girl who hadn't cleaned her room."

For about a year, every time she asked Harmon to do something, Caspi recalls, "it was like being back in high school asking for the car keys. But I got over it."

Unlike in the movie Freaky Friday, there are no magic fortune cookies to speed the adjustment process along. The surest way to avoid turning the workplace into dysfunction junction is to follow a few tested strategies.

Define roles

This approach worked well for Steve Lancashire, who bought a Mayflower moving franchise in Austin in 1995 and changed its name to American Relocation Systems.

Lancashire hired his father, Ben, a retired CEO of Inland Container Corp., and put him in charge of payroll, accounting, taxes, insurance, and long-term financial strategy.

"I knew the moving business," says Lancashire the younger, a former Mayflower executive, "but I really needed his expertise on everything else."

Says Ben Lancashire: "The natural tendency, especially for someone with my corporate background, is to try to take charge. But I backed off and stuck to my part of it. Now I rarely challenge his decisions. He has some pretty darn good ideas."
Ask strategic questions

Plenty of parents know they need to back off and let the kid run the company, but they just don't know how.

Ira Bryck, director of the Family Business Center at the University of Massachusetts at Amherst, recommends learning a new way of making suggestions that he calls strategic questioning.

"Lots of people already have a parent's blaming, critical voice inside their heads. They don't need to hear that voice from an employee at work every day," he says.

If a child is about to do something a parent thinks is boneheaded, Bryck says he should refrain from saying, for example, "For crying out loud, that will never work!"

Instead ask strategic questions like "Can you tell me how you see that fitting into your overall strategy?" or "Have you thought about [insert perceived problem here]?"

The alternative, alas, can get nasty.

Wayne Rivers of the Family Business Institute coached one business owner who was so sick of his dad's domineering ways and so unable to confront the old man that if he saw his dad's car in the company parking lot "he'd just keep driving," says Rivers. "He'd usually head for the golf course, where he could whack away at little balls all day." (Paging Dr. Freud, Dr. Sigmund Freud ...)

Not surprisingly, with the nominal boss AWOL most of the time, the business nearly went under.

The deadliest power struggles, it seems, occur between fathers and sons.

Joseph Astrachan, director of the Cox Family Enterprise Center in Kennesaw, Ga., notes that a substantial body of academic research shows that "fathers and daughters generally make great business partners, because they aren't in competition. Daughters want their dads to stay heroic. They are aiming to protect that image, both in their own minds and in their fathers' minds. Sons are different. Sons want to replace their fathers as heroes."

When the Oedipus myth plays out in a family business, and neither father nor son is willing to give an inch to the other, says Astrachan, "I've seen conflicts that have destroyed both the business and the family, a total blowup."

Plan for conflict

Some families work out private code words for defusing the stress of an argument. "There are times when we get pissy and frustrated with each other and the conversation just feels like it's going all wrong," says Doug Harmon. "Then usually one or the other of us will yell, 'Keeee-YAH!' That's our signal to back off, cool down, and maybe even laugh about it."

Adds daughter (and boss) Laine Caspi: "We got that from my son, who learned it in a martial arts class. It's what you yell before every blow."

Others invite a third, neutral party into their donnybrooks. "Whenever we have a big disagreement, we try to be very professional about it, but we're Italian," says Hank Datelle. "We get mad and yell and scream for 15 minutes, and then it's over and forgotten."

Datelle, 65, began his career at IBM and then started three successful Internet companies. In 2001 his daughter Lisa, 36, who had been working for a big pharmaceutical benefits-management company, decided to start her own firm, Cypress Care, to compete with her former employer.

At first Cypress Care operated out of the basement of Lisa's house in an Atlanta suburb. She persuaded her father to come aboard, along with her brother Marc, 38, an information-technology and finance whiz.

Says Hank: "I researched the field and realized that Lisa was right about what was lacking in the industry. With my startup experience, I figured I could help." So he bankrolled the venture, now a $200 million company with 150 employees.

The Datelles hired a moderator, in the form of a chief operating officer who is no relation, to make sure that their arguments did not lead to bad decisions.

Says Lisa: "My dad knows more than I do about some things. And I know more than he does about other things. So we've made an effort to hire people who know more than either of us." In the event of an impasse, the COO casts the deciding vote.
Lose the ego

As any boss knows, giving somebody a lousy performance review is hard - so hard that many studies show that the majority of corporate managers, if they have a choice, avoid those conversations altogether.

Now just imagine having to tell your mom or dad that his or her work is simply not good enough.

Says Mike Johnston, 40, who hired both his retired parents to work at Savory Spice Shop, his gourmet spice business with stores in Denver and suburban Littleton: "It's really hard to tell your mom or dad what to do, or to give them constructive criticism. They're your parents. We've had some difficult conversations."

Obviously, having your kid pick apart your work is no day at the beach either. As in so much else, humility helps. As Johnston's dad, Charlie, 65, puts it, "I made up my mind at the outset that Mike knows spice. What he says goes."

Set benchmarks

Having performance objectives from the get-go can make a huge difference.

Andrew Keyt, executive director of the Loyola University Chicago Family Business Center, often gets called in to help entrepreneurs give performance reviews in sensitive situations.

"If goals are marked out in advance," he says, "then negative feedback becomes much easier on both sides, because it's not personal." What if worst comes to worst and your child decides your services are, um, no longer required?

Rivers of the Family Business Institute says that firing a parent is so traumatic for most business owners that "it really can't be done in one brief meeting, as you probably would fire any other employee. It's a process that generally takes four or five months."

If you work for a son or daughter, and if he or she has been gradually taking projects away from you and encouraging you to take more vacation time, guess what? You're probably being eased out of your job.
Have an exit strategy

Ben Lancashire is gradually stepping aside after almost 12 years of working for son Steve's moving company. "He's learned a lot about general management," says the elder Lancashire, who is 78. "I can play more of an occasional consulting role now."

Hank Datelle plans to stay with Cypress Care for two more years - it's part of the deal he and Lisa made with private-equity investors who bought 70% of the company last summer - and then go work on his golf game or (who knows?) maybe start another company.

Laine Caspi has hired a chief financial officer to replace her dad, who's training the new person, because her parents will be moving to Mexico in August. Why? "We like it there," says Dad. "I'm ready to get back to retirement and relax."

Parents of Invention, Caspi's company, has grown 100% a year every year since 2003 and has expanded its product line from one item, a baby carrier called the Ultimate Babywrap, to about 20. Caspi says that without her dad's support, she would have had to abandon the business in its infancy.

"All entrepreneurs go through these dark days where you just think you are crazy to believe your business will ever take off. When I was really down, I called my dad and said, 'This company will never succeed,'" she recalls.

"He said, 'Are you having fun with it?' And I said, 'Well, most of the time, yes.'

He answered, 'Then you're already a success.' That picked me up and kept me going." Then again, that pep talk sounds very much like a dad and not very much like a CFO..

Telis Demos contributed to this article.

Small Businesses Tempting More Buyers

© 2007 The Associated Press
May 14, 2007, 12:46 a.m.

NEW YORK — Small businesses are hot prospects for buyers these days.

Financiers with money to spend are turning more frequently to the mini-mart or small trucking company as a good investment. Among the most avid buyers are private equity funds flush with cash.

"There's no question that small businesses are becoming more frequent takeover targets," said Joe Astrachan, director of the Cox Family Enterprise Center at Kennesaw State University and editor of the Family Business Review. "Ten years ago, this didn't happen at all."

Buyers have gotten far more sophisticated about gauging the risks of taking over a small business, and as a result are going after those "all the way down into the area of 100 employees or fewer," Astrachan said.

But new buyers pose some challenges as well as opportunities for small business owners looking to sell. Along with capital, they may bring performance contracts that require owners to stay in the business and keep it growing. Moreover, buyers may suddenly swoop in with an offer unexpectedly — which may require a more rigorous approach to keeping the business ship-shape.

Proof that the buying spree has heated up is partly in the growing ranks of business owners and executives seeking out advisers for a review of their personal finances, according to M. Holly Isdale, managing director and head of wealth advisory services at Lehman Brothers Inc.

"There are bids being made that may tip family or closely held companies into selling because the price is right," said Isdale. "Executives are coming to us and for a look at how their finances are structured."

How small is small? Mom-and-Pop outfits continue to fly under the radar of the acquisition-hungry — these are the tiny corner grocery or liquor stores whose owners struggle to make ends meet. As ever, such businesses are more likely to fall victim to the local superstore than become the object of buyer desire.

Prime targets are well-oiled businesses with an annual profit of at least $150,000. Manufacturing, trucking and garbage collecting concerns are popular targets.

"It really depends on the industry, but most deals are being done with businesses with around $250,000 or up in annual profits," said Grafton "Cap" Willey, a shareholder and managing partner of the Rhode Island offices of Tofias PC, a regional accounting firm, and chairman of the National Small Business Association.

Common sense comes into play. If an owner is working more than 60 hours a week and the business is bringing in only a modest profit, there's probably not a queue around the block to take it off his hands.

"If it's more like a job than a business, why would someone want to buy it?" said Paul Hense, president of Hense & Associates, a small accounting firm in Grand Rapids, Mich.

Still, there seem to be more people now looking for profitable small businesses than are available, according to Hense, who has seen many of his good clients bought out.

"That's the awful part of being a small CPA firm," said Hense. "We're good at taking other small firms and making them work. Then they go away when they get bought."

Private-equity funds are the biggest driver of small business takeovers these days, though retired executives looking to get back into action with companies to call their own are also buyers.

"Buyout firms are raising huge pools of capital," said Isdale. "There's just so much money going into buyouts."

A common modus operandi for a private-equity fund: Take a minority stake in a business through a performance-based contract that grants representation on the board of directors. A bigger share of ownership results if the company doesn't perform well, and a buyout can follow.

Small business owners who get into a deal with private equity should remember that these arrangements may exert uncomfortable pressure. Often, a partner is looking to turn around the investment in two to five years.

"We like to say that small business owners are looking for patient capital," said Willey. "Venture capitalists, by their nature, aren't patient."

So it's important for business owners to make sure they have a good exit strategy should things go wrong, said Colin C. Blaydon, director of the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth College in Hanover, N.H. "Owners have to make sure they're in control of their own destiny."

Ira Bryck, director of the University of Massachusetts Amherst Family Business Center in Hadley, Mass., said he sees numerous people with small family businesses who want to sell.

People in that position should consider a number of things, said Bryck. Among them is making sure the business isn't bloated with vacation homes and other "toys." These can make it hard to tell the true value of the business.

"When it comes time to sell your company, which often comes unexpectedly, you have to throw all of that stuff overboard and clean house fast," said Bryck. "You have to get rid of anything in the business that's not a value-added part of it."

Indeed, the element of surprise is more often in play these days, as private equity funds get more aggressive.

"We're starting to see more hostile takeovers," said Isdale. "It used to be that as a senior vice president, I would have a say, but now takeovers are coming out of the woodwork."

Understanding the real value of the business is also key. Small business owners are "notoriously bad at judging the value of their own business," said Astrachan. Often, an owner thinks it's worth a lot more or less than it really is, he said.

"They also need to figure out what value they derive from the business that isn't financial," said Astrachan. "What's the thing they get out of it that would be hardest to purchase? Lots of times, the financial offer might be great, but it just wouldn't make up for what the business adds to your life."

From a respected business newspaper that does not allow free posting of its articles:

An article about fraud in small business quoted Ira Bryck:

"Keeping compensation clean is important. It's best for an owner to be paid separately for roles as owner and manager. As a manager, an owner "should be paid a salary that you would pay anyone for doing your job . Separately, the owner is entitled to a dividend based on the company's financial performance."

Dow Jones does not authorize the self-posting of any parts of its content to websites. However referring to an article or creating a brief summary in your own words would not require our permission. Thank you for honoring our copyright. Best regards, Gail Bondi Dow Jones & Company, Inc. Reprint and Permission Services (5/11/07)

Estranged Company

By Colleen DeBaise, SmartMoney.com
December 5, 2006

RICK TRAMONTO and Gale Gand are a masterful culinary duo. For 25 years, the Chicago pair has made beautiful meals together, most notably at top-flight eatery Tru, where customers dine on Tramonto's sumptuous main courses and Gand's delicate desserts.

But while they make magic in the kitchen, the same is not true at home: The once-happily-married chefs have been divorced since 2000, a year after they opened Tru. Despite the breakup, their business has thrived, and the former husband-and-wife team (who remain amicable) are currently opening four new restaurants in suburban Chicago.

"We are the poster children for a divorced couple who can still work together," says Gand. "People come to us and ask for advice as they are splitting up, and they marvel."

Most couples who start a business together but wind up divorcing are used to bitter endings, not the sweet times that Tramonto and Gand are enjoying. About 1.2 million husband-and-wife teams run a business together, according to the National Federation of Independent Business. And when love fails, the business often does, too, with many ex-spouses liquidating their shared endeavor.

Yet in some cases, as the restaurateurs' story illustrates, the passion for the business can supplant the passion the partners once had for each other. Some divorce experts say that shouldn't be so unusual. Especially as more soon-to-be-ex-spouses try the "collaborative" approach — which focuses on new and amicable ways to resolve disputes — running a business together post-divorce emerges as a distinct possibility.

"We ask ex-spouses to be parenting partners; it only makes sense, on a financial level, to at least let the couple explore the option of being business partners," says Susan Hansen, a family-law attorney in Milwaukee who serves as president of the International Academy of Collaborative Professionals. "If you can co-parent — and we have that as a reasonable expectation — you should be able to co-own a business."

Debi Davis was an early, unwitting proponent of the idea. In 1991, she started nutritional-supplement company Fit America with husband Byron in Fort Lauderdale, Fla. A year later, they divorced. And then they spent the next 14 years growing the business together.

"It initially started out as survival," says Davis, of their unusual arrangement. The couple, strapped for cash because of a previous business failure, started Fit America when their children were nine months and five years old. "We had two kids — because of that we needed to stay focused and do what was right for the family."

Their business not only survived but took off. By 1997, it was bringing in close to $45 million in sales. (Byron left the company last year to explore new options.) Davis says it worked because the two "were great partners." Her ex-husband's expertise was marketing and finance, while she was adept at operational management. "We really brought two different aspects of the business together," she says, "although we personally wanted different things out of life."

Couples who decide to divorce each other but not the business need to do careful planning, experts advise. It's especially critical to have a partnership agreement in place, which will spell out each other's responsibilities and outline what happens if the business partnership (like the marriage) sours1.

The ex-spouses may want to consult a mediator or even a therapist, who can advise them on how to resolve conflicts. And, bottom line, the arrangement won't work if the two can't get along. "They have to have the ability to communicate, and there has to be some reasonable degree of trust and respect," says IACP's Hansen.

Clients, she says, were often confused. "People would say, 'Are you guys divorced?' and I'd say, 'Yes,'" she says. "Byron would look at me and say, 'We are? I didn't get the memo!' That was his standard line."

Most ex-spouses don't enjoy such camaraderie — which is why divorce lawyers usually don't recommend that they try to run a business together. "I've been doing this for 20 years," says Lee Rosen, a certified family-law specialist and president of divorce firm Rosen Law Firm in Raleigh, N.C. "And I don't think it normally works."

He's seen couples attempt to work together, post-divorce, usually because the company's revenues support the family and both partners are critical to its success. And he's watched those efforts fail. "The same issues that were happening in the marriage were continuing to happen in the office," he says.

Also, some divorcing couples forget to be realistic. "When people think they are going to do this, they haven't considered dating," he adds. "The minute that starts happening, it's like 'Oh, we didn't think of this.'"

In the most unpleasant of situations, ex-spouses will continue in the business together because neither wants to give up control. "The worst-case scenario is kind of a 'War of the Roses' and they both have too much invested to get out, so it's not a strategic relationship but a spiteful sort of thing," says IRA BRYCK, director of the University of Massachusetts Family Business Center in Amherst, Mass. "The real ugliness there is they can draw employees into taking sides, and even customers into taking sides."

For that reason, restaurateurs Tramonto and Gand hid their breakup from their 100-member staff for the first six months. "We didn't want to scare them," she explains. "We didn't want our clients to think the restaurant was going to close."

Why did they decide to stick together? "We were way better business partners and co-chefs than anything else," Tramonto says. "It was natural, and I think that's why it worked." The former spouses also knew they would always be linked by their son Gio, who's now 10. Running a successful business is perhaps "the new and improved version of staying together for the kids," Gand says.

Ultimately, the former couple's shared history in the restaurant business and a mutual respect for one another kept them together. Both have remarried and had children with new spouses. But at work, their long partnership still produces delicious results.

"Last night, he had me taste his Brussels sprouts with béarnaise sauce — it was great," Gand says. "He just tasted the tuna fish sandwich from my new coffee bar, and I could tell from his eyes that it wasn't perfect. He can zero in on the thing that I'm missing." After so many years together, "we can read each other's minds," she says. "And she totally understands what I'm looking for, without me having to say it," Tramonto adds.

Sticking together as business partners when you've decided to untie the knot is rare.

Most divorce experts recommend that ex-spouses explore other options first:

One spouse could buy the other out. That's an especially good choice if one spouse started the business, or is more passionate about it.

Sell it, and divvy up the profits. Often, it's tough to unload a small business, but if the company operates smoothly and profitably, then it's possible to find a buyer.

Split it. Generally, this only works if the company is large enough to have separate units that can be spun off from one another.

Speed up the succession plan. Family businesses often name children as successors; a divorcing couple with adult children may be able to choose this option.

Liquidate the business. It may not be pretty, but liquidation allows both parties to walk away and start over on their own.

Faculty Statement

Daily Hampshire Gazette "Business School"
February 12, 2007

Name and title:
Ira Bryck, Director

Business name, address and description:
UMass Amherst Family Business Center, UMass Continuing & Professional Education, 100 Venture Way, Hadley, MA

The UMass Amherst Family Business Center is a learning community that helps you:

Strategize the transition to the next generation
Professionalize through use of more formal governance structures.
Trade on family strengths, and inoculate from liabilities
Treat your business like a business and your family like a family.

For more info, see www.umass.edu/fambiz or call (413) 545-1537

Experience in the field: Director of the UMass Amherst Family Business Center since inception in 1994; speaker, writer, advisor on family business matters; 4th generation president of family’s childrenswear retail store on Long Island; author of 3 plays about issues facing family business

Philosophy of business success:
My motto, “Treat Your Business Like a Business, and Your Family Like a Family,” begins on a one-way street of professionalizing. One step inevitably leads to the next.

Don’t join your family business unless you are passionate and talented in what they do (but understand what they do: Domino’s says they’re in the delivery business, not the pizza business)
Hire only the right people, that add something vital, but control quality with job descriptions that focus on everyone’s highest value activities, delegating what they are merely competent at. You may add “what my job isn’t,” for the founder who can’t quit as chief cook and bottle-washer, who needs to delegate, like it or not.
Family business founders often rely on powerful gut feelings, and are not known as obsessive planners, but to succeed, you need to create specific, measurable, achievable, realistic, time-related goals and objectives (SMART, to Drucker fans). There’s no better way to know where you’re going, and determine when you’ve arrived, or that you’re lost.
Family businesses are famously secretive (hence “private” and “closely held”) and don’t like to be told what to do, or how they’re doing. But without performance evaluations, you can’t definitively separate the endowed from the entitled. This is how you can all Tell the Truth.
To equate a given level of success to an earned level of reward, establish compensation policies. For family members, this helps salary to not feel so much like allowance from mom and dad.
To succeed wildly, and be rewarded in kind, you need to know your company’s capacity to invest and incent, impossible without getting great at budgets.
But if only the elite knows how your company makes money, you’re limiting how much everyone can row together, so you need to foster a stakeholder, “Company of Owners” mentality in the ranks. Once that happens, you’ve built the better mousetrap that will attract the best and the brightest. This takes us full circle, where the only family members that will qualify for employment are the passionate and talented. Next step is making your family a welcoming and healthy nest, whether you’re in the business or not. Stay tuned.

Not All in the Family

An outsider can help a family business thrive and grow. Here's how to find such a leader and make the transition successful.

By Fred Sandsmark, iQ MAGAZINE—Cisco Systems
September 2006

All family businesses eventually reach a crossroads. Many family businesses were originally created after World War II, and now their founders are aging. The founder's children or grandchildren often have other career interests. Today about 30% of family businesses are handed to a second generation, and less than 10% make it to a third.

Family businesses are the engine of the world's economy.

Globally, 80% of businesses are family-owned, according to a 2004 study by the International Family Enterprise Research Academy.
In the United States, they account for 62% of total employment and 78% of all new jobs, according to the Cox Family Enterprise Center at Kennesaw State University in Georgia.

Outside leadership of family businesses isn't a widespread trend, yet. Only 14% of family businesses had hired a CEO from outside the family, according to the 2002 American Family Business (AFB) Survey, still considered the most definitive study of U.S. family businesses.

Businesses that did hire from outside were pleased with the result: 71% of them rated their experience as either "extremely successful" or "very successful."

Filling Big Shoes

There are many reasons to bring outsiders into a family business, including:

No single family member has all the skills and management aptitude to lead the company.
When family members disagree about who should lead the company, an outsider may be a good compromise.
If you have ambitions to grow the company to the next level, it may require someone with fresh ideas and different qualifications than a family member.
If you're growing quickly, according to IRA BRYCK, director of the UMass Amherst Family Business Center: "You need to look outside and see what talent is going to make you better, faster, and cheaper."

The AFB study found that 55% of family-business CEOs older than 60 who expected to retire in the next five years had not yet picked a successor. "Such lack of planning sets the stage for stressful transitions that may divert precious resources needed to run the business effectively," says Joe Astrachan, director of the Cox Family Enterprise Center.

Looking Outside

Hiring from the outside is a new frontier for many family-owned companies. Not only might the family lack experience in looking for and working with outside leadership, but executives might be reluctant to join a close-knit family operation. The following are some tips from experts:

Conduct a professional search. Be as specific as you can in the job description, and include company cultural elements. "The big difference between a family business and a nonfamily business is that the cultural fit of the person is paramount," says Cynthia Scherr, principal of Scherr Management Consulting.
Use the Internet to help define the job responsibilities, scope, and background required. Nick Parham, career coach and principal of Zitron Parham Career Services, recommends studying online job postings from similar companies. "You start to see that some challenges are universal," he says. "You also discover what's different about your business, so you can better describe what you need."
Be honest about the connection between family and business. The family and the business are inextricable. "The one critical success factor, above all others, is that the outside CEO views the family as part of their job," says Astrachan. This includes management of emotions, expectations, and nonfinancial rewards.

Attracting Top Candidates

Family-owned companies may need to make changes to attract well-qualified candidates. Family businesses that are secretive may have to become more open. "Financial information, productivity metrics, and communication about where the company is going all have to be available," says Scherr.

Outsiders, says BRYCK, often fear that family businesses are saddled with outdated, inefficient technology and personality-driven procedures: "The more a company can use technology to perform systematically, the more appealing the company is to capable new leaders."
When a Leader Is Made, Not Born

Parham advises family companies to approach a leadership transition with an open mind. "You'll have your traditions, processes, and thinking challenged," he says. "You may not be convinced that a new approach will work, but you should be open to testing it."

Specific, measurable goals can lessen the emotional component of evaluating a new leader's performance, BRYCK notes.

Finally, clear, honest, two-way communication is the primary factor in making new leadership successful. Parham says, "An open dialogue can build a relationship with the candidate that causes them to say, 'I want to work with these people.'"
About the Author

iQ Magazine contributor Fred Sandsmark is among the 70% of children of family business owners who chose not to follow in their parents' footsteps.

Lost in Transition

If you don’t take steps to ensure your company’s future now, you may not have the chance later. Here’s how to plan for a smooth business transition.

By Carol Tice, Entrepreneur Magazine
November 2006

Online exclusive: Have more questions about transition planning? Read The Monitor Group’s answers to the most common business transition questions.

It still smarts when Terri Getman recalls the financial disaster that befell her family because her father didn’t plan ahead. He owned a minority stake in a closely held Georgia paper-making machinery manufacturer, but died suddenly six months after the business was launched.

With no written plan outlining his ownership rights, the family was cut out by the other partners. These owners later sold the business to a German firm for a handsome profit, pocketing the funds themselves. “We did 11 years of litigation to get nothing,” Getman ruefully recalls.

Her story is far from unique. A study of more than 1,400 business owners conducted last April by investment consulting firm The Monitor Group in McLean, Virginia, revealed that more than 82 percent had no written plan describing what they’d like to see happen when they leave the business.

The result is often lost income to the founder or his or her heirs, and a business that doesn’t thrive or even survive after the founder’s departure. Consider two more tales of transitions gone wrong.

A story in the Puget Sound Business Journal explains that when Wilson Products Inc. owner Kenneth Wilson died unexpectedly in 2003, his three daughters found themselves in charge of Wilson’s $12 million aircraft-parts business. All three had grown up around the Auburn, Washington-based company but were never trained to take the helm.

With the aerospace industry going through rapid change, the business floundered, filing for bankruptcy last year. With $20 million in orders on the books, the Wilsons couldn’t find a buyer, and the company’s assets were auctioned.

According to the St. Louis Business Journal the second-generation owner of Missouri frozen custard company Southern Products Co., fought with his son Mark Dorsey over how the business was run. So the younger Dorsey left in 2004, got his MBA, and started a competitor, Pacific Valley Dairy Inc.

Southern Products, which had $100 million in annual sales, went bankrupt in 2005. The winning bidder at the 56-year-old company’s bankruptcy auction was Pacific Valley Dairy, which paid less than $3 million for it.

With so much at stake, why do so few entrepreneurs plan for their departure? Such planning brings up a host of uncomfortable issues, including death, the company’s true value, and often, touchy family relationships.

“People know they have to prepare themselves, their family and their business to have a well-planned and well-valued sale transaction,” says The Monitor Group president Glenn Kautt. “But most aren’t doing it.”

Experts say even owners who don’t have a clear sense of when or how they’d like to leave their business can get the process rolling with a few basic steps.

1. Write Down Your Wishes

Begin by mapping out what you’d like to see happen when you depart. Then create a timeline for when you’d like that to occur, says Trudy Nearn, owner of Sacramento, California, estate-planning law firm Generations.

“People either haven’t thought about it at all, or they have unrealistic expectations,” she says.

She recalls one client who wanted to leave her day-care center to one daughter while leaving the land under it to another daughter. The owner assumed this second daughter would be willing to charge the day-care center affordable rent.

Nearn pointed out that the land-owning daughter would want to maximize the value of her inheritance. So instead, one daughter inherited the business and land while the other got an insurance policy of equal value.

An important part of planning is envisioning what the owner wants to do after departing the business, says University of Massachusetts Family Business Center director IRA BRYCK. Some fear they’ll be unhappy and bored once they relinquish their position. In fact, less than 17 percent of respondents in the Monitor study imagined they would retire after leaving their business. More than 45 percent said they planned to start another company. Still others relinquish control but stay on in smaller roles. In any case, having a plan for your next chapter can be the impetus to move forward.

More at: http://www.entrepreneur.com/magazine/entrepreneur/2006/november/169178.html

Notable and quotable:

By Faye Wolfe, UMass Website main article
week of August 13, 2006

http://www.umass.edu/umhome/news/articles/37422.php

UMass Amherst faculty lend their expertise to the media on topics from global warming to kids’ TV

Geosciences professor Ray Bradley (center), with graduate students Ted Lewis and Tim Cook, is frequently contacted by national news media to comment on his research. (photo by Ben Barnhart)
IRA BRYCK's expertise in family-run businesses comes from first-hand experience. He grew up working in his father's clothing store. Ira is on the left. (IRA BRYCK personal photo)

Listed in many a newspaper or television reporter's rolodex are phone numbers in the 413 area code that begin with 545 or 577, the main UMass Amherst exchanges. Stories on most every topic gain heft from expert sources, and there are plenty of experts on this campus. A few weeks ago, CNN news anchor Lou Dobbs got in touch with geosciences professor Raymond Bradley to talk about a widely-discussed National Academy of Sciences report on global warming. It wasn’t the first time that Bradley cropped up in a national news story. As one of the authors of a landmark paper charting climatic change over millennia, he is often interviewed on the subject.

About the same time, fans of NPR’s Marketplace might have tuned in to hear host Kai Ryssdal discussing with IRA BRYCK whether you should ever loan money to your brother. BRYCK, the director of the UMass Amherst Family Business Center, advised, “If you were a banker, you would be considering that person’s character and their collateral, and I think that as the lender you have every right to consider those same things..”

BRYCK is in the media again, in the June issue of BusinessWeek Online he discusses what it takes to bring the younger generation into your family busiiness.

UMass Amherst faculty show up in media all over the place. Rick Wolff, from the Economics department, was quoted recently in London’s Daily Telegraph, talking about the U.S. housing boom going bust, and predicting that it could “take the U.S. economy down with it.” The August issue of the Chicago-based magazine In These Times quotes another campus economist, Robert Pollin, in a story about the effect of living wage mandates for garment workers on consumer prices.

The formidable grasp of their subject make many UMass Amherst faculty sought-after sources. To mention a few: Political science professor Sheldon Goldman comments frequently on Supreme Court–related developments—like the hearings this spring on Justice Alito’s nomination to the court. He's been quoted in The Christian Science Monitor, Newsday, USA Today, and MSNBC. Fergus Clydesdale from food science, talked turkey with The New York Times, was tapped for his take on trans fats by The Washington Post, and spoke to other nutrition-related issues elsewhere. Psychology professor Ervin Staub, a source for a recent L.A. Times article about the “potentially immoral forces of groups,” has offered his insights into news events like Abu Ghraib on CNN, in Reuters, and on NPR. And when Emily Bazelon, a senior editor at the online magazine Slate wrote earlier this year about the television program, The Electric Company, she turned to psychology professor Daniel Anderson—“kids-TV guru” was how she described him—for his opinion on how children relate to the “disco feel” of the ’70s educational show.

What makes a professor notable and quotable? Obviously, profound knowledge of an area of research and study is key. Being an author, like Bradley, of a high-profile paper or a member of a prominent committee may catch a reporter’s eye, too. For instance, Clydesdale served on the Advisory Committee on the Dietary Guidelines for Americans; its report, released in 2005, received widespread coverage. In May, The Wall Street Journal sought out the opinion of James Young from Judaic and Near Eastern studies on soaring cost estimates for the New York World Trade Center Memorial—not surprising, given that he was a member of the jury that selected the original design for the memorial. And the PBS program Frontline ran an excerpt from Young’s book At Memory's Edge: After-Images of the Holocaust in Contemporary Art and Architecture on its Web site because, as it explained, he was “the only foreigner and the only Jew to serve on Germany's commission to select the its national Holocaust memorial.”

Media savvy is vital to forging a successful relationship with journalists, according to Ed Blaguszewski, director of the UMass Amherst News Office. He says,“Faculty who become regular commentators follow the news, understand how their knowledge intersects with current events, and articulate an opinion concisely. They also understand that in today's 24/7news environment, speed is prized. Journalists often request to speak with an expert today, if not within the hour. The best expert is often the available expert.”

The News Office works with the media to find available experts. Says Blaguszewski, “We're matchmakers. We interview faculty to discover their research and expertise, and we talk daily with reporters to pitch stories and identify their interests. Those conversations, combined with an experts database that Blaguszewski's office maintains and a national media request service, help us connect the right experts to receptive journalists.”

Some academics may avoid the limelight; but points out Blaguszewksi, for those who do go public, “The rewards are many: increased visibility and recognition for the campus, its programs, and individual faculty, and the opportunity to educate the public and contribute to civic debate.”

The aforementioned IRA BRYCK is one who has become expert at being an expert. Having been on Marketplace several times, for instance, he knows that, “Radio is an entertainment medium. Points need to be pithy, not too raggedy. I know that I’m not talking to an audience who has specifically shown up to hear me speak, so I try to give what I say general appeal, so that someone might think, ‘I never thought about family business like that before.’ I also like having the chance to debunk accepted wisdom, the oft-repeated ideas that come from research being misconstrued. For instance, family businesses fail at a horrific rate, but so do all businesses. Ultimately, I want what I say to be true.”

“I also want to be careful about what I become noted for,” he says. “I became an ‘expert’ on family business loans from one article I did.”

And there are outcomes you can’t anticipate. “When I did the Marketplace story on lending to family members, a childhood friend who hadn’t seen me in years heard it,” BRYCK says. “He didn’t know it was me until the end of the interview. He told me, ‘I thought this person really knows what he’s talking about.’ And then, he asked me for money.” The good news? He was kidding.

Room To Grow

By Eileen P. Gunn, BUSINESS WEEK, SMALLBIZ—MANAGING
Advancement Communications, August 9, 2006

You want your kids to join the family business. They want to do their own thing. Here's how you both can win

As a teenager, Justin Glaze had little interest in his family's business, Westfield (Mass.)-based Decorated Products. The company makes metal identification stickers for heavy equipment such as boilers, and Justin's passion was racing four-wheel all-terrain vehicles called quads. Then he had an idea that brought the two together. He asked his father if Decorated Products could start selling durable decals that racers could use to customize their quads.

At first, Jeffrey Glaze thought his son's idea was farfetched. Then he got to thinking. The decals would give Decorated Products a route into the consumer market. And after recalling his own rocky entry into the company his father founded in the 1950s, he realized that the decals were a chance to draw Justin into the business. So in 1999, Jeffrey created a division called Go For It Graphics. More than just a unit to produce the decals, Go For It was designed as a sort of laboratory where Jeffrey could explore new markets and employees could learn new printing technologies. Justin could get to know the company as he attended trade shows and advised the company's graphic designers about what quad racers wanted. By the time Justin, now 21, joined Go For It Graphics full-time last year, "he had his own area of expertise, which he is respected for," says Jeffrey. "And a place that was his own." As technical adviser, Justin is lending his knowledge of racing to the business while gaining familiarity with other aspects of the company's operations.

Business extensions, or labs, are a way to bring younger members of the family into the business while benefiting both the company and the next generation. Done right, a lab lets up-and-comers use their skills and interests to develop a product or market that's related to the core business. They can learn about the company while discovering their own strengths and weaknesses and building relationships with other employees. That'll help smooth the transition should your child eventually become part of senior management.

A lab can boost the core business as well. The younger generation's fresh eyes can spot opportunities that owners caught up in the day-to-day running of a business may have missed. "The older generation sees the company selling golf clubs, while the younger generation sees them selling relaxation," says IRA BRYCK, director of the University of Massachusetts Family Business Center in Amherst. "That broader view opens up opportunities." As the Glazes discovered, it can also lead to new revenue streams. In 2005, Go For It Graphics accounted for 10% of Decorated Products' sales of $3 million.

That doesn't mean everyone will welcome the idea. Other employees may see the venture as pure nepotism and be reluctant to chip in. Tensions can also rise at home, especially if your other children are involved in the company. And no matter how good the idea, if you're ambivalent about the new venture, the project won't fly.

For a lab to succeed, you and your offspring need to treat it as serious business. You'll want to draw up a plan that includes a budget and the goals and expectations of both your child and your other employees. The goal is to provide the support the next generation needs without clipping your child's wings. With a little effort on both sides, a lab can bring your kids into the business you love and help them take it to the next level.

The Need

The idea for a lab often comes from the younger generation, but as CEO you'll need to believe in the business payoff and be able to get behind the project. "The older and younger generations have to agree that there is a need for this offshoot, that there are customers that want it," says Andy Birol, owner of Birol Growth Consulting in Solon, Ohio. "And the project should clearly be leveraging skills that the business or the child has."

The need was acute at Underwood Travel Associates, a 35-employee travel agency in Carnegie, Pa., that books business trips and tours. After September 11, Underwood's only steady business came from a client who organized NASCAR racing tour packages. That made a strong impression on David Underwood, 36, who had joined his father Jeffrey's company in 1999 as a salesman and was eager to make his mark. "In a family business you don't feel part of the team until you see yourself making a big impact on the bottom line," says David.

The Underwoods knew they had to develop new revenue streams, but they also needed a buffer against the cyclical nature of the corporate business. Early in 2002, David persuaded his father to buy the NASCAR client's tour company, bringing Underwood's corporate travel expertise to a niche retail market. But it soon became clear that the operation was a cash-flow disaster. The previous owner had spent thousands to buy hotel rooms and race tickets a year in advance but collected money from customers only a month or two before the trips. While Jeffrey was willing to take out loans to carry the operation for a time, he had to concentrate on Underwood's main business. That left David to do the heavy lifting for the new venture. "I made it clear to David that if we were going to do it, he would have to be the one to figure things out," says Jeffrey.

David got to work. He renegotiated with the hotels to pay a deposit when he booked and the balance when his customers paid him. He also negotiated installment plans with the racetracks, timed so that his last payments were due after his clients paid for their trips. The previous owner discarded unused tickets, but David started selling them on eBay. By 2005 the NASCAR business, called Choice Racing Tours, accounted for about 15% of Underwood's $30 million in revenue.

The Buy-In

Both Jeffrey Underwood and Jeffrey Glaze quickly saw the potential of their sons' ideas. More often, the younger generation has to push hard to win over parents and older employees who aren't comfortable with change. Larina Kase, owner of Performance & Success Coaching in Philadelphia, says laboratories give the often gun-shy older generation more time to get comfortable with the notion of change. "The older generation is more likely to see any change as messing with what works, and they're afraid of that," she says.

Joseph Fontana learned that firsthand. Fontana, now 40, joined his family's business, Detroit-based Michigan Box Co., after college. He rotated through manufacturing, logistics, and customer service jobs before settling in sales. But Fontana was much more interested in technology and graphic design, and as personal computers took off in the 1990s he began thinking about applying his tech savvy at work. At the time, Michigan Box mostly produced plain white cardboard boxes for pizzerias and bakeries. Fontana began using new industrial printing technologies to develop boxes that were more sophisticated and personalized. He suggested that clients try high-gloss boxes with photos of their products or four-color designs.

Clients liked the designs, but Fontana's mother, Elaine, then CEO, and the company's board were much less receptive. Both the business and the local economy were shrinking, and they didn't want to take a chance on unproven products. "I didn't think I was in a position to start something new," says Elaine. "People fear change, especially when it has to do with technology, and we had to be convinced."

Undaunted, Fontana made mock-ups for clients, sometimes farming out work to a graphic design firm. He brought his mother to sales meetings to hear how clients responded to the suggestions and to trade shows to see that competitors were moving in this direction. "He was stubborn as hell," says Elaine. In 1999, after two years of pitching, Fontana got an order from a local bakery for a glossy, colorful box for a line of Greek pastries it was selling in supermarkets. That sale changed some minds. The board budgeted $10,000 for computer equipment and software. Last year, custom orders accounted for 40% of the company's $17 million in revenues, and Fontana was named CEO. Even so, he knows the two-year delay has meant a lot of lost dollars and clients. "If I'd been allowed to carry the ball and had money to invest where I saw fit, it would have accelerated the whole process," says Fontana.

The Plan

A formal business plan can help the younger and older generations agree on the venture's goals as well as the resources it needs. If your child wants seed money, ask for a rough budget, along with a timetable and revenue projections. Of course, you needn't give them exactly what they want, but some financial support is a good idea. "I would insist on the parent having skin in the game," says Birol. "And I don't just mean money; I mean some emotional buy-in of the idea."

Your offspring should demonstrate the skills needed to run the venture, but that doesn't mean they have to fly solo. From the start, your child should know he can seek advice when he needs it and is responsible for reporting progress on the venture. "You need to schedule periodic check-ins and have an open-door policy," says Kase. The younger generation should feel they have room to make decisions and potentially small mistakes without your whole business taking a hit. "There is some coddling going on," admits Jeffrey Glaze.

The plan for the venture should also include how the project will be staffed. Ideally, you'll hire one or two new employees to focus on the new business and show its importance. But many companies wait until a project is generating revenue before spending on new hires, so it's likely that current employees will be asked to help. This is where your visible support will make a difference. "The parents set expectations and the employees follow," says Kase. All the employees will get excited about the venture "if the parent says it will be a good learning experience for the whole company." But if employees sense any reluctance on the CEO's part, they are more likely to push back instead of pitch in.

At Michigan Box, Fontana found revving up the sales team was almost as challenging as winning over the board. "Some of them were intimidated because it's a more complicated sale. There are more things to do, and it takes longer," he says. "But when we showed them what it was all about, they started to get it." Some staffers embraced certain new projects but resisted others that seemed too ambitious. Fontana says it was a gradual process of training people, showing them the potential this new venture offered, and coaxing them past their fears. "One by one, people had their 'aha!' moment," he says.

Things ran less smoothly at Ovation In-Store, a maker of store displays in Queens, N.Y. Marc Weshler, 35, started a lab to develop real-time Internet-based displays to complement the company's traditional plastic and cardboard constructions. After he had the idea in 2001, Weshler crafted a business plan that explained how much money he needed, what kind of technology he wanted to develop, and who potential clients would be to get his father, Benjamin, to seed the idea. He built a prototype and made his first sale in 2003.

But the plan hadn't spelled out whether any of the company's 65 employees would be involved with the venture. At the time, Ovation's business was slow, and the designers and engineers Marc needed to work on the project were eager to do something new. But Marc's sister Melissa, the executive vice-president for operations, saw things differently. She thought employees were neglecting current clients in favor of an unproven venture. Eventually, after the Net displays started bringing in money, Marc's lab was integrated into the main company and the staff reorganized. In retrospect, Melissa concedes that she was "territorial." And Marc, now chief marketing officer, says: "I didn't do as good a job communicating the project down as I should have." Had their plan addressed what staffers and other company resources Marc could use, neither he nor Melissa would have felt ambushed.

Finally, your son or daughter should be prepared for you to pull the plug if the venture doesn't reach agreed-on milestones or income goals. Says Birol: "The child might not suffer the same adverse consequences as another employee would if the business doesn't work, but there should still be accountability and standards by which you measure the venture's success."

The Payoff

David and Jeffrey Underwood recently hired someone to run Choice Racing Tours. David has taken a senior role in the main business, running corporate sales and scouting for other niche travel services to develop. And the lab has created a ripple that has spread throughout the company. Choice Racing's success has helped all employees step out of their comfort zones. "We are more willing to try new things in general, now," says David, adding that Underwood recently launched another niche business, Choice Music Tours, for high school bands.

Back in the main fold, David says he can see that the experiment gave him the leadership credibility he had craved. "The other employees used to come to my father when they had questions, even on something I was familiar with," he says. "Now they'll come to me first." And Justin Glaze has found that his father's company is a far more exciting place than he imagined. "I've learned the whole business by doing Go For It Graphics, and it's all interesting to me now," he says. That sounds like an experiment gone right.

The money pit: Should you lend to friends?

NPR Marketplace Money,
aired on June 23, 2006

Listen to this story at http://marketplacemoney.publicradio.org/display/web/2006/06/23/the_money_pit

Should you loan money to your relatives or friends? What should you ask for in return? And how do you say no? Kai finds out from IRA BRYCK, the Director of the UMass Amherst Family Business Center.

KAI RYSSDAL: There are a lot of names for it: moolah, cash, dough. Whatever you call it, doesn't change one simple truth: Money can't bring you happiness. And sometimes it can bring you pain. Case in point, an e-mail we got not too long ago from a listener. His friend asked him for a loan. Let's just say afterward, the friendship dropped like a bad stock. IRA BRYCK is the director of the University of Massachusetts Family Business Center. Mr. Brick can it ever end well, money between friends?

IRA BRYCK: Well, usually it does. There's a 14 percent rate of default which is never a happy ending but in many cases it can have some advantages if you have the right honest discussion.

KAI RYSSDAL: Well, let's lay out a couple of hypotheticals here. My brother comes to me and he says 'listen I need $15,000 to start up this business idea I've had, it's been just killing me for years I haven't been able to do it, can you help me out?' What do I do?

IRA BRYCK: Well first of all if you were a banker you would be considering that person's character and their collateral and I think that as the lender you have every right to consider those same things. And so right away, you do have the right to say no and there's a certain science to saying no. But assuming that you said yes I think you would also have the right to hear more about that person's strategy. A lot of entrepreneurs are very short on putting it down on paper and that's something that a bank would certainly want to see.

KAI RYSSDAL: I mean in all honesty if this is a close friend of mine or a relative, I'm going to eat the $15,000 and chalk it up to experience.

IRA BRYCK: Well that's something that you should consider beforehand. First of all, there's a good chance that you're not going to get it back. Be ready that that loan could turn into some sort of gift or debt that you'll be writing off before too long.

KAI RYSSDAL: Let's get back to that science of saying no thing. How do you do that?

IRA BRYCK: There's always the option—this wouldn't happen between friends as much as maybe between a parent and a child—where if you said, 'I respect your willingness to take a risk with that money that I'd lend you, but I'm not as risk-tolerant as you and I would feel much safer paying towards my grandchildren's education. 'So you could dedicate the money that they would not then have to spend.

Blame it on somebody else. Say 'I'm protecting myself from the IRS and I need this loan documented' or 'My accountant would never let me make a loan without the proper paperwork.'

You could also say, you know, 'If you pass all the requirements that a bank would have you run through, don't take it personally, I'm just not a great banker.'

KAI RYSSDAL: Should you consult an attorney and get some formal contract thing signed up or is this one of those do-it-yourself kinds of gizmos?

IRA BRYCK: Certainly. I mean there are forms that you could buy in any stationary store that would help you document this, but if the loan is not paid back and you want to write off a bad debt, the IRS is gonna want to see that you have properly documented this loan and that there's the right rate of interest for it to even be considered a right loan. So certainly it's worth the small investment of an attorney to make sure that it all goes right.

There are also companies out there that will just officiate a little bit and make sure that you are serviced in your loan in the proper way. Circle Lending, they're in Cambridge, Mass., and you can read all about how to think about the loan as a lender or a borrower and they will do everything that a bank will do including be the middle man there. But certainly they would help you get it all down on paper with the ts and the is properly crossed and dotted.

KAI RYSSDAL: Let's say a close friend of mine comes to me and says 'Listen I need $7,000 can you help me out?' I mean am I allowed to say 'Well wait a minute, what do you need it for?'

IRA BRYCK: Well yes I think that you could say it in a way that is loving and friendly, and you could explain that you have some reservations. First of all, that you can't live easily without the $7,000 and that you've heard all sorts of stories about loans being defaulted on and you value your friendship so much that you don't want your friendship to end over $7,000.

KAI RYSSDAL: I suppose there are qualitative differences as well depending on what the money might be used for. It's one thing to give somebody $10,000 or $15,000 that they can then put into a business that they have a really solid plan and other investors and it's another to give somebody some money to pay off a recurring credit card debt.

IRA BRYCK: Right and you might make a mercy loan for that person who has just hit a rough patch and they can explain to you why they're going to get out from under and pay you back. If you really feel that that $7,000 is going to go to drink or interest and they're borrowing from three other people next month, then you should just consider that this is the cost of your friendship to loan the $7,000 or lose the friend etc. So sometimes it's a business decision but sometimes it really is a judgment call

KAI RYSSDAL: IRA BRYCK is the director of the University of Massachusetts Family Business Center. Mr. BRYCK thanks very much for your time.

IRA BRYCK: My pleasure.

May 8, 2006

from a respected business newspaper that does not allow free posting of its articles:

An article on Sibling Rivalries, and the trickiness of passing along a family business, especially when some of the heirs work for the company and some don't, quoted Ira Bryck:

IRA BRYCK, falls into the "fair" camp (of equal vs fair). Children who don't work in the business, he says, "don't know what investment is needed, and shouldn't be able to say, 'You can't reinvest in the business if it costs me my dividend.' "

The article discusses the Neveu family, that followed the same philosophy, and joined the UMass Amherst Family Business Center, "just to talk about the dynamics of being a family business," says Stephen Neveu. The article discusses that at the center's forums they heard about the pitfalls of giving voting stock to siblings outside the business. Mr. Neveu recalls hearing family-business speakers talk about conflict-of-interest disasters. Outside family members might wonder, for example, whether insiders were making decisions for the benefit of the company or themselves -- and demand that insiders take a pay cut.

Business Home Schooling

The UMass Amherst Family Business Center Celebrates 10 Years Of Love And Money

by Deborah Klenotic, UMass Magazine

http://www.umassmag.com/Spring_2005/The_Ties_That_Bind_862.html

They hesitate to name one another in public and sometimes meet in undisclosed locations.They learn, while sipping apertifs in business dress, about “competitive intelligence gathering” from former CIA operatives and about emotional intelligence from Daniel Goleman. They strategize on buyouts, takeovers, partnerships. Cold wars brew; key rings and sometimes fists fly.

The G8? Mafia? Disney board of directors?

No, but you’re getting warmer. They’re members of the approximately 75 families in western New England who have successfully ventured into business together and have joined forces through the University of Massachusetts Amherst Family Business Center.

Under the guidance of director IRA BRYCK, the Family Business Center, a Continuing Education outreach program, recently celebrated its 10th year of educating family businesses on best business practices as they apply to all companies (such as how to collect from delinquent customers) and to family business in particular (such as whom to have on the board of directors), while revving their entrepreneurial engines with lessons like “Get off the same page!” The center also serves as a confidential forum for members to bring their family dynamics to the table, getting things out in the open with each other and with other people who know what it’s like to have Dad decide whether you’ll be promoted or have your sister sign your paycheck.

For its extensive programs; its mix of business instruction and family counseling; and the relaxed, productive atmosphere of its meetings--an atmosphere fostered by BRYCK’s respectful emphasis on the group’s confidentiality and, stemming from 17 years’ experience with his family’s childrenswear store, his compassionate sense of humor about the foibles of family businesses--the Family Business Center is earning accolades. It was recently named “Most Innovative and Creative Continuing Education Program” by the University Continuing Education Association and “Most Innovative Program” by the International Family Business Program Association. Yahoo Internet Life magazine named BRYCK’s Web site (umass.edu/fambiz) the “Most Comprehensive Family Business Web Site, By Far.”

“The Family Business Center is one of my favorite things,” says Cindy Johnson, the briskly energetic young owner of Fran Johnson’s Discount Golf and Tennis, who’s been a member for over ten years. Johnson and her father, from whom she bought the thriving sporting goods business, recently sat on an FBC panel about business succession plans. Thanks in part to the FBC, says Johnson, “my father and I have come a long way from when I first approached him about buying the business, and he kept saying, ‘you’re pushing me out!’ Family time was not fun then.”

Money. Family relationships. Office politics. Considering what bumpy territory each can be, it’s a wonder that anyone braves a family business, which requires charting all of them at once. (Of course, you do have time to unwind after you’ve put in your sixty hours a week.)

In fact, 80 to 90 percent of the 24 million U.S. companies, including one-third of the Fortune 500, are family owned or managed. We all know some of them: Wal-Mart, Cargill, Mars, Ford, Crane Paper, Disney.

“Many family businesses get along well, especially if familyness is their message, such as ‘We bring good things to life,’” says BRYCK, sitting in his office. On his computer screen is an electronic version of his newsletter, Related Matters, and on the wall nearby, a 1977 Polaroid of BRYCK and his father standing side by side—but a ways apart from each other front of racks of boys suits.

“Family businesses also break up more often than marriages, with two- thirds failing in the second generation,” BRYCK notes. “Almost no business schools in the United States teach family business. University-based family business centers—there are about a hundred--try to fill the educational and support gap.”

Members of the Family Business Center gather in formal dinners, where they’re wined and dined and enlightened by business visionaries as well as by plays written by BRYCK that dramatize family dynamics behind the counter or on the shop floor. They also regularly meet in smaller roundtables for specific types of family business members, such as siblings or presidents. In addition, the center provides pro bono consulting sessions with BRYCK for individual companies and free technical information sessions from its six corporate sponsors (the center receives no state funding).

“When members first start coming to our dinners,” says BRYCK, a big guy with an English sheepdog geniality who is clearly expert in the art of communication, “they comment on the quality--this is not your bad coffee and stale croissant affair--and say how good the conversation was and how they felt normal for once. Every day, many of these people have been thinking, ‘Our family is screwing it up, we’re so dysfunctional.’ For them to walk out feeling normal—that’s a big thing.”

Member Karen Randall (2nd year member), owner of Randall’s Farm and Greenhouse in Ludlow, Mass., says that although all family businesses, including Randall’s, have family issues to deal with, theirs doesn’t have any particular problems right now. “Probably because I’m single and don’t have children,” she says, acknowledging the gigantic workload of the business owner, “and am the sole owner by mutual consent of the family,” including the two sisters who work for her.

“For us,” says Randall, “the Family Business Center is more an opportunity for growth, a chance to step back from what we do every day”—such as signing about a hundred paychecks every Friday morning, as she’s preparing to do now with her mom, Elsie, in her office overlooking the store-- “and to listen to intelligent people speak about entrepreneurship. To have a fantastic entrepreneur like Stu Leonard, who owns the biggest dairy store in the world, come and speak to our group is an amazing opportunity. I took eight employees to that dinner.”

The center also is also a grow light for this produce business owner. “Because the roundtable is a very confidential venue, you’re not afraid to vent to other business owners, to talk about sales, anything. And you listen to other people and think, ‘Wow, they don’t see their business like I see mine.’ It definitely inspires me.”

Although since age 11, she was washing and packing the squash and scallions they grew on the farm. “I never thought I wanted to come back to the store--I got my degree in elementary education—but I did always feel a commitment to it.” She bought the family business in 1996, about ten years after the death of her father, who started it as a roadside egg stand in the 1950s, and has turned it into one of Babson College’s Top 100 Women-Owned Businesses in Massachusetts. Asked whether she has moments now when she concludes that things worked out perfectly after all, Randall responds, “No, never. There’s always a conflict.” Maybe so, but Randall appears perfectly content as she fields phone calls and interruptions—a truck won’t go into reverse, an employee wants to attend a produce show, someone needs to sand the entrance— while sitting down to a stack of paychecks with Elsie.

Ambivalence toward the family business is common, says BRYCK, as is an inadvertent but nevertheless long-term commitment to the Mom and Pop operation.

“In many family businesses, the founder is likely to have started it because he hated his job and wanted the American dream of owning a business,” explains BRYCK. “Children come in because they want to or because they lost their job or decided they didn’t want to be a dentist after all. The way my father always expressed it to me—and he did this unintentionally—was, ‘if all else fails, there’s the business.’” BRYCK returned to his family’s store in his twenties, after getting an education degree and briefly running a small, private K-6 school.

For this and other reasons, says BRYCK, “many families have a hard time treating the business like a business. Some employees may not start at the bottom and work their way up, but others have to. Employees who are not family may be treated too informally, or, conversely, they may be required to follow rules, like punching a clock, that family employees ignore. The owners may not be sure how much to pay themselves; they may not be sure how to decide who should be president.”

Outreach staff use humor to focus on customer service

Humor was a key ingredient in a professional development workshop on customer service conducted recently for 120 Outreach staff.

from UMass Amherst "In the Loop" online newsletter
March 21, 2006

IRA BRYCK, director of Continuing Education’s Family Business Center, started with videotaped interviews of staff members from each of the five Outreach units, collecting stories typifying where customer service could be improved. Then, with co-facilitator Helmi Pucino, a local trainer, he assembled a troupe of improvisers, including UMass students Michelle Whitaker and Scott Braidman (members of Mission IMPROVable), Kelsey Flynn of Villa Jidiots, and local actor Nick Simms.

The group performed six skits riddled with customer service problems. After an audience discussion, facilitated by IRA BRYCK, on ways to improve attitude, make structural changes, and adopt best practices, the vignettes were re-staged to demonstrate the better methods.

The event was followed on March 1 by a presentation by Isenberg School of Management professor Alan Robinson, author of "Ideas Are Free," on how Outreach can best gather and implement a steady stream of ideas from employees for continuous improvement and solutions to challenges.

Theory of Relativity

By Lorraine Duffy Merkl, New York Post @ Work
April 3, 2006

Some dads don't just bring their sons to the office—they hire them.

AS if trying to get ahead at work isn't hard enough. Competition for the most coveted assignments, raises and promotions - not to mention the boss' attention - can transform the office into a minefield of intrigue straight out of "The Apprentice." But honestly, do you think any of the show's winners would have had a snowball's chance if, say, Donald Jr., Ivanka, Eric, Tiffany or baby Barron were among the contestants? Oh, let's not even pretend.

"Nepotism is not going to go away," says IRA BRYCK, director of the Family Business Center at the University of Massachusetts.

It's here to stay - but as Adam Bellow, author of "In Praise of Nepotism: A History of Family Enterprise from King David to George W. Bush," says, "We have to figure out how to practice it well."

Practiced arbitrarily, nepotism is an embarrassment to everyone, especially the incompetent beneficiary - whom others end up taking pleasure in mocking.

Steve, an employee at a major utility company, works side by side with the son of an upper-management honcho - a man who miraculously jumped from entry to supervisory level.

"The guy never went through any training," says Steve. "He's having a horrible time. And it's not his fault. They shouldn't have hired him in the first place."

Marc, a former account executive at a major ad agency, once got saddled with an assistant AE, who happened to be a client's daughter.

"She got a window office right off the bat and assignments all her own."

That was all very well and good, but when her father stopped being a client, she was nudged into a tiny cubicle, an event which Marc calls "the high point of [his] time there."

While he got to have the last laugh, dealing firsthand with office nepotism often drives people - not the boss' nephew - to throw up their hands in frustration. After spending a year reporting to the boss' daughter, Theresa left her graphic design job at a marketing company.

"She cut out early every single day and messed up packaging and other things because she had too many tasks for someone who worked such a short day," says Theresa.

"Plus, she made employees walk the family dog."

It's hard to watch a bigwig's nincompoop niece get hired - even harder not to be jealous of those with "an uncle in the business." For some, nepotism is so unsettling that intelligent professionals suddenly lose all sense of decorum.

One of two things generally happens. Either the sacred cow kicks into effect, and the employee is handled with kid gloves - or the exact opposite happens, and the rest of the office piles on the work (and the resentment) and generally treats the relative like an untouchable.

So how do you deal when you find yourself working 9-to-5 with someone who got their job because of who they know? "Don't over-think the problem," says Bettina Seidman, a Manhattan-based career management coach, who works with clients face to face and by telephone.

"The connected person often doesn't want to be treated specially. They just want to be left alone to do their work. At the beginning, don't discriminate; treat the person as you would anyone else."

Here's what to do if the nepotistic hire is:

Your colleague: They might be getting away with murder on a regular basis, but stay out of it. It's not your job to monitor or gossip about their salary, hours or workload. "Just be in charge of yourself and do your job the best you can," says Seidman. Regardless of relation, employees who do quality work get the boss' attention. Who knows? Work well, and you could end up as the golden girl/guy of the office with the best assignments - and the ability to get away with things yourself. If you think about it, it's sort of hypocritical to dislike someone because they're connected, when we all seek to create a mentor/prot‚g‚ bond with our superior to help us get ahead.

Your subordinate: If they have some problems at the onset, act as you would with any new employee; Counsel them. If they heed your advice and show improvement, have another meeting and acknowledge the elephant in the room - something along the lines of, "We both know you got the job because you're related to so-and-so, but you're doing good work and I'm glad you're on the team." They deserve that.

"What these people don't deserve is the instant judgment that they are getting something they have not earned," says BRYCK, who also conducts seminars for outside managers at family-owned companies. Donny Deutsch, Christy Hefner, Aerin Lauder, David Lauren - they all have the education and qualifications, as well as the right genes.

Bellow, who is also executive editor-at-large for Doubleday, stresses that having an "in" isn't enough. "No one succeeds without effort." In fact, those who have been hired by family, scoff at the idea of having been given preferential consideration.

"My father was more demanding of me because he wanted me to learn the right way to do things," says John Masi, who worked in his dad's bakery while growing up in Yonkers.

As for the assertion that family members will often throw their weight around to get their way, that's rubbish, he says.

"I was expected to earn people's respect by working hard."

If, however, your subordinate proves not to be of the afore- mentioned ilk, then you will have to have another disciplinary meeting; perhaps many.

Document the unacceptable behavior and record all the times you sat down with the person to discuss difficulties. When evaluation time rolls around, you can go to the boss with firm examples of how his nephew is not cutting it and all the things you have done to help him get with the program. No, we didn't say this conversation would be fun.

Your manager: Then, my friend, you have a very special problem. It is never advisable to go over your boss' head (whether or not nepotism is involved) and "tattle" to their boss. Without that as an option, an employee's first instinct might be to head for a new company that has policies against hiring family members or friends; where opportunities and advantages to people are based on ability and they can "make it on their own."

The truth? Bellow says, "The idea of the self-made man or woman is a myth. The most prominent examples of people who were supposed to be self-made, weren't. They received benefits, gifts and help at critical points."

You can still get passed over by someone who may not be related to the boss - just liked by him/her - and that's who'll get the support.

"Don't rush to jump from the job," says Seidman.

"If you like the company and the work, don't let the emotions of the situation dictate your leaving. Talk to the manager first."

Try something like, "We've gotten off on the wrong foot, what can I do to work more smoothly with you?"

If you can't do that, then perhaps try an HR person, company mentor, or a career counselor to seek advice from.

And before you get too defensive about family hiring family or friends, keep in mind that 90 percent of businesses in America are family-owned - which includes one-third of the Fortune 500 companies.

And 78 percent of all new jobs are created by family businesses and most of those positions are filled by nonfamily members.

Before hiring a relative:

Don't hire yours or anyone else's just because they "need" a job. Make sure he or she is a viable candidate before you make an offer, and that they have the skills needed to do the job. You're running a business, not a charity.
Don't supervise one of your own. If you could never get your son to do his homework at home, how will you get him to do the report you need ASAP?
Don't put relatives together so they can play out their family dynamic in the office. Imagine Jan Brady: "Marcia, Marcia, Marcia. She always gets to supervise."
Do establish boundaries. At work, it's important to be professional. It also cuts down on reminding other employees that you and another employee have a personal relationship.
Do clearly define the relative's position so he doesn't have to jump through all kinds of special hoops to achieve the same success as a nonfamily member.

Before joining a family-owned company:

Understand why you are being hired. Is it to groom someone's relative so they can fill a higher-level position and eventually be your boss?
Are they recruiting you for a special expertise that no one in the family can offer? That's a great position to be in.
Research the company's reward system. Do only family members or relatives of people in high places get the best jobs?
An outsider brings a sense of professionalism to what could be called the "casual atmosphere" of family members working together. Are they open to this more formal approach to business?
Make sure you have support from higher-ups and that they make it clear to your underlings that you are in a position of authority. As such, they have to respect you -even though you are not "one of them."

Quotes from upcoming article in Best Life Magazine (Rodale Press)

Think carefully about where you slot the child who will succeed you. If he/she leap-frogs senior employees they’ll be demoralized, warns IRA BRYCK, director of the University of Massachusetts Family Business Center. Conversely, you can’t shortchange your kid just because he’s your heir. Provide real responsibility—then develop a training program with goal setting, evaluations, and a reward system, and send a clear message to all that your company is a meritocracy, with a slight bias of affirmative action for family.

Here’s where most patriarchs fail. George Berkowitz, founder of the Boston-based Legal Sea Foods restaurant chain, split his company into two to appease dueling sons, who each wanted control. One son felt cheated by the deal, quit, and sued. The lesson? You don’t have to treat kids equally to be equitable. Fairness is more important than equality, assuming that your family can play fair.

Dear Son, You’re Fired

By Anne Field, Small Business Review,
February 28, 2006, 4:50 p.m.

Dealing with the non-performing family member

Here’s a scenario that has played out in many a small business: For seven years after taking his first-born son into the business, the founder watched for signs that the kid really was a chip off the old block. He wasn’t. Assuming that he would take over no matter what, he put little effort into the job and dismissed all criticism. Finally, the father promoted his No.2 son, who had worked diligently, over the older brother.

That wasn’t the end of the problem, of course. The passed-over son is furious and isn’t speaking to his brother or his father. Other employees are forced to tiptoe around, generally doing everything they can to avoid the older son. So far, the situation hasn’t harmed results at the company, a 50-employee manufacturing firm. But unless some resolution is reached, it will, predicts Jane Zalman, a consultant with Zalman Family Business Solutions in New York, who is working with the family.

Zalman empathizes with the father. “It’s very hard to tell our siblings or children they’re not doing a very good job,” she says. “But it’s even harder to fire them.”

But ultimately, the non-performing son has to shape up or Dad has to get him out of the picture. The younger son is now doing the work of two and other senior employees will grow increasingly resentful as they watch No. 1 collect a fat salary for doing nothing. Those who can do so will may leave. Meantime, productivity will likely suffer, decision-making will be stalled and the company could make strategic mistakes.

In these situations, the business owner is torn, of course. Can he do right by the business and keep his family intact? “You still have to sit down with him on Thanksgiving,” says Zalman. But Zalman and other small-business experts say there are steps you can take to make this difficult situation easier to get through:

Insist on traditional performance measurement systems. Business owners make things worse for themselves and their companies when family members (or any employee) is not given a specific job description and regular performance reviews. This puts the feedback on a professional basis. It also helps to add a 360-degree review system, so input comes from peers, customers and subordinates, too When possible, have the family member report to a non-family employee. (Note: If your company does not have formal job descriptions and regular performance evaluations, goals and measurement systems, etc., a lazy son is the least of your problems!)

Confront the person directly—through someone else. Lots of times, families do everything they can to avoid dealing with the problem. Again, you can get around this by making sure the individual reports to a non-family member. You may have to change the reporting structure before you can deal with the problem. If the problem child/relative must be a direct report, consider hiring a coach who specializes in family businesses to provide impartial input.

But don’t expect a quick fix. Only in movies does that helpful heart-to-heart yield instant results. Chances are, you will have to commit to a series of discussions. IRA BRYCK, director of the University of Massachusetts Family Business Center in Hadley, Mass., is working with three owners—two siblings and a cousin—of a 20-employee retail firm. Two told him that the third, the eldest, is “doing work that could be performed by a high school student,” he says. But they were too intimidated to confront him. After working with BRYCK, they broached the touchy subject and began discussing what each individual’s role should be. They have a long way to go, says BRYCK. But, he adds: “At least they’re now talking about who’s helping and who’s hurting the company.”

Find a better slot. Could be, the person is simply in the wrong job. Thomas Davidow, head of Thomas D. Davidow & Associates, a family business consultancy in Brookline, Mass., recalls a five-employee real estate firm, in which the founder’s son floundered for a year-and-a-half as a salesman. Finally, he had the guts to admit he wasn’t happy. He moved to marketing—where he’s become a whiz.

Send the rookie to a farm team. Before bringing a young relative into the business, let him or her make their mistakes and learn about the world of work in somebody else’s shop. Use your connections to find the kid an entry-level spot in a similar or related business. “The chance of people saying yes is high, especially if they know you’ll do the same thing for them,” says Davidow.

Examine the kind of mentoring you’ve provided. In some cases, the individual may just need a little more training. “Some people feel their kids should have the skills, just because it’s their son or daughter,” says Vince Vecchiarelli, president of Hank’s Auto Body West, a third-generation family-owned business in Wheat Ridge, Col., who also does consulting for family-owned businesses. When he joined the company in 1983, his father almost immediately put him in charge of starting a new office, but with little direction or supervision. The business started to grow—so much so, in fact, that Vecchiarelli, himself, feared he wasn’t up to the job. On his suggestion, they ended up hiring a seasoned CPA to act as his right-hand man and tutor. “We could focus on what my father couldn’t teach me,” he says.

Make sure the person really is screwing up. Before you get ready to confront the problem child, make sure that you’re not the problem. Often, successful business founders have unrealistic expectations. “For some people, no one will be good enough,” says Davidow. BRYCK tells the story of a founder and son, who stepped out of day-to-day operations of their family business—and have done nothing but criticize the performance of another son, now the president, ever since. “He’s actually doing fine,” says BRYCK. His solution: BRYCK is working with all three to come up with specific objectives for the president and ways to measure his performance. This will force the outsiders to be specific and constructive. Until now, he says, they have only been “second guessing him.”

Families find therapy of a sort in help running businesses

By Stephen Singer, AP Business Writer
Long Island Newsday, January 29, 2006, 12:02 p.m. EST

STORRS, Conn.—At a time when most people are enjoying their retirement, 73-year-old Stephen Altschuler is grappling with his company's future—and his family's role in it.

Altschuler founded an electronics assembly manufacturer 34 years ago and built it into a company that now employs 96 workers. Based in Torrington, the privately-held Altek Electronics Inc. makes circuit boards and electronic assemblies for original equipment manufacturing companies, primarily in Connecticut.
Preparing to hand his company over to the next generation has been a source of stress for Altschuler and his two children, who are vice presidents of Altek Electronics. The family hired an outsider with experience running manufacturing facilities six years ago to help settle future ownership issues.

"Most entrepreneurs don't ever want to let go of their business ever," said Altschuler's daughter, Sabrina Beck. "Children want the opportunity to take the steering wheel and drive the car."

Conflicts in family firms are common. Up to 90 percent of businesses in the United States are family-controlled and more than one-third are expected to go through ownership changes in the next five years due to retirement, according to the University of Connecticut's Family Business Program.

UConn and other universities have established programs to help family-owned businesses mediate such conflicts, which can cause turmoil for the family, employees, suppliers and customers.

"It's less like therapy and more of having the difficult conversations and discussing the undiscussable," said Michael Stern, who runs a consulting group and works with the Family Business Program.

The UConn program, part of the School of Business, offers itself as a "think tank" for family business owners, successors, family members and non-family managers. It helps family-owned businesses wrestling with thorny problems such as how to promote, demote or fire a family member.

Academic interest in family-owned businesses has gone worldwide. The University of Pennsylvania's Wharton School has launched the Global Family Alliance to research and share best practices of family enterprises of "substantial net worth."

"We know very little about corporate governance vs. family governance," said Raphael Amit, chairman of the Global Family Alliance executive committee. "We need to look at families from around the world."
IRA BRYCK, director of the University of Massachusetts Family Business Center, a continuing education program, said his service is "therapeutic, but is not therapy."

"Where family businesses are closely held, businesses and secrets are closely held, there's a certain secrecy, a certain shame that our family is dysfunctional when all families are dysfunctional. When you get over that you can think more creatively," he said.

At Altek, the Altschuler family decided to share ownership with Richard Razza, hired in 2000 and soon promoted from production manager to company president. He also mentors Sabrina and her brother, David Altschuler.

"That took some of the heat off the relationship with me and my kids," Stephen Altschuler said.
The company also posted a "perpetuation plan" on its Web site to reassure vendors and would-be customers that the company would continue after Altschuler's departure.

University mediation programs help family-owned businesses through personnel and staffing issues, in addition to issues of who will eventually run the firm.

"As a parent you want to support or enable your child, but as a boss you may have to fire your child and bring in better management," Stern said.

Other issues focus on whether entering a family business is a birthright or a reward based on merit, Stern said. And compensation can be a problem, too.

"Parents frequently tend to give kids equal amounts for Christmas and Hanukkah, but do you pay an office manager the same as a sales manager or do you pay the market rate for those positions?" he asked.
Companies founded as family enterprises run the gamut from titans such as Wal-Mart and Ford Motor Co. to the local hardware store. While many publicly traded businesses have escaped the stresses of family personalities and relationships, far more firms still feel the pull of pressures among parents, children and other kin.

Richard N. Dino, associate dean for graduate programs at UConn, said succession is among the most complicated issues family businesses confront "and if not done correctly, leads to the demise of the company."

David Altschuler, a vice president of Altek and the son of the company's founder, is practical in one detail in the operation of his family business: He calls his father by his first name.

"At work I call him Stephen. At Christmas I call him Dad," he said. "We try to remain professional in the company. Sometimes we succeed. Sometimes we don't."