PKF International
PKF Poutsma Lemon Limited
PKF Poutsma Lemon Ltd, Keri Keri, New Zealand
Accountants and business advisers

A Wellness Program for the Family Business... When It Is Necessary to Manage Unmanageable Conflict

By James N. Bieneman

Let's paint a hypothetical picture of a family business; we'll call it Sunlight, Inc. This is a good company - - profitable, not a lot of debt for its size, loyal employees and an enviable reputation. Sunlight has continuously adapted to competition and conditions in the market. The company is profitable with a strong balance sheet. The future of the business appears bright although unresolved family issues are a concern.

Selling the business would secure the owner's future but leave family members in a financially difficult and professionally unattractive circumstance.

The management of Sunlight includes the owner's son and oldest daughter and the husband of the owner's second daughter. The owner has been retired for some years but still comes to work when he is in town, as he describes it to "keep peace in the family." But the other reason he is still involved is that he retains ownership of nearly all of the Company's stock, and he and his wife depend on the Company for their retirement income. He comes back, therefore, also because he feels his presence is necessary to protect his financial future.

The problems at Sunlight are almost entirely traceable to family differences. The oldest son is the president; his sister is a vice-president, and the brother-in-law occupies a senior management position. There is almost no trust or communication among the second generation family members. Their personalities are different and they espouse contrasting philosophies on the way to manage the business. Each is quick to point out the others' shortcomings.

The owner and his wife are aware of and concerned about these differences and feelings.They are beseeched with advice from one child or the other. Mostly this advice suggests changing (reducing) the authority and role of a sibling. The parents feel these suggestions are oversimplified, not good for the business and won't fix the family problem. But they badly want their children to get along.

The parents think this could happen if each of their children and their son-in-law would behave differently in certain ways and make changes in their business and personal behavior. But both the owner and his wife are skeptical when it comes to believing that people really change. They are at a loss as to what to do but convinced that things can't go on the way they are.

If you were asked to advise this family what would you tell them? Here are my suggestions.

Don't tolerate the intolerable: At Sunlight, for example, the son-in-law comes to work late, leaves early and shirks important responsibilities. Perhaps because his wife is defensive about her husband's behavior, his conduct has been condoned with silence.

His work habits would have been easier to confront, of course, years ago. But addressing his problem now is better than later or never because this behavior has far reaching and negative implications. If allowed to continue, the son-in-law's example may ruin an entire department or worse.

Don't indiscriminately throw money at the problem: One of the siblings at Sunlight lives beyond his/her means. There has been a tendency to find special ways to compensate this family member which undermines fairness and the accountability that Sunlight wishes to impose on the rest of the family.

Don't make bad business decisions in an attempt to cover for family members: At Sunlight they once acquired a new company that wasn't a good fit in order to employ a family member whom they couldn't place in the primary business. Of course this didn't work.

Consider selling the company but don't expect this alone to fix the family problem: Sunlight is a valuable company and if selling the business will achieve the owner's personal and financial objectives this may be the best solution. The dilemma for the owner of Sunlight, which his spouse is quick to point out, is that the children depend on the business, too, and their career and personal difficulties in the event Sunlight is sold are likely to become the parents' problem as well. Further, in this example both the parents and children still have hope to resolve their differences. Selling the business seems to them to forestall a reconciliation or make certain that it will never happen.

You are not alone: Many owners and families think that the degree of their family business conflict is unique. Invariably this is not so. Owners and families can be consoled and energized to deal with their own family business challenges by knowing that many others have faced and often overcome similar circumstances.

Get outside help: At Sunlight the relationships and communication have deteriorated to the point where the parties are talking very little and communicating not at all. They are unable to develop a plan of remedial action. Outside help is called for, usually in the form of a board member, the company's accountant or attorney, a family business specialist or sometimes a psychologist who specializes in such matters.

Take square pegs out of round holes: There is nothing to be gained by continued failure or poor job performance. When a family member is clearly not suited to his or her role in the company, change that role. Even if it means a diminished responsibility, in the long run individuals will be gratified if they are suited to their positions and are therefore a success.

Be sure to analyze the family implications of business decisions and vice versa: I recall a father who said with reference to his son, the president, "I'm going to fire him; this has gone on long enough." The father was referring to behavior that by any standard was unacceptable. However, there were at least three implications of the son's potential departure that the father had not considered: 

  1. There was no replacement for the son's expertise except for the father who was loath to end his retirement
  2. The owner's wife did not support her husband's conclusion because she felt that he had not tried sufficiently to work with their son and that the problem was of the father's making, and
  3. To everyone else in the company, the son's behavior mirrored his father's example and therefore what was really needed was a change by both father and son. When appraised of these considerations the father addressed the son's behavior in a much more comprehensive way.

Develop a family business plan: The family business plan is as important for its process as for its results. For example, the rules for stock ownership or the criteria and conditions for employment of family members are significant elements of a family business plan. But the process by which the family addresses and resolves these issues is even more valuable.

At Sunlight the family promised each other they would work diligently for a year on their family business plan, with monthly meetings, interim discussions and a very focused agenda. At first this seemed like a long time and a lot of effort, but not after they realized that their differences had been around for a lifetime and that the results of a good family plan could be profoundly satisfying.

A serious planning commitment over a reasonable length of time offers the chance for success. If the discussion is limited to a few sporadic meetings there is just too much history to overcome.

Utilize a Family Council: A family council is a standing committee whose membership includes family members who are involved through ownership or employment in the family business. In addition the family council nearly always includes the owner's spouse and periodically the spouses of second generation family members. The Family Council is where the family business plan is developed.


< back to articles


Home     About     Services     Links     News     Careers     Events     Tools     Contact Us    


     SitemapContact Us | Websites for accountants by Wolters Kluwer

Keep in Touch

Register for free email updates from PKF Poutsma Lemon

* essential