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Written by: Bob Koester
OK, OK, maybe “hate” the work is a little strong. But serious dislike of the work is a real problem facing businesses in general and family businesses in particular.
Several years ago, I visited with the board of directors of a very closely held family business. All the senior management positions were filled by fathers, sons, nieces, nephews, and cousins. Some of these relatives really enjoyed their roles. One in particular did not. This individual’s lack of enjoyment manifested itself in a lack of interest in exploring new ways of doing things.
The company had a long history of success. It was in a very mature industry. However, the multiple stores were in good locations, the customer service level was generally very high and the business had a LOT of very loyal customers. The family was close and the work ethic was very high.
So, you say, what’s the problem?
Did you happen to notice how often the past tense was used in the preceding paragraphs? If so, you guessed correctly…the company is no longer in business. Unfortunately, when the decision was made to shut down, the company lacked enough appeal to make a really big pay-day possible for the owning family.
Here’s the point. Business succession planning or business transition planning requires a careful assessment of all facets of the operation if financial success is to be maintained or enhanced.
Obviously, the financial components must be clearly defined, understood, and performing at or better than established goals. But, it is also extremely important to be sure the right people are doing the right things. That can be tough if family members are in jobs they don’t like. Dislike can come from miscasting family members as easily as it can come from hiring the wrong outsider and can be even more damaging. (It’s often pretty hard to fire a family member and if they are used to the money, they won’t quit.)
I’ve observed that family businesses can be very “un-democratic” environments. Usually, the patriarch or matriarch built the business through hard work and making the key decisions. That decisive behavior can show up in the way younger family members are put in jobs. Keeping a close eye on the money is a good example. Many times, a close family member is assigned that job. What happens if that individual lacks aptitude, or interest in the treasury function, or accounting, or taxes? Will the work get done? Probably. Will the work be the highest quality and most beneficial? Maybe not.
Sales is another area where miscasting can easily happen. I’ve seen many cases where golf and sales become confused. Frequently the confusion comes when the younger family member wants the benefits of the company money, but doesn’t really want to be actively involved in productive work. So, they focus on goodwill building under the loose pretext of sales or marketing. Unfortunately, Mom or Dad stays back at the plant doing the actual work.
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What are some of the implications of the scenes we’ve built in this story?
Declining cash flow can certainly be one implication. In an extreme situation resentment and ill will between family members can be another. The ability to focus on future expectations for the business may suffer.
Business owners should have an end game in mind. If the end game is a successful transition to second, third, or some other generation ownership, paying attention to the interests of the planned successors is important. If the end game is selling the business for a good price, it’s critical that all of the family employees/owners are involved in the enhancement process. Buyers buy on earnings and if the earnings have been depleted by unproductive family employees, the end game will suffer.
Either way, loving the money and hating the work can be a real problem and one worthy of regular review and attention.