So, You’re in the Family Business…?by Paul Karofsky
Ellen (daughter):I’m convinced the economy is starting to rebound, Dad. All the economic indicators seem to be pointing in the right direction.
Charlie (son):I agree. Housing starts and sales are up and mortgage rates are even rising a bit. If we don’t open a new location now, then when?
Henry (father):Whoa! Let’s slow down a bit. This business serves us pretty well the way it is right now. I know you kids are chomping at the bit, but we’ve got a lot to consider here. You don’t just go out and open a new branch location. We’ve got to think this out very carefully.
Ellen:Dad, we’ve been talking about this for almost a year. How much longer do you really think we have before it’s going to be too late?
Charlie:Come on, Dad, Ellen and I will have our own families before you know it. We’ve got to start building for the next generation.
Dad reflected, “These kids scare me sometimes. They seem so impulsive. I can’t believe they’re not satisfied with all that I’ve tried to build for them for over twenty-five years. What more do they need? I’ve learned that bigger isn’t necessarily better. Besides, I’d like to start slowing down a bit. I don’t have their levels of energy or need. And I certainly don’t want to put all I’ve worked for at risk at this point in my life.”
Ellen and Charlie consider their position, “Once again we’re two against one, but Dad always wins. It’s still his business. Do you think he’ll ever let go? He’s so conservative. We’ve done our homework, we’ve explored alternative locations and financing options. We’ve even got some solid cash flow projections. But he just won’t say “yes.” We’ve got to do something to grow this business soon for our own sake.”
What’s going on…
Henry’s suggestion to slow down the process reflects his concern about making what he perceives as a major change. He has spent all his working life building this business up to the point where he and his children can have comfortable lives. His desire to slow down and reluctance to take a major risk at this point in his life are understandable.
Henry is also concerned for his children. While they may see his conservatism as serving his own needs, and, indeed, to some extent it may, it is also an expression of his concern for them. Henry’s retention of “control,” however, adds another dimension. If Henry is convinced that his children wish to change the business contrary to his desires, then he is certainly not going to be motivated to yield control. This position may become untenable for Ellen and Charlie, and what now presents itself as a disagreement, could abruptly turn into a major conflict.
What should they do…
Discussions must rise to a new level. Ellen and Charlie need to talk about the next generation and their dad needs to talk about his desire to slow down and reduce his risks. Together they can share their dreams, hopes, concerns and fears about the future. There is little value in keeping some of this “soft stuff” too silent in family businesses, assuming that family members automatically know what each other feels.
The family business members need to establish some shared goals for the business. These can be in part a response to their dreams, hopes, concerns and fears about the future. With an especially keen sensitivity and respect to Dad’s desires, these discussions need to include the future of “control,” including ownership and leadership succession.
Alternative strategies to meet the needs of the family and the business (responding to steps #1 and #2 above) need to be explored. Creativity can play a major role here. Ellen and Charlie are focused on new location to meet their needs. If their goal is growth, then perhaps an expanded product offering, or an enlarged current location, or diversification may better match some of Dad’s goals too.
Just as Ellen and Charlie have done their homework in exploring a new location, they need to do the same in considering other alternatives. This makes comparisons more valid and will help ensure greater confidence from their dad.
While steps #1 through #4 are designed to be processed by consensus among family members, sometimes this requires a third party to help along the way. Since family members will need to negotiate with each other, a facilitator may help move things along. While everyone’s needs may not be totally satisfied, the mark of success will be a reasonable comfort level for all.
Intergenerational differences in a family business are to be expected. For this family, differing perspectives are significant and understandable and can create some schisms. But open expression, joint goal setting, creative exploration of alternatives, careful preparation of homework, and effective negotiation can frequently bridge the gaps.
Paul Karofsky was president of his family’s third generation business. He completed graduate studies at Harvard University doing research in family communication styles. Paul is Executive Director Emeritus of Northeastern University’s Center for Family Business and facilitates its Leadership Development Forum. He is the Founder and CEO of Transition Consulting Group, Ltd and is a frequent speaker and resource to educational institutions worldwide. Paul consults to family enterprises and can be reached at [email protected] or 561-626-1110.
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