With each installment of our Video Blog Friday’s Series, Paul Karofsky reflects on influential lessons learned from his career working with family businesses.  Each Friday, we will provide a new story with a unique topic – so stay tuned!  We hope you enjoy the seventh feature in our series, When Circles of Fog Block a View to the Future…, where Karofsky presents a situation where a family business must assess the ability of the younger generation to take hold of the business.

Dad (speaking about his son and daughter): You’d think Harold would be more responsible. He has always been late and I’m really fed up with it. I swear if he does this one more time, that will be the end. Then he can go out and try to get a job somewhere else and see how easy it is. And Susan drives me crazy, too. You’d think she could make an intelligent decision on her own, but she always comes to you and me for the answers.

Mom: Well, I’ve had enough, too. You think it has been easy for me all these years? Running a house, raising the kids, helping with business, and trying to save for retirement?

Dad: So what can we do? We’re both in our sixties, we’ve worked our heads off for forty years. We’re finally out of the bank, but everything we’ve got is tied up in the business and the real estate. We’re tired and fed up, and our kids, now in their thirties, are still children. How can we even think about retiring?

While the particular details may vary from family to family, Mom and Dad’s situation is not that unique. All too many family businesses are facing a similar dilemma. Lots of parents in family businesses are concerned about a lack of “responsibility” and “independent decision making” from their adult children matched with their own desires for retirement.

What’s going on…

In this family business, the issue of “responsibility” evidences itself through the pattern of “lateness” which Harold has developed over time. It is something that has become expected of him. That expectation actually gives him permission to continue to be late. He knows it is both expected and tolerated despite parental ranting. He also knows that his parents’ threats are idle. Clearly, there is little in this system to inspire and motivate a change in Harold’s behavior. As parents expect certain behaviors from their children, they frequently come about as self-fulfilling prophecies. This circular pattern of “family” behavior now plays itself out in the business setting.

Mom and Dad fault Susan for not making her own decisions and say that Susan always comes to them for “answers.” Parents often find it “easier” to make decisions for their children than to help guide them to become good decision makers themselves. Again, a circular pattern emerges: Mom and Dad give Susan the answers so Susan does not have to make the decisions on her own. This only frustrates Mom and Dad while limiting Susan’s independence and self-esteem and ability to make decisions on her own.

Mom and Dad express a dilemma: their desire to retire along with their concerns about their children’s “responsibility” and readiness to take over the business. So a third circle of behavior appears: the more parents see their children as dependent on them, the less willing parents tend to be to grant further independence either for themselves or their children. A question of sufficient financial resources complicates the matter even further.

What to do…

1.The circular pattern of Harold’s lateness must be cut in order for the behavior to be altered. Some very basic business rules about punctuality are needed and consequences must be consistently applied. It is reasonable for all employees, especially family members who are expected to set an example, to be “on the job” within five minutes of the appointed hour. Showing up any later communicates to others a misstatement of power. It says “I am more important than you are; your time is less valuable than mine.” And that is clearly not a desirable message to give customers, suppliers or co-workers. While any failure to adhere to company policy should be communicated at once, repeated failures should evidence themselves at performance appraisal time and consequently impact job level and compensation. Ultimately, failure to meet company policy can and should result in termination.

There needs to be clarity on who the decision maker is for any particular issue. If all agree that it is Susan, then there are two possible ways of altering the present pattern. First, Mom and Dad could let Susan make the decision on her own. They can offer advice and alternatives, but must resist making the decision for her. Alternatively, Susan could break the pattern by assuming the decision making role herself. Either way, Mom and Dad will need to tolerate some decisions that will be different than their own and Susan is bound to make some “mistakes,” but that is an important part of the learning process. As Susan gains more experience in making decisions, hopefully the quality will improve along with Susan’s self confidence and increased willingness to make more and more decisions on her own.

2.Mom and Dad need to have a sit down discussion with Harold and Susan expressing their concerns about the future. A realistic assessment should be made as to whether or not ownership transfer within the family is the way to go. If the family concludes that Harold and Susan are capable of ultimately “taking over,” then the new functions and responsibilities that Susan and Harold will need to perform should be detailed one by one. An action plan defining gradual responsibility changes with accompanying plans for training and skill development should also be developed. Each success that Harold and Susan experience will become a foundation for more in the future. From a financial standpoint, Mom and Dad, along with their attorney, accountant and insurance advisor, need to explore options for ownership transfer and a way to fund living expenses for the future. Perhaps some rental income on the real estate can help.

For parents to accept their children as responsible adults is not always easy, but this does not mean that the “children” are irresponsible or lack the potential to be good decision makers. Patterns of family behavior develop over decades, but that does not mean that people cannot change. With a heightened awareness and a concentrated effort, family business transition goals can be achieved as the family plods through the fog.

 

Paul Karofsky was president of his family’s third generation business.  He completed graduate studies at Harvard University doing research in family communication styles.   He is the Founder and Chairman of The Peer Alliance and is a frequent speaker and resource to educational institutions worldwide.