Family Business

Solving family business issues takes time

March 2, 2013 

I am frequently asked what it is that I do when I try to help family businesses. This is a difficult question to answer as no family or business situation is like another – the players are different, and each has their unique hopes, dreams and desires. Moreover, the uniqueness of the family, with its unquestioning love, is intermingled with the business which is trying to make a profit and run efficiently.

It is really half psychology and half business. So when people ask me how to fix a family business, I often declare that it can be similar to a marriage counselor: They can’t tell you whether you should be married, but can take you through a process to help you figure out what you want to do and how to get there. Sorry, there is no iPhone app available to address your family business issues.

But let me share one best practice with you today.

Success in business is pretty simple: Do it better, faster and cheaper than your competition, and you will win (assuming there is a modicum of market out there). However, this approach does not always work well inside the business. Sometimes slower is better when trying to make certain changes in the family business.

I had a client where there were a number of equal owners involved. The discussion revolved around the transitioning out of the long-time leader, the process to determine the new leader and the governance rules that would be used going forward. The meeting took quite some time and there was a lot of discussion.

I asked awkward and sometimes uncomfortable questions to ensure all the issues got out on the table.

Discuss in detail

In the end everyone came to an agreement on the timing, the process and the governance structure. There was no yelling, and no punches were thrown – just a lot of good honest discussion.

Later, when I was debriefing with one of the equity owners, he expressed his frustration with the meeting: “I think we could have done the whole thing in 15 minutes and gotten back to work.”

The owner of another family business had a similar attitude. We had covered a lot of material and had done some really good work over a few days. But there was an important issue that we had not had time to get into so far – family compensation.

The owner was a hard-driving business person, focusing on the details and letting the big picture take care of itself. Speed was of the essence – whenever there is an issue, let’s get it addressed and move on. This perspective paid off in spades for the business over the years.

So when he suggested we quickly gather the kids into a room and hammer this out in an hour before I left and he was about to go out of town, I demurred.

Take the time needed

His kids had been working in the business for quite some time. But the structure of the salaries had gotten out of control, elements of compensation were ambiguous, and some benefits had been hastily put into place. It was clear that in order to get the entire compensation package for the family members back into some kind of line, there were going to be disagreements. And someone, if not many parties, was going to walk away with less than what they originally had.

The better answer was to wait until everyone could spend the time required to fully discuss the topic, get all the data on the table, state desires and rationales, and forge a solution in which all parties could gain an understanding of what was being done, if not come away completely satisfied. This is what was done, and the end result was a sensible compensation program that made sense and everyone bought into.

Business is logic and family is emotion. When dealing with family on a business topic, especially if it is personal, be sure to allocate sufficient time. If you cut it short, you will end up with a solution that people don’t support – and hurt feelings. How much time? As much as it takes.

Henry Hutcheson is a nationally recognized family business speaker, author and consultant in Raleigh. He can be reached at Familybusinesscarolina.com.

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