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By Samuel Greengard
It's no small irony that the same qualities that helped Bill Maritz
build a multi-billion-dollar business empire led to his demise. The
late chief executive officer of Maritz, Inc., a St. Louis-based
consulting firm, helped clients motivate their employees through
sophisticated travel and incentive programs. However, when it came to
his own key employees namely his family Maritz couldn't mend a
rift the size of the San Andreas Fault.
By the late 1990s, his sons Philip and Peter were at the throat of
another brother, Stephen, whom Bill Maritz had already chosen as his
successor. Then, before his death in 2001, the elder Maritz arranged
Philip's and Peter's ouster from the board and altered their
inheritance. Stephen wound up controlling 60 percent of the firm's
voting shares and the other two brothers cried foul. By the time the
dust settled, tempers were flaring and lawsuits were flying.
Meanwhile, the company's sales plummeted by $1 billion within a year.
Unfortunately, stories like Maritz, Inc. aren't unusual. These
days, family feuds are just as much a part of the business landscape
as P&L statements and mobile phones.
While many family-run businesses function just fine and
participants benefit by working toward a mutual goal, too many others
encounter squabbling siblings, bickering spouses and parent-child
backbiting. The list of family businesses that have lapsed into
turmoil reads like a Who's Who of the corporate world: U-Haul, CK
Mondavi, Rite Aid, Hewlett-Packard and Kinko's, to name a few.
At the very least, infighting can undermine profits and torpedo
family relationships. In the worst cases, screaming, fistfights and
murder can enter the picture. "Family members can parlay their
relationships into greater success or wind up destroying the business
and their lives," says Quentin J. Fleming, a Santa Monica, Calif.,
management consultant and author of Keep the Family Baggage Out of the
Business (Simon & Schuster, 2000). He notes that only about 30 percent
of family businesses survive to the second generation, and a mere 10
percent make it to the third generation.
To be sure, developing a successful strategy is no simple task.
There are personality issues and practical issues to consider. There
are egos to massage and control issues to assuage. "Within a family,
issues and problems become magnified. And when people work together on
a daily basis, the situation can quickly reach a flashpoint," states
Russ Allred, president of Bakersfield, Calif.-based consulting firm
Allred & Associates and co-author of The Family Business: Power Tools
for Survival, Success, and Succession (Berkley Publishing Group,
1997).
All in the Family
It's not difficult to understand why a family business can present
headaches...and heartache. Not only is the owner dependent on the
business, so are participating family members, including children,
cousins, uncles and aunts, and others. Drawing the line between
business and family relationships can prove difficult, especially when
the family pecking order doesn't jive with the company's
organizational chart.
At the heart of the problem, Fleming says, is the lack of clearly
defined roles and responsibilities, along with a succession plan. That
can lead to feelings of inequality, as well as power plays and ongoing
anxiety about who makes decisions and how they play out within the
organization. Left unresolved, the resentment and jealousy can
escalate from a simmer to a boiling cauldron. "Too often, any kind of
disagreement or dysfunctional family behavior will ignite problems.
Those involved don't realize that the family baggage is masquerading
itself as a business problem," he explains.
The situation can lapse into crisis if the owner of a family
business suddenly falls ill or dies without designating a successor.
The resulting power vacuum can suck otherwise level-headed individuals
into the fray. What's more, the lack of planning can mean that no
family member has the knowledge and training to assume the reins.
That, in turn, can lead to additional disputes and a lack of focus and
continuity about how to run the business.
Many family businesses also encounter speed bumps because the owner
is unwilling to treat sons, daughters and other family members like
employees instead of children. In many cases, the behavior isn't
intentional but still has serious consequences. "The patriarch of the
family remembers children, nephews, nieces and cousins when they were
in diapers and afraid of monsters under the bed," Fleming explains.
"Grown men and women walk out of the president's office and wind up
crying because they feel as though they're being treated like a
child."
A few years ago, while Fleming was providing consulting services to
a family business, the president of the company admitted openly that
he didn't trust a key executive, who just happened to be his child.
The head of the firm was still upset at his son for losing a bicycle
when he was 10 years old and reminded the 45-year-old about it on a
regular basis. "The father couldn't get over the issue even after 35
years. He was denying his son opportunities and hurting the business."
Surviving for the Long Haul
Approximately 80 percent of U.S. businesses are family run. The
list of 18 million companies includes large corporations like Ford
Motor Company, Motorola, Nordstrom, Fidelity Investments and Simon &
Schuster, Inc. And it's a myth that only small, mom-and-pop firms
encounter problems.
For example, at U-Haul, a family coup d'ιtat in 1986 ousted the
company's founder, L.S. Shoen, and his brother Sam, and resulted in
lawsuits and countersuits, stormy board meetings and occasional
fisticuffs. At retailer Rite Aid, founder Alex Grass' son Martin
vanquished him in 1995 after a bitter boardroom battle. Later, Rite
Aid's board gave Martin the axe for improperly pledging corporate
assets to secure a bank loan and then falsifying board minutes.
Fortunately, most families manage to steer clear of such nasty
disputes. The most successful typically embrace a group of core
strategies: a board with outside advisors so that decisions don't
become personal; holding regular family meetings to address business
and family relationships; offering ample career development
opportunities; and developing common values and a common vision.
According to Dennis Engelbrecht, a consultant at the Family
Business Institute in Raleigh, N.C., an organizational chart and
detailed succession plan are also essential. "Ideally, people know
what their role is, they're able to receive training, and then assume
the position when a transitional period occurs," he says. Author
Allred believes that it's better to make succession decisions early
even if it means a family member winds up offended and quits the
business. "The worst thing is to deal with organizational issues at a
moment of crisis," he says.
Finally, it's wise to consider mediation before a situation blows
up, says Lee Finkel, director of the Office of Dispute Management for
University of Phoenix and a certified mediator and arbitrator.
"Dispute resolution provides the greatest opportunity to resolve
problems and preserve relationships. When a family business is
involved, a mediator brings objectivity to a situation where there's
almost always a great deal of subjectivity. The process helps curb
emotions."
In the end, family businesses that foster communication, trust and
confidence are likely emerge as winners. And, make no mistake, the
rewards can be enormous.
"In many instances, family businesses maintain a long-term
perspective and a level of energy that other companies have difficulty
matching," Fleming says. "They can achieve greater success and provide
participants with a greater sense of satisfaction and happiness."
Seven Deadly Sins
According to Quentin J. Fleming, author of Keep the Family Baggage
Out of the Family Business, the following seven deadly sins can
destroy a family business:
- "It's the same old song." People's behaviors, roles and beliefs
from childhood are perpetuated in the business, which could result in
stagnation and lack of innovation.
- "We're one big, happy family." When you run a business like a
family, it can create problems with gender roles, equality and
avoidance of confrontation.
- "They may have grown up, but they'll always be my children."
Parents are unable to accept their children as grown adults, and
therefore reluctant to turn over power or authority that's necessary
to run the business.
- "You're not loyal to this family if you insist on being selfish."
Rather than seeing family members as individuals, business owners see
them as automatic employees, often forcing them into a business they
don't want to be a part of.
- "Father knows best?" Business founders usually possess dominating
personalities and/or are consumed with the business, which can build
resentment among children who have always played second fiddle to
dad's work.
- "Maybe it will go away if we ignore it." Business families often
fail to address problems that emerge within any family sibling
rivalry, marriage, death.
- "Tell me about your childhood." Children working in the family's
business don't have the "space" to resolve critical issues about their
childhood. Parents can either be hyper-critical or too forgiving of
flaws.
Succession Success
Remarkably, two-thirds of family businesses do not have a
succession plan in place. Here's how you can ensure the future of your
company:
- Create an organizational chart that shows your organization's
current management structure.
- Map out your organization's competencies and understand how and
where key employees fit in.
- Develop a succession plan for filling various positions in the
event that someone leaves or dies.
- Provide training, mentoring and knowledge sharing to prepare
employees for future assignments.
- When a vacancy occurs, follow the plan without hesitation.
- Review and update the succession plan on a regular basis no less
than every six months to a year.
Our Faculty Recommends
Family Business Institute
Offers books and resources on running a family business effectively.
www.familybusinessinstitute.com
919-783-1880
Family Business Power Tools
Provides articles, information and more about family businesses.
www.allredbrothers.com
888-425-5733
FamilyBaggage.com
Author Quentin J. Fleming's site offers a free business assessment
tool and other resources.
www.familybaggage.com
310-459-9570
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