When the youngest brother assumed the reins of the family business, he ruled with the tenacity of his father, never mentioning the word family within the walls of the company and referring to his siblings merely as “shareholders” in the corporation.
Now, as some of the siblings look toward retirement, the younger brother is running a campaign of intimidation. He is trying to convince his brothers and sisters to give him their shares in the company. He argues they couldn’t possibly sell their stake in the family business to an outsider and would be foolish to subject themselves to the outrageous taxes that would follow a company buy-back of the stock.
Sound outlandish? Cruel, perhaps? A made-for-TV movie? Think again. This is the scenario evolving at one Cleveland business and, although Dr. Sherrod Morehead, a clinical psychologist, wants to protect the identity of the company, he uses it as an example of how dirty family business can get.
“He’s intimidating them, beating them up, making them feel frightened nervous and scared,” explains Morehead, who is working with the family members to find an amicable solution. “That’s how it works and it is just one example. There are people who do a lot worse things than that to their ‘shareholders’ to get more.”
Bullying and treachery are not what one expects when it comes to charting the future of the family business. However, Morehead and Peter Calfee, a certified accountant and financial planner, have seen it all before. In fact, the emotional struggles that often accompany family business succession planning are the reason they joined forces to found Family Business Advisory Partners Inc. Their goal is to help guide companies through the often-difficult transition.
“What Peter was finding was you can have all the financial documents properly planned and executed and nothing happens or conflict continues,” says Morehead. “The documents are basically superfluous. I was finding I could get everybody settled down and then, if we had to go outside and bring somebody in to start (preparing) the documents, it flared the whole thing up all over again.”
Even the most honest attempts at succession planning, Morehead explains, can be derailed by differences between generations and personalities. Calfee and Morehead say there are, however, several ways to improve the chances for success when family members sit down to chart the future of their business.
Create a mission statement
Business owners may labor tirelessly over the mission statement a company presents to its customers, but may give little attention to a similar declaration when it comes time for a succession plan. Morehead says it is crucial to get the company’s wishes, problems and values on the table, so they can be included in a type of road map as the process evolves.
“Somewhere in the continuum of that discussion comes the real heart and soul and reality,” says Calfee. “You should look at this piece of paper to guide you, but it can take some days, weeks and months for the leaders in each generation to come down to say, ‘That is us.’ There’s a lot of time spent building that platform.”
Identify the “emotional CEO”
Morehead uses an example from his days at Baylor University in Texas to explain the phenomenon of the “emotional CEO.” He was close friends with the owner of the Houston Oilers and would go to his house on Sundays to watch out-of-town NFL games.
“One day we were looking at the game and analyzing what everybody was doing, and the wife of the owner said to the group, ‘You know, I just never have liked that guy’,” recalls Morehead, explaining that she had singled out one of the team’s linemen. “Two weeks later, for some reason, that guy wasn’t on the football team. That’s what I’m talking about.”
Incorporating the thoughts, beliefs and prejudices of off-site influences such as spouses is crucial to drafting a long-lasting succession plan. Although it may not always be easy to glean the information, Morehead says success can be hindered if the factor of an emotional CEO is ignored.
“If we’re working with an owner and his executives, and leave out this off-site influence, it’s likely that our effectiveness is reduced 50 percent,” says Morehead. “We find ways to make that discovery and include, not in person, but in attitude, that individual.”
Recognize the generation gap
Much of the friction generated during the succession process is due to the communication gap that exists between generations. A son may think his $33,000 a year salary is much too low, while the father remembers being paid only $7,000 for the same job early in his own career.
Many times, a translator whom everyone trusts is needed to help bridge that gap. Calfee says often, the stress of the family business will lead sons and daughters to adopt certain roles when dealing with the business because they feel they cannot say what they really think.
“You begin to play act certain stylized behaviors and that’s what saps the energy from a company very quickly,” he says. “It begins to draw you down physically very quickly, because you’re not being true. They may think, ‘We don’t interface about this naturally, so I get into this role,’ and that may not be healthy for the company.”
Evaluate the plan
After spending the better part of a year drafting a plan, some business owners may not want to tinker with it. But, Morehead says, evaluating the plan and how it is working is a crucial element of the process. He says meeting once every quarter should be enough to make sure the company is staying on track, or to determine whether the plan needs to be modified.
The bottom line, he says, is ensuring the process is as smooth as possible. Otherwise, the squabbles could grow to legendary proportions.
“We come in on a periodic basis just to check signals about how the fit is between where they are now and where they wanted to go and how the mission statement is working,” he says. “Every time you make a new hire or somebody leaves the company, it impacts the culture. So, if there’s been three of four changes in a short amount of time, you may need a culture check.”
How to reach: Family Business Advisory Partners Inc., (216) 328-2271
Jim Vickers (email@example.com) is an associate editor at SBN.