Diana: [00:01] This is Diana Schad, CEO of the Family Business Alliance of West Michigan. I’m joined today by Ira Bryck, president of the Family Business Center of Pioneer Valley in Amerce Massachusetts. Today we will be talking about some conflicts that may come up fairly often in family businesses. Ira, thank you for joining us today!
Ira: [00:17] So nice to be here.
Diana: [00:19] I enjoyed reading your advice column, and some of the questions come up. I thought that maybe would could talk about some common problems that come up in family businesses, and talk about how you would help them and advise them to deal with the situation.
Ira: [00:30] Mhm.
Diana: [00:30] The first situation is where you’ve got the patriarch who’s been in the job for fifty/sixty years and doesn’t want to retire. You’ve got a next generation who’s anxious to take over the company. How do you deal with a situation like that where you’ve got the next generation that’s ready to move up, but the father or mother isn’t ready to step down?
Ira: [00:50] Well it is the classic, stereotypical problem. You know, sometimes they say that the founder of the business, the senior person, is asking the wrong question. Instead of saying “when I die” they’re saying “if I die”; they’re definitely going to die. I find that, first of all, a lot of these questions, the correct answer is “it depends”. There are so many different details that could be affecting the situation.
Just to pretend that I know about this case, I think it’s really good to ask people “What is your end goal?”. If you’re 80 years old, how long do you think you’re going to live? Well, how long did your parents live? “Well my mother lived ’till 93, my father lived ’till 89”. Are you in good heath? “Yes”. Okay, well let’s say that you live to another 90 years and you’re not in too much pain, and you’re not demented, what do you want to be doing when you’re 90? Get them to talk about that. To get to that point, where do you need to be at when you’re 87? You’re 80 now, so what do you need to do in the next 7 years? “Well I would need to do this and this”. When you’re 85 what does life look like? Just back it up to the point that he says “okay”. By the time that he hits 81 which is not far away, [he says] “I definitely have to do ‘x’, ‘y’, and ‘z’”. It might just be that they’re not seeing the length of the race track properly.
That’s one thing, the other one is, what do you want to do with this business? I mean, a friend of mine, I gave him the idea for this book I’m proud to say, but he wrote a book called Trapped in the Family Business and is coming out with a second book called “Thriving in the Family Business”. In the beginning of the book he says, “I asked my friend Ira Bryck, ‘What percentage of people are trapped in family businesses?’” and I said, “It’s 100%.” To a greater or lesser extent, anybody who is in a family business is thinking, “What else could I have done? How did I end up here?”. It really is the greatest hell for people who are not using their passion or their talent, or it’s just they’re getting underpaid, or they’re getting overpaid and they are scared to leave to do what they love because the paycheck is so good. It just helps to look at, if money didn’t matter, if you could do anything, let’s fantasize together. It’s good to get people together to just look at alternate realities and just talk about what else could this be.
Diana: [03:20] Now what about a succession plan? Do you recommend a written succession plan for families, so they don’t face this situation?
Ira: [03:29] Most people don’t have a written succession plan. The studies that had been done years before by Mass Mutual and Arthur Anderson used to do them, and Earnest Young, talk about how a very small percentage of people actually have a succession plan, and of those it’s almost not ever written down. It’s a good exercise to go through. In a way, it’s like Harvard talks about strategic plans. Strategic plans are useless, but strategic planning is crucial. The process of talking about succession, the process of admitting “Well I’m going to die one day, and I don’t want to do this, and I had other hopes”, and to even get that senior member into a discussion of ‘people like you who have retired have found happiness in doing what they loved when they were 12’. If you look at the book New Passages by Gail Sheehy that studied a lot of Harvard Grads. What did you love when you were 12? Just get them talking, try to loosen them up.
The problem is that a lot people, I guess it’s described in the old testament as “stiff necked people”, God would yell at the Israelites “You’re a stiff necked people!”, if you can’t role play, if you can’t fantasize, if you can’t imagine a ‘what if’ imaginary story, it’s unlikely that you’ll be able to just think creatively, and you’re just not going to be able to succeed in this. I have consulted to many family businesses that told me that I was the fourth or fifth person, let’s see if I can stay on the bucking bronco longer than the other four did. They just have their head set on doing the same stuff different day.
Diana: [05:13] Another scenario that we hear often comes up is non-family members working for the family business, which can sometimes really work out, but in a divorce situation can create a complication with the business and with the family. What would you recommend for families in that situation?
Ira: [05:29] Again, it depends. I consulted to one family, I was brought in because there were parents that started the company, they had three sons in the business, and one of the sons fell in love with the manager. He married this woman manager, and the marriage was not succeeding. What happened in that one case is they got a divorce and they went back to being very friendly coworkers. That’s not something that you can just prescribe to anybody. There are famous stories about people who are divorced in family business and then it just goes to the courts. There’s a lot of people where the in-law works out really well in that business.
The second part of that question, if you’re not actually a family member, for a business to say there’s more opportunity for family members than there are for non-family members, that’s not a good business to attract non-family talent. It’s unlikely of the 24 million companies in the United States, that you are the best suited for your family business; or of the, seven hundred/five hundred million people (I don’t know what they population is anymore) that your son is the one that should take over your company. I have been in several situations where I have said, “Let’s do a search. Who is the most qualified person on earth to try and get this job, and if you’re child and this person are in the dead heat, have affirmative action for the family”. I was on several search committees when I was at Mass, and they would always come in and read this, “this is an affirmative action organization”. If there is a tie, it goes to the union member, the woman, or the person of color. God forbid there are three finalists and one is union, one is woman, and one is person of color. I say affirmative action for family. I’ve done that with family businesses, and they’ve said “I actually want to give my child a 20% handicap. If my child is 80% as good as the contender, then I’m giving it to my child”. You can give it to the most incompetent child, it’s your business. You’re going to lose every competent person that works for you. Demoralizing.
Diana: [07:46] That leads to another scenario, I’ll call it the “bossy brother” scenario. What do you do if you have multiple siblings and you have one sibling that has taken it upon themselves to be the next leader of the organization, and has left the siblings out, and seems to be manipulating the parents?
Ira: [08:03] I would say it depends. [Laughter] In a business that would be agreeable to this, you need to figure out, what really are the measures of success? How do you tell objectively (as objectively as you can) who is doing a good job here? You may have to bring in outsiders to determine that, to say whose salary is contributing what to the bottom line. If you have a family where some people are just not cutting it, you can say “Look, we will keep you here, we will act like a safety net for you. If you were not our family, we would not have you here”.
If somebody is really a top performer and they’re a family business member they should still get paid what they would get paid if they were not a family member. Then there is the whole confusion of sometimes there’s a tax benefit to just pay somebody sort of a smooshed in combination of dividends and salary all together so that they don’t have to pay more in taxes. It’s a mess. I think, even if you have bigger tax consequences, it’s important to hire a compensation expert to come in and say, this person should be making x in the real world and should be making that same amount in the family business. Let’s say that there’s one sibling who is a bully, you have to determine, is this person just a bully personality, or are they self-righteous about how much better they are than everyone else? There’s many, many scenarios.
If they really are the leader and they are being kept down because the parent doesn’t want to say I love child x more than child y, so I pay them the same. I’ve been in that situation consulting to a company, and I have brought in a compensation [expert], I am not the compensation expert, but I brought in a compensation expert to say this brother should be making 50% more than they’re making, and you’re overpaid, and you’re overpaid! Again, cold water and fresh air! That’s the name of my advice column. In that situation, where I told everybody what they really should be making according to this compensation expert, then they can talk about how they don’t really want to be spread apart that much, and how it’s a family, so they start playing with the numbers a little bit. If somebody is just a bully, there’s a lot of family business consultants that are psychologist who can deal with all of this family systems stuff. A lot of times they don’t market themselves as physiologists, they even leave PHD off the business card because most family business owners don’t want to be in therapy. If it’s just the bullying issue, then it probably pays to bring in somebody who has a good psychology background and family systems can explain these things and delve in a little bit.
Diana: [10:53] Thank you very much, any other conflicts that have come up in your history that are relevant to this discussion?
Ira: [10:59] I just think that there’s a lot of times where everybody in a family business know that they don’t really enjoy working together, but they are getting mortgage payment done by the business, and they’re figuring, “So what it’s a life sentence, but that’s where I make the big bucks”. It’s important to come in and have the father say, or the mother say, or whoever, you are not trapped in the family business. I hereby release you, anybody who wants to go work somewhere else, I will give you a gift of love to carry you over. I have had that situation in many consultations and there’s been several people who just said, “I am so glad that I can now leave the family business, am I still invited to Thanksgiving? Yes? Great!”. So, there’s life after family business.
Diana: [11:43] That is fantastic advice, thank you so much for joining us today.
Ira: [11:46] My pleasure.