Judy Barber

Sometimes when I meet with members of a family for the first time, I get a sinking feeling in my stomach. I realize they may not be ready to do the planning that needs to be done. Often, in a multi generational business each member has his and her own agenda when facing the business issues. Many times, such emotional issues as control, loss and autonomy are not (and perhaps should not be) fully discussed as part of the planning in some situations. Yet it is always best when each member of the family understands his or her own part in the struggle to make business decisions.

The McBride Emporiums, Incorporated is a chain of upscale regional department stores that Joe and Marie McBride founded 30 years ago. Joe and Marie, along with their son Joe Jr. and daughter Anne, are deadlocked in their planning for the future of the business. Joe Sr. complains about the time the meetings will take away from the business. At age 65, he plans to continue to work in the business for another five to ten years and doesn't understand why the lawyer, CPA and family are in such a rush to plan now for the future since "The kids aren't ready to take over the business anyway." However, he would like to back off of some of the daily grind.

Marie, who is 60, continues to work in the business part-time and feels her life is on hold. She's tired of working and believes there is now plenty of money for their retirement. She's not sure why Joe feels he must continue to work so hard. She's also unclear about whether to begin traveling and playing golf with a group of women friends or to wait for Joe.

Joe Jr., who is 35, feels little autonomy in his role as Chief Operations Officer, although he is a shareholder. His dad second guesses him, keeps him in the dark about the overall finances and wonders where the money will come from to re-capitalize and stay competitive with the large franchises moving in on family-owned businesses in their largely rural area.

Thirty-three years old Anne joined the business two years ago after spending ten years in marketing and advertising. When she joined she was excited about the prospect of expanding into new communities. Her father and brother are constantly at odds. She feels adrift, worries about her mother's restlessness and has been contemplating seeking a job outside the family business. Anne, who has never been particularly close to her brother Joe Jr., is not sure about her future in the company. "We're just stuck," she says.

The stalemate in this family comes from each member looking to the other to make a decision or a change. To a large extent everyone is waiting for Joe Sr. to make a move, but the others also need to assess their own challenges.

Here are some of the questions members of both generations need to ask themselves as they consider planning for the future of the business enterprise:

THE SENIOR GENERATION

#1 Where do we go from here? Joe plans to spend the next five to ten years in the business, but why? He needs to ask himself how much of this decision is based on his lack of confidence in his children, his thoughts about the potential for a stimulating life outside the business and the difficulty he might have in facing the loss of his participation in the business. Joe's own motivation is an important factor in being realistic about how much control he will retain and of which parts of the business he can let go.

#2 How much time do we want to spend together as a couple? Is it realistic for Joe and Marie to consider spending more time together? Much depends on the patterns established over the years and the needs each may have for closeness or distance. People married a long time sometimes have a hard time facing how much time they truly wish to spend with each other as retirement approaches. Talking over this question may be tough, but can help Marie and Joe plan how to spend their time once they retire.

#3 What information, training and experience do the next generation need to take over from the senior generation? What skills and knowledge will be necessary to bring Anne and Joe Jr. up to speed? How can they acquire these tools? The younger generation may resist because of time restraints, a difference in priorities or perhaps a fear of the unknown. These issues need to be brought out into the open so the family can agree on training priorities.

#4 What are the tough leadership decisions that need to be made regarding who will have the authority in the next generation? Whose skills are best suited for which jobs? No parent wants to disappoint his or her children, but without a process to assess the strengths and challenges of the next generation, too much time can be spent bickering rather than dealing with choosing a leader for the future.

THE SUCCEEDING GENERATION

#1 Is this the right place at the right time in my life? With the lack of clarity about their roles and influence, it is essential for Joe Jr. and Marie to look at alternatives outside as well as inside the business so neither feels trapped.

#2 What are our strengths and weaknesses in relationship to this business? Dad may have issues of letting go because of his strong identity with the business and a need for control, but what are the genuine concerns he might have about our abilities to run the business? Gaining expertise in a field that dad has dominated may be difficult; fear of his criticism and worry about not learning fast enough to meet dad's expectations are issues to face.

#3 Are we willing to take economic risks as well as provide financial security for our parents? Anne and Joe must consider putting their own mark on the business - perhaps by expanding it. They must do so in such a way that doesn't jeopardize their parents' future. At what point would the banker for the business make a loan with one or both of them providing the personal guarantee? This may be necessary to protect Marie and Joe's retirement.

#4 Do we believe the family can work through these transitional issues so there can be a positive outcome for the business and the family? Anne and Joe Jr. have their own rivalries to work out and need to be open to new ways of approaching their relationship. Can they convince their parents that they can work as a team?

These questions are only the beginning of the complicated and varied tasks a family faces as it begins to discuss generational transitions. A willingness on the part of family members to look at the ways interpersonal relationships affect business solutions may be the first step in talking openly about some of the tough, often unspoken issues that surface in this challenging process.

PERSONAL EXPERIENCE

Passed Over: When Dad Brings in a Non-Family Successor

This interview tells the story of Rob, a forty-nine year old entrepreneur who until recently believed he would run the family business that he had worked in for nearly twenty years. Yet he survived, and in many ways has even thrived since his father told him that he wasn't going to manage the day-to-day operation of the business. For the sake of Rob and his family's anonymity, geography, events and circumstances about the business have been changed.

FM - Can you tell us about your family business?

Rob The family business was originally in the area of food and entertainment, which my father and his brothers started before I was born. My father and his brothers parted ways when I was in college. Subsequently my father bought another business in 1967 and the nature of the family business at that point changed.

FM - Were you aware of what was going on?

Rob Yes, I was aware of it the family acrimony as it festered. So in 1967, my father went solo in the music business. In the winter of 1977 he spread his wings and bought a media company.

FM - As you were growing up, did you have expectations that you would join the business?

Rob I was always interested in business as far back as high school. I majored in business in college. I always had the expectation of being in business, although I had other aspirations that developed over time. I became interested in politics, and for a period of time thought about that as a career. I also thought about writing.

FM - When did you begin to think about getting involved in the business?

Rob I was completing my master's degree and working as a writer when my father first approached me. I had just passed my thirtieth birthday. My father said, "Well, why don't you come back to the southwest, I'm going to buy another business." He took me on a fishing trip in Montana, which is very uncharacteristic of him. We flew to the mountains and with the sun setting in the west, I heard how important it was for a father to have his son in the business. I remember specifically his describing the sign above the business, "So and So and Son" and how meaningful that was to him. I wasn't a young kid, but I had never had a particularly close relationship with my father. I think I was probably influenced by his salesmanship - he is a very effective salesman.

FM - So how did it go?

Rob I agreed to come back to the southwest. He had just purchased a media company. Now he'd never been in the media business and didn't know anything about it and neither did I. It represented a climb up for him. I went back to California. While he closed on the deal I did have some pretty intense second thoughts about what I was doing.

FM - What were those about?

Rob The reservations had to do primarily with the way I felt about dealing day to day with my father and the idea of leaving my own career as a writer. I began to feel a significant degree of angst about returning to the family business.

FM - So did the "angst" continue? What did you do?

Rob I went to Europe for three months, took classes and wrote. After a period of time I felt there was something missing. There was more that I wanted to do. That coupled with loneliness, I decided to come back.

FM - What did you tell your parents?

Rob I remember writing a letter outlining what I thought was a reasonable business agreement. My thought was, as outlined to him, "If we work together for five years and I'm contributing, you're happy and I'm happy, then I'd like the opportunity to be partner with you." My best recollection is that my parents agreed to that and encouraged me to come home.

FM - How did it feel that first summer when you went back?

Rob Once I got into the work, I found that there was a special excitement in starting a new enterprise. I found myself in a position to influence things. Basically I took the business from the licensing to the strategic planning to the execution of all aspects of the business. I wrote a strategic plan, which became the basis of our early years of success.

FM - So, in the five-year period, did your father express any reservations to you about your ultimate role or about what he thought you could or could not do?

Rob No. He never said to me, "You know Rob, you need to train, or you're never going to make it." He would generally just disagree with certain things I was doing, and that was constant. But there was never any question that I would one day become his successor as CEO.

FM - After that five-year period, what happened to the agreement that you thought you had with him regarding a partnership?

Rob At first he reneged. I'll never forget going to a meeting with my father's accountant. I made the presentation. I attempted to justify the partnership based on performance and the time frame of the agreement. The accountant was very much aligned with my father and supported him in saying, "No." I felt devastated.

FM - What did you do?

Rob I began to interview with a prominent firm on the East Coast. After seeing me take the steps of looking to leave, my father changed his mind. He ultimately gifted me shares of stock over a two-year period, so that I owned about 25 percent of the media business. I'm not sure what motivated him. Perhaps to keep me there, but I felt a great sense of appreciation becoming a partner.

FM - So you ran that business. How did that go?

Rob We had good years through the eighties and then the competitive environment in the industry began to change. It became tougher, a lot more challenging and a lot less fun. I operated undercapitalized in the fashion of a guerrilla warrior. I managed the company effectively for fifteen years, which other pros in the business have told me was a significant accomplishment. In 1992, a large company moved into our market and began to compete directly with us. It came out of nowhere like a knockout punch. At the time, there was a new regulatory ruling that permitted consolidation in the industry. It also had the effect of bidding up the value of family-owned and operated businesses such as ours.

FM - What was your father's response to the crisis?

Rob I went to my father and his new assistant, Ted, and I said to them, "You know, we really are being attacked. We need to talk about this." My father just dismissed the entire subject after a few moments and returned to a mundane issue.

FM - So how did you respond to this huge competitive challenge?

Rob I saw an opportunity to cash out for more money than my parents had ever dreamed of and I told them, "Either we're big enough to start gobbling or we ourselves get gobbled. Now is the best time to sell."

FM - How did your father respond?

Rob My father opposed the idea of selling. To him it was giving up, and giving up meant failure - my failure. It was at that point that for the first time I began to hear from him for the first time about the issue of my competence as CEO.

FM - So this was the beginning of the end for you as your father's successor?

Rob It was absolutely, but I did not realize it at first. I did not realize the depth and power of my father's disappointment at selling off this part of the company.

FM - Do you believe you were right?

Rob From a business standpoint, yes, because we did tremendously. My father's original investment was $100,000. We sold for $6.0 million. And that's not bad.

FM - Did you get acknowledged then for that?

Rob Zero. The acknowledgment I got was in the form of "You lost it, you failed." I wasn't good enough. That was my father's interpretation of those events, and he's entitled to his own view. He has subsequently described his relationship with his business as his mistress. This is not something he looks at objectively, dispassionately. It's his mistress, and I was responsible for ending his relationship with his mistress.

FM - That must have been difficult for you.

Rob It was really tough. For twenty years I was told repeatedly, "Someday, Rob, it's all going to be yours." Now I saw my position undercut, my salary decreased, my inheritance slashed, and the presumption of my financial security threatened.

FM - When did the decision get made?

Rob There was never any announcement, so to speak. The changes took place through my father's actions over a period of time. He made it very clear who he regarded as in charge. After the media business was sold, I assumed I would move back into my office at the music division but that became Ted's office. I began to open my eyes to the fact that, "Hey, I'm not really welcome back here."

FM - Did you and your father ever have a direct conversation about the changes?

Rob There was little discussion between the sale of the media business and the closing. But the explicit discussion happened after that.

FM - How did you respond to this terrible blow?

Rob It was such a powerful force. Yet with as much disappointment as I experienced, it provided me with an enormous opportunity for growth. There have been things I've been able to learn and adjustments I've been able to make that have been as important in a positive way as the disappointment was in a negative way. I've come out a far stronger person than I ever was before.

FM - What kind of strengths do you have that you might not have had if your life had gone according to plan?

Rob I've become, maybe by necessity, a far more spiritual person than I ever was. My life is much more balanced.

FM - What do you mean?

Rob I have my own successful business and handle some of my father's affairs outside the music business. I am president of a growing local business association and president of the Kiwanis Club. I am on the board of a downtown task force. I spend a lot of time with my kids, as much time as I can with my wife.

FM - So, at what point did you decide that you needed to move on and start a new life?

Rob My salary was cut dramatically. I had a bundle of money from the sale, so I made an investment on my own and it has been highly successful. I actually feel a great sense of appreciation for my parents. I wouldn't have had a lot of the opportunities, including the opportunities for growth I have now if it wasn't for them. I have committed myself to forgiving them their failings and putting the hurt behind me.

FM - What advice do you have for others who fear they may face a similar fate?

Rob If I were advising someone considering a career in a family business, my advise to them would be to look carefully at the family relationships, see whether they're healthy, whether there's appropriate communication among its family members and if the relationships are based on mutual respect for each other and a willingness to sit down and talk things through. But then also I would advise them to separate the business agreements from the family context; be specific and get it in writing.

FM - Thank you, Rob, for your willingness to talk about this difficult transition for you and your family.

Four Things to Do to Avoid Being Passed Over in the Business:

1. Take a hard look at family relationships. If you don't get along with mom or dad now, what makes you think it will be any different when you work for them?

2. Determine if relationships are based on mutual respect.

3. Assess the willingness on both sides to sit down and talk things through.

4. Separate business agreements from the family context ... get contracts in writing.

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