By Wayne Rivers

Advisors to family businesses spend most of their time managing the “dollars and cents” of the family; there is little question this is important. But not enough time is devoted to finding out what the family wants and then coordinating those desires into strategic planning. The mantra of all counselors and consultants to family firms should be “family first.”

How do you know what each family member wants? Face to face interviews are extremely helpful in ascertaining the feelings and interests of those involved. Having conducted hundreds of these interviews over the past few years, common themes are easy to spot in families in business together.

There are three circles of influence in every family business, and the interests and desires vary according to where particular persons reside in those overlapping orbs. For instance, a family member who works in the business but doesn’t own stock has a different viewpoint than a family member who owns stock but doesn’t work in the company. While it is dangerous to generalize because each family member is unique and has individual goals and aspirations, let us relate some of the most frequently repeated hopes and emotions.

All family members hope that having a family business will enable both the family and the business to be stronger than either could individually. Their great fear is that conflicts, jealousies and poor relationships will devastate the companies they’ve worked so hard to build. With few exceptions, owners of family firms say that if they gain the world but lose their families in the process, the effort has been futile. Let us more closely examine the individuals in this family to learn of their hopes.

Dad
While the complexion of family businesses is changing and we now see more firms led by women, the vast majority of today’s businesses were started and run by men. As they approach their sixth and seventh decades of life, these patriarchs remain firmly in control of their businesses, if not their families. They are what they do, and they love being in control. Their two great fears are losing control and being financially dependent on others. Their intellect tells them the time is coming when they should no longer head the business, but they don’t like it. They can tell you stories about friends who retired and died shortly thereafter. In fact, many operate as if ignoring the subject will somehow make it go away. Few have developed written succession plans; to do so would be an admission that they aren’t Superman. Dad wants to see the business continue because it is his greatest triumph. Someone accurately pointed out that starting a business is the closest thing a man will ever know to giving birth. As long as the business continues, there will be some remembrance of the giant who founded and led it.

Dad wants to make sure that he and Mom will be financially secure in their old age. The common refrain is that they don’t want to run out of money before they run out of life. They have heard the horror stories of friends with lingering illnesses and know how much medical care can cost. Dad has been responsible for the finances of the family and the business, so he wants to be sure there is enough money to last through his lifetime.

Additionally, Dad wants to know that the children will be able to manage what has been left to them. He assumes (incorrectly) that because they have watched him manage both the business and the assets it generated, the children will know the right things to do. Dad and Mom can usually live comfortably on $100,000 per year (although this sum may not be quite so comfortable for a young couple with school-aged children). Dad is concerned that the younger generation will frivolously spend what is given them.

Mom
While Mom shares Dad’s concern about financial security, her interests are different. She loves her family and wants them to be close and harmonious. Dad may have been the chief executive officer of the business, but Mom is the true CEO… chief emotional officer. She tries to ensure that everyone is treated equally and fairly. Mom doesn’t like conflict and will go to great lengths to prevent it. She is generally a little jealous that the business has taken so much energy and time. She may have been the wife, but the business was often Dad’s mistress and the source of more than a little resentment.

When something happens to Dad, Mom doesn’t want to either lead the business or own it. If she ever worked in it, it has been many years since she did. She knows that leading the business could put her in conflict with her family, and this isn’t a pleasant thought.

We said earlier that Dad is what he does, i.e., he is his work. Not so with Mom. She may have taken every step that he took, but she is more than her work. Even if she worked every day in the business, she is also a mother and nurturer. When Dad is no longer active in the business, Mom wants her loving family around her. She wants harmony, and she wants financial security.

Children
To children of family business owners, the business is part of their heritage. As one daughter of a founder explained, “ I think of the business as a sibling. It certainly received more time and attention from Dad than I did.” There is a deep sense of pride felt by family business children coupled with a longing to see it continued because it so occupied their father’s attention. While there is usually some jealousy and animosity that they didn’t get to spend as much time with Dad as did their friends, adult children are proud of what has been built and the position and wealth it has afforded them.

Children of entrepreneurial fathers want one thing more than any other - they want Dad’s approval and his blessing. They will go to great lengths to get it. This is especially true of sons; the competition between Dads and sons is often fierce. Getting Dad’s approval often means beating him at his own game. Dad’s approval is paramount in importance, even if male children don’t recognize or admit it.

Whether they work in the company or not, all children want to know they are loved equally by their parents and want to feel they will be treated fairly by them. This applies to gifts made during life and the distribution of assets at death. Adult children have an understandable curiosity to know that their parents have taken necessary precautions for preservation of wealth through estate planning, and they want to know details about how things will be settled. Most are afraid to broach the subject with their parents for fear of being thought greedy or meddlesome, but they are extremely interested in knowing the plans.

One of the most difficult issues for families in business to understand and resolve is the fair vs. equal problem. Cash is easy to divide equally; however, when one of the largest assets in the estate is stock in a closely held company, the division becomes more complicated. All want the children treated fairly, but fair in family companies is not equal.

Children working in the business
In most business families there are children who work in the family company and those who don’t. Children working in the firm want to know two things: First, who is going to be chosen the leader in the next generation? If they are not to lead it, children want to know what is their career path? Is there a place for them that provides meaningful work and an appropriate income? This issue needs to be considered carefully and communicated lovingly, but clearly. It is unfair for children to invest 20 or 30 years of their lives only to find they won’t be the chosen one and there may not be a meaningful place for them in the business.

Second, children in the business want to know when leadership changes will be made. The common complaint of adult children is that they feel they are always “warming up” and never get in the game. A written plan of action will alleviate anxieties and give everyone a track upon which to run.

Children working in the business want to know when and how the stock will be divided. Will all children receive stock regardless of whether they work in the company or not? Most children know equal distribution of stock is a recipe for disaster. Clearly someone must be in charge, and that someone must be able to make decisions which will stand. Those children who will not be the leader want to know that the chosen one cannot and will not lord over them or become a tyrant who drives them out of the company. The leader must know that other shareholders won’t see their certificate as a guarantee to work little and receive a lot.

Everyone wants to know how they can resolve the conflicts which are sure to result from working together. How do they undo things if the interpersonal relations are not working? In short, they want to know the plan and how it is expected to work.

The goals of children working in the business are to continue the legacy and to take it to new heights. They know this firm afforded Mom and Dad a good livelihood, and they want the same for their families. They want to keep the door open so that their children will have the chance to take over one day. This is more than a job to them; they want to be good stewards of what is entrusted to them.

Children not working in the business
Family members who don’t work in the company have unique perspectives. Either they chose not to come into the company or never felt welcomed. Even as a member of the family they feel somewhat left out. They don’t understand the issues which drive decisions being made in the company. If they are shareholders, they cannot fathom why there are no dividends resulting from their ownership. After all, Mom and Dad certainly did well enough. They cannot help but be somewhat jealous of the compensation and perks received by those who work in the company. Stock is a part of their heritage, but these inactive shareholders wonder just what has been given them. They are told it has value, but aren’t sure what it is because stock in a closely held company is hard to value and there is little or no income.

What do non-employee family members want? They want to see the company continue to prosper and to continue the family name. They want fair and equitable treatment. If they own stock, they want appropriate income or benefits from the ownership. Non-employee shareholders want to know the value of their holdings - a fair market value. They also want to know how they can cash in some or all of their stock should they choose to do so.

In-laws
Perhaps the most difficult relational issues involve the spouses of family members. While the spouses might have known the position and perhaps even the wealth the family enjoyed as a result of the business, they generally had no idea what they were getting into. Unless they come from similar backgrounds, they don’t understand the dominance the business has in family functions. In many instances they got their first inkling of what was to come when they were asked to sign pre-nuptial agreements. This hurt them and separated them from their new in-laws.

What they know of the business is often garnered from their spouses who naturally paint rosy pictures. Because they love and believe their spouses they also believe what is said about the business, other family members, and employees irrespective of whether the picture is accurate or not. It is only natural they will side with their spouses in conflicts and sibling rivalries.

Spouses often complain that employee family members are speaking a foreign language, one they neither choose to learn nor want to understand. If they work in the business, they are never a member of the family or business “club.” They always feel like an outsider and generally will never own stock in the enterprise. These feelings of being an outsider often grow to full blown resentment of the business.

In-laws want income, security, prestige, benefits, and ownership proportionate to other family members. Spouses want their significant others treated equally. The problem is that spouses use their own yardsticks as measures of what is equal, and other family members often don’t know those measures because of the informality or infrequency of opportunities to communicate as a group.

Changes within the family
Even if one is able to get a good handle on the issues and desires of family members working together in a closely held company, the picture changes quickly. Children are born, come into the business, get married, retire, and, ultimately, die. All these circumstances affect the family and the business. The emotions and issues within the family are important and must be considered carefully in order to ensure harmony and continue the success of the enterprise. Healthy families spend time together, communicate openly, and learn to resolve issues which could become conflicts. This process takes considerable time and some capital, but is well worth the effort. The alternatives are ugly and costly.

Spend time learning what your family members want, and help them get it. The rewards are better than gold. Nothing can be more rewarding than loving family members working together for personal growth and financial wealth. ■

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.
Vol. 4, Issue 4