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Articles - Family Life in Family -Business

Growing the family firm's second generation

Friday, May 14, 2004



By Kathy J. Marshack, Ph.D., P.S.

Cathy and her older brother Charles have worked in her family's restaurant business for 25 years. Cathy's parents, the founders are nearing retirement and want the business to carry on under the care of their children. Cathy and Charles are ready and well trained for succession. So, where's the problem?

The problem is the youngest son, Brian. Brian has never worked in the family firm, preferring to try other ventures. Unfortunately everything Brian has tried has failed. Cathy's parents have "bailed" Brian out of one jam after another. Now as they face retirement, the parents want Cathy and Charles to share ownership and management of the business with Brian.

Cathy and Charles are beside themselves with frustration. They don't want to offend their parents. However, Brian's inexperience and lack of maturity may cause considerable problems in the business. Neither Cathy nor Charles relish the idea of taking care of their brother indefinitely as their parents have done.

This type of problem is all too common in family-owned firms. Most of us cherish the responsibility of parenting and are reluctant to give it up when the children leave home. In family firms where children may never leave home, the parenting role may continue indefinitely.

A parent's job is to nurture and protect children so that they can grow up healthy and capable of independent adult life. But parents don't teach independence directly. Independence is a state of mind that children must conquer for themselves.

Sometimes Mom and Dad fight because one doesn't want the child hurt and the other wants the child to face their mistakes. Alternatively the child may be making a bid for independence but the parents thwart it. The parents complain that their grown child is not very strong or capable of leadership. Then they complain when the child speaks up for himself.

There are a variety of strategies for ensuring that the second generation in family firms really grow up. The strategy that fits for you depends upon the business, the parent's skills and personality and the skills and personalities of the children.

The child needs an environment where they must prove themselves capable of leadership in the family business. For some this means leaving the business for awhile and working elsewhere. For others, it means getting an education before returning to the family business. Another child may benefit by working their way up from the "mailroom" with no preferential treatment from the parents. Finally, some children will be better family members and more capable adults if they never return to the family business.

There are two goals in family firms. One is to develop a thriving business. The second is to develop healthy independent adults who can contribute to society.

Keep in mind that the business can be successful without the child and the child can be successful without the business. That is, set your sights on accomplishing both goals independent of each other, and you may be surprised how they come together in the long run.

Balancing act during holidays can take its toll

Thursday, December 05, 2002




By Kathy J. Marshack, Ph.D., P.S.


"SHOWER - COFFEE - GO!" That's how one young husband and owner of a successful family firm starts his day. His wife of five years, however, has a much more complex morning routine.

After making her husband's coffee, she feeds the baby his bottle until he falls asleep again. Then she wakes the toddler, dresses him and gets his breakfast. After brushing the toddler's teeth, he goes off to play leaving Mom to shower and dress for work. Before the wife leaves the house she confers with the nanny about any last minute needs of the baby. Then she gathers up the toddler and leaves for work. After dropping the toddler off at day-care, she arrives at work by 9:00 am. Did she get breakfast?

By this time the factory is humming. The husband is deep into his work behind closed doors. The young wife takes the next hour to "check in" with the supervisors and foremen. She chats with the employees as she walks through the hall to her office. Once behind her desk, she works non-stop, as does her husband for the remainder of the day, which often lasts well into the evening. They rarely see each other throughout the workday except for a cursory "check-in" regarding mutual decisions. Lunch is an apple or a cup of yogurt at their desks.

The daily routine of this couple is typical of entrepreneurial couples. Not all entrepreneurial couples have young children, nor do they work in the same building. Some ride to work together. Some work out of their homes. But regardless of the physical differences the one thing these couples have in common is the hard work of balancing the two worlds of marital relationship and business partnership --- or LOVE AND WORK.

This balancing act can take its toll on a couple, the family and the business, especially at during the holiday season, with the added stress of preparing for the holiday. There are vacations to plan for, employee bonuses and Christmas parties, out of town guests, last minute "rush" orders to fill, school and community functions to attend, and so on. The research shows that generally the stress is felt most strongly by the wife, who must manage the additional holiday responsibilities along with the routine family responsibilities and her work responsibilities.

While the husband feels the pressure too, he can compensate by working longer hours at the business. Herein, lies the problems for many entrepreneurial couples. Although it is tiring to work longer hours, it is actually more tiring to have to juggle two jobs (home and work), two schedules and two different kinds of responsibilities, as any entrepreneurial wife is aware. Anyone who has worked rotating shifts knows what a toll it takes on one's health and social life.

The two worlds of Love and Work are very different really. Trying to bring them together in a family-owned business creates constant friction. The reason for this constant friction is that the purpose or the drive behind the business is competition and growth. Whereas, the purpose or drive behind a family organization is nurturing and protection of family members. The interaction of these two systems (family and business) necessitates accommodations to each system.

Add to this difficult balancing act the stresses of the holiday season and the likelihood of an "explosion" during the holidays is dramatically increased. Actually the explosion is just as likely to happen after Christmas with the post-holiday depression. Not only is business slower than before Christmas, but all of the illusions we harbor about warm family togetherness at the holidays may not have been fulfilled.

There are several things you can do to prevent the worst possible case scenario and to have a much more meaningful Family/Business holiday season. First, assess the division of responsibilities between husband and wife. Is it really necessary that the majority of the burden be carried by the wife to maintain the family? Perhaps she is better suited to the task, especially when there are young children, but it certainly takes its toll on the marriage to have the worlds of love and work so rigidly defined. With baby changing tables now being installed in the Men's room, it's not so hard for dads to assume more of these responsibilities.

Secondly, assess your expectations of the holiday season. Remember now that you both work. The typical entrepreneurial husband works 60 hours a week in the business. The typical entrepreneurial wife works 49 hours a week in the business; then she goes home and puts in another 49! Don't expect that you can attend every function or have a perfectly decorated home. Some people even eat Christmas dinner at a restaurant. In other words, look at your work and home responsibilities and decide what you can and can't reasonably be expected to accomplish.

Thirdly, along the lines of expectations, dig down deep and look at your feelings about the holidays. Many people don't have extended kin to visit at Christmas. Many people even have unpleasant memories about previous holidays.

Many people are experiencing current problems in their lives that won't go away with Christmas or New Years. Don't stick your head in the sand and pretend that wishing will make this holiday a warm, wonderful Norman Rockwell affair. Notice your feelings --- sadness, anger, grief --- and if they are intense talk to a psychologist. Dealing with your feelings now will enable you to ease through the season and prevent the explosions that come from built up stress due to unrealized expectations.

Finally use those entrepreneurial traits that set you apart from other people, such as individualism, creativity, determination, willingness to work hard. With your spouse negotiate the kind of unique relationship that works best for you. Don't rely on stereotypes to define your roles at work and home. You can set up anything you want; you're the boss.

Also Norman Rockwell Christmases are not the only kind to have. Start some new traditions that fit your lifestyle. For example, spend a quiet Christmas Eve at home. Or if you have no extended kin to visit, invite friends over. Instead of a garish display of presents under the tree for the children, take gifts to the local children's hospital. Cater dinner. Have pizza. Someday your grandchildren will think that Christmas has always been a pizza party followed by a trip to the children's hospital to sing carols.

Should your children leave the nest - and business - behind?

Friday, April 12, 2002




By Kathy J. Marshack, Ph.D., P.S.


Every parent faces the day when their children are no longer children. They must make their way in the world as adults. Some are off to college, others to travel, others the military, and many straight off to work. Whatever their direction, they are no longer kids. We may think they still need guidance, but they will move into adulthood without looking back. If we haven't prepared them for this move by now, the parents in their lives have little to say anymore about the life paths they will choose.

In a family-owned business, preparing children for entering into adult life is different in some ways than for other families. In addition to teaching life skills, parents assist their children to integrate independence and confidence. They are preparing their children to fly freely and strongly when they leave the nest.

But in a family business the assumption may be that the child will stay in the nest; that they are being groomed to take over the family business when the parents retire. There is an inherent conflict in grooming your child for independence and yet holding that independence in suspension until the parents retire from the business.

Family business owners, who wish to groom their children to succeed them in managing the business, need to work with this inherent conflict. Too often the mistake is made that the child is never fully prepared for leadership and thus they remain a child indefinitely (much like Prince Charles). Another mistake is to assume that the child will take over the business when they are not interested nor inclined to so.

Preparing children for taking over the family business requires that parents selflessly attend to preparing their children for healthy independent adulthood first. A child who has grown into a self-sufficient, wise and autonomous individual is in a much better position to assume the role of leader. A child who remains subordinate to the parent into his or her 40s can hardly be practiced at autonomy or leadership.

Therefore, parents with family businesses who plan ahead for succession require a more thoughtful approach to emancipating their children. Having young children work in the family enterprise teaches them skills they could not learn otherwise. They not only become familiar with the product and style of the business, but they acquire confidence. They are participating in taking care of the family - an important value to instill.

As children get older they can be given more responsibility, even management duties. However, their progress up the ladder should not be based upon the fact that they are the son or daughter of the owner. They need to be evaluated, as would any other employee. This teaches the child to do the hard work of improving themselves.

There comes a point in adolescence when a decision needs to be made about whether a particular child is leadership material. If so, a new path must be developed for this child. It is impossible for the child to become a leader and continue to work under their parents. They need a period of proving themselves in the world, apart from their parent's protection. If they have never worked for anyone other than their parents, how can they or you be sure that they really can handle decision-making alone?

Parents are often very reluctant to let their children leave the nest. In a family-owned firm this reluctance is extremely strong. The business has evolved as a reflection of the family identity. It almost seems as if the family or business is breaking up if a family member leaves. But for the health of the child, the family and the business, children must leave and discover their own talents.

Family firms who have handled this transition gracefully, have encouraged their children to leave home and work elsewhere for a period of years. If after this time the child is ready to return to the family enterprise, and there is a suitable position for the child, then the match can be made.

The risk, of course, is that once out of the nest the child will never return, that they will find another life that suits them better than working in the family business. But then isn't that what parenting is about? The business will be much more successful being managed by strong capable leaders who want to be there and by a leader who has proven his or her talent in more than one arena.

It is important for families in business to be open about their planning for business succession. Children should be advised early about who is being considered for leadership. But there should also be flexibility about this decision. Over time another child may prove to be the better successor. Or perhaps the chosen one chooses another direction.

If parents keep in mind that their job is to raise healthy autonomous children, then they are a success no matter which direction their child chooses. Whether the child chooses to return to the family business or not, they can always be a contributing member of the family.

Will your family business survive the death of its founder?

Wednesday, January 03, 2001




By Kathy J. Marshack, Ph.D., P.S.

The death of the founder of a business can take many family businesses by surprise. A strong willed entrepreneur takes advantage of an opportunity, builds the business to success, then dies leaving the family totally unprepared to continue the business. The business gets sold and the family legacy dies with the founder.

Family business owners are notoriously poor at planning for the future of their businesses. They literally act as if the founder will never die. They don't think about the possibility even when that person is in his 70's or 80's. As a result, most family firms don't live beyond the first generation.

Death is not an easy subject to talk about; nor is retirement, especially for rugged individualist and entrepreneurs or their families. But it a subject that needs to be addressed by all members of a family firm. Is the business merely a reflection of the founder? Is it his personal property? What part do other family member play, shareholders and stakeholders alike? Who will run the business after the founder steps down? When will the founder step down?

Answering these questions and others leads to the development of what is known as a "succession plan." Even though it is tough to plan ahead to the day when you are no longer running the business you founded, it can be exciting and rewarding to know that your creation will live on and prosper under the guidance of a trusted family member. Equally rewarding is knowing that you have provided for your family.

While it is too late to work on a succession plan after the death of a founder, it is never too early to plan, even if you have no successor or just started your business or your kids are too young to even work yet. Succession plans can evolve over time to fit the changing needs of the family or the business or both.

At first, you plan may be nothing more that the understanding with your spouse that you both want the business continued after you retire. The initial plan my include provisions for how to groom the successor when one is chosen, for example. The key ingredient in all plans is that the stakeholders are communicating with each other about the need and that you are looking towards a healthy future.

When considering a succession plan it is best to enlist the aid of professionals who are knowledgeable about the unique needs of a family firm. Attorneys and CPAs can assist you in addressing the issues of estate planning. Management consultants can advise you about the most desirable business structure. Perhaps it is time to look at professional management, for example. Or perhaps your niece is better suited for he presidency than you son.

The toughest questions that need answering about succession, however, cannot be answered in an attorney's office. The founder and his or her family need to break down the old barriers to talking about death and retirement. All of the old "skeletons" in the family closet need to be cleaned out. Emotions, biases, age-old grudges need to be vented, explored and settled.

Until the family can talk openly and honestly about how they feel about each other, they cannot make a reasonable decision about how to run the company. Like it or not, the family system or style is what really dictates how things will go in business. So understanding your family system and improving it contributes to a healthier business.

Just as with legal and financial decisions, the emotional or psychological aspects of succession planning usually require the assistance of a professional. Psychologist trained in the dynamics of families as well as the workings of a family business are best suited to guide you through the emotional process of succession planning.

The psychologist's job is to meet with all stakeholders individually and in a group to discuss absolutely everything that can affect the succession plan. This is not a time to be secretive. The future of the business and you livelihood depends upon open and honest communication. Families who don't plan ahead not only lose control of the business, they often have a myriad of other problems associated with the loss of the business, such as infighting, divorce, alcoholism, depression, etc.

A psychologist understands these kinds of "people" problems that are intertwined with business decisions. Their goal therefore is to help you create a plan that suits two purposes, 1) To ensure the success of the business, 2) To ensure the health and happiness of the family.

In order to accomplish these important goals family members need to face the tough issues that most other people avoid.

People - Making in the Family Business

Thursday, September 14, 2000




By Kathy J. Marshack, Ph.D., P.S.


When she was about six, I overheard my eldest daughter describing my work to one of her school friends. She said, "A psychologist is a mommy who sees clients in the basement." At the time my office was located in the basement of my home, remodeled for just that purpose. And, since I often work at home, my daughter has been able to see me in many of my roles, the most important to her, of course, is that of "mommy."

Being the owner-manager of a family firm requires juggling many roles, too, not just with family members but with employees as well. The way marital and family obligations are handled affects management style with employees and vice versa.

For example, in family firms where spouses work together, management style must be assessed in three arenas: 1) marital, 2) parenting, and 3) business management. Furthermore, the integration of these three styles must be assessed.

What is your marital style?

Let's take marital style first. Are you both leaders? Is one the leader and the other the support person? Does the style change depending on context? Are you a team? Or are you both separate and dedicated to your own spheres? Does your marital style differ greatly from your parenting style or your management style?

Marital partners find each other for myriad reasons. Some are attracted to opposites. Some want someone like Mom. Whatever your marital style - know it. Don't assume that it is irrelevant in your family firm. This style shows in the boardroom and on the production floor. If it is incompatible with the business, then you will have many problems. Employees sense the discrepancies. They know when there has been a marital fight.

What kind of a parent are you?

If a couple has children, whether they work in the business or not, be aware of parenting style too. Parenting style is affected by business-management style and vice versa. We learn a lot from our children about human behavior. Those lessons are translated to the work place.

Are you an authoritarian parent? One business owner orders his family around at home just as he does his employees at work. His wife and children don't like it and are, in fact, a bit intimidated by him, but he says he can't help himself. Are you permissive? Permissive parents often have children who are rebellious because they have always had to make their own decisions. Are you authoritative? This type of parent generally has a good balance and makes decisions as the leader of the family, but includes children when appropriate so that the children gradually learn the responsibilities of adulthood.

Parenting style is obviously related to marital style. If two marital partners do not think alike about parenting, there will be a disorganized, and possibly, very depressed family. Discussing differences about parenting and making a united plan is the best thing parents can do for the family structure. Equally so, it is important that parent/owners determine if they are treating employees the way they treat their children.

What about your management style?

Management style at work is the third aspect of family/business style that needs to be evaluated. It can be categorized as one of the four styles: 1) telling, 2) selling, 3) participative, 4) delegating. Which are you? Are you apt to tell employees what to do? Or do you build a good case for what they should do? Or do you include employees or other managers in the process of developing new business? Finally, are you inclined to run the show yourself but delegate tasks to team members?

Americans have been successful in the world marketplace because of their emphasis on the "rugged individualist." We have been willing to fight to protect the rights of the individual. But as we move into the 21st century, Americans are beginning to realize that we are all part of one planet and one global economy.

We cannot afford to be isolationists. We have influence and others influence us.

Members of a family firm are in the position of understanding these influences better than most. A family business is a delicate balance of the interacting systems of marriage, family and business. How you manage and respond to these systems will determine your success.

An authoritarian father with a "telling" business-management style and a traditional marriage characterizes the entrepreneurs of the 1940s. But, because that model is so dominant, many family-business members don't know what other styles exist. If following in Dad's footsteps works for you, look no further. But, if you desire alternative styles to keep up with the changes in your business and your personal life, look for answers to the questions in this article.

Will your style work in the 21st century?

First accept who you are. Whatever your style, it is probably the most comfortable way for you to be. This doesn't mean there is no room for improvement. But it's best to start with who you are and then to build marital, parental, and management styles around your personality.

Second, accept your spouse's style, too. She or he has developed a certain personality that is unlikely to change. Rather, you two are looking for ways for both of you to realize your full potential. Don't compromise before you have explored all of the ways for both of you to be fully who you are in the marriage and as parents.

Third, when considering a parenting style, not only do your consider your partner's style, but you must also include the personalities and needs of your children. Most parents are astounded at how wildly different each one of their children are. While a permissive style may be appropriate for one child, another may require more authority.

Fourth, remember that your management style at work is more related to your marital and parenting styles than you realize. It is in the family that we first learn to relate to others. We learn about male/female relationships from our mothers and fathers. We learn about power and control and decision-making, too. We learn about love and friendship and sibling rivalry or competition.

These early lessons shape us for the rest of out lives. How you treat employees and how you want them to treat you is dependent upon your understanding and utilization of these early lessons.

The business of people making.

Virginia Satir, a noted family therapist once said that parents are in the business of "people making." In a family business, I think this is true in more ways than one. As parents, certainly our children are shaped by the family firm - just as my daughter saw me as a mommy

who works in the basement. And, as family-business owners and managers, your employees are also shaped by your marital/parenting/management style. You can cultivate the best in your people or contribute to something much less desirable.

Understanding your unique management style in the workplace and how you have integrated past and present family lessons into a family business will help you to be flexible and to adapt to the requirements of the 21st century.

Are you 'Daddy's little girl' in the family business?

Friday, August 04, 2000




By Kathy J. Marshack, Ph.D., P.S.


My mother was fond of telling me this little aphorism when I was a girl. Perhaps it was because she had two daughters and no sons. Or perhaps it is because she was the only daughter in a family of sons. Whether she was trying to teach me the lesson, or to merely advise me of a fact, I have noticed the truth in this saying more often than not.

The value of relationships does seem to be more important for women than for men. Not that men do not enjoy loving relationships, but that women tend to define themselves more in terms of their relationships. Women and girls are more willing than men and boys to put their needs aside to maintain a relationship. Within a family firm for example, it is often the wife who does not take a formal salary. She is equally likely to forgo a formal title in the corporation, although she is just as hardworking an asset to the business as her husband.

Likewise with daughters. Daughters in family firms often see their roles as supportive of the family. They are not as driven to be leaders as are their brothers. This does not mean they do not want recognition. Rather their first priority is to ensure the success of the loving relationships. After all, these relationships came before the business. They are the driving force behind the business; the reason it came into being.

The research indicates that family owned firms were started by their founders primarily as a way to support the family. The women in family firms still recognize this intent long after the men have turned their attention to developing a thriving enterprise.

But this concern for family first often gets in the way of founders considering their daughters as successors. Although their daughters may be hardworking, college educated, committed to the family enterprise, and have many other talents, founders most often groom their sons to succeed them in the leadership of the business. The research shows that even founders who have no sons overlook the possibility of a daughter taking over the business.

Considering the importance women place on nurturing the family, and considering that a successful family firm requires a cohesive and committed family, daughters may be the most likely choice to succeed the founder of a family firm. In her study of 8 family firms, Collette Dumas identified the roles that daughters typically plan in family firms. Dumas chose only those family firms where the daughters held management positions. She also identified the qualities that make for a successful transition of leadership from fathers to daughters in family firms.

The majority of fathers and daughters that Dumas interviewed expressed great difficulty in managing the ambiguity in defining the daughter's roles in the family and in the family business. The roles assigned by both fathers and daughter ranged from "Daddy's little girl", which emphasizes a fragile, defenseless, dependent position, to that of a tough and independent manager in the business.

While the daughters studied were capable and assumed several roles in the family business, their primary role with their fathers (and which was learned at an early age) was that of defenseless dependent. As one daughter put it, "Even though I've been working here a long time, I still have to kiss him every morning. Otherwise he'll be hurt. I don't think he's made the transition to seeing me as an adult. I'm still his little girl."

While sons may also stay boys in their father's eyes, at least sons come into the family business with the expectation that someday they will take over. Daughters rarely have this illusion. Therefore, they may remain Daddy's little girl indefinitely. This position leads many daughters in family firms to struggle with a sense of identity. Many daughters in family firms, as well as their mothers, work wide by side with their brothers, yet their names are not on the organizational chart.

All of the fathers Dumas interviewed reported that they had never considered their daughters as potential successors in the business before their daughters came to work for them. And all the fathers reported that long periods of time went by after their daughters came to work for them before they considered the idea. Dumas refers to this phenomenon as the "invisible successor." Only when a crisis emerge where the daughter was needed to help out Dad, did either party consider her potential as a successor. Unlike sons, who come to work for the family business to further their career and eventual ownership, daughters come into the family business out of dedication to Dad and the family.

As a result of struggling with these issues (role ambiguity, invisibility and identity), daughters in family firms develop one of three styles according to Dumas: "Caring for the Father," "Taker of the Gold," or "Caretaker of the King's Gold."

In the first style, "Caring for the Father," the daughter may feel a lack of purpose and direction. She has not developed a clear and strong identity. Such people often attach themselves to strong leaders or father figures and become dependent on them in an attempt to fell "alive." In the family firm these daughter are largely oriented toward pleasing the father and caring for his comfort and wishes. His needs come before the daughters.

While there is nothing unhealthy about caring for another person, to do so exclusively not only robs the daughter of her identity, but may harm the firm. If the daughter's behaviors are oriented toward caring for her father to the exclusion of actions that would be beneficial to the organization's effectiveness and survival, she will not be prepared to take over the CEO's role when she succeeds him.

In the second style, "Taker of the Gold," the daughter has taken the opposite extreme by developing a rigid identity or sense of self. She works hard to achieve, even overachieve, but she thinks only of herself. In the case of daughters trying to become independent of fathers, the takers-of-the-gold become more interested in taking charge of the business assets than in responding empathetically to the father or recognizing this accomplishments.

While these daughters are strong and quite capable, they operate independently and thus do not take advantage of the resources available to them to make informed decisions. These daughters have behaviors that are rebellious and disrespectful of the business's norms. In the long run this style produces a great deal of conflict between father and daughter and potential distress for the business.

The third style, "Caretakers of the King's Gold," represents a midpoint between the first two styles where the structure of the identity is harmonious and stable and at the same time less rigid and dramatic. This daughter suffers less from a sense of inner emptiness and is less inclined to continuously prove her existence to others. In other words, this healthy sense of identity allows the daughter in a family firm to simultaneously take charge and take care of the "king's gold" (the business), "the king" (the father), and herself.

This style may seem to cast the daughter back into the dependent role of "Daddy's Little Girl." However, daughters who represent the style of "caretaker of the King's Gold," have found their identity through interdependence with their fathers. While sons cannot feel like men until they break away from Dad, daughters mature through affiliation and interconnectedness. Fathers with this type of daughter find that they can gradually phase out of the business. Their daughter is capable of running the business with out them, but she also values working with her father for as long as he is capable.

Murray Bowen, a family systems psychiatrist has suggested that interdependence is one sign of a healthy family. Certainly this is no less true for a family firm. Fathers and daughters who are able to be respectful of each other, nurture each others developmental needs and both creatively pursue the business are in a better position to make a healthy transition from father to daughter when the time comes for the succession of leadership.

Five must-answer questions for passing on the family-owned business

Thursday, December 03, 1998




By Kathy J. Marshack, Ph.D., P.S.


Our world is a bundle of contradictions. The other day I read that the American Heart Association will not allow its healthy heart logo to be placed on Post Grapenuts cereal because the company is owned by Phillip Morris, a tobacco company. Grapenuts cereal has relatively no sugar and no fat. On the other hand, the healthy heart logo is on Kellogg's Fruit Loops cereal, which is 50% sugar, because Kellogg's pays the American Heart Association for the privilege. With these kinds of mixed values going on, it's very important that you recognize the only one who can take care of you is you. Not even a private non-profit organization can be relied upon to guide your eating habits. While it may be easier in the moment to focus on only those pleasant uncomplicated things in life (such as the taste of Fruit Loops) in the long run ignoring the contradictions may prove quite hazardous.

People are often surprised to find out that I can have negative, suspicious, even paranoid thoughts, and that I waste my time researching things like the contractions of the American Heart Association. After all, I am a psychologist and professionally I encourage entrepreneurs and their families to find healthy constructive solutions to the problems that life dishes out. So if I am professionally supposed to look on the bright side, why then do I point out everything that is or could go wrong?

The simple answer is balance. We live in a world of duality ... positive/negative, good/bad, male/female ... and balance is the act of giving each side attention and respect. Having a positive outlook on life is just fine, but looking only on the bright side is like the proverbial ostrich with his or her head stuck in the sand. You also need to look at what is going wrong, or not working, or not even in the ballpark of reality. If you fail to account for the negative side of things, you fail to plan and live your life fully. How can you correct your mistakes, if you never sort through your flaws and problems? To sum it up, my motto is : HOPE FOR THE BEST, but PLAN FOR THE WORST. That way you've got everything covered.

For entrepreneurial couples and families in business, there are two unpleasant areas which are regularly ignored and therefore never planned for ... death and divorce. Some of the juiciest scandals come from family firms that failed to plan for the succession of the business after death or divorce. Because the founder never thought he or she would die, they never developed a plan for whom to pass the business on to. Even if they had a successor in mind, they may never have told this person, let alone trained them. Furthermore, the founder usually has no plans for employees, customers, vendors or even their files or inventory. If you ask these founders what they would like upon their deaths, they often have very specific wishes, but they have no plan to carry them out.

Still there are more entrepreneurs planning for business succession than planning for divorce. Planning for the possibility of divorce of an entrepreneurial couple is a real taboo, apparently. Most couples fear that if you plan ahead for the possibility of divorce, you are setting yourself up to create a divorce.

Matt and Kristen were a happily married young couple when they started their modem manufacturing business in their garage. They had a toddler and one school age child at the time. Kristen's Dad loaned them the startup capital. Both Matt and Kristen had the technical expertise for the business, since they each had a degree in engineering and had originally met while working at a high-tech company in the Silicon Forest. It all seemed perfect and it was for awhile. But business started booming and employees were required. Then the garage got too small and a warehouse was rented. Then a third baby came along and Kristen was fatigued trying to cover the home front as well as the business. Soon she opted for staying at home and Matt ran the business.

Even this set up worked for awhile because Matt was a capable business manager and had hired excellent help. He did not have to work excessive hours because he and Kristen had designed an excellent product that practically sold itself, especially with their combined contacts in the industry. So Matt was able to be available to his family almost as much as when he had worked a 9 to 5 job. The problems emerged, however, when Kristen became resentful that she was no longer at the helm of the thriving business. After all, she had prepared herself through education and training for a career that she thrived on before the marriage and children. Although she loved her children and Matt, she felt a great loss at not being able to use her education and intellectual talents too.

Eventually Kristen's resentments grew to the level that she and Matt couldn't talk anymore without a fight. Matt started working longer hours at the office. The children were stressed and scared because Mommy and Daddy weren't happy. When the baby came down with a serious illness requiring hours of Kristen's time and emotional energy, she brought up the topic of divorce. As clear as their thinking had been about how to develop the business, how to use their combined talents and resources to secure a financially successful future, Matt and Kristen had never considered divorce and therefore had no plan for parting ... as marriage partners nor as business partners.

But let's back up and take a look at what might have happened had Matt and Kristen built into their life/business plan the possibility of divorce, right from the start.

If they planned for an amicable divorce or dissolution of the partnership, they not only would have a legal document to follow (such as a prenuptial or partnership agreement), but they also would have had to look at what could go wrong and make contingency plans so the worst may not happen. In other words, in planning for the worst, they would look at these things among many others:

  • What if the business grew so big it moved out of the garage?
  • What if there was more to handle at home requiring one or the other partner to quit working the business and focus more on home management?
  • What are the desires of each partner with regard to career and business?
  • What are the desires of each partner with regard to the children and family development?
  • What are the desires of each partner for their marriage?

Paradoxically, by planning for the possibility of divorce right from the start of a marriage and business venture, the entrepreneurial couple has to focus on those things that actually will help strengthen their marriage/partnership. By digging deeply into who you are, and what you want, you have the opportunity to negotiate with each other to make your desires come true. Instead of resentments building, the trouble spots are planned for. Therefore the entrepreneurial couple has a better chance of facing the problems head on, learning from them, or even avoiding them. Planning for the worst in this case isn't a prescription for divorce, but insurance against it.

Remember the question isn't "What do I do with my business or marriage/family if I die?" The question is "What do I do with my business or marriage/family when I die?" And the question isn't "What do I do with my business and marriage/family when we divorce?" The question is "What do I do with my business and marriage/family if we divorce?" Death is inevitable and those who don't face this one are avoiding their responsibilities to others and courting a miserable demise for themselves. Divorce on the other hand is not inevitable, but avoiding thinking and talking about the possibility is just as foolish as ignoring the inevitability of death. If you want to get started planning for the worst but hoping for the best with regard to creating a healthy, long-term, successful marriage/business partnership with your spouse, try asking yourselves this question:

If one or the other of us wants a divorce in the future, why would that be and what can we do now to prevent this.

Compensation planning in a family business

Thursday, April 02, 1998



By Kathy J. Marshack, Ph.D., P.S.

For years Arnie looked forward to having his son and daughter join him in his publishing business. Arnie and his wife, Ilsa, had rebuilt the business after Arnie’s father lost everything due to some poor planning and miscalculating the marketplace. Even though the business went under when Arnie was in college, he could see the potential. He had a degree in marketing and knew the publishing business from the inside out. With Ilsa’s accounting background, they systematically restored the business to a healthy functioning. About the time that Arnie’s and Ilsa’s two children were off to college the business was in expansion mode and Arnie was counting on his son and daughter to help take the company into the twenty-first century. The children were eager to help out too. They were getting relevant degrees in college, had acquired internships at publishing houses back East, and upon graduation were ready to come home and learn the family business under Mom’s and Dad’s tutelage.

Arnie and Ilsa had laid the groundwork well for inviting their children into the family business. The kids had seen how hard their parents worked, but they weren’t ignored. The family always came first. Also Arnie and Ilsa involved the children in the business from the start. Even as toddlers, they played in the office. As older children, they helped out with odd projects and straightening up. They were familiar with all of the employees, who felt like one big extended family to them. In high school, the children tried their hands out with some of the professional work. Frequently the family business was a subject for a high school project. It was common knowledge and often discussed that both son and daughter were welcome to work in the family business after they completed college.

All seemed to be going as planned until the day came to discuss the employment agreement with each child. Never before had the family had to consider real business when dealing with each other. As teenagers, the kids had been paid minimum wage or a bit better. There were no benefits or perks because their parents took care of those things. Now the children were adults, responsible for their own lives, which meant that negotiating compensation had to be strictly business. The children couldn’t be expected to work for minimum wage anymore and they expected to be compensated for contributions they made to the company. Arnie and Ilsa had some work cut out for them.

The question was, How to compensate their children, as if they were regular employees, but with the added benefit of having trusted family members to help run the business? Compensating relatives is a sticky business. Not all people are really created equal. It is sometimes very difficult to assess and compare the talents of family members who are also employees. Nor do all family members contribute equally to the business. As a result of the stress that this causes, many family business owners ignore the problem and let compensation become a breeding ground for dissension in the family. For example, many wives in family businesses do not earn a salary at all. The reason given by the CEO for this is that it saves on taxes. The justification is that she is an owner of the business, so she is growing an investment. However, the research also shows that family business wives are invisible when it comes to decision making and that they feel isolated and unappreciated. Lack of a salary or a nominal salary may account for this.

A recent survey by Mass Mutual Insurance Company reports a wide discrepancy between the salaries of sons and the salaries of daughters in family businesses across America. On average the typical son in a family business earns $115,000, while his sister earns only $19,000. These salaries also reflect the tendency of family firms to view the contributions of women as of less value and the strength of primogeniture in succession planning. In other words sons are groomed for leadership while daughters are groomed for supportive roles and paid less than their brothers.

In other situations, CEOs of family firms attempt to avoid the problem of compensation for family member/employees by paying everyone the same, even themselves. Or they hire a family member simply because they are family, regardless of their abilities. The problem with this method is that the talented and creative employees are not rewarded for their work and may become resentful of the family members they must "carry." And the employees who are overpaid are not getting accurate feedback for their work performance, which makes it hard to improve. Likewise the CEO is not really viewed as sacrificing when he or she takes a low salary. Rather he or she is viewed as a weak leader.

Although it is not easy to put aside the anxiety caused by developing a fair compensation plan for your family members/employees, it is absolutely necessary if business is to thrive. Family relationships built upon honesty are far superior to the games required by compensation plans designed to avoid friction. So if you follow the advice of experts you will design your compensation plan according to these five steps:

  1. Write up accurate job descriptions for each employee. Include responsibilities, level of authority, technical skills, level of experience and education required for each job.
  2. Identify what your compensation philosophy is. Do you want to pay about average, or higher? Do you want to attract talent from other companies? Do you want to offset the typical male/female wage differential? Are you a training ground for young, inexperienced people?
  3. Gather information on the salaries of similar positions in your industry. Size up companies that are similar to yours in number of employees, revenue, product, geographic location, etc. What salaries and other benefits do these similar organizations pay their employees?
  4. Develop a succession plan. How will a successor to the leadership be identified among family member/employees? How will they be prepared for leadership? How will this choice affect the morale of the family/business? How will this successor be compensated?
  5. Design an affordable plan. Obviously you want to do the best you can with the dollars you have. What can you afford to compensate each family member/employee relative to their contribution?

After you have a compensation plan that reflects the family’s values as well as sound business practices, you are in position to negotiate an employment contract with a family member. It is important that everything is spelled out up front so that when you have an annual review, there is a way to compare employee performance with outlined expectations in the job description. Salary increases can then be based upon the employee’s true accomplishments.

It will be hard for Ilsa and Arnie to totally separate their love for their children from this matter-of-fact compensation plan. There is room in any business for discretion in awarding raises and other forms of compensation. However, when the money decisions are made strictly from emotion or avoidance of emotion, there is bound to be trouble. As the CEO of a family business, make the best decision you can for the business. As a parent or a spouse, encourage your family member/employee to achieve their greatest potential within or outside the business. In this way both business and family wins.

The Family/Business Vacation

Tuesday, April 01, 1997




By Kathy J. Marshack, Ph.D., P.S.


A couple of years ago at a Family Firm Institute annual meeting, a woman approached me and asked about how I manage to attend these meetings and still have time for my family. She noticed that my children and husband were staying with me at the hotel and would frequently meet with me during breaks throughout the conference. She also wondered if there were others at the conference who may benefit by arrangements for their children and families. Since I had had several people question me about this, I assured her that there were many conference attendees who would be interested in a conference that allowed for family participation of some kind. Being a woman may make it easier for me to consider how to balance family and professional needs. Not that men don&rsquot value their families, but there is no precedent for a man to bring the baby to the board room. On the other hand, it is becoming more common for women executives to have a play pen in their offices and to take breaks from work for baby. And more and more large corporations have child-care on site, so working parents can visit their children for lunch.

I remember taking my younger daughter Phoebe to a conference in Raleigh North Carolina when she was just three months old. She slept on the long plane ride to Chicago, then explored with wide eyed interest the Chicago airport as I whisked her and I to the next plane to Raleigh. At the conference itself, I mixed batches of formula in my hotel room (I brought along a mini-hot pot to boil water) and asked hotel staff to chill bottles in the staff refrigerator. Even though my environmental consciousness required that I use cloth diapers, for the duration I acquiesced and used disposables.

As I wheeled Phoebe (in her umbrella stroller, which easily totes on the airplane) to various conference meetings, I got quite a few inquisitive looks ... and smiles. Everyone wanted to talk to the baby. And I got several offers to baby-sit, so that I could attend a meeting without interruptions.

My husband and I are committed to raising children who have a sense of belonging to a family with parents who are professionals. The children see our work as part of who we are ... and they are part of it too. I seldom attend a conference anymore without taking one or both children and my husband along. This last trip to L.A. was no exception. This time, Mom stayed at the hotel in downtown L.A. for three days, while Dad and the girls visited Grandma and Grandpa in Orange county. Following the conference, the family picked me up to visit my uncle and cousin who live near Burbank. So close to Hollywood, we made a side trip to the famed Universal Studios. We all rode the Jurassic Park ride and the girls have T-shirts stating "I survived Jurassic Park." Before leaving town, we made one last trip south to say good-bye to the grandparents and slip in a trip to Disneyland. Needless to say we were tired when we got home eight days later, but we were nourished, professionally and personally.

Within just a few short years, since I first took baby Phoebe with me to Raleigh, hotels and resorts have started catering to business travelers who wish to bring their children with them. While Mom and Dad are at their business meetings, or downloading their e-mail from the office back home, the children are able to participate in events sponsored and supervised by hotel staff. This certainly makes it easier than in the days when there was no one to help with the children. Sometimes, I would just have to skip a meeting because baby came first.

However, there is another potential problem. Workaholics may never learn how to leave work, if even the entertainment industry (i.e. hotels) encourages you to work instead of play. Combining work and play as I have described above is one alternative, but another is to plan vacations without work in mind at all. Oh, I know, pure vacations aren&rsquot write offs, but they may do more good than reduced taxes. In our family, we plan at least one two week vacation a year that has nothing to do with work. And we usually have two to three long weekends that are purely family fun too.

These considerations are especially relevant to family firms, of course. As a family who also happens to be in business together, you have the sophisticated task of integrating the needs of family and the needs of business. If your spouse and your children feel a part of your work, they are in a better position to help with business growth, even if only as interested stakeholders. And if you are willing to take time from your busy schedule to play with your children and family, even at a business conference or trade show, you are sending a very important message. That is, no matter how important the business, no matter how you wish the business to succeed, what&rsquos the point if you cannot share your successes with the ones you love?

Here's the secret to finding a reliable auto mechanic

Thursday, February 06, 1997




By Kathy J. Marshack, Ph.D., P.S.


Have you ever experienced that chilling feeling that creeps up your spine when your car starts acting up? It's bad enough to be inconvenienced by having your car in "the shop," but what's even more frightening is having to face the mechanic, a person you don't trust, yet need.

Mechanics lie to you. They make unnecessary repairs and over-charge you. It's not just a feeling. There have been "undercover" stories on television where the mechanics are caught "red-handed." Mechanics can't be trusted. That's a fact! At least, this is what I believed until a couple of years ago when I met our current "family auto mechanic." This guy is like a breath of fresh air. He and his wife run the shop with a couple of employees. He's honest, hardworking, RELIABLE. His prices are fair. The work gets done in a timely manner. And to cap it off, my car is always better after he's fixed it. Is it any wonder that his business has grown steadily over the years, so that he had to move from his quaint little storefront to larger more professional space? I hope the growth doesn't change his values. With this issue of the Vancouver Business Journal , I began to wonder what is it that makes our "family auto mechanic" so exceptional. There are the basics. He's timely. He's knowledgeable. He's personable but not terribly out-going.He remembers my name. He charges what the work is worth, not what the traffic will bear. I always get answers; no double-talk. He rarely tells me he has no time for me. If he can't fix it, he tells me where I can get the car fixed.

He does little extras; he's willing to pull leaves out of rain drains so that the interior of my car stays dry.A major appliance company conducted a study a few years ago to learn how to improve the quality of the repairs on customer's appliances. The technicians were given tests to determine their personality style; then divided into one of two types, introvert and extravert. Introverts are people who quietly within themselves figure out the problem. Whereas, extraverts are more noisy about their problem solving, needing to talk aloud and get feedback from others. The appliance company then asked their customers two questions: (1) How satisfied are you with the repair?; and (2) How satisfied are you with the technician? While the customers found the extraverted technicians more personable, there were fewer complaints about the repairs done by the introverts. In other words, the guy who quietly goes about his business of getting the job done, but doesn't interact much with the customer does a better job. Our "family auto mechanic" fits this picture. But there's more. There's something deeper that makes my mechanic special. He really seems to love his work. He works hard, often late into the night. And his wife is working right beside him. It must be that he enjoys solving the mystery behind my car problems. He probably wants to earn money too, but money is a byproduct of doing what you love.

Obviously our "family auto mechanic" is being paid well for doing what he loves. I know that I am not alone in this desire to have a mechanic I can trust and who does quality work. Recently on National Public Radio I was listening to "Car Talk," a lively program dedicated to answering tough car repair problems called in by listeners. On this particular night I was amused to have an astronaut call in from his space shuttle orbiting the Earth. Although the reception was compromised by a little static, I learned about the problems astronauts have with their vehicles.But what was even more fascinating about the program is that the hosts were offering to set up a free locator service for mechanics. They asked listeners to send in the names of mechanics that they felt were RELIABLE and trustworthy. If you want to find a mechanic you can trust, you need to get to know the person. Just as with your physician or hair dresser, the relationship with your mechanic should be more than passing. In our frenzied world, many of us have lost tract of the community spirit, but that community spirit is what helps build trust. If I know my mechanic and his family and he knows me and mine, we can build a relationship of trust over the years. He knows just how I like things done. I know that I can trust him to have my best interests at heart. Most importantly, I want to work with someone who cares about me, not just my car; and I want to work with someone I care about too.