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On the way to our office in Boston, my father and I were at the entrance to the Massachusetts Turnpike when I turned to him and asked, "So, what do you think?" He replied, "What do you think?" The night before, we agreed that this was the day to make the decision -- perhaps the most important in the history of our business.
At the time, we were a wallpaper and wall-covering wholesaler, one of the largest in the Northeastern U.S. Our customers consisted of retail stores and commercial users. On the heels of our most successful year, we had just acquired more territory with the purchase of a New York distribution center from our largest supplier. We were also beginning the assimilation of new staff, an added warehouse, and more than 1,000 new customers.
CONSERVATIVE SON. Three months following the close of that deal, we learned that a distributor abutting Pennsylvania, New Jersey, and Delaware was teetering on the edge of bankruptcy. Without warning, this new acquisition opportunity arose. Though other businesses were eager to buy the faltering distributor, we were the prime contenders -- and had to make a fast decision. As it turns out, the crossroads taught me as much about our industry as it did about the unique leadership dynamic in family businesses.
After intense due diligence, we cranked out some projections. The pro formas looked good, and my dad, the consummate entrepreneur, felt ready to go forward. As a chief operating officer of only 32 years of age, I was nonetheless the more conservative of us.
Distributors have basically two financial assets: inventory and accounts receivable. Our business was strong and healthy. We had always been able to take cash discounts offered by our vendors. And all we'd known of banking relations prior to the first acquisition was rolling over certificates of deposit. Suddenly, our dream world was about to change. The increase of the New York territory meant more inventory and receivables, but the addition of Pennsylvania, New Jersey, and Delaware would mean doubling the company.
EQUALITY OR BUST. I had a lot of questions. Could we handle it? Did we have the people? Did we want to take the associated risks? How involved would my dad be? What about my wife and our two young children and the necessary travel the new enterprise would impose on me? Was this what I wanted? And, perhaps the biggest query of all: Whose decision should this be, my father's or mine?
When I had asked my dad eight years earlier if I could work for him, he vehemently answered, "No! You'll never, ever work for me, but you can work with me." After I'd clearly demonstrated my commitment to the business and he felt comfortable with my ability, we became partners. So here we were, facing an extraordinary opportunity and debating who should call the shot.
Many family businesses struggle with such power questions. Marshall Paisner, founder of ScrubaDub Auto Wash Centers, a major chain with headquarters in Natick, Mass., recounts a similar scenario in his book, Sustaining the Family Business. A longtime student of family enterprise, Paisner faced the challenge of selecting a leader to succeed him. With two very capable sons, Bob and Dan, in the business, Paisner wanted them to make the decision. And they, in turn, wanted him to decide.
YOUR LIFE, YOUR CHOICE. Colleagues felt that Paisner's reluctance to make the final call stemmed from a fear of the consequences of selecting one son over the other. Paisner ultimately explained that his rationale was very simple: His sons had to make the decision, because they were the ones who had to live with it.
What did Bob and Dan do? They listened to their dad and ultimately decided that one of them would serve as president and the other as CEO, based on their own natural strengths. Under their balanced leadership, ScrubaDub has grown dramatically.
What path did I choose? I told my father that I had great confidence in his wisdom and respect for his judgment, and that was why I felt he should choose. Then he called my bluff, replying that he wanted me to make the decision because of his confidence in me. If I really did trust his judgment, he argued, then I should listen to him and make the decision myself.
POSITIVE ENABLING. Like Bob and Dan Paisner, I listened to my father. The clear expression of parents' trust in their children, recognizing that they're the ones who have to live with the longer-term consequences of major decisions, can be truly empowering. My dad's confidence gave me the confidence in myself to move forward with the new acquisition.
Jut as the Paisner brothers did, I made the ultimate strategic decision, which helped shape the company for the next generation. But in both cases, as with many family businesses, it was really the behind-the-scenes decisions of the fathers that enabled the actions of their sons.
Paul Karofsky is Executive Director Emeritus of Northeastern University's Center for Family Business, and a member of the Family Firm Institute. A former third-generation family-business owner, he's currently the principal of Transition Consulting Group in Boston, where he advises families, businesses, and educational organizations
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