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AZRIELA JAFFE

8.18.99  
The Ultimate Family-Biz Inheritance — A Blueprint for Solving Disputes
One courageous family faced its conflicts and expelled a son from the company to save it

A businessman contacted me about a family-business matter. To better help him, I asked for some details about the business, and he related a marvelous tale -- a lesson, really -- about saving a business and a family.

I asked his permission to share it with my readers, and he generously agreed, though he asked for anonymity. What's particularly impressive is the creative and courageous approach the family took to resolving its problem. Here's an edited version of his account:"My dad, mom, and eldest brother started a business in 1979. My parents' dream for the future was to split the ownership among their four sons equally. They started giving us shares a few years ago.

"About two years ago, they stopped because they felt the four of us weren't getting along well enough, and they had concerns about turning over the controlling interest. They forced us to talk, develop a plan, and then convince them of what we wanted to do. We needed to either address the issues of leadership and decision-making -- without the presence of our chief referee (Dad) -- or sell the company."

SMART MOVE NO. 1. Unlike most family-business owners, Mom and Dad didn't shove the emerging conflicts under the rug. He continues: "Over the course of the next half-year or so, we met monthly. An uncle who owns a small restaurant helped us. We developed a Code of Conduct for the brothers and settled on a system of decision-making and dispute resolution. We created an Office of the President that meets at least monthly. We all share in that role.

"To make sure the meetings happen, a substantial part of our compensation is tied to attendance at the meeting: If you don't show, you don't get the check. (No one has missed a meeting in two years -- we even met at one brother's house once when he was bed-ridden with pneumonia.)"

SMART MOVES 2&3.Structuring regular business meetings with a mediator, and tying compensation to attendance is one of the best ideas I've heard in a long time.

Did that solve everything? Read on: "The meetings went well, but we felt we were dancing around some deep personality conflicts with one brother -- call him Sam. The more we worked together, the more obvious it became that Sam did not share our vision for the company. Sam and another brother argued viciously in front of an outsider.

"That brother offered to leave or take another position in the company. The three brothers ultimately decided to ask Sam to leave instead. For the next few months, we worked with a family-business counselor. As one might expect, things were very rough. Sam threatened suicide. Awful tensions developed between Mom and Dad."

Doing what had to be done for the business,though it was difficult for the family, and tapping a trained family-business counselor to work through the trauma, were definitely Smart Moves Nos. 4 and 5.

The resolution?

"Finally, we bought Sam out of the company. The remaining three brothers share a common vision about the business. We are now motivated to start succession planning for our children."

NO PAIN, NO GAIN. In many cases like this, the conflict would have destroyed the business and the family. This man credits his uncle with saving the company. Here's why he was so effective: "My uncle had the trust and respect of all the participants. He understood the stakes and the fine balance between family and business issues, but he insisted we make progress. He cared deeply for the family, and he knew some short-term pain was needed to ensure the long-term health of the family and the business."

If this column were a fairy tale, all would live happily ever after. That didn't happen. Sam is now distant from the family. That saddens his brother: "Sam has a hard time understanding that his role in the business is separate from his role in the family and that we all love him immensely as an individual and member of the family."

On a positive note, Mom and Dad are mending their differences now. Still, conflicts continue to develop in this family. That led to Smart Move No. 6: A family retreat with the counselor to plan how to bring the next generation into the business.

This is a courageous family. They have a great legacy to pass along to their children, and I don't just mean the assets of the business. Their gift is a model for resolving conflict.

Now, that's an inheritance!


Have a question on how to handle the pressures of running a business and the impact on your personal life, marriage, and family? Contact Azriela Jaffe at AZ@azriela.com. Please put "BW Online question" in the subject field. Your real name will be kept confidential if you request, but please give an E-mail address, phone number, and your hometown so she can contact you for more information. Because of heavy volume, Azriela cannot guarantee that she will answer every query.

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