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Mixing Family and Business

By Judi Bailey

One of the greatest values of our commonwealth is maintaining a happy healthy family, but what happens if you mix family with business? It makes for some interesting dynamics.

“You have to address unique issues that other businesses don’t have,” says Bob Tiell, director of career services and workforce development with the Jewish Family and Career Services in Louisville. “Relationships may gum things up and cause more serious problems. They may undo the business by keeping it from shifting from one generation to the next.”

It happens often since some 70 percent of all companies are family-operated, according to Tiell.

Family loyalties can muddy up career planning. Tiell tells about a gentleman who was getting ready to leave his family’s business. The man had an emotional commitment to the company and suffered a great deal of anxiety about how to talk with his father about it.

Other major family-business issues owners deal with, Tiell said, include minimizing sibling rivalry, carving out functional work roles and identifying each member’s principal talents and skills.

“Each family business has its own challenges,” he said. “Communication issues in the family, communication issues with non-family employees, lack of a succession plan, no formal qualifications to be in the business and no planned leadership development are a few of the possible issues.”

William E. “Skip” Miller, president and owner of Miller Lumber Co. in Augusta, admits he doesn’t do the best job with communication.

“I probably should learn to listen to these new guys, be more open to technological change,” he said. Himself a second-generation participant in the business, Miller’s two sons Craig and Scott work for him. A potential fourth-generation employee, Grayson Miller, age 4, likes to walk the lumber yard most mornings before heading to daycare, Miller said.

“It’s rewarding to be a part of a multiple-generational business where we are bucking the trend,” he said.

“The trend” Miller references is this: The first generation typically works hard at the business, the second generation slacks off, and the third gives up the business. There is no evidence of that occurring at Miller Lumber, however.

Carol Lowery, Ph.D., a clinical psychologist with Family Psychology Services in Lexington, says how people are doing in their personal lives spills into their work even if family members are not involved. “But it’s much more emotionally involved and often counterproductive in a family-operated business,” Lowery said.

“We see patterns of stressed-out communication,” she said. “When that happens, a blaming pattern ensues: Dad becomes more critical of the kids, which in turn affects the work environment.

“Family members need to become aware of how they communicate when they are under stress.”

Another example Lowery offers is that of the family father who has run the business for 20 years. The next generation wants to have more input into the business practices, but parents have trouble letting go of the traditional practices that seemed to have worked for them.

On the flip side, family-run operations can offer a great deal of pleasure as well.
“I’m a very blessed person,” said Rich Engle, owner of J&R Outboard in Louisville. One of the benefits of a family business for him is complete and utter trust.

“I don’t have to worry about a dime missing,” Engle said.
He and his wife, Betty, own the business, which they started in 1969. Their son, Doug, runs one aspect, their daughter, Sheri Inclan, another. Although Engle doesn’t have a written-in-stone succession plan, the general thought is that the siblings will serve as co-CEO of the company.

“I try to let them make their own decisions,” Engle says, “and they’re usually right.”

Kathleen Hoye, director of the Family Business Center of the University of Louisville, warns of the importance of recognizing the dual systems involved. One system, or governance, is the strategy for the family. The other is the strategy for the business.

“In general,” Hoye says, “you need to prevent family dynamics from dictating business strategies.”

Hoye suggests having some kind of a family council where members communicate how they can participate in the business, where their talents can take them and how they will be evaluated.

In the business governance there should be an independent board of directors including non-family members for greater objectivity. This keeps the business from being influenced by fluctuations in the family relationships.

Hoye mentions that generational succession used to assume the first son inherited the business. “It’s not true anymore. But there can be problems when a founder divides the company equally, then they all scramble for power.

Eventually the business gets sold because the parent doesn’t want to make the choice of successor.”

The best regional example for this, Hoye points out, was the Courier-Journal newspaper in Louisville. Robert Worth Bingham took over full ownership in 1920, then when he began to consider a successor, old sibling rivalries emerged as a power struggle between the children. Instead of appointing one of them to follow in his footsteps, Bingham sold the publication to Gannett in 1986.

Picking a successor isn’t easy due to the potential of hurt feelings. An example Hoye gives is if a female is identified as having the best potential to run the company, older siblings or male siblings are likely to react negatively.

“One of the things that matters most,” says Tiell, “is adopting a policy for hiring in a new family member. It’s recommended that a family member first work for someone else. They need to have a place for skill-building, maybe earn a college degree. This needs to be spelled out to every family member not yet part of the business.”

Clearing away messy entanglements and providing safe avenues for communication allow families to work together in the creation and succession of a harmonious family business.