As I reflect on 38 years of experience in business succession planning I can confirm that there was a time when being categorized as a “family” business was not a compliment. The term was derogatory, considered synonymous with “mom and pop” business. This stereotyping had obvious exceptions but was more right than wrong with respect to pets laying around with assumed rights superior to visitors or employees; kids entering the business out of school as an expert because they had worked a few summers and then coronated with a vice president title, a parking place and a tricked-up office.
The female spouses acted like princesses and the male in-laws were on the payroll, but not to be found unless you called two days in advance or bumped into them at the country club. The attorney and accountant were long standing and highly embedded based upon personal relationships without any concern as to the level of expertise or competency. There were sloppy records and sloppy surroundings, other than the shine on the new luxury cars bestowed upon all the family members. There were few if any up-to-date documents such as revocable trusts, buy sell agreement, employment agreements, summary plan descriptions, board minutes, etc. Key managers achieved there standing by loyalty, patronization and tenure, not productivity. Most employees were friends of the owners or kids and family members of employees. Accountability was a misunderstood concept being limited to doing whatever the owner said when he was around, otherwise doing whatever each person felt like doing. Information, technology, strategic planning, and operating budgets were not even part of the vocabulary. Succession planning was a foregone conclusion, because the owner had a will giving everything to their spouse and a life insurance policy owned by and payable to the business.
I am pleased to report that based upon my current experience, things have changed. By and large, families have come out of the ether and recognized that their business represents a unique opportunity to achieve economic and social standing. They understand from consultants and sophisticated advisors that the velocity of the economy will eat their lunch if they blink, efficiency must prevail over tight margins, and relationships with family members, managers, employees and vendors are both their greatest asset and their greatest liability. “Family” business is now looked upon as a partnership between the parents who have the experience and the children who have the enthusiasm and technological expertise. Decisions are no longer made in a vacuum with family members and outside advisors throwing in their opinions and joining in the debate until a decision is made. Everyone understands accountability especially the kids because they realize they are working under a microscope getting credit for anything they do bad but nothing they do good. Pride is beginning to drive the success of the business. Through hard work, self sacrifice and graduate degrees from the School of “Hard Knocks,” “Family” business has become a good word, a complement and an honor.
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