“How do I resolve this issue? If I don’t address this, there will be a mess after I’m gone, but if I open up this can of worms, my life may be hell and my family will be in a uproar.” I asked this frustrated dealer if he was paying his sons the same amount and not surprisingly he said, “yes”. “Do they own equal amounts of stock?” Again, the answer was “yes”. Clearly he had identified the problem but did not know how to resolve it. In almost 25 years of working with car dealers, I have heard this story retold many times. Why? What is the impact upon Succession Planning? 

When dealing with family members, dealers often disregard sound business practice and make decisions from the heart, instead of what is best for the business. Ironically, this usually backfires, creating family problems on top of business problems. Equal pay plans, regardless of responsibility or productivity, promoting children before they are ready or qualified, allowing children to operate in a free-lance style, coming and going as they please, are the behaviors my partners and I see all the time in dealerships. 

When your child begins working in your business, are you/were you willing to apply the same ground rules that you would if he/she were not related? For instance, did your son/daughter have to qualify for a job in your business on the same basis that a non-relative applies? Would his/her resume qualify your son/daughter to be given their initial job? Future jobs? 

It is amazingly common for children to be paid the same, regardless of their position within the dealership. You certainly would not do this with employees who are not related to you. Undoubtedly this happens because Dad is unwilling to make business decisions that appear he is playing favorites. He may also feel pressure to help his children equally so that they can take care of their own families and have similar lifestyles. 

This is a problem that must be addressed NOW if you plan to have your legacy continued via your children. Sooner or later the more productive child is not going to put up with equal pay and equal stock ownership when he/she is carrying the major load. In most cases, the turmoil is brewing below the surface, but it will definitely boil over when Dad is gone, if not before. In order for the dealership Succession Plan to be successful, this issue needs to be resolved NOW while Dad is around to help reach a solution. But, many dealers are reluctant to get into this discussion because they are fearful of not being able to find a solution without tearing apart the family. Unfortunately, unless Dad addresses the problem, his family and often the dealership will be torn apart after he is gone. Therefore, a third party advisor is usually necessary to open up these potentially volatile issues and achieve amicable solutions. 

Key to getting this problem resolved is to engage all the players in discussion regarding their expectations. What do you expect from your sibling? What should your sibling be able to expect from you? What should Dad be able to expect from each of his children who are working in the dealership? What should they be able to expect from him? Values, job descriptions, roles and responsibilities, decision-making, communication, hours, authority, vacations, pay plans, stock ownership, bonuses, etc. etc. – all of this needs to be discussed. The more detail the better and they need to be written down. 

Often one or more parties perceive things entirely differently and this will present problems. As a result, each of the parties is likely to have unreasonable expectations. This is where a third party intermediary is critical, helping each of the siblings and the dealer to work through their differences. If done properly this process will take several meetings, culminating in all parties signing what has been agreed upon. There is no short cut, if you want to find solutions that will work for everyone. 

The stakes are very high – the future of your business and the ability of your family to enjoy harmonious relationships. Find someone soon who can help you tackle and resolve this crucial issue or risk having to sell your dealership in the future. What could possibly be more important?

 Sign up for our monthly e-newsletter to stay informed on how to overcome related succession planning issues.