I love family businesses. As a young man I opened my first flooring store at age 23 and as the children came along, it seemed natural for them to be working at one of the stores. All four of them became productive citizens, but none stuck with the business-tough boss! Working in the business taught them valuable lessons on how to compete in the free market and the rewards of hard work, persistence and honesty in the greatest society on Earth. They were involved right up until I sold my stores in 1986.
The best book on family businesses was written by the late Sam Johnson, son of the founder of Johnson’s Wax, which grew to become the largest privately owned company in the world. Something he wrote burned into my memory “All your children aren’t created equal.” Sam eventually split Johnson Wax into a few parts giving each child a segment suited to his individual talents.
The elder Johnson knew, as most people running a family business know, that unqualified fairness has no place in your decision making. There are strengths and vulnerabilities that only a parent completely understands. I remember another company founder who could not ignore the disparity of talent among his progeny. He divided up the stock equally among the heirs, but only one was granted voting rights.
Having owned a family business and having worked for more than two decades as a consultant to floor covering retailers I have concluded this: Many of the problems in family businesses are caused by relationships, not a lack of business skills. Looking back, I would have loved to have had my oldest son running my original business but it didn’t work out that way. We happen to be kindred spirits, but most importantly, he was and is extremely talented. We are now in similar careers–only what I do helps retailers what he does helps politicians.
In the flooring industry, family seems to be the rule rather than the exception. Families have issues, conflicts and baggage-and so do businesses. When you mix the two there are bound to be problems. When they do arise, it’s important to identify the source of the conflict while understanding the personalities involved.
For one thing, whether you are in the schoolyard or the board room, families take sides. A long time friend of mine who ran a sizable home furnishings store recalls conflicts involving his two sons-one of who had a clear talent for the business. My friend’s wife aligned with the less gifted son and thought he should have equal say in the business. To resolve the issue and keep peace in the family, my friend opened a flooring store for him, keeping the talented son in charge of the main operation which avoided hurt feelings or alienating his wife.
It is essential in business that you honestly assess any barrier that stands between you and your goals. The next step is taking the necessary action to overcome those obstacles. Entrepreneurial types sometimes find it difficult to let go of their business even though they have talented sons (or daughters) ready to take the helm. Owners with emotional maturity recognize they must let go for the sake of the family and the business.
Another friend took over a failing business from his dad and made it into one of the most successful single store flooring operations I’ve ever seen. He was successful, but years later when it came time to hand the business down to his son, he had difficulties letting go. This led to his wife siding with the son which almost led to divorce. He finally let go, retired and moved out of state.
In my consulting I’ve come across parents who are talented and highly motivated, but whose kids woefully lack these attributes. On the other hand, let it be noted that some of the finest and most profitable retail flooring operations in the country are being run by second and third generations. Their names are running through my mind as I write. Talented progeny or not, some of the older generation just can’t let go. My job as a consultant was to gently point out that coaching the new generation and then letting go is the only way to assure continued success. Parents who have been running a successful business over the years have much to be proud, but I have to make it as clear as crystal that things have changed drastically in the marketplace. What worked in 1960 or 1970 will not work as well (if at all) in 2007.
One of my favorite family business stories concerns Jordan’s Furniture in New England. It was once a broken down low-volume furniture store operating out of a warehouse in Waltham, Mass. When the two sons, Barry and Eliot Tatelman took over, they combined their knowledge of business with their wit and creativity. They started running radio spots using banter reminiscent of the legendary radio duo “Bob and Ray.” They soon became pop icons throughout the region and built Jordan's into a $350 million business. Their tagline; “Jordan’s Furniture-not to be confused with Jordan Marsh” was genius. The brothers recently sold their business to Warren Buffett.
Handing off to the next generation may not always go as well. Many children have run their parents’ businesses into bankruptcy-single stores, national and regional chains. Giving jobs to unqualified relatives is among the biggest mistakes businesses can make. It happens so often, it’s become business folklore. In many circles, the initials “BL” and “SL” refer to the ne’er-do-well brother-in-law or son-in-law who needs a job. They soon become the object of much scorn and ridicule. Most family businesses have one or the other. This is not to say that there aren’t talented in-laws. I know several.
Even worse than hiring untalented relatives is leaving a business to a child with no ability to run it. It is not only foolhardy, it’s cruel. It will quickly crush employee morale and may subject your children to endless conflicts and derision. More seriously, business failure becomes a real possibility. Running a retail store takes passion, a love of the business and people. These are not common attributes. It’s a parent’s duty to take an objective view of their children. It may sadden you to realize your child is not suited to running the operation, but it will be tragic if you realize this only after you've handed him the keys.
Another family issue occurs when love and respect trump clear focused objectivity. There are those children who find it difficult to believe their parents could ever be wrong. A dealer at a Flooring America convention told me that for years he didn’t like what I said in my columns because it contradicted what he learned from his father. “The things you wrote about were the opposite of what my father taught me and I resented you for doing that,” he confided, adding “As time went on, you started to make more and more sense to me.” He also advised that other sons could feel the same way.
I have since adjusted my presentations, whether written or oral, to reflect this aspect of families. I explain how different business is today. The Internet has changed everything. Consumers are smart and they understand sales and service. They won’t put up with poor service or sales attitudes. Times have changed and retailing must change with them.
All of this doesn’t mean that family members shouldn’t have an inside track, but if you refuse to hire and promote the obviously more qualified employees you are hurting everyone. Nepotism can be the biggest destroyer of businesses, large and small.
Another family situation involves fathers who inadvertently or purposefully run family members through a much tougher regimen, meting out rougher treatment than given to other employees. Parents might expect more, but abusive treatment leads to problems. The lesson is treat all employees, family or not, with respect and fairness.
There is a huge difference between a “leader” and a “manager.” Leadership involves the ability to inspire confidence and loyalty from the people who work for you. Owners who insist on being involved in every aspect of the business paralyze themselves and others. Power is sharing information, giving credit rather than taking it, sharing knowledge instead of protecting it and having the maturity to delegate important functions to others. In other words Let go and have faith in the next generation when appropriate. And most of all, remember Sam Johnson’s words “All your children are not created equal.”