What happens when keeping it in the family puts the business at risk? Lawyer H. Dennis Beaver, writing for the RedwoodTimes.com, answers a reader question on this very topic:
“I am writing you on behalf of several of us who are longtime employees at a family-owned furniture and appliance store in a small Southern California community. We are worried about the future, about this business surviving.
“The company was founded before WWI and prospered during all the events our country has gone through. It has always been family run, and in fact, many of the employees are children and grandchildren of the original handful of people who first worked here. Until recently, this wasn’t a job — it was like a second home. But over the past few months, everything has changed,” “Seth” wrote.
“The owner of the company retired and installed his 30-year-old son-in-law (who we call Sonny-Boy behind his back) as the new CEO. But he has never worked in the appliance field. In fact, he never kept any job for very long, having been spoiled all his life, entitled, coming from one of the wealthiest families in town.”
“There was a big office meeting, Sonny-Boy made a speech announcing enhanced compensation, better hours, more money spent on needed remodeling, hiring more staff, but he did just the opposite! He micro-manages everyone, cut hours, fired people who were needed in the service department, and now our best salespeople — 20 years or more — are leaving. Customers are upset discovering ‘their’ appliance advisor has left. We are losing business, big-time! What can we do?”
“Passing the reigns from one generation to another becomes problematic in family-run businesses where blood often wins out over competence, and it is very common,” Dr. Lyle Sussman, author, consultant, and Professor of Management at the University of Louisville commented when I discussed this very sad situation with him.
“The question of what employees can do — other than marrying into the business — leaves few options, and finding a new job is frequently the only safe course to follow.
“Family business owners need to ask themselves if they are committed to what they have created surviving into the future. If they are, decisions must be based on sound business practices, not blood. An employee can do the same thing, by stating, ‘I would like my grandchildren to work in this business, but how could they do that if it doesn’t exist and it will not exist if we have incompetent people running it.'”
Sussman explained that in small communities, there are many people who will only buy from one company because they have dealt with a service rep or salesperson for “10, 15, 20 years.”
He points out that “with generations of ownership, employees, and customers, transferring power to the wrong person puts everything at risk. When senior, experienced people are leaving, the house is on fire, but denial is a powerful enemy of change.”
We asked, “What should these employees do?”
“The most respected employees of that store — who have been there the longest — should knock on the owner’s door and say, ‘We need to talk with you.’
“They need a face-to-face meeting, base it on lost business, and the effect this person is having on the business. It’s an intervention. They must ask the owner, ‘Do you want this business to live or die?’”
“If you want this business to live, understand that you are enabling incompetence in the store, and what your family has created will not exist. Then, the life or death decision will be made by the very family that started the business and will live with the consequences.”
If the owner says, “I hear you, so let’s bring in a business coach or trainer to work on his shortcomings,” to Sussman, this won’t work with the type of person you’ve described. You can’t cure dishonesty. So, it’s no to training. This person needs to be removed and the sooner the better.”
Sussman sees a race against the clock, predicting that, “Within three to six months, this thing could go belly up! And just think of the tragedy of that happening, after close to a century of success.
“This is more than a business tragedy, it is a human tragedy, and one that doesn’t have to take place because a solution is so obvious, so simple. And that solution is to get son-in-law out of there!”
Wondering if the owner was aware of how perilous the situation was, we placed several calls to him. It’s been days now. We’re still waiting for that call.
Dennis Beaver practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to 661-323-7993, or emailed to Lagombeaver1@Gmail.com. Also, visit dennisbeaver.com.