What was the scariest but best decision a family business had to make?

Business Leader Post, July 23, 2014

Thomas D. Davidow, Ed.D.

A large family owned wholesale company contacted me about helping them set up a Board of Advisors as one step in their transition process.  I explained that having a Board of Advisors was an excellent idea for all the obvious reasons. However, their family dynamic/issues would have to be in place first.  The Board is there to aid in helping the family business. It is not a place where family issues can be addressed. The last thing that a group of outside business professionals want is to get caught in the middle of a messy family dynamic.

I suggested that I do an assessment first, which would involve talking to all family members who were both managers and owners as well as their spouses to find out the status of the relationships between and among the family members.

There were three members of the next generation. Two brothers worked in the business, and the sister’s husband had a role in management. The younger brother was the driver behind establishing the Board of Advisors. He felt that his older brother, who was the apparent heir to the senior management position, was not the best business man. He believed that establishing the Board would allow his ideas to be taken more seriously and that it would be the most effective way to influence the direction of the business.

Unfortunately, the process of assessment revealed that the younger brother had an addiction problem that created havoc both in the business and in the family. There were stories of inappropriate use of funds and other improper behaviors.  I explained that the first step in the process was to address the son’s problems, i.e. he needed to go to a facility to address his problems. Unless the family agreed to hold the younger son accountable, I could not continue with the case. This put the parents into a very scary and frightening place. They had been aware of the issues for years but had not dealt with them for the fear of their son’s reaction and the impact of that reaction on their relationship with him, his wife and their grandchildren.

The parents struggled mightily while I held the line, but they finally found the courage to establish a level of boundaries and accountability for their son. We came to a compromise:   The son agreed to get help from a therapist and to sign a contractual agreement which stated that if he ever "stole" from the business again (i.e., if he had a relapse), he would have to sell his stock in the business at an agreed upon formula and leave the business.

Eighteen months later, the son broke the contract, sold his stock, left the company and went through what could only be described as a terrible period in his life. However, the son was indeed talented.  Consequently, when he addressed his addiction issues, he landed a significant job with a company in the same field as his family’s business and went on to become very successful.

As scary and painful as it is, holding family members accountable for inappropriate behavior is the only way that you can give them the opportunity to grow and change.