Flying the coop: policies to implement before - and after - a family member leaves the business

Entrepreneur, August, 1997 by Patricia Schiff Estess

Look at it this way: The very act of family members uprooting themselves from a secure business and the comfort of familiarity is a sign of exasperation - maybe even extreme anger. Remaining family members, especially parents who always took their children's participation in the business for granted, often feel deserted and even betrayed when the exodus occurs.

The disappointment felt when a child leaves to pursue a personal calling must be dealt with by parents who are caught between wanting the child to be happy and wanting this progeny to perpetuate the longstanding family business.

Not surprisingly, the longer the departing family member has been involved in the business and the closer he or she is to being the successor, the more negative the decision to leave is to the rest of the family. Dr. Sam H. Lane, a Ft. Worth, Texas, corporate psychologist specializing in family businesses, says that's because "the decision to depart is rarely for positive reasons.

"Every two months or so, I get a call from a 35- or 45-year-old who says something like 'When I joined the business, my parents said they would retire in 10 years. It's 20 years later, and I don't see this happening.' The adult child is angry. He or she sees others of the same age advancing in a chosen profession and doesn't get the feeling this will ever happen in the family business."

Frustration, disappointment and conflict are most often the driving forces behind the schism.

STOPPING THE EXODUS

Certain policies and processes, established before anyone has thought of leaving, are helpful in stemming an exodus.

* Family employment policies that establish developmental plans for kids: Milestone checkpoints need to be established so that both generations have a clear understanding of what the kids have done and what still needs to be learned or accomplished before moving on to the next step or taking over the leadership reins. Objective standards help defuse frustration, and developmental plans provide a road map for granting greater authority and decision-making responsibilities. If children derive personal satisfaction from their work and contribute positively to the family business, the possibility that they'll leave is less likely.

* Family forums: These are also a good way to defuse frustration - especially when the topics discussed are sticky, such as plans for the older generation's retirement and the next generation's advancement and succession.

* Leave-of-absence policies: These allow time off for members who are uncertain about their future goals to assess their roles in the family business. "People often don't want to leave for good; they simply need a break from family, from conflict," says Fredda Herz Brown, founder and managing partner of The Metropolitan Group, a family business consulting firm in Leonia, New Jersey. "Sometimes they want to go back to school; seriously pursue a hobby, passion or talent; or simply try out something different. Leave-of-absence policies might allow them to hold their stock in abeyance and might assure them of a position within the company if they're back within a certain period of time." Most important, these policies give the breakaway family member opportunity for a change of heart and provide a way back into the family business without losing face.

THE MOMENT OF TRUTH

At the time the decision to leave is made, it's probably not possible to take the angst out of the situation, says Lane. But it is possible to minimize it so that it doesn't shatter family relations.

John Ryan was working with his brothers and cousins as Ryan Inc. Central's treasurer, project manager and manager of corporate real estate when, in 1994, he decided to leave the 113-year-old Janesville, Wisconsin-based earth-moving contracting firm started by his great grandfather. He wanted to head the company's subsidiary, Land and Water Resources Inc., an organization in Rosemont, Illinois, that helps developers compensate for the wetlands they destroy or damage by constructing off-site wetland tracts. It seemed like an easy move. But it wasn't.

"I had to buy my family members out of Land and Water Resources, and they had to buy me out of Ryan Inc. I knew the family thought I was deserting the business, and there was a lot of resentment. I spent a lot of time in honest and open communication showing how there would be mutual gain for us all [Land and Water Resources uses Ryan Inc. as a subcontractor on many jobs] and why I needed to go out on my own. I wanted to convince them that I wasn't doing this to hurt anybody. My father and uncles, who our generation had bought out in '84, were very supportive - my brothers and cousins less so."

FILLING THE VOID

When a person leaves a family business in which there was conflict and anger, you might assume that things would become better on a personal level, simply because relatives' egos don't collide daily, and they aren't forced into joint decision-making. That's not necessarily so, warns Lane. "They still have to deal with the leftover baggage from the departure transition," he says. Unless they do, relatives are going to continue to feel hurt, duped or disappointed, and relationships will never be completely salvaged.