A big firm's stake in family business - managing family conflicts in a family business

Nation's Business, March, 1991 by John A. Davis, John E. Messervey, Ernesto J. Poza

A Big Firm's Stake In Family Business "Those honchos at headquarters keep coming up with rosy sales projections and glowing strategic plans," lamented Marilyn Green. "Don't they know our entire distribution effort is in the hands of family businesses?" As director of dealer development for GlassKing, a major supplier, Marilyn seems to be spending more time coping with family infighting than she does on new product launches or gaining market share.

Each year, the concerns of her distributors--most of them independently owned family firms--grow more complex and alarming. Succession planning, sibling rivalry, and partnership squabbles have replaced sales growth as a priority. A particularly devastating blow came when Marilyn's West Coast representative called with the news that the head of GlassKing's top dealership, an $80-million company, is involved in a bitter divorce that is consuming virtually all of his energy. Sales have been dropping like a rock. "I'll bet the corporate strategists didn't put this one in the five-year plan!" muttered Marilyn.

Lately, the consequences of unresolved family problems have hit GlassKing's bottom line harder than in the past. Marilyn first noticed a complacency among dealers at an annual sales meeting five years ago. They were a little grayer, a little heavier, and clearly less enthusiastic about rapid growth. "They've peaked," she recalls thinking, "and where are all the young people?"

Marilyn remembers when these owners were the best in the business. Now, faced with weekly reports from sales reps about family quarrels and about owners "who think they will live forever," Marilyn is asking: "How did we get into this mess? And how do we get out?"

Remember The Advantages

Marilyn Green has her hands full contending with family conflicts in GlassKing's dealership network and the reluctance of older dealership owners to retire. However, she should not lose sight of the advantages that family dealerships offer to a large company like hers.

All market share is local, in my view, and family dealerships generally serve local markets better because of their connection with the community. Their ties with customers and their families can span generations and help the supplier dominate markets for decades. The family dealership also often contributes a great deal of capital that the supplier would otherwise need to invest.

If GlassKing is committed to family dealerships for its distribution system, it should take steps to preserve them for the long haul.

Recognizing that the supplier-dealer relationship has some built-in conflicts, Marilyn should not try to work directly with the dealership families to facilitate family conversations and planning. Families won't be open to talk about their issues and plans in front of GlassKing management. Instead, she should sponsor educational programs and consultation services to make sure that the predictable problems of managing a family business are addressed. In particular, I would recommend a program to introduce dealers and their families to ways of managing a family company and handling the process of succession.

Marilyn should also encourage each dealer family to create a family council--a discussion group that would explore the family's interest in the business and family issues that arise because they have a business. These discussions are best facilitated by a consultant familiar with family-business issues. Setting up such a program of education and family discussions is not inexpensive. But how much would GlassKing lose if just one major dealer went under?

Find Ways To Be Supportive

Top management of many large companies that depend on independent dealers, distributors, and franchisees often say, "We're one big happy family." And, like real families, they run for cover when the conflict starts.

In one sense, you can't blame them. Until family-systems theories merged with sound business practice, there was little help available. Although the stakes of unresolved family conflict are higher than ever for large companies that deal with family firms, there are now some solutions.

Marilyn should keep in mind that succession is almost always a once-in-a-lifetime event, yet we expect the business owner to hit a home run the first time at bat. In reality, most family-business owners have few models to follow. GlassKing can help by finding successful succession stories within its dealer network and sharing those stories with all its dealers.

Moreover, GlassKing must be committed for the long haul. Succession planning is a process that takes years. Marilyn could also create a "family-business succession audit," asking each dealership a few questions: How old are your owners? Does the chief executive have a designated successor? Do you have a written succession plan? (If it's not in writing, it doesn't exist!) Armed with this information, Marilyn will know which dealers need the most assistance with succession.

GlassKing could also add a family consultant to its corporate team. However, GlassKing will need to be patient and realistic in its expectations. No consultant should be expected to undo 30 years of family behaviors in a couple of annual meeting presentations. The key is to create awareness of the issues and to present potential solutions.