How Your Kin Can Fit In

A “family business” is an oxymoron. My colleague Lloyd Rawls is fond of saying, “You cannot run a business like a family and you cannot run a family like a business.”

Family is about unconditional love and acceptance. Business demands performance underscored by “what have you done for me lately?” Many potential mine fields must be navigated if you want your children to succeed in your dealership and continue the family legacy.

I met with a dealer who had been a client for almost 20 years. During this time, his father died and left him the business, which had grown significantly under his management.

This dealer says his son has decided to come into the dealership after spending several successful years in a finance business. Dad is thrilled and scared! We talked about sharing the experience of running the dealership with his son. I said it would undoubtedly reinvigorate him, as he enjoys working with his son.

“But,” my dealer friend said, “I don't want to risk my relationship with my son. I don't want this experience to be the same as I had with my father.”

What can you do to preserve family relationships while bringing children into the family dealership?

Consider a family member employment policy. It puts in writing exactly what requirements your children need to fulfill to qualify for a position in your dealership. It allows everyone to know what is needed and expected.

Agreed-upon priorities must be clearly set down. Otherwise you are likely to encounter entitlement issues should children want you to bend the rules to allow for their shortcomings.

This problem presented itself with one of our family dealership clients, comprised of two shareholders who are brothers.

The son of the eldest brother graduated from college with a degree in finance, then joined “dad's' dealership. After a couple of years, he graduated from the National Automobile Dealers Assn.'s Dealer Academy. This followed the acceptable protocol for a child to one day be considered his father's successor.

The younger shareholder's son dropped out of Northwood University and joined “dad's” dealership and started to sell cars.

Tensions began to mount between the young cousins and the brothers themselves.

The lack of a written employment policy for family members made it difficult to broach the subject of unmet and unstated expectations. It was even more complicated by the relationship of the shareholding brothers. The situation had to be addressed or potentially there would be greater problems should the two cousins become shareholders.

We use an expectation attachment to the family business employment policy. It is designed to detail in writing what you expect from family members. That includes performance, hours, interaction with managers, promotion and pay plans. Their managers should be aware of the expectations, too.

An exasperated dealer once told me, “My son-in-law works for me, but doesn't work as hard as I did when I was his age.” He then expressed his concern that his daughter makes a lot of money in her career, but wants to quit and begin having children.

The dealer asked me: “Should I pay my son-in-law more than he's worth so they can continue their lifestyle?”

I asked the dealer whether he had ever communicated his expectations to his son-in-law and daughter? He hadn't. He agreed that he should have.

Typical of someone who has built a business from the ground up, he said, “No one had to tell me to work extra hours.”

It is natural as parents to want to help our children and make their lives easier. However, the potential for dealership failure when succession occurs increases if you allow your children to take the escalator, not the stairs, to the top.

Hugh Roberts, CFP, is a partner with The Rawls Group. He is at [email protected] and 818-610-3480.