Dysfunctional family business may need outside help

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Dear Joan:

My husband and I have a problem with my husband’s sister, who works in the family business. She continues to cost the business money by not paying quarterly taxes on time and therefore, has cost our family business approximately $7,000 last year. Not to mention that she never works a 40 hour week, yet gets her base pay figured off of 40 hours. The brothers, who do ALL the work in the company, have taken a 10 percent pay cut this year, as the business suffers financially.

The true reason the sister gets away with the repeated unethical business behavior is due to the 82 year old father, who continues to “hold all the reins,” if you will. He will do nothing when it comes to giving a consequence for his daughter’s poor work habits.

Since she produces the payroll checks each week, and continues to fight with my husband (her oldest brother) the most, she has, on two occasions this year, given him his paycheck ripped up in three pieces. The first time she ripped the check, she wrote profanity on it first and highlighted it. This is how my husband gets his checks when he has said something to her regarding her poor work skills.

My husband has tried on many occasions to talk to his father about this ongoing problem and he (the father) continues to allow her behavior, stating “this is my daughter…so what?”

Her behavior has caused my husband and his brother such frustrations as they try to keep business going upward. Do you have any suggestions?

Previous employees have quit due to her brown-nosing the father to get her way. The rules that are set for the other employees and the sons, who work their tails off, do not apply to the sister.

There are a lot of things this person has done through the years that in any other company would merit immediate termination. Can you please forward any tips? This business is truly suffering because of “daddy’s girl.”

Answer:

Daddy’s girl is a selfish, manipulative brat who never grew up and daddy is the one who let it happen.

Many families have some dysfunction but when a family business is involved, those dramas can have a huge impact on everyone else involved. Unfortunately, this scenario plays out in many family businesses because the family members can’t compartmentalize their personal and business roles.

Most of this sad, frustrating situation rests squarely on the shoulders of the father, who insists on holding on to the reins far longer than he should have. Instead of preparing the next generation for managing and growing the company, by gradually stepping aside and developing the next group of successors, he is smothering the life out of what he built.

The profile of this entrepreneur is classic: they identify so closely with the business they have no life without it, and they believe that the business couldn’t possibly do well without them.

The owner is blinded by the daughter’s relationship with him. He may fancy himself a good businessman but he loses all perspective when his children are involved. It’s not clear if your husband has shown evidence of his sister’s antics, but if he hasn’t I suggest he do so. For instance, did he show his father the ripped up checks with the profanity? Did he (or an outside firm) do exit interviews with departing employees and show them to the sister and the father? Did the father see the specific costs the daughter has caused?

If your husband has done all this and more, it’s evident that the father will not change until he is carried out of the office, feet first. In the interim, you may have some luck by using a person who has influence with the father, such as the father’s lawyer or accountant.

Ideally, an outside consultant who is an expert in family business would be able to assess the situation and facilitate these issues. If the father will block any outside intervention about his daughter, you may want to try coming in the side door. Try to convince him the family needs to develop a transition plan—tax and estate planning, succession planning, etc. If the consultant is skillful and earns the trust of the owner, he or she may be able to influence him.

There are lessons to be learned from this:

·        Family members should get outside experience before gaining entrance to the family business: having the right genes is no job qualification.

·        Family businesses should have an outside board of directors.

·        Family businesses need a succession plan and an estate plan, so the second generation can step in gradually, while the owners phase out by a specified time. This should include a carefully thought out distribution of the voting stock. Conflict and gridlock will usually occur if every sibling is “treated the same.”  For instance, siblings who don’t work in the business may have some non-voting stock.

·        Families should hold family meetings separate from business meetings.

·        Family businesses should promote on a clearly spelled out set of criteria—family members need to earn their advancement like everyone else. It’s not only good for them but it’s good for the business and everyone in it.

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