In Family Business
DMA Group, Inc.
Family members engaged in the family business successorship process may drastically reduce the odds of successorship trouble and business failure by adopting and practicing the following:
1. Work Outside The Family Business. Following completion of an acceptable formal education, potential successors (daughters, sons, daughters/sons-in-law) should spend seven to ten years working in non-family owned businesses gaining experience, exposure, credibility, and self-esteem working for and reporting to non-family supervisors.
2. The Family Business "Owes" You Nothing. Look upon your family's business as not owing you or any family member a job or an income. Successor generations need to adopt an often times difficult reality of most family businesses—that to work for one is: (1) a privilege, (2) a sacrifice during the first 10 to 15 years, and (3) financially rewarding only over a lifetime.
3. Work Harder. If and when a family member joins the family business, they should expect to work harder and smarter producing greater results for less freedom during the first ten plus years.
4. Don't Compare. Non-family, non-employee spouses are often forever challenged to comprehend and/or accept the foregoing numbers 2 and 3 above. You should not compare your married life to others who are not in a family business similar to yours. They will rarely compare.
5. Take Less Pay. Family member pay is based on formal education, growth potential, leadership skills, market demand, and merit less 20% during their first ten plus years of family company employment. This emphasizes frugal values and a "pay the price" investment attitude.
6. Don't Base Employment On Stock Ownership. Family business stock ownership is under the sole and exclusive control and decision making of the senior generation family business stockholder(s) and their professional advisors. Successor-generation family members should base their employment and/or potential contribution to the family business on the potential of the business to fulfill their career interest and desire to work around and with family members. Employment should not be based primarily on compensation, assumed favorable treatment or stock ownership.
7. Blood Relatives Only Stockholders. Stockholders of (the parent company of) privately-owned family businesses (or the parent company of) should be limited to deserving full-time, long-term employees who are blood relatives and cash investors. In-laws who are full-time employees and deserve stock in the family business should be awarded stock in the name of the blood relative spouse.
8. Sign Stockholder Limitation Agreement. Issuance of all company stock should be accompanied by a professionally-written, completed, signed stockholders' agreement evidencing all agreed-to stock use and disposal limitations.
9. Hold Formal Planning Sessions. Participate in a formal, off-site family business planning session at least every six months to discuss recent family business issues and plan future family business priorities.
10. Provide Written Solutions To Problems. Identifying family business problems is easy! Your challenge is to identify major issues or problems only when you can submit, in writing, detailed practical solutions to the problems that may be successfully implemented.
11 . Measure Results, Not Effort. Family member employees, like non-family employees, should place the greatest operational emphasis on the execution of basic tasks to achieve measurable results as opposed to analysis.
12. Always Be Respectful. Under all circumstances, always be sensitive and respectful to "the boss(es)," especially in the company of others.
13. Learn From Experienced Specialist. Use an experienced, competent family business specialist, counselor, or facilitator to provide focused, prioritized, objective management of the successorship process.
©DMA Group, Inc., 1996