When the future of the family vacation home is under discussion, family members' emotions tend to be strong, and the financial stakes are often high. Warm memories of time spent at the “cottage”—whatever its location, size or value—spark a desire to keep it in the family for generations. As a place where family members gather to relax, a vacation property is the glue that binds the family together. At the same time, its current fair market value may represent a large part of an estate, with the promise of continuing appreciation in the future, making it a financially valuable asset to keep.

The first challenge is determining how to transfer the property to the next generation with the least tax cost. The transfer can be handled in many ways: by gifting undivided interests in the cottage each year to individuals, by gifting the property to an irrevocable trust or by placing it in a limited liability company or limited partnership and gifting interests in the LLC or partnership.

There are several advantages to using trusts or LLCs. These vehicles offer the ability to transfer interests at a discounted tax cost, avoid probate in the state where the property is located upon the death of an owner, and protect the home from the next generation's creditors. Nonetheless, these vehicles are more complex and costly than outright ownership.

While each form has its advantages and disadvantages, the LLC form offers the greatest flexibility. If the owners contribute funds to maintain the property, there are fewer tax issues with an LLC compared with a trust. In addition, the owners can easily amend the LLC agreement to change the rules governing owners' and users' duties and obligations over time. For example, consider an LLC agreement that prohibits members from withdrawing during their lifetime. As time progresses, the family agrees that withdrawals should be permitted in some circumstances. The LLC allows the family to amend the terms of their agreement to permit a withdrawal during a member's lifetime, and to specify the conditions under which this may occur.

Creating an owners' agreement

Regardless of the form chosen for transferring the cottage to the next generation, it is essential to have a written agreement setting forth rules and procedures so the property can be maintained, managed and owned by multiple family members for many years. Even if individuals own the property outside of a trust or LLC, joint tenancy agreements can specify the terms of ownership, management and use. If a trust or LLC is used, these terms would be specified in the trust or LLC agreement.

While it is tempting to ask your attorney to draft up an agreement to which all owners will be bound, the best approach is to give all current and future owners a say in how the property will be held and managed. Attempting to impose obligations, burdens and restrictions on owners without their input is a recipe for disaster. Written questionnaires or family mediators can be helpful, enabling family members to state their thoughts anonymously.

Questions that should be asked of the next generation include:

• Do you have an interest in owning the cottage?

• Which decisions about maintenance, use and management of the property should be made by all owners, and which decisions should be made by a smaller committee?

• Under what circumstances should a sale to an outsider be considered, and who will make the decision?

• Should transfers be permitted among owners and descendants? How will price be determined?

• Can family members be bought out, and if so, what will be the price and payment terms? Should a discounted price be paid in order to discourage withdrawals and reduce the financial burden on those who continue to own the property?

The agreement should specify how funds will be collected to pay for expenses related to the cottage. Because different owners' interest in using the property (or ability to use it) may vary, membership dues, special assessments and usage fees can permit the financial burden to be spread among the family to reflect differing degrees of use and ownership. Such fees can promote fairness while also basing part of the burden on ownership of the property.

Membership dues are typically charged equally per owner. By contrast, as the name implies, usage fees are charged according to actual use, similar to rent. Finally, special assessments can be levied based on actual ownership percentages. By modifying how these three charges are assessed, you can tailor the agreement to fit your family's needs and promote a sense of equity in the property.

The agreement should also specify how several other decisions will be made. For instance, it may be appropriate for a small committee or group of managers to make some of the routine decisions and be responsible for bill paying, while other decisions may be so important as to require a vote of all owners. Issues that might be addressed include:

• Handling of routine expenses, such as property taxes, insurance, utilities and housecleaning.

• Handling of non-routine expenses, such as replacing docks or decks, repairing the roof or plumbing, redecorating and purchasing new appliances or furnishings.

• Determining who will use the cottage, and what rules users must follow.

• Renting the home to third -parties.

• Selling the property.

• Paying expenses above a stated dollar amount.

• Mortgaging the property or refinancing existing mortgages.

A written agreement will not be able to resolve all issues that may arise over the years. But the creation of a written agreement requires the owners to think about issues in advance and reach an accord outside of the heat of the moment. The agreement also lays an important framework for resolving disputes; it sets forth the rules of engagement and the dispute-resolution procedure. These benefits can be invaluable in a time of crisis, allowing energy to be spent on the issue at hand.

Ultimately, the key to successful ownership of a family vacation home lies in encouraging buy-in to the concept of keeping the cottage in the family, as well as establishing fairness in the financial and non-financial aspects of ownership. Removing perceived inequities in use or financial burden can allow family members to enjoy the property for years to come.

Susan Gell Meyers is a partner in the law firm of Warner Norcross & Judd LLP in Grand Rapids, Mich. (smeyers@wnj.com).

Family meetings are an essential part of running a family business and are critical to maintaining family harmony. When I was growing up, in addition to holding regular board meetings, my family often discussed business around the table as members gathered for meals and socializing. It was a way to bring spouses up-to-date on the company's direction and introduce the children to the business.

Over the past 30 years, family meetings have become more organized and more formal. Often an outside adviser is invited to help give the family some perspective as well as to promote a good flow of frank communication.

A fellow member of the Young Presidents' Organization who is CEO of his family business told me he spent a good deal of time studying family meetings. He had even hired an adviser to help his family set up a structure that works best for them. As a result, he schedules two kinds of meetings—one is held every other month for the owners and managers of the company, and another, the so-called general meeting for the rest of the family, is held once or twice a year. The ownership meetings cover topics such as strategy, insurance, wills and wealth management. Spouses are invited only to the general meetings, which focus on personal matters. Philanthropy and family values are also discussed here.

Another family I spoke to runs informal meetings throughout the year mainly to discuss personnel issues. According to the CEO, these meetings often take place at their vacation home during a weekend break. The frequent meetings not only foster open communication but also help elevate the children to an equal professional level. Conflicts are rarely brought home, though Mom has occasionally stepped in to arbitrate.

One friend, whose former husband runs a family-controlled public company, holds a more formal meeting once a year. Attendance is mandatory for her five grown children, three of whom have scattered across the globe. Each of her children holds stock in the family-controlled company, and one of them continues to work there. At her family meetings, leadership is rotated to allow for diversity in management style. Spouses are not included in the discussions, which usually revolve around investment policy, probably her most difficult issue. Every other year, an investment adviser joins them to help facilitate. My friend was pleased to tell me that this year, all of the family voted to invest in one of the members' new ventures. Now that is the essence of trust.

Speaking of trust, I trust that Family Business Magazine will provide you and your family with many discussion topics for your next family meeting.

In 1977, when my husband, Dave, and I started our own business—now called AwardsMall.com/Total Awards & Promotions Inc., based in Madison, Wis. —we were “babes in the woods.” We figured we would encounter some challenges along the way, and that our growing wisdom and the way we chose to deal with the challenges would get us through. Funny how naïve we can be when we're just starting out. How could we have known that we would face some of the most difficult trials a person could imagine—and how could we have foreseen the dramatic impact these experiences would have on our business and our careers?

In January 2002, our son, David Blaine, died of a grand mal seizure at age 33. David didn't work in our family business; he was a stand-up comedian. He knew (and let us know) early in life that his goal was not to work in an awards company. He was headed for a great career in comedy, but on the way he developed epilepsy at the age of 23. That's when he honed his “never quit” attitude. Several times, David would go on stage after having a seizure. Calling on all his reserves, he would give a wonderful show, and no one in the audience would ever suspect he'd just had such a brain- and body-breaking experience. “Never quit” was his personal mantra. After David's death, we learned the true meaning of that motto, with the help of caring friends and colleagues who helped shore up our resilience.

When our son died, our personal lives were torn apart, and our hearts and souls were suffering. In the midst of our bereavement, it hardly seemed important if our company made it or not. We got up each morning, got our bodies dressed and took them to the place called “work.” We didn't care if the sun was shining, if the snow was snowing, if customers called or came in, if the phone rang or didn't. All we knew was that we were in so much pain that we couldn't deal with the daily tasks of running a business. Our three daughters suffered just as much. Two of them work in our business; the third owns a web design company that works closely with us. None of us could participate in a meeting—we could hardly look at each other without breaking down.

When family businesses are tested in this way, some fail. Some families can't get it together after such a devastating event. Yet some come back like a phoenix. What's the secret? If I were on a quiz show and had to give an answer, I'd say “resilience.” I always thought anyone who owned or managed a family business had that characteristic, at least to some degree. I thought it came with the confidence and inner strength a family team develops as they grow their company. It's a “what choice do we have—let's just get going” mindset. Or “It could be worse—let's take care of things.” It's rewriting the script. It's perseverance. It's a “never quit” attitude. In business and in life, how you play the cards you're dealt determines whether or not you succeed.

Thank goodness for people like Bill Meddings—our friend, mentor and adviser—who stepped up to the plate after David's death. Bill had years of experience running his own business; the fact that ours was slightly different mattered little to him. He pitched right in and kept things going. Bill, who had sold his own company, had been working with ours for a couple of months, to explore the development of a new product division. He had yet to start on our payroll. His upbeat, enthusiastic attitude kept customers coming in, kept “the troops” happy, and for all practical purposes kept the business out of the poorhouse. Bill had developed resilience during two tours in Vietnam. He also had lots of caring to give. His attitude helped us find meaning in life again.

Along with Bill, other friends from neighboring family businesses—even our competitors—came forward to help us keep on keeping on. Our colleagues from a special industry group we belong to, the Recognition Roundtable, called us almost daily to make sure we were getting back on track. Their constant offers of help were a beacon of light in those dark days. And our own staff members, led by Kimberly DiMaggio, our general manager, were everywhere we needed them to be and did everything we needed them to do, and more. Proof of their dedication showed up in all the “extra miles” they went to keep things humming.

One of the major lessons we learned from these wonderful people was that we had permission to go on, and be successful again, enjoying life and business. We just had to give this permission to ourselves. We had to accept what happened and find the right ways to use this life challenge as we went forward. One thing we find has changed—for the better—is that while we were very close before, our family and non-family team members are even closer now.

Since David's death, one of our daughters has been diagnosed with multiple sclerosis, one had a mild stroke and the third has had other health problems. Any time family health issues occur, there's an impact on the family business, so having a resilient mindset helps. We've learned to hold each other up as we go forward. We accept what we can't change, and we change and improve on what we can. Certainly we're not heroes, angels, martyrs or supermen/women, but we know we must go on, so we go on. We know we can succeed, so we work toward that. We know we are supposed to laugh and have fun at what we do, so we do.

Linda Marshall, owner of Elysee Scientific Cosmetics in Verona, Wis., faced a similar challenge when her son Jim, the company's chemist, died in March 2002 at age 38. Despite their pain and anguish, the rest of the family pulled together and directed their efforts toward their common goal of keeping the company going. Linda, along with her son John and her daughter-in-law (Jim's wife), Jennifer, continued working as a team, and even Jim's young children, Jadyn and Ryan, have pitched in when needed.

To meet Linda is to see resilience in action. She travels back and forth to Florida to sell the company's products on the Home Shopping Network in addition to managing all the company's other distribution outlets. She also serves on the executive committee and board of directors of the Cosmetic Toiletry and Fragrance Association. She and her family share the “never quit” ethic.

While certainly a sense of purpose and a commitment to the enterprise play a huge role, it seems that the better equipped a business family is to handle stress, the more resilient they will be. These hardy family business owners seem to look upon difficult situations as learning opportunities. They focus on the lessons rather than the adversity. They work at “making lemonade.” They strive together to reach the light at the end of the tunnel.

With help from our friends and colleagues, Dave and I were able to reignite our passion for our business. We once again love what we do. Our business's future again looks bright. Our family has learned some valuable lessons. The most important one is how many wonderful friends we have, and how important they are to our business as well as to our personal lives.

One Sunday afternoon in September 2004, we were hit—literally—by another challenge, though it was nothing compared with what we faced in 2002. A lady drove into our mall parking lot to do a little shopping at a neighboring store. While attempting to park, she stepped on the accelerator instead of the brake. She tried to correct her mistake, but in a panic she stepped even harder on the accelerator—shooting her automobile right through our showroom windows and ending up smack-dab in the middle of our showroom. Thank goodness, our store was closed at the time.

Another business might have been devastated, but not us. We were so grateful to know the lady walked away without a scratch ... what a miracle. As for our store—well, we figured, the damage can be fixed. Inventory can be replaced. Stuff is only stuff. The important thing is that no one got hurt.

In the end, our store got fixed, the stuff got replaced and our business got lots of publicity. For weeks, we were told every car joke you can imagine. Every group meeting we attended, we had yet another joke to hear. We held a “garage sale” and boasted of our “drive-through service.” All the while we kept thinking: No one got hurt, no one got hurt, no one got hurt.

It's my belief that developing a resilient mindset is a lifelong process. One doesn't get it overnight. Resilient family businesses practice positive behaviors. They appreciate what everyone brings to the table. They focus on respect, caring and love for each other. They communicate when they're up and when they're down. They laugh and they cry—together. They hold hands with each other and take their bows in good times. Like a legion of soldiers, they link arms in bad times as they go forward to rebuild, regroup or reorganize their business. That's family business resilience. At our place, we call it the “never quit” attitude.

Donna M. Gray and her husband, Dave, own and operate AwardsMall.com/Total Awards & Promotions Inc. in Madison, Wis. She is the author of Never Quit! The Ups and Downs of Running a Family Business, published in 2004 by Veda Communications Co. of Fresno, Calif. (www.NeverQuitFamilyBusiness.com).

Twenty years ago, when their four children were teenagers, Anthony and Jackie Montag began a tradition: the annual family vacation. This past summer, Anthony, 70—the founder and CEO of A. Montag and Associates, an investment management company in Atlanta—and Jackie, 67— the company's head of business development —continued that tradition when they invited the rest of their family to spend a week at a lodge in Maine. The group has now expanded to include two sons-in-law, two daughters-in-law and 12 grandchildren. The Montags see their two sons, 38-year-old Ned and 37-year-old John, every day at the office. So why would a family that works together want to travel together?

Like most business families, the Montags have little time to socialize in the office with Ned, the chief operating officer, and John, head of client services. The Atlanta branches of the family visit frequently outside the business, but the Montags' two daughters, who are not shareholders, moved away when they married. The vacation is the one week a year when the extended family can enjoy one another's company without interruptions.

The Montags, old hands at planning holidays, have learned to keep things simple. Because they travel with small children, they look for vacation spots they can reach in non-stop flights. They prefer informal, camp-like settings that offer activities family members can do either individually or communally and where the grandchildren, whose ages range from five months to 19 years, can get to know one another. “We want our grandchildren to be buddies,” says Jackie. “The best part of these trips is watching them become friends.”

The Montag tradition of taking family vacations has lasted because the trips are planned for fun. But when families tack on business agendas, the vacations can backfire. “Families have to plan vacations for the right reasons,” says Kelin Gersick, senior partner in Lansberg Gersick & Associates, a family business consulting firm in New Haven, Conn.

“Vacations are not about management,” Gersick explains. “They are opportunities to build connections among shareholders and to socialize the younger generation. Vacations can have wonderful payoffs, even though families may not see them for decades.”

Many business families combine vacations with a family business retreat. In such cases, it's advisable to keep the vacation part of the trip separate from the retreat, Gersick says. He recommends that families schedule the business meetings at the beginning of the trip. Once the work is completed, family members will be free to enjoy themselves without having to think about or plan for meetings.

Of course, for business owners forgetting about work while vacationing is easier said than done. In fact, says Gersick, it's unrealistic, especially for small-business owners. What makes more sense is setting aside an hour at the beginning or end of each work day to check in with the office and respond to essential messages. It's important to hold to that time limit, he notes; otherwise, more and more vacation time will be eaten up by work.

Planning for fun

Good family vacations don't just happen; they require careful planning. Travel can be even more stressful than work, especially when the group is large, young children are in tow and tight security measures are a fact of life. To minimize the tensions of multigenerational travel, Gersick recommends all-inclusive vacations—like dude ranch visits, barge trips or packaged tours—which limit decisions families have to make. The last thing business families need is to spend their holiday negotiating what to do and where to eat.

Having reasonable expectations goes a long way, too. Family vacations should be voluntary, not command performances, says Gersick. The older generation must accept that some family members may not be able to go and that others may not want to. But if those who go enjoy themselves, more family members will probably want to go on the next one.

No one has to twist arms to get the shareholders of the McCarthy-Bush Corporation to hop on board. They start anticipating the next trip as soon as the last one ends. McCarthy-Bush is a fourth-generation construction business in Bettendorf, Iowa (Quad Cities), with affiliates in mining, real estate development and sheet-metal fabrication. Jack Bush, chairman of the board, married Patricia McCarthy, granddaughter of the founder; they have seven children, five of whom work in the business along with two sons-in-law and other relatives.

The idea for family vacations was born in 1986 when Jack invited the third and fourth generations to a Family Firm Institute conference in Hawaii. They had such a good time that they decided to make vacations an annual event. Because of the size of the family—there are 30 grandchildren, who represent the fifth generation—the trips are limited to the third and fourth generations.

“My in-laws are hooked on cruises,” says Jack's son-in-law Mike Johnson, 48, who heads the company's Clinton Engineering Division, “and that suits us just fine. Between activities on board and tours in port, cruises offer something for everyone.”

The family has a vacation planning committee, with rotating chairs. Committee members research ideas for cruises and present them to the family. Everyone's voice is heard, but the chairs have the final say. In practice, the third generation usually votes for Jack and Patricia's first choice.

“Everyone wants to go on the trips,” says Johnson, “so we never argue over where to go.”

Family traditions

After 14 years, the family has established several honored traditions. While family members go their own way during the day, they meet for appetizers and drinks before dinner in Jack and Patricia's cabin, a spacious suite booked especially for these pre-prandial gatherings.

The large family takes up two tables at dinner; there is a tacit agreement to rotate seats so that everyone sits next to different relatives each night. Johnson says the dinners are the highlight of the cruise. “We have a nightly competition to see which table is having the most fun,” he says.

Although the family tries to keep business talk to a minimum, they have built into each cruise a special feature they call “Jack's Corner”—an area of the ship where Jack holds informal conversations with family members. Jack, now 74, is semi-retired, but he still stops by the office every day to observe what's going on. “Jack's Corner is the old man's time to counsel his flock about business and remind us to be philanthropic,” says Johnson. “He's an extrovert, and he wants family employees to be the same way.”

After hearing their parents talk about the family vacations, the grandchildren clamored to be included. Two years ago, Jack and Patricia started taking batches of grandchildren on cruises. The four oldest went on the first trip, and the next six on the second. “The kids loved it,” says Johnson, “and now the others are excited about having their turns.”

Getting the kids on board

Not all youngsters are so enthusiastic about family vacations. Teenagers, of course, are the most notorious dissenters. But the chances of engaging their interest are greater, says Gersick, when parents plan trips with them and not for them. “Parents shouldn't assume what's fun or good for the kids,” Gersick says. “The younger generation will be more invested in the trip if they are part of the planning.”

Dirk Junge, chairman of the Pitcairn Trust Company, a wealth management firm in Jenkintown, Pa., tapped into his family's history as a way of involving the younger generation in a family trip. Junge's great-grandfather was John Pitcairn, co-founder of the Pittsburgh Plate Glass Company (PPG). In 1987, the family sold most of its stock in PPG and transformed its family office into the Pitcarin Trust, which manages the family's money along with funds of outside clients.

Several years ago, hundreds of Pitcairn's descendants gathered in his ancestral home in Dumfernland, Scotland, to honor him. The family's sense of its history has tied the large clan together as a family and a business for more than five generations. Junge wanted his children to be equally knowledgeable about their maternal ancestors. He combined the trip to Scotland with a visit to his wife's ancestral home in Alsace, France, and he enlisted the younger generation as family historians.

“They researched information about both regions and shared what they learned with the extended family,” says Junge. “This turned out to be one of the best and most memorable trips our family has ever taken.”

The Pitcairn descendants play as hard as they work, and they often vacation with other family members. To foster connections across branches and generations, the family set up a website for what the Pitcairns call their affinity groups (see “Reinventing a family dynasty,” FB, Winter 2004). Family members interested in, say, going scuba diving or rock climbing can hook up with other relatives who share those interests. One family member, a string musician, rounded up a group of relatives to join him at a summer music festival.

“These trips are just for fun,” says Junge, “but we see a carryover to the business. Family members who travel together are more open, more trusting and more engaged with one another.”

Family adventures

Mark Zoller knows firsthand how much good vacations can benefit families. He grew up in a family that turned their love of outdoor adventure into a family business. His father, Phillip, founded Zoller's Outdoor Odysseys, a rafting and fishing guide company in White Salmon, Wash., in 1974. The business was later divided into two companies, with son Tracy, 43, taking over the fishing business and Mark, 41, buying the rafting guide business when his father retired. This past year, Mark's 18-year old daughter, Rachel, became the third generation of the family to be licensed as a commercial white water guide. Her three younger siblings also help out in the business.

Long before he started Outdoor Odysseys, Phillip took his family on camping trips throughout the Pacific Northwest. A favorite trip was llama packing into Hells Canyon National Recreation Area, on the borders of northeastern Oregon and western Idaho. (Mark's family raises and trains llamas.) Two years ago, Mark and his two oldest children persuaded Phillip to return with them to Hells Canyon.

“My dad had been living the family's latest adventures through our eyes,” says Mark. “I wanted him to experience the incredible feeling of sitting on the rim of Devil's Canyon again, this time with his grandchildren.”

Now 64 and not as fit as he once was, Phillip worked out for four months to get in shape for the climb into the canyon. “It was a huge challenge,” says Mark, “but he made it. It was special then, but it will be even more special 25 years from now when the kids look back on it.”

Mark and his brother, who grew up with an adventurous father, have a full storehouse of family vacation memories. Mark remembers sitting around many a campfire, his mother flipping pancakes and his father poking the fire with a stick and recounting his youthful adventures. Now Mark says his job as a dad is creating memories for his children.

His family still laughs about “the road trip from hell,” when they drove to Yellowstone National Park in “a junked-out Suburban” that broke down every hundred miles. “I was always jumping out to fix something while my wife and kids sat in the car praying,” Mark recalls.

The Zollers, who are busy leading rafting trips five months a year, take vacations in the winter, which they are able to do because they home-school their children. This past December, they went to South America for five weeks to visit Rachel, who is staying with an uncle while learning Spanish. Their adventures in the Amazon jungle paled next to getting caught up in civil unrest in Bolivia and having to dodge roadblocks to reach the airport.

Taking a five-week trip was a major decision for the family. Mark worried about leaving the business for so long and what he'd face when he returned. In the end, family considerations outweighed business concerns.

“Our kids are growing up fast and will probably move away from the small town where we live,” he says, “so we feel an urgency to take family vacations now. Entrepreneurial families work, work, work. Taking time out for a vacation shows kids that families have a life outside the business—and that the reward of hard work is play.”

Deanne Stone is a business writer based in Berkeley, Calif.

Ten tips for a successful vacation

Family business advisers Kelin Gersick of Lansberg Gersick & Associates and Dennis Jaffe of the Aspen Family Business Group offer the following vacation-planning suggestions to the older generation:

1. Make the vacation a special event, not a regular family outing. Do something different from what you usually do together.

2. Extend invitations to everyone, but make participation in the trip voluntary.

3. Invite family members to take turns planning family trips.

4. Involve the younger generation in planning.

5. Be attentive to the difficulties of traveling with small children.

6. Keep in mind that younger family members have limited vacation time and may want to save some vacation days for personal travel.

7. Plan outings that encourage family members to relate to one another in new ways, like raft or barge trips.

8. Consider all-inclusive vacations, which free family members from making group decisions.

9. Keep business agendas separate from family vacations.

10. Don't try to plan the perfect vacation, or it will never happen. What's important is enjoying time with the family. You can always do something different on the next trip.

— D.S.

Who pays?

The wealth of individual family members, the size of the family, and family tradition influence who pays for the vacation. In many families, the older generation pays for all or some of the expenses. Anthony and Jackie Montag of A. Montag and Associates in Atlanta, for example, pick up the bill for lodging and meals for the extended family, but the second generation pays for airfare, rental cars and incidentals for themselves and their children.

In the Pitcairn family, it's customary for the senior family members to pay for everyone on family vacations. But when family members go on affinity trips—such as when members of the large extended family who share an interest in scuba diving go on a diving trip together—they pay for themselves.

When a family vacation is combined with business, families must take care to charge the business only for expenses incurred from real work. “It's never appropriate for a family business to pay for a family vacation,” says consultant Kelin Gersick, senior partner in Lansberg Gersick & Associates, a family business consulting firm in New Haven, Conn.

There is one exception to this rule, Gersick notes. “When the family members on the trip are all shareholders and, in the course of the trip, they hold a shareholders' meeting, then the company can pay for that portion of the expenses,” he says.

When in doubt, Gersick advises, family business owners should ask themselves: What would the company pay for if the people on the trip were not family members?

— D.S.

“I was helpless to prevent the downfall of our family business,” laments Jane, a former owner of a printing company in the Midwest. Like many siblings who are not directly involved in their family firms, Jane admits she mainly focused on her own life; she had moved away from her hometown and was busy with her own career and family. By the time she realized what was happening, it was too late. The successful business her father had bought from his employer went bust under her younger brother's leadership. The legacy her parents had provided for all three of their children was lost.

“In retrospect,” Jane says, “I understand that the core problem was alcoholism, concealed under the veneer of country club living, a high-end lifestyle and a social network of heavy drinkers.” There was an “elephant” dominating the business, and the family and their non-family employees had tried to ignore it for too long.

According to the venerable tradition of Alcoholics Anonymous, Jane's identity will be protected. Her story is painfully familiar. The first sign of the elephant was a “tremendous increase in relationship problems, including an ugly divorce and a cut-off of ordinary contact with the rest of the family,” she recalls. Failure to communicate led to business decisions made in secret and the manipulation of funds for individual advantage. There were more golf games than strategic plans; more heavy drinking than financial analysis.

Like many second-generation family firms, the company was governed in a casual, informal style. No well-functioning board met regularly to review executive and company performance. As is true of all too many well-meaning families, no one wanted to trigger more conflict by confronting the issues, even as suspicions about major problems increased.

Eventually, Jane's brother—a capable, attractive business leader who initially had enjoyed the confidence of his parents and the respect of the community—walked away from the business, seeking a “geographical cure.” He closed the doors and began a new life in another state, with no explanation to other family stockholders.

Unfortunately, a “geographical cure” seldom works. Jane and her other brother, whose only inheritance was their share in the business, were left with unanswered questions, frustration over what had disrupted the family relationships they had once enjoyed, and the troubling dilemma of whether to take legal action.

Trapped in a ‘CAGE'

In a society inundated with beer ads and encouragement to “party hearty,” our notion of normal social drinking has become super-sized. There's lots of encouragement to drink a six-pack each weekend night, or two or three Manhattans a day. How do you know if alcohol is controlling your future and the future of those you love?

You can simply do the math: If you're a man, do you have more than 14 drinks per week? If you're a woman, do you have more than seven? If you're a man, have you had more than four drinks on any day in the past month, or more than three if you're a woman? If you answered “yes” to these questions, you may be at risk for developing alcohol-related health problems and should speak with a health care professional trained to recognize substance abuse and addiction.

Another way that professionals assess drinking problems is by asking whether alcohol is becoming a CAGE:

C: Have you ever felt that you should cut down on your drinking, or has anyone else suggested that you cut down?

A: Have other people annoyed or angered you by criticizing your drinking?

G: Have you ever felt guilty about your drinking?

E: Have you ever had a drink first thing in the morning (an eye opener) to steady your nerves or get rid of a hangover?

Here's my personal definition of an untreated alcoholic: someone who keeps on drinking despite emotional, familial, financial, legal, physical, social or spiritual problems. Many alcoholics go to work every morning and try harder to prove they can get the job done. Some alcoholics give up drinking every year for Lent to “prove” they don't have a problem. Some episodic drinkers, who drink to get drunk only on “special occasions,” leave behind terrible memories of ruined holidays and children who expect promises to be broken.

Usually, problem drinkers change their behavior only when the pain of maintaining their drinking becomes greater than the pleasure it brings. When the bank refuses to refinance the company, or a divorce is threatened, or, in a state like Ohio, a salesman gets a bright orange license plate indicating a DUI, the resulting crisis may be sufficient to motivate change.

More often, change occurs when someone else stops enabling bad drinking behavior—stops lying about why the 8 a.m. meeting was canceled, stops taking on extra responsibility to cover for the alcoholic at work, stops stocking the refrigerator with beer, stops riding in a car when the driver is drunk or stops avoiding tough questions about the problem drinker's job performance. As Alanon emphasizes, you can't change anyone else's behavior, but you can change your own.

Most professionals say that enjoying a glass of wine with a great meal or a frosty beer at a baseball game isn't a problem if alcohol is not used to solve emotional problems. Some individuals “need” a drink whenever they are upset or frustrated; they also “need” a drink to celebrate every Friday afternoon, or every real or imagined victory. Teenagers who start drinking at 15 or 19 don't learn how to manage the ups and downs of normal emotional development. When they finally become sober at 40, they may find themselves functioning with the emotional maturity of an adolescent.

No matter how it's mixed, alcohol remains a depressant. Even though it reduces inhibitions, so that one may feel less tense (and less socially constrained), it contributes to a downward emotional spiral. The train that the alcoholic boards is headed straight downhill, and although some of us have a DNA loading that predisposes us to alcoholism, anyone who drinks long and hard enough can eventually flip the switch and become addicted.

Polysubstance abuse—the mixing of alcohol with prescription drugs, marijuana, cocaine, crack or other substances—is increasing, according to sources within AA. Those who mix alcohol with antidepressants engage in peculiar behavior indeed.

Advice for family business owners

Family business owners who dream of passing their business on to the next generation need to learn as much as they can about the drinking behavior of their kids and grandkids. Some college students drink like fish in the campus environment and somehow manage to move on with their lives as successful adults; other adolescents become belligerent, depressed poor performers who develop a chemical addiction that will remain a challenge for the rest of their lives.

If someone in your family can't remember where he was the night before, or what happened to his girlfriend, this is no joke. A “blackout,” or loss of recent memory, indicates brain damage and represents a major red flag that should not be ignored, especially if you are considering the person as a future leader of your company.

Some grim statistics are worth reviewing. According to the National Institute on Alcohol Abuse and Alcoholism (www.niaaa.nih.gov), alcohol consumption leads to more than 100,000 deaths each year from alcohol-related injuries and illnesses. An April 2004 report noted that more than 12% of eighth-graders and nearly 30% of 12th-graders said they had five or more drinks in a row in the previous two weeks. Where are your children?

NIAAA reports that 29% of U.S. adults, or nearly three in ten, are “risky drinkers” who regularly or occasionally exceed screening guidelines. The category of risky drinkers also includes 7% of U.S. adults —about 18 million people— who met diagnostic criteria for alcohol disorders in 2002. How many are employed in your business?

Do any members of your family meet the criteria for alcohol abuse or alcohol dependence? According to the DSM IV, the diagnostic manual used by clinicians, alcohol abuse is characterized by failure to fulfill major role obligations at work, school or home; interpersonal, social and legal problems; and/or drinking in hazardous situations.

Alcohol dependence, also known as alcoholism, is characterized by impaired control over drinking, compulsive drinking, preoccupation with drinking, tolerance for alcohol and/or withdrawal symptoms.

Abuse of alcohol and other substances continues to be one of the top health problems in our society. At $400 billion per year, untreated addiction is more expensive than heart disease ($133.2 billion per year) diabetes ($130 billion per year) and cancer ($96.1 billion per year). The emotional costs are inestimable. How much has substance abuse cost your company already?

Some steps to take:

1. If you are concerned that someone in your family business has a problem with substance abuse, tell that person what you have observed—at an appropriate time—and ask him or her to get help. Studies have found that the most effective person to suggest treatment to an alcoholic is his or her boss.

2. Learn about Alcoholics Anonymous or Alanon meetings in your area by contacting your local Council on Alcoholism or the National Drug and Alcohol Treatment Referral Routing Service (1-800-662-HELP). Attending 90 meetings within 90 days (often scheduled quite flexibly) is one inexpensive but effective route to recovery.

3. With appropriate legal advice, require random drug screening, especially for those using heavy equipment or driving company vehicles.

4. Provide adequate benefits for addiction treatment through your employee assistance program or health insurance plan, or refer to your local health department.

5. Provide information and training for managers and other supervisors, so they can recognize substance abuse problems and intervene appropriately.

6. Recognize that chemical dependency can be treated effectively, like other illnesses, but there is no quick fix. It is not only an acute problem, but also a chronic one that requires continuing vigilance, “one day at a time.”

Substance abuse is maintained by secrecy and denial. It is treated effectively with honesty, compassion and understanding of this complicated and relentless disease. If there is an elephant stomping around inside your business, your intervention may be essential. After all, your business and your family are at risk.

Ellen Frankenberg, Ph.D., is a family business consultant who facilitates family meetings and coaches executives and successors (ellen@frankenberggroup.com).

Choosing to stay

Carrol Green
Audicles Hearing Services Inc.
San Antonio, Texas

Carrol Green recalls that her parents seldom talked about business at the dinner table. That's because they rarely came home in time for dinner. Her father, Arthur Small, ran the family's hearing-aid company and worked nights and most weekends. Her mother, Gretta, who did secretarial and sales work for the company, also often worked late. Carrol, the oldest of three girls, cooked meals and helped her younger sisters with homework instead of hanging out with friends.

Despite their busy schedules, Carrol says, her family was close-knit. “In those days, if you weren't in your office, you weren't making money,” she explains. After her father retired in 1980, Carrol, now 58, took the reins of the company, Audicles Hearing Services Inc.

Carrol, who had spent some time teaching, originally had no intention of joining the business. In fact, she remembers being irked by the jokes that followed when she told friends her father sold hearing aids. Her classmates would invariably respond, “Huh? I can't hear you.” So she starting saying simply that her father owned his own business.

But when her then-husband came on board shortly after they were married in 1971, she joined Audicles part-time. Two years into the job, he decided to quit and become a teacher. “My father was devastated,” Carrol recalls. “I had wanted to go back to teaching, too. But my father really wanted the business in the family, so I told him I'd stay in the business.”

After her father died in 1984, Carrol figured if she wanted out, the time had arrived. She took two weeks off to decide whether or not to continue. She recalls ultimately reasoning that “I've put my blood, sweat and tears into this business; no way was I going to walk out on it.

“I realized I really did like the business,” Carrol reflects. “From then on, I've not thought about leaving. Now that I've made my choice, I'm happy.”

But she regrets that her father opted not to use the family name, Small, for the company. Clients are drawn to tiny, barely visible hearing aids, she explains, because “there's still a stigma against being hearing-impaired.” Arthur Small “thought it would be pompous to use his last name for the business,” Carrol says. “But if he had simply called it Small Hearing Aids I could be retired by now! We missed the advertising opportunity of a lifetime.”

Changing dynamics

Vincent ‘Randy' Chin Jr.
VP Records
Jamaica, N.Y.

Though his business is now based in Jamaica, N.Y., Chinese-descended Vincent “Randy” Chin, Jr., 42, grew up on Jamaica the island, surrounded by reggae music.

Randy recalls that as a young boy, he cared more about his toys than his father's fledgling music studio. One day, he was waiting for his dad to finish a conversation so he could ask him for a new toy racecar. As the discussion dragged on, Randy remembers wondering, “Who's this guy with dreadlocks my dad is talking to?” It was reggae legend Bob Marley.

Randy initially became an engineer for McDonnell Douglas. He joined the family recording and distribution company in 1996 after a round of McDonnell Douglas layoffs. Today, Randy is the VP of VP Records, which has been spinning out platinum records, even as Internet downloading has wreaked havoc on most of the music industry.

VP Records is now the largest Caribbean music label. “We've had hits,” Randy modestly acknowledges. He notes that one of his platinum-selling artists, Sean Paul, “has been very successful, and I think the genre has gotten a lot of exposure. Plus, we've expanded internationally.” The company has offices in both Jamaicas as well as London, Japan, Canada and Florida.

VP Records releases an average of 60 reggae and other Caribbean albums per year. Billboard Magazine has named it “Best Independent Record Label” for the past two years and “Best Reggae Imprint Label.”

All this success has opened new doors for VP Records with some of the big chain stores. That's not sitting well with the entire family. Randy's mother, Patricia, who co-founded VP Records in 1979 with her husband, Vincent Sr. (who died in 2002), still rules the roost. Randy says she wants to ensure their expansion doesn't mean they will ignore the smaller independent stores that helped VP Records become the No. 1 Caribbean label.

Randy says expansion is a greater goal for him and his brother Chris, 44, the company president, and their sister Angela, 40, who runs the Florida office with her husband, Howard Chung. Nephews Joel, 23, the company's A&R director, and Andre, 21, who works in promotions, are children of Randy's oldest brother Clive, 50, who runs his own small production company.

Randy says his mother is “a bit more old-school. She was dealing more with independent stores, and as we've expanded the company, the business dynamic is very different. So there has been that conflict. This is a constant area of discussion—the direction we should head in.”

With Chris at the helm, mother Patricia has turned her attention more to a new line of clothing she's developing, Riddem Driven. Randy's wife, Kecia—who has a few complaints of her own, chiefly about the amount of work Randy takes home—has gotten drawn in as well. She now works in merchandising with Patricia at Riddem Driven.

Finding the best spot

John LaCarte
Model Cleaners, Uniforms and Apparel LLC
Charleroi, Pa.

Model Cleaners' slogan is “Quit fooling around and give us your clothes.”

With five brothers working together in the company's ten dry-cleaning outlets and uniform rental division, the owners can't afford to fool around, either. One way the LaCarte family keeps sibling rivalry at bay in their company, based in the Pittsburgh area, is by clearly defining each brother's role.

“We didn't just go oldest to youngest when appointing jobs,” says eldest brother John, 37, the president. “We've recognized each other's strengths and moved around to different areas of the company until we found the best spot,” Michael, 36, is general manager of dry cleaning. David, 35, manages sales, while Joey, 32, is general manager of uniform rentals. Youngest brother Danny, 24, who played college football, decided to tackle the family business when the Buffalo Bills opted not to sign him. Their father, Jack, 61, who purchased the flagship dry-cleaning location in 1986, still assumes the role of family mediator.

Management council meetings, which include the five brothers and eight non-family managers, help “take the family dynamic out of decisions,” John says. “We discuss objectives for the quarter with other [non-family] people who also have a stake in how well the business runs.” With $8.5 million in sales and a 32% five-year average annual growth rate, the stakes are high.

But the family dynamic does sometimes creep in, and John says he occasionally yields to family pressure to keep the peace. For instance, he initially wasn't thrilled with the “Quit fooling around” slogan, created by a marketing company, but several brothers who liked it convinced him to give it a try.

The LaCartes still use the slogan, but the accompanying graphic has changed. One of their former print ads featured a man in knickers and socks with the motto as the headline. When John's 90-year-old grandmother saw the ad in a newspaper, she called him and suggested he ditch the ad with “those legs in it.” That was the last time it ran. Now print ads feature clothes hanging on a hanger. “Everyone has their clothes on now,” says John. “So Grandmother still has quite a say.”

Advice from everyone

Tania Warminski
Flynn's Tire & Auto Service
Mercer, Pa.

At Flynn's Tire & Auto Service in northwestern Pennsylvania, everyone in the family tends to join in business discussions, whether they work at the chain of tire shops or not.

“We're all insiders,” says vice president Tania Warminski, 34. That includes her mother, Irena Flynn, who likes to find and compare competitors' ads and offer suggestions for Flynn's marketing materials. Even Tania's nine-year-old daughter, Aubri Warminski, has her own air-pressure and tread-depth gauge. But Tania says Aubri prefers helping out with paperwork in the back office.

“I was more of a tomboy than she is so far,” Tania says. “I loved working in the shop. I didn't spend a whole lot of time working on cars, but I did do some brakes and alignments along with technicians. I've shown Aubri how to put a car up on the lift, hoping some of that will get into her blood. But I'd never force her to enter the company.”

Flynn's was founded in 1964 by Tania's late father, Joe Flynn II, along with his brother, R.P. Flynn, and their father, Joe Sr. R.P. Flynn is still involved as an adviser; his teenage children, Annie and Jimmy Flynn, work part-time at the company's Kent, Ohio, location.

Tania says her passion for the business was kindled when she was little. That's also true of her brother, company president Joe Flynn III, 31. “This is the only thing he ever wanted to do—be a tire man,” Tania says.

Tania says she doesn't mind that her younger brother is in charge. She points out that he's single and has no children, while she values the flexibility to leave work to attend her daughter's soccer games and take her turn carpooling. That arrangement is especially important these days. Tania's husband, Joseph Warminski, is serving in the Army's 350th psychological operations company in Iraq. A project manager who helps plan and execute Flynn's ongoing expansion efforts when he's stateside, he's been overseas since Sept. 11, 2004.

The firm's 250 employees also have flexible schedules, Tania says. “We let them leave early or take a day off to go to a child's field trip,” she says. But customer-service standards are strict, she notes. To ensure superior service, Flynn's emphasizes employee training.

When her father was still alive, he traveled to Oregon with Tania and her brother to visit a 253-store tire chain and observe its training program. They also toured the Seattle Fish Market and experienced its renowned customer service.

In fact, Tania recalls, the day before her father died suddenly in 2002 of a brain aneurysm, the three of them had discussed plans to enhance the company's training.

Tania and her brother have since implemented an ambitious training program that now includes 43 online courses (for salespeople and technicians through Goodyear), which cover technical skills as well as customer service.

“Our family name is on that building, so we want to make sure we give the best quality work and parts,” Tania says. “We tell our employees, ‘If you make the customer happy, you'll make us happy.'”

Trust and sacrifice

Lissette Calderon
Neo Development
Miami

“Your fuse is always shorter with family members,” notes 30-year-old Lissette Calderon, president of Miami-based Neo Development, a builder of high-rise apartments. “We have to make a conscious effort to talk to each other the way we'd talk to anyone else in any given position.”

For example, during the first three months of Lissette's pregnancy with her first child (due at press time), she was supposed to stay home in bed. But she chose not to, with construction under way on Neo's third project, a 433-unit high-rise. Lissette's mother, 47-year-old Maria Calderon, Neo's director of sales, did not approve. “She knew not to talk to me as a mother at the office,” Lissette says. “But she had a difficult time sitting back.” Outside the office, things were different. “She would talk to me from a mother's standpoint at home.”

Lissette says she plans to bring her new baby to the office. She knows her mother will enjoy watching the child grew up, as will her 22-year-old brother, Raphael, who works part-time in Neo's construction division while finishing college. “There's no other way I'd want to work, after experiencing a family-run enterprise,” Lissette says.

Lissette, who had previously worked for another real estate developer, founded the company in 2000 after a stint on Wall Street. She says she appreciates the trust and sacrifice involved in working with family. “I don't think anyone will run the sales division any better than my mother,” she asserts, “and there's no one I'd trust more to tell me the truth.”

She says family has been critical to the fast growth and success of the company, which reached $40 million in sales in 2004 after the previous year's $3 million. “When we started this,” she says, “both Mom and I didn't collect a salary; we lived off savings for over a year. I couldn't have hired another director of sales to do that for free for a year.”

Nor could she obtain free information technology services from anyone other than a relative. Her husband, Gabriel Albelo, 33, has his own software consulting company and runs Neo's systems in exchange for office space.

Sometimes, Lissette admits, shop talk gets in the way. “At family gatherings I find myself talking with my mother on the side about a deal or issue,” she says. “I have to catch myself and know when to let it go.”

Clinton Wilson, a journalism student at the University of Massachusetts, is working as an intern under the tutelage of Family Business contributor Jayne Pearl.

At the end of the fiscal year, you know where you stand. Clear numbers benchmark your company's success or failure in meeting its targets. Over time, a series of annual figures become graphs that tell you where you've been, and where you need to go. But when you look at the family dimension of your family business, there are no such benchmarks. Families cannot be measured by numbers. There's no black-and-white certainty that your family is “healthy.”

Talk shows and tabloids have left most of us too well schooled in the addictions, abuse, and violence of clearly dysfunctional families. We recognize them when we come across them at the country club or the church picnic. It's those families in the middle, yours and mine, with irritating but nonviolent problems, that raise questions in the middle of a sleepless night. How did we manage to raise a son who says he's “too smart to work?” Why do our two daughters-in-law fight with each other at every family brunch?

How do you know whether or not your family is healthy? When there are arguments in some families and cultures, the anger is loud and swift and then life goes on. In other families any decibel level beyond “rational” leads to days of stony silence. When is the expression of anger healthy? When does irritating behavior cross a line and become an indicator of unhealthy pressure building up within?

Family cycles

There is no perfect emotional climate of a healthy family. So many cultural and ethnic variations exist that we can only look out for extreme changes in our own family's “normal” behavior: Is this angry outburst more severe than anything we've seen before? Has criticism reached the point where it prevents individuals from doing their jobs? Have our own best efforts to solve a persistent problem failed? Is it time to call in professional help?

Like other living organisms, families come in many shapes and sizes, and there is no one right way to organize them. They span generations and form a unique “structure” or culture through growing constellations of individuals. Because our personal experience of family has become “normal” for us, we may actually expect other families to act like ours. Like snowflakes, though, no two families are really alike.

Does your family represent the traditional structure of one mother and one father raising their biological children all the way into adulthood? Have you been able to re-structure your family following a divorce? Does your nuclear family tend to feel isolated, or are there extended family members who pitch in during times of trouble?

The late 20th century has spawned lots of new ways to structure a family: single- parent families, remarried families, surrogate families, and so on. At least we have dropped the term “broken family.” Some of us have even learned, perhaps the hard way, that there is no such thing as a “blended family,” because the experience is never smooth. Bi-nuclear says it better.

The good news is that each of these new family structures can become healthy, even after a major loss through death or divorce or desertion. Single parents, for instance, can best develop a healthy family when they have a “co-parent,” some other supportive adult—grandparent, friend, or another single parent—who knows them and their children well, and backs them up when they need help. Stepfamilies do best when the first or biological parent consistently remains the limit-setting parent, and the new parent focuses on nurturing the children, rather than trying to discipline them.

Adaptive as many Y2K families may be, the pace of change keeps accelerating. The materials from which the family structure is built keep evolving, too. Cultural, ethnic, economic, religious, social, educational, physiological, and geographical experience is constantly changing for each individual. Consequently, the chemistry of all the individuals combined into a particular family is re-mixed day by day.

A snapshot taken at the family reunion last summer can never be repeated. Someone will have married, or divorced, or died; someone has been born, or adopted, or has moved to Australia; others have gained inches, or beards, or pounds, or stature.

Even the conventional nuclear family, as family therapist Monica McGoldrick has taught us, has its cycles. What is “healthy” behavior for a family at one stage of its life—everyone gathered together around the supper table most evenings—may be dysfunctional at another phase of the cycle, for instance, when the “children” hit 30. Like other living organisms, healthy nuclear families grow and change so much that they eventually die, while their descendants live on.

Former children, former parents

For owners of family firms, understanding the life cycle of the family has special significance. In our complex, competitive culture, the prolonged dependence of our children now ends at about 25; before that, many parents still co-sign car loans and offer shelter during law school or after the first broken engagement. All through adolescence, our sons and daughters assert lots of other kinds of independence, but they gain true economic indepen dence only later. For grown children work ing in the family firm, it may never come at all. Dad's name is still on every paycheck.

Precisely because they will remain economically dependent on their family's resources longer than their peers, it is important that children of a healthy business-owning fam ily achieve some kind of economic adulthood. One option is to demonstrate success at a job with another company before being hired by the family firm; another is to clearly link paychecks not only to standards in the industry, but also to success or failure in accomplishing defined, measurable, individual goals. It's not an allowance from Dad; it's good pay for good work.

Whenever your sons or daughters gain their own variety of economic independence, sometime between 18 and 25, you become “former parents” because your sons and daughters are “former children.” This means that unsolicited personal advice ends, and the lip-biting begins, because they are now responsible for their own adult lives, and your family's life cycle has entered a new phase. If you participate in your son's annual review because you are CEO, you focus on challenging him to improve his performance relative to his own goals, as you would any other promising employee.

Does it work?

All these issues come down to one. In order to determine whether your family is healthy, the first question is an entrepreneur's question: “Is it working?” Would each member of your family say it's working for him or her? “Working” means that each member has received enough basic support (according to their age and situation) to meet their physical, emotional, spiritual, economic, and intellectual needs. It also means that each member can also give back something healthy—a joke, a hug, a good day's work—to everyone else in the family, even mom and dad.

The emphasis here is on each member of your family saying, “It's working.” Every family will fail in some aspect of its vast responsibilities, but if it's working, each member can say, in Bruno Bettelheim's phrase, that this is a “good enough” family to live in. If even one member persistently says there is too much anger and not enough love to go around, then that family is an unhealthy place, for that individual has perhaps become the scapegoat for all the others. The clearest indicator of family health does not come from pastors, or psychologists, or pediatricians. It is each member deciding for himself or herself that this family is working, that it's “good enough for me.”

If you clearly want to develop some kind of benchmark for your family, why not ask each member to help you? Invite them to an “annual meeting” to review the health of your family. Together you can decide what is working or not working for each individual member. If you believe it would be helpful, a family psychologist or other family professional can act as facilitator. But at this consultation, the family members themselves are the decision-makers.

Ellen Frankenberg, is a Cincinnati-based psychologist who works with families in business. Over the past 10 years she has developed a practical process to guide healthy decision-making about family participation in a business.