Helping business families to repair their relationships
Reconciling Relationships and Preserving the Family Business: Tools for Success
By Ruth McClendon and Leslie B. Kadis
Haworth Press, Binghamton, N.Y., 2004
274 pp.; $49.95 hardcover, $29.95 softcover
Reviewed by Barbara Spector
Is an interpersonal conflict blocking progress in your family business? You won’t completely repair the relationship if you focus only on the matter at hand, authors Ruth McClendon and Leslie B. Kadis assert in Reconciling Relationships and Preserving the Family Business. A more productive approach, they write, is to examine the family as a system—encompassing members who are not active in the business as well as those working in the company. “[I]t is essential to change patterns rather than fix the problem,” they note. “The problem will reappear in another form if the patterns of interaction continue.”
The authors are co-founders and co-directors of the Carmel Institute for Family Business in California. McClendon, a licensed clinical social worker, is a family and couples therapist, a teacher and supervisor of family therapists and family business consultants, and a founding board member and fellow of the Family Firm Institute. Her husband, Kadis, is an organizational and business psychiatrist and a teacher of family therapy and family business.
Their book is divided into two parts. In Part I, they discuss relationships in business families; in Part II, they present their “Reconciliation Model” for resolving conflicts as well as an extended case example (a fictional family based on several clients) that shows the model in practice. The text, they write, is intended as “a survival guide for people involved in family businesses, for both family members and those serving as their advisors.”
McClendon and Kadis note that the Reconciliation Model was inspired in part by the work of South Africa’s Truth and Reconciliation Commission and point out the parallels between governance of a nation and a family. “The reform process in South Africa stressed that the past could not be ignored,” they explain, “and that accountability was a prerequisite for establishing trust.” Trust is a key issue, as they note later in the book. “[W]hen trust is taken for granted, as it is within most families, betrayals of trust are harder to withstand.”
Part I details how the past and present merge in family relationships (in which relatives’ current roles “usually have roots in past traumas and misunderstandings”) and the advantages of considering a family business from a systems perspective. This section of the book also addresses what the authors contend are the two key relationship problems seen most often in business families—oppression and fragmentation—and their tendency to be passed down through the generations.
Part I is an in-depth resource for family business service providers outside the mental health field. Business owners who want a consultant’s-eye view of family relationships and an explanation of theoretical principles will also find this section useful. Part II, which describes McClendon and Kadis’s Reconciliation Model and shows how it works via case examples (called “Interludes”), is a compelling read for anyone.
The model involves three stages—“Recognize,” “Reconsider” and “Rebuild”—in which family members seek the truth about their relationships and create common understanding, acknowledge memories and learn to listen and understand, and finally foster collaboration and establish reconciliation practices. Of course, it takes a lot of hard work for ruptured families to complete these steps, as illustrated in the case examples.
Along the way, McClendon and Kadis offer insights that can help the healing process. For example: “Internally, forgiveness involves strengthening the inner self by taking less personal offense, reducing anger and blaming, and acquiring increased understanding of situations that formerly led to feelings of shame, hurt and anger…. Forgiveness allows individuals to stop dwelling on the negative; it does not mean that the past is forgotten. In fact, many relationship violations are never forgotten, but with forgiveness the violations begin to occupy a different internal space that shields people from being so vulnerable to new wounding.”
The book concludes with a discussion of some dilemmas facing family business consultants: Who, exactly, is the client? How does a service provider maintain confidentiality and neutrality? What are the advantages and disadvantages of a team approach? When is it time for the consultation to end? Familiarity with these issues can help the business owner ask the right questions before engaging a practitioner.
How to make an in-law feel welcome
Has there been a recent addition to your extended family? A small investment in time and effort can strengthen your relationship with your in-law, notes Heidi Hess Saxton of Milan, Mich. She speaks from experience—she married into a family that owns two businesses, one of which is in the fourth generation.She suggests a few ways to make the transition easier for everyone:
1. Do … treat the in-law like an individual, rather than an appendage. Personally invite the new family member to family business and social functions as appropriate (rather than expect the spouse who works in the business to pass along the necessary information). Encourage your in-law to help with the planning, if possible.
2. Don’t … assume the new family member will go along quietly. Keep your in-law “in the loop” on the time, date and venue of family events. If she suggests something different, be willing to “flex” traditions and schedules that don’t affect the business.
3. Do … find out what your in-law does well and allow him or her to shine. Can she help to decorate the office at holiday time? Can he help to plan the company picnic? Express appreciation for your new relative’s talents.
4. Do … take note of your in-law’s interests. If you can think of a way to share them, do so. Otherwise, think of these interests as gift-giving opportunities.
5. Do … put family first when appropriate. If a salaried family member must put in extra time after normal business hours, be sure to acknowledge the “outside” spouse for making accommodations, as well.
6. Don’t … poison extended family relationships. Avoid criticizing family members about work-related matters outside of work, especially in front of children.
7. Do … include “bridge” friends at family gatherings that aren’t business-related. Invite a few other people whom you think the newcomer would like, or encourage her to bring a friend along.
8. Don’t … hold too tightly to first impressions. Cut the new person a little slack if he seems ill at ease or says something that puts you off. It can be tough to be the new kid on the block. A little patience and kindness can go a long way.
9. Don’t … use money to exclude people. If one branch of your family has fewer financial resources, find ways to level the playing field without embarrassing anyone. Set a dollar limit on gift giving. Rotate hosting responsibilities. Suggest family outings that don’t require a huge investment, like barbecues or sports events.
10. Do … try to see the situation from the newcomer’s perspective. If you are unsure how the new person feels, ask. You may not always be able to give the newcomer what he wants, but you can always treat him with the consideration you want him to give to you.
Tax and estate planning tips
In order to increase the odds that your family business will survive into the next generation, it’s essential to plan for the future, note Gail Cohen, Gayllis Ward and Kurt Brimberry of Fiduciary Trust International, which manages the assets and investment strategies of individuals, families and institutions. They offer the following planning suggestions:
1. Get a plan. Ask yourself the tough questions:
• Who will run the business when you’re not able to do so?
• Which family member(s) or employee(s) can take responsibility?
• Is it better to sell? If you sell now, you can control the process. If you wait till later, the outcome could be a hastily organized liquidation.
• Substantial estate taxes may be due at your death. Where will your heirs get the liquidity to pay—insurance policies, buy/sell agreements with business partners, liquid assets outside the business?
• If you transfer the business to a family member, how will you ensure that your heir has effective control? Also, consider how to equalize treatment of other family members. Compensating them with a larger share of liquid assets and non-voting stock is one solution.
2. Seek outside help. You may be superb at running your business, but you may not have the right family business planning experience. Consider hiring a consultant to guide you through succession issues.
3. When it comes to tax planning, don’t let the tail wag the dog. Work through your family issues first. Then turn to a team of lawyers and accountants who can ensure your plan is tax-effective and properly executed.
4. Consider creating a centralized family entity such as a family limited partnership (FLP) or family limited liability company (LLC). Centralized entities can be funded with a mix of shares in the family business, liquid assets and real estate. They offer a high degree of control if documents are carefully drafted. You can use shares of this entity to make gifts that are discounted for tax purposes to family members, family trusts and charitable trusts. When you die, the centralized entity will impose a degree of discipline and structure on family members.
5. Examine your operational structure.
• Are you taking advantage of tax-efficient structures? LLCs and limited liability partnerships (LLPs) offer liability protection, flow-through taxation and flexibility. Ask your lawyers and accountants if it is possible to switch. Getting out of a C or S corporation can be tricky, but it’s worth investigating. Use LLCs or LLPs for new ventures.
• Contribute to a mix of company-sponsored retirement plans. Ask your lawyers and accountants to review the array of defined-contribution and defined-benefit plans.
6. Communicate! When working with partners, employees or extended family, make sure information is communicated in a consistent, even-handed way and that no one is left out of the loop. Emotions run high when the family business is at stake.
7. Execute the plan. A plan is worthless if it just sits on your desk.
• Review personal documents—wills, trusts, powers of attorney, etc.
• Review business documents—bylaws, partnership agreements, buy-sell agreements, etc.
• Update when necessary and have your lawyers draft the new documents that you will need, such as a new will. You may decide to set up a family LLC or LLP, or family and charitable trusts.
• Don’t be penny-wise and pound-foolish—obtain professional help to draft your documents.
• Review your plan on a regular basis or whenever your situation changes.
• Make contingency plans in case you become disabled. Determine who will run the business if that happens.
For more information, see www.ftci.com.