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Where the Family Sets the Tone

Have you ever heard the statement, "If you take care of your employees, they'll take care of you?" It reminds me of an story shared by a friend about her elderly grandmother, a woman of great wealth and status who resided in Manhattan. She was driven by chauffeur to the corner market, where she asked the clerk for two melons. "One," she requested, "should be slightly bruised." "Bruised?" replied the puzzled clerk. "Yes," she answered. "It's for the help."

Many family-business owners live the "good life," filled with perks typically unavailable to others -- luxury cars, country-club memberships, travel, and expense accounts. While business principals certainly are free to determine their own lifestyles, the impact on the rank and file can have disturbing consequences, not unlike those that have affected companies such as Tyco.

BANISH THAT BEEMER. Several years ago, I was asked by a client, Howard, and his father, to explore whether or not Howard's entry into the family's West Coast tech-manufacturing business would be appropriate. Howard had recently received his MBA after three years' experience in an allied field. After extensive interviews with Howard, his father, key nonfamily managers, and representatives of the board of directors, I suggested that there was a career opportunity for Howard in the company that would meet both the family's goals and the needs of the business.

Shortly after his dad offered his blessing, Howard called me filled with excitement. "My dad gave me the O.K.," he said, "and even bought me a new BMW convertible as a gift."

"That's great," I replied. "I'm pleased for you, your dad, and the business, and I know you're going to enjoy the BMW on the weekends."

"The weekends?" he stammered.

LOW PROFILE. "Yes, on the weekends," I said. "If you show up at the plant on Day One in a new, expensive car, just think about the message that gives the rest of the organization." Clearly, neither Howard nor his dad had taken the thought process that far.

The other night, I was talking with Daniel, a longtime friend. He and his cousins recently took over the ownership and leadership of their highly successful fourth-generation distribution business. Although the company is exceedingly profitable and liquid, with substantial investment and real estate portfolios, Daniel's father still drives a 12-year-old Pontiac.

Daniel, however, is a bit less conservative -- he pulled up to my house in his "new" used Taurus. "No reason to be flashy in business," he contends. "I prefer to keep a low profile."

ARRESTED DEVELOPMENT. Daniel said he learned this not only from his father but also from his in-laws, who had taken a different approach to "business expenses." At conferences, their family members always traveled first class, stayed in suites at the finest hotels, had exclusive "family only" dinners at four-star restaurants, extended their stay at the best resorts, and sent the rest of their staff home -- coach class -- immediately following the business portion of the meetings.

For years this seemed to work out O.K., but then the inevitable occurred -- business conditions changed. Ignoring the advice of their accountant, the family members didn't change their spending habits. The owners opted to reduce overhead by eliminating jobs and lowering insurance benefits, while maintaining their own lifestyles. Morale sank and "seeing the handwriting on the wall," several key people found other jobs as the business continued to deteriorate.

Soon after a feature article on the president's new waterfront home appeared in a major magazine, the bank called the note on the company's working capital. Family members knew things had to change. But it was too late. Within a year, Daniel told me, his in-laws' business was on the auction block, and family members were scrambling to find jobs for themselves. They still had a lifestyle to maintain.

MODERATION'S REWARDS. In family-held enterprises, the family is the model -- the behaviors and attitudes of its members set the tone for rest of the staff. Family members are under the microscope for what they wear, what they drive, where they live, whatever they do, and however they do it. Nonfamily employees, quick to see the differences, are certainly not reluctant to compare family-member lifestyles and practices to their own. While they recognize that rank does have its privilege, it can be hard to take when it's seen as coming at their expense.

Maybe there's an approach lying between the extremes of bruised fruit for the help and a 12-year-old Pontiac. Last weekend, I was talking with my 7-year-old grandson about the meaning of the word "moderation." He quickly grasped the concept. After considering the alternative, I suspect, many family business owners might do so as well.

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