In many family businesses, there's a great deal of confusion between ownership and management. They are not one and the same. I began to figure this out several years ago when I bought some IBM stock. I wrote a letter to the president of IBM explaining why I felt that they should place less emphasis on their mainframe computer business and spend more time marketing PC's. I received a nice form letter from the shareholder relation's department; Im sure IBMs president probably receives a lot of unsolicited advice from stockholders. In my consulting practice, the following are several questions I have been asked by business owners: Q. Should the daughter of the owner who stands to inherit a portion of her father's company have any say-so in the management of the company? A. No, unless she also is a member of the management team. Q. The owner's daughter married one of the company's outside salespeople. How long should the owner's new son-in-law continue to work in the business before he's promoted to sales manager? A. Until he has earned the respect of the other members of the management team and until he becomes the most qualified person for the job. It's extremely demoralizing to other employees when family members are shown favoritism. Q. My two sons each own 25% of the business. One is an outside salesperson and earned $92,000 last year in commissions; the other is a buyer and I pay him $51,000. The buyer son says that I am treating him unequally. How do you recommend that I respond? A. The rule in family matters is to treat kids equally, but in business the rule is to treat the kids equitably. Pay offspring who work in the business on the basis of their value and contribution to the business. Q. My daughter, still a 25% owner in our business, used to work here full time as our retail store manager, but now that she has two small children, she only comes in occasionally to work on special assignments. When she comes in the store, the store manager who replaced her says she still tells the retail sales staff what to do. When I spoke to her about it, she said that --as an owner -- she feels she has the right to say anything she wishes to anyone she wishes. What's your opinion? A. Violating lines of authority is one of the biggest mistakes an absentee owner can make in a family business. She is totally out of line when she usurps the new store manager's authority. She should never issue a directive to an employee who reports to another manager. If she observes something that the manager needs to know about, she should ask the managers permission to make a suggestion, and not make it as if she were still an authority figure. Q. My brother and I are 50/50 owners. I am CEO of the company and my brother has been sales manager for six years. Our sales have gone down for two years in a row and our market share has plummeted. What should I do? A. Whether your sales manager is an owner or hired hand, the sales manager is accountable for achieving the sales budget. Unless you're prepared to see sales deteriorate further, give him a deadline to get sales moving in the right direction. If he fails to meet the goal the two of you agree on, you have little choice but to replace him. SUMMARY Owners who do not work in the business should be rewarded by receiving their fair share of any declared dividends. And if the business is sold, absentee owners are certainly due their share of the proceeds. But ownership and management are two completely separate issues. To keep their jobs, owners who are also managers should have measurable goals to achieve just like any other employee. Owners can't be fired as owners, but as managers, they certainly can be. |
