br David Bork
Near my home is a local business, one that I would not normally take as a client, simply because it is small. It began with the now deceased grandfather, Floyd and his wife June. They purchased the land in the 1920s and were farmers, growing crops and cattle. The property included an intersection on a main road with ever increasing traffic. It wasn’t long before they opened a gas station at the intersection…then came the convenience store. Soon there was a strip mall with restaurants, a variety of shops and soon after that, a mobile home park. Then came the Laundromat, a county office, machine shops, an auto parts store, a farm products, several ethic grocery stores. There wasn’t a real plan for all this to happen. Then came a purpose built day-care center, a quick lube shop, the bowling alley and a very large garden center including an 80,000 square foot greenhouse. It was much like an amoeba that keeps multiplying over and over again, until it all had a name on the map, “Floyd’s Crossing.”
Floyd and June are long gone but his four children and nine grand children continue on. Over the years everything was done by committee. No one had specific job descriptions and they didn’t know who was responsible or accountable for anything. They tired to create structure in the business but to no avail, saying, “We have always done it this way…”It was a mess, an accident waiting to happen.
There was a “Board” but it really amounted to most all of the family coming together to discuss everything. One of the daughters had married a man, Alvin, who had a very high opinion of himself and his business knowledge and acumen. It meetings he would furrow his brow, put a scowl on his face and opine about “…how it ought to be done…” With his manner and demeanor, he intimidated family members and blocked constructive decisions. One of Floyd and June’s daughters, owning 25%, lives far away and she designated Alvin her surrogate. Alvin’s wife, Betty, granddaughter of Floyd and June, got the proxy of her branch of the family so now Alvin and Betty voted 50% of the shares. Further, they live 300 miles from the business and installed a video system so “…they could keep current with what was going on in the business office.” Then they would formulate positions based on the fragments they saw and their imagined long distance wisdom. To call it an accident, waiting to happen would be an understatement. An explosion was imminent.
Betty’s brother, Will, publisher of a sports magazine, came to me and asked if I would help them. I made it clear that my clients were never this small, but asked him to lay out the issues in the business. Floyd’s Crossing is part of my larger community. I purchase groceries and other products there. The idea came to me that I should take this case as a charitable case, help the family as a way of improving the business and thus, make a contribution to the health of the community.
Just from the details I have outlined, it is clear that this family business has a lot of moving parts. They are developers, landlords, and much more – and every family member has their own opinion on what and how things must be done.
I took the family through a process of clarifying their values, some of which came from Floyd and June, others from their life experiences. Using the core values that they shared, they then agreed on a vision for the business. Much to Alvin’s chagrin, the family has elected to hold the property for the long term, build out the properties. There is a large Latino and Mexican population in the community and they will create a town center, La Zocalo, and feature ethnic events, Mexican and Central American restaurants. The vision is to take the best parts of what has been happening and to “ratchet it up” to the next level.
Robert, grandson of Floyd and June, is a very competent businessman and has been appoint President, with Salvatore, his cousin the Chief Financial Officer. While Robert is competent, his weakness is that he wants to make all family members happy…at least that WAS one of his weaknesses until I worked with him. Robert now fully understands that the only measure of his performance is the business and has nothing to do with the happiness of family members.
We have created a bonifide Board of Directors, with seven members. There are four family branches and each has a representative, then there are three outside directors. A subcommittee of family members developed a set of criteria for the outside directors, then went about to identify candidates and then select three. These were the main criteria:
- Competent business professionals with experience relevant to our business.
- Minimum of 20 years experience in business.
- Served on Board of a business in the region.
- Highest integrity, with the ability to remain objective and independent.
- Willing to commit necessary time to provide real value to the business.
The first meeting of the new board was last week. Sunday I received this note from Robert’s brother:
“I thought I would let you know that a new operating agreement was signed on Friday, for half the cost and 10 times better that what we had before. The same day we had our first board meeting that included the newly appointed outside directors. Robert and Sal did an amazing job providing information to the board and in their presentations during the meeting. Alvin is… the same… There is no need for concern, for it is a strong board and advancement is eminent. The outside directors listened to him, politely acknowledged his view while citing other facts and figures that refuted the view. Most importantly, they stressed that it was fine to get comparative data from industry sources, it is imperative that the business be operated in its market and not based on what might work hundreds of miles away.”
The effect of having outside directors on the Board was to neutralize Alvin. He is on the Board as representative of that branch of the family but no longer does he intimidate other family members. The presence of the outside directors elevates the decision making to the issue level away from the “opinion” level as before.
This family is on its way to “professionalizing” the way it operates. No longer does everyone gather and give their opinion on all matters. That, itself, is a big step. I feel a sense of satisfaction that I have contributed to the community by helping to assure the continuity of this family institution. In lieu of fee, the business has made substantial contribution to a community charity. It has been a Win-Win for everyone.
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