Mom and Pop's Corner:
 

Where Goes My Loyalty, to Sibling or Spouse?
So, You're in the Family Business
by Paul I. Karofsky

Jeff: Look, Jane, we've been partners in this business for three years since Mom and Dad retired. Things have been going pretty well. I thought we understood each other and knew what to expect. I like your husband. I know he's capable and talented, but I'm not sure about his coming into the business. Besides, we're not hiring right now.

Jane: You're my brother, Jeff, I thought you'd understand. Steve doesn't intend to come into the business forever. It's just that the market is tight right now and companies in his field are down-sizing. He really needs a job. And our business could always use some good help.

Jeff: You're asking me as your brother, not as your business partner. It's not this company's responsibility to create jobs for family members in need.

Jeff reflects: "Now what am I supposed to do? She's putting me in a tough position. My sister and I have a fine business partnership and have had a good family relationship. Maybe I'm not being 'fair,' but I'm really concerned about her husband coming into the business. We don't need more help right now. What is he going to do? Are we just supposed to make a job for him just because he needs it? What kind of a salary would he get? How would my wife react? Is she going to want a job here too? What does this say to other employees? What if Steve doesn't work out? Who fires him? What if he never finds another job? Do we have to carry him forever? It just gets too complex and I'm really not up for the risks."

Jane's own thoughts are: "What good is a family business if it can't take care of the family? My husband is certainly my family! We can afford one more good person. I don't understand why Jeff can't be more sensitive to our needs at this time. It's certainly not my fault if Steve's industry is down-sizing. Can't we simply create a position that would work out well for Steve and for the business? Jeff's view simply isn't fair. I wouldn't feel the way he does if this happened to his wife!

What's going on?

Jeff is trying to sort out the issues. He says this is a family issue and not a business issue. But, in a family business, can you ever totally separate the two? The current business partnership between Jeff and Jane appears to be satisfactory. The entry of Steve into this system will certainly mean lots of change. Jeff is looking at the consequences of such a change. Where would Steve fit in the operation? To whom would he report? What would his compensation be? How would other employees react? How would this alter Jeff and Jane's relationship? What if Steve didn't work out? Despite Jeff's solid analytical skills in looking at this issue, he is a bit muted in his empathic ones.

Jane has at least one view of family business that differs from that of her brother. She sees "care of the family" at its roots and expects "more" of her brother, like some understanding for Steve's situation. Though the company may not be seeking additional help at this point in time, she believes that it is not unreasonable to create at least a temporary position to help Steve. Jane draws from her own feelings about "fairness" and how she would react if Jeff and his wife were in this situation, as she forms her expectations.

What to do?

Early in the business partnership, siblings and other family members in business together need to have a clear set of rules about who will and who won't work in the business. Some companies encourage all family members who are capable to enter the family business. But, typically, they suggest that a "need" or a specific job opening be there first. For other family businesses, working in the company is restricted, based not only on the needs of the company, but whatever constraints may be imposed by the then current principals (like "no" for spouses, but "yes" for children). For all, the rules of entry must be determined and put in writing.

Though the arguments for offering Steve a temporary position might be compelling, if a temporary job is offered, the meaning of "temporary" must be explicit not only for Steve's planning purposes but for family members and employees alike.

Jeff should explore further his concern about the possibility of his wife wanting to work in the business if Steve came in. Many principals believe that working with spouses is "asking for trouble." Others find it enormously rewarding. Jeff needs to address his own feelings about his wife working in the business in order to make an untarnished decision about Steve.

The discussions between Jeff and Jane must continue. Both need to express their own concerns and feelings and each needs to hear those of the other. Negotiation between the two is a reasonable approach. If both can meet their "needs" and are willing to compromise on their "wants," resolution may be attainable.

When the needs of sibling and spouse conflict, the fallout can be intense. Whose needs come first, those of sibling and business partner or those of spouse and life partner? Where will the loyalty be placed? The dilemma is powerful. Does loyalty to one implicitly mean disloyalty to the other? Siblings might have a wonderful business partnership filled with trust, understanding and mutual respect, but some pre-established rules of the game sure can help.

Paul Karofsky was third generation CEO in his family's business. During his 22 year career, he experienced acquisitions, divestitures, partnership separations, ownership succession, and leadership transition. Having sold his business, he returned to graduate school focused on intergenerational relationships. Paul is Executive Director Emeritus of Northeastern University's Center for Family Business in Boston and a member of the Family Firm Institute where he holds a certificate in Family Business Advising with Fellow Status and is recipient of the Hollander Award. Named an Outstanding Resource by the Young Presidents' Organization, Paul consults to families, businesses and educational organizations. You can learn more about Paul Karofsky at Transition Consulting Group. He can be reached at pkarofsky@transition-consulting.com.