In this interview, Michael Worthington from Business Radio 101 talks with John Broons about ways to make your family business work better for you.

Transcript

Michael

John, I get a lot of people that are families in business, and I think one of the biggest questions that I see come up consistently is how come some families in business just seem to get along and it all seems to work, and other ones they disintegrate, and it turns into a big mess.

John

These things happen, and a lot of people have done a fair bit of research on this to try and work out what it is that breaks the families. In a lot of cases that I’ve come across generally the family dynamics change over time. As a family that is working hard in their business, a mum or dad together, and the kids come in and they’re working early before school and late after school, stuffing envelopes with invoices, or-

Michael

I’m thinking of my kids there, John. Free labor.

John

That’s how some of these businesses start. When they grow, and the kids have this emotional connection to the business if there’s more than one kid, there’s, okay, we’ve got to share it round maybe. The business will grow. People will come in, employees. Sometimes the kids get sidelined. They’ll go to school. They’ll get an education, and they may or may not come to the business. When they come to the business, what are the rules about coming into the business? What are the rules about leaving the business? Have we had these conversations?

Michael

That one you said, now, and I don’t want to interrupt your flow, but the rules on leaving the business. That’s an interesting one. We see that in business partnerships. If me and you went into business we’d have those rules.

John

If we had a partnership agreement there would be some sort of conversation we will have expected to have had. Not everybody does that.

Michael

No, but in business I was always taught you go into a business partnership, you have got to have entry rules, you got to have exit rules. You’re saying this applies to family.

John

Of course it applies to family. Just to follow this particular train, if you’ve got a son or a daughter who comes in and spends time in the business, and you say, “Listen, it’s …” One particular example where a son had finished a job for a period of years. Dad says, “Why don’t you come in to help me for three months?”

15 months later when I asked the question of the son: “So, have you got a contract?” No. I said, “Was there a conversation about how you come into the business?” No. I said, “Do you feel the salary’s fair?” Dad’s sitting next to him and mum’s sitting next to him, and it’s like, “No.” I said, “What happens if you want to leave?” Shrugging of shoulders and looking at dad and no comment.

I said, “Well, there’s no contract, is there? If you have employees who are hired by skills or for a particular purpose that are unskilled, it doesn’t matter, they will be under an award or they will have a contract, and hire dates, and fire dates, and what you can do, and what you can’t do, what they can do, or what they can’t do, so why shouldn’t that also stick with families?”

Michael

Excellent. It just caught me, and I know we’re talking about families that succeed and don’t succeed, but just when you just mentioned that then it was just like … It was one of them moments of going … It seems, it’s like, is it the blinding flash of the obvious some people say?

John

Yes. That’s exactly what it is.

Michael

That we don’t see.

John

Family or people that will hire family members, in some cases, “Come and give us a hand for a couple of weeks.” It gets to be a couple of months and then it can be a couple of years, and sometimes it’s a very long time. You’ve missed your chance to think about, “Gee, I should have gone out and done something else with my life.” Some people will say it’s your fault. They don’t take ownership. We have those sorts of problems that do pop up sometimes where people have given many, many years of service and they feel they’ve been dudded, especially when the business gets sold, and then, “Where’s my share?” Your share? Well, I’ve put in just as much as you, and you’re my brother, you might own it, but mum and dad left it to both of us, didn’t they? Where’s the shares and where’s the agreement and where are the conversations?

Michael

Ouch. Getting back, because I’ll end up dragging you off topic, as I tend to do.

John

No. That was actually back on the topic, why do they come, but …

Michael

That was back on. This is part of these dynamics you’re talking about.

John

Yes.

Michael

Wow. We’ve got to this stage. Is this what you’re saying starts to disintegrate? Is it almost, I hate to use the word lack of trust, but is it because things aren’t discussed that certain members of the family don’t know where they fit properly is kind of a … Well, it’s always …

John

You have to have a conversation about why you’re being hired, in my opinion. I’d like to have a contract about the work that I’m doing, and that at least gives me some understanding of how long I’m expected to be there. Is it a one-year contract? Is it a five-year contract? Is it a never-ending contract, if I want to leave? I need to be in control of me is what I’m saying. The business needs to be under the control of those people leading the business. If I join in and I actually want to jump on the train and go on the train of the business, great, but I also need to know how to get off the train, and if the train driver says, “No. I don’t like you.” I need to know how to exit you.

That is part of it. Then you’ve got so many other parts that will come to play. You need to know who you are. Those conversations are important. The business needs to know what it is, but the family which is even something that’s different again from the train of the business, the family needs to know what it stands for. Do we really want to be here for the next 10 years, 20 years, 50 years, 100 years? If so, what does it look like, because we need to know how to handle change, change of the environment, change of the economy, change of the location, change of the product, change of the customer, change of the supplier, change of the government.

In 100 years a lot can happen, so we need to be able to have these conversations, and if we don’t have them somewhere along the way as an individual I can be challenged, as a family I can be challenged, and as a business I can be challenged.

Michael

When you consult with families that are in business as well as helping them get these structures and these conversations happening, are you also then constructing it so they know how to continue these conversations, so through the changes in environment, through government, through customers it becomes part of their organization?

John

Ideally the family will grow, the individual grows, the business will grow. The business already has a structure. In most cases you start off as a small trader. You might become a partnership. You might become incorporated, and sometimes you can go public. The fact is the business has a path and they grow and they have structures and they have processes and procedures. What I try and help families do is have some of that processes and procedures around what they do, and understand what ownership means and how that will have effect on processes and procedures, and in the ownership thing where you have what’s called a board of directors, quite possibly, as the business professionalizes and gets bigger, so we need to understand how that works as well.

There’s another part of this conversation, Mike, and that’s what happens as the family changes over time. I talked about the demographics and how we move forward, but really as individuals in families age, yes, older people will step out, but the younger people as they grow up, the kids they tend to find partners and get married and that changes the family dynamic. The culture of the family will change. You bring some other person in, they may be of a different religion. They could be a different ethic origin. They could be Spanish, Russian, Italian, Greek, French, Japanese, Chinese, Korean, doesn’t matter. If they’re different to the way you’ve got brought up, there’s going to be some difference of perspective when you come into the family.

You can have family disagreements that have absolutely nothing to do with the business that will fracture a family, that in turn will carry into the business, whether it’s because an individual’s in there or whether two or more people are in there from the family. Conversations can be shortened. There can be anger that can be brought into the business place, and it can break that way. It doesn’t have to be business issues that will break the family. It can be family issues that can break the business.

Michael

I guess that’s when you’ve talked so many times, when you talk about family businesses and you say, well, it’s actually a family that’s just in business, and you’re saying because it is a family that’s in business together, those family dynamics that are coming in … They must be really challenging at times because you can’t pick your daughter’s partner or your son’s partner, if it’s mum and dad running the business, and sometimes it’s like-

John

Sometimes they try, and sometimes they do.

Michael

Sometimes they try. True. You yourself, you’ve been through this. You went and bought your family business.

John

Yes. There was a financial restructuring of the family and the business for me to extricate myself from the family stuff that was going on.

Michael

When you did, how difficult was that for you then to start having conversations, and keep the family together and still united through something that is a massive change, because there’s a big power shift, now, change?

John

The way I worked it was I had to have conversations with my sisters and my mother and my brothers-in-law, and my stepfather about what we were all about. Our primary focus was always family. The business was just part of the conversation, and yet it was driving a lot of the angst because of the economical environment of the day. That was navigating, having conversations, trying to achieve outcomes that were agreed by all family members to be fair.

Michael

Agreed by all family members.

John

Yes. Sometimes the stuff that goes on about kids, grandkids, grandmas, grandpas, what Uncle Jack did or Uncle Jimmy did, or Auntie Fay did, you can look through genograms of different families that have been in business for many, many years and there are secrets and there are liaisons and there are all sorts of carry ons that will shape the family and the business going forward. As a professional working in this field, I will try to find out as much as I can about the history of the family to see what sort of paradigms get played out through generations.

Michael

When you’re talking about in-laws and outlaws as we colloquially call them in Australia and they’re coming in, what is the best way for a business … This is a family business. Say it’s a son or a daughter and they married and they turn around and they say, “Well, now I’m married, my partner should be in the business, John.”

John

If it was me? I’d say, okay, do I need a job in the business filled? If there is no job for him in the business, then I’m not necessarily going to give him one. I’m not going to make a job. I’m not going to pay extra expense if there isn’t requirement for it. There’s a conversation that would have to be had with the daughter many years earlier: we will only employ if we need jobs filled, and those jobs that we fill will need to be filled by somebody who’s capable of doing those jobs. We will pay the person benchmark, so we will pay within the vicinity of whatever it takes if somebody was doing a comparable job in another industry similar to ours.

Michael

Your attitude is that just because we’re a family and we’re in business there is no entitlement just because you’re a member of the family to have a job in the business.

John

That’s my position, but different families will be different. That’s their choice.

Michael

I guess that’s where someone like yourself when you sit down at a boardroom table with these people or their dinner tables probably sometimes with these people, they must be the challenging conversations that you have to navigate and not so much steer but mediate, would that be a good term for what you do in those circumstances?

John

I prefer the term facilitate the conversation.

Michael

You facilitate it.

John

The reason I use that word instead of mediate is it’s not a matter of mediation. There’s not going to be a winner or loser out of all of this. This has got to be a win-win for everybody. We all have to have that picture in our head, how do we actually go on from here? If we’re staying as a family together and in business together, how do we make sure that we can even have an argument and still walk away friends?

Michael

Is this the same attitude that comes up, say, I married into the family, but I already have a business, but now I say, “Well, we’re a family. You should buy your products and services off me rather than them.”

John

Sometimes that happens, but here’s the conversation that needs to be had: “Why should I buy it from you?” Is the product better, cheaper? Is it going to help me in my business? Yes, I understand I can be an extra sale for you. It’s got to be a value-value exchange. To me if you’re in a family business, you want to try and achieve win-win. Then everybody can hopefully remain happy with outcomes. In this case I would need to know much more about what was being offered from the family, from the son-in-law, the new son-in-law who said, “I’ve got this business on the side. You should buy my product instead.” I’d also like to know more about the family’s business. Do these products … Are they aligned? Are they working for the same benefits? Is it an improvement for our business, or is it just something that we’re …

If it’s a line ball, maybe you might support a son-in-law. The son-in-law would need to understand then that if something else came in cheaper you might leave the son-in-law, or if the son-in-law’s product became less environmentally friendly or had difficulties with it you might move. Yes, there’s an opportunity because it is a relationship. That’s what brings the opportunity together, but we also need to be understanding of if the business environment changes, we need to both be flexible enough to say, “Time’s moving. Things are changing. We need to make our moves.”

Michael

Even though families in business bring emotions into the business, you’re saying that at the actual end of the day you still need to treat it as business.

John

In business, we’re out to make sales, generate wealth, and if we’re in a family business we generally like to have some fun and have a nice place of work. We also like to have a nice place of work so that the employees will stay. That said, the family side of things, if that’s the driving force then we’re going to try and stay aligned and happy in everything we do. We don’t necessarily bring the emotions of the family into the business. Yes, we can have fun and, yes, we can be happy, but we need this conversation and what are the rules about how we bring ourselves and how we represent the business.

Some businesses are very different. Some businesses will be 24/7. Some businesses will be in different avenues. They could be aligned with some sporting thing, so they’re out there on the weekends saying, “Our team’s great. I need to be wearing the colors of the team.” Therefore, what are the rules of the family? If we’re wearing the colors of the team or the company, are we allowed to drink socially, because it’s our weekend and yet we’re out there representing the business? There’s a lot more conversations that maybe we haven’t thought of to have.

Michael

Hence, John’s favorite saying: when you’ve seen one family in business, you’ve only ever seen one family in business.

John

There’s another thing, too, and I won’t say it’s the last one, but it’s certainly another one. Family dynamics can, or businesses, family businesses can be shattered by the fact that sometimes those founders or the older generation they just can’t bring themselves to leave. How do we go about structuring that so that we can actually keep the business going, at the same time showing respect to the older generation, at the same time giving the power to the younger generation? It’s real middle ground. All family businesses are different. All the people are different. We’re playing all sorts of music and everybody’s playing a different instrument. Sometimes you can get some really lousy sounds.

Michael

That’s a great analogy.

John

If you had somebody that was able to have the conversations that would elicit the trust that maybe we could move people from, “I have to be here 24/7, every day, every week. I’ve done it for the last 40 years, and I plan on doing it for the next 40 years.” That’s not necessarily going to be in the best interests of everybody, but how do we have those conversations so that the older generation realize that maybe it is time, and doing it in a way that the younger generation are respectful of the older generation, that it’s not just a hammer and thongs and, “No. Move out. Move over. I’m taking the chair now.”

Then you also have the older generation sometimes they’ll not even have a will. There’s a very large section of owner businesses where the owners don’t have wills. That’s a critical, critical thing for businesses, because in different countries, in different jurisdictions … In Australia, for example, the state trustee takes over, and you may not be able to get to that individual’s bank accounts. You may not be able to get into whatever control that individual had if they pass. Family members can’t access any of that person’s assets or business pieces, because there is no will.

Michael

I’ve seen it actually happen where they’ve had a family trust, and one member of the family was the executor of the trust, or whatever you call them, for the distribution. They passed away unexpectedly and no one else had access to the trust. It was a nightmare to start trying to get it to work out, even though her husband’s saying, “Yes, but it was my wife.” Because obviously they’ve done it for protection issues. “Well, you’re not on it. You might be a beneficiary, but you’re not-”

John

You can see why do family businesses break down? We don’t necessarily know even what mum and dad might have in their will. I encourage people to have conversations. If we don’t know what’s in mum and dad’s will and there’s two kids that aren’t in the business and two kids that are, have we ever talked about what’s fair and what’s reasonable and what’s equitable? Equal, “equal,” and, “I’m getting the business. You don’t get anything.”

Michael

We used to see a lot of that in West Australia, for those overseas viewers and listeners, but we used to see a lot of that with our farming, didn’t we? It was very much a-

John

Farming is very much a difficult area from that point of view.

Michael

You’re the first son. You get it and the eldest daughter says, “I was here first.” They’re going, “Nuh-uh (negative).” We’ve seen a lot of difficulties in farms just particular to West Aus-

John

And siblings then get frustrated. They get angry because it gets to be a little bit based around greed, which dislocates family, which means the cousins, the next generation, the third or fourth or fifth generation, they won’t talk to each other because mum and dad won’t talk to each other, therefore we’ve got that disconnect. It’s a much bigger issue than people sometimes think about.

Michael

How many years have you actually been doing this now, John?

John

Over 30 years. I don’t know. More.

Michael

You obviously have seen hundreds of clients in doing this. What are the types of businesses you’ve actually personally navigated through and helped them on their path to get exactly what they want?

John

There’s a number of manufacturing businesses. There’s farming businesses, a few service industries. It’s been quite a mix. It’s been quite a mix.

Michael

Have you found with the families in the business that there were particular industries that are a little bit more, or types of family businesses that have been a little bit more difficult or challenging to navigate through the complexities, or is it just the families, there’s certain families that are more complex due to whatever that’s in there?

John

Generally the family business stuff is the stuff that I come in for. The complexity of the business is not necessarily a big part of the conversations. It’s more about where the individuals are playing within the business, whether they’re trained, whether they’ve had experience outside, whether they’re competent, whether they’re able to work with others. That crosses over from the business into the family’s [inaudible 00:24:33]. How do we get along? Some families have a black sheep, and that person has never been spoken to for 20, 30 years, but pops up when dad passes away. You know what I mean?

Michael

And I’m here.

John

Across the board it comes down to the people, therefore the conversations.

Michael

For you, you get engaged into, and every family is different, and I’m just looking for a little bit of generality, you get engaged. Is there a period of time for yourself which is the intense time for yourself? I know you know to speak to all the family members. Is this what you try to do? Is this your consistent approach, get a complete overview of each family member first?

John

I try to. I try to get a big picture. I spend quite a bit of time doing that. Without that initial time spent with family members, I can’t get to know the questions that I need to ask when I get everybody together in a group about the challenges that they’re all facing.

Michael

You use that process to unpack or review all the dynamics that are going in, and the challenges that those dynamics might be creating. That’s what you’re looking for there, so then you can start to find the pathways.

John

Yes. A little bit. I need to understand the individual. I need to understand the group, and that’s part of the work that I do.

Michael

I know you’re short of time. I know you’ve got to go to another appointment, but I’ve got you in the studio. I’ve got to ask you one question. 30 odd years you’ve been doing this, why? Why [inaudible 00:26:19]?

John

It’s a question that came up the other day, in fact; I was with some colleagues. It’s just obviously, for me, it’s a big part of I use the word heart. I’ve been through changing family business structures, experiences. I think I was quite lucky, but I also think I had the right conversations at the right time with my family, and not everybody knows the right conversations or the right time, and that’s why I say I was quite lucky. I just found it so interesting and enjoyable, and I see the possibilities of families breaking down. I think I can be a help to families who are in business, so that helps families, which to me makes me feel good. If I can help businesses, that means it’s going to help hopefully grow the economy and make jobs for other people as well.

Michael

Thanks so much John.

John

Thank you Michael.