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  • Mariana Rojdev

Case Study: Stalling for 12 Years to Transfer the Family Business

Updated: Apr 7



Situation

  • Family: Elderly father/founder; two brothers and a sister are active; one brother is a passive owner; elderly mother is an active “mediator.”

  • Business: Shipping, warehousing, logistics, and real estate interests.

  • Ownership: Father and mother were reluctant to sell the business to their adult children and to recede from daily operations—had been stalling for 12 years.

  • Crises: Losing $600K/month; sister “left” the family-owned business (FOB) in a rage; major battle over the going‐forward business strategy.

  • Leadership: The three active siblings have complementary skill sets (strategic, operations, and sales) and, on paper, would be able to carry the business forward.

  • Core Issue: The supercharged, emotional issues swirling around, which were causing everyone to work at cross‐purposes, behaving non‐rationally, and interfering with the FOB's critical success factors—focus, determination, courage, and teamwork.

  • Not Happening: Formation of a Holding Company; Intentionally Defective Irrevocable Trust; Family Limited Partnership; redesign of accounting system per Holding Company reorganization; business valuation.

Objectives

  • Preserve Family Relationships: Parents with their three active adult children; father with his daughter; the active adult‐children with their passive brother.

  • Bring the Sister Back In: Her departure would cause a meltdown, plus she was getting ready to do something non‐rational (buy a business to “prove herself”).

  • Align the Three Actives: The relationships among them had been battered and bruised by all the turmoil. Their bond to one another needed to be shored up.

  • “Reality Talk” with Mom: On many issues, Mom thought and spoke for Dad. She saw the lay of the land more clearly than he (e.g., his age/health, the high “feud potential” within the family; etc.) But she was ambivalent about standing firm on the side of FAMILY HARMONY.

  • Get Dad to Do the Right Thing(s): By hook or by crook—otherwise, everything was going to implode— the Family and the Business.

Solution

  • Conduct initial half‐day interviews with each family member to establish rapport and credibility; to triangulate to an approximation of “REALITY”; and to assess (tentatively) the breadth and depth of the family’s talents and abilities.

  • Administer web enabled‐assessment survey to all family members and key non‐family management. This organizational 360 produces objective data to counter‐balance the interview findings and assist in the process of triangulating toward a balanced understanding of the situation.

  • Facilitate Family Councils to resolve conflicts, prevent self‐defeating and non‐rational behavior, negotiate compromises, promote harmony, surface creative solutions, and move the family toward a mutually beneficial resolution of the difficult situation.

  • Convene side‐bar meetings to support the underlying consulting strategy—meet alone with the parents; meet alone with the three active siblings; meet alone with the passive sibling; and initiate one‐off phone conversations—utilizing this form of “shuttle diplomacy,” as the need arises.

  • Reorganize the business roles of the four key players; negotiate with Dad to assume a marginal role; invite the daughter back to run her former division; elevate one brother to run the division that Dad was “running” (this brother was seen historically as “just” a sales guy); and formalize the most talented sibling’s role as CEO.

  • Advise the Top Management Team (a.k.a. the sibling team) on how to operate effectively as a team, with a clear and smart division of labor, playing to each other’s strengths, communicating with finesse, preserving harmony, and executing on effective turnaround of the business.

Results

  • Dad stepped back and out of the business.

  • Dad transferred ownership of all meaningful entities to his children.

  • The “governor” was removed from the siblings’ incomes, and they were compensated more in line with their roles and contributions to the business.

  • As their tax advisor observed to us, “The business has made a tremendous turnaround,” going from bleeding $600K/month to showing a monthly gross profit of from $250K to $350K.

  • The family moved ahead on sorely needed tax and estate planning.



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