Family Business Case Study
What Would You Suggest?
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Case Study: Two Brothers**

Joe Francis, 65, is faced with a difficult dilemma. The founder of a successful rental company, Francis Footwear, he has four children, Mary, age 42; Joe, Jr 37; Robert, 36; and Irene, age 31. Joe and his wife Kathleen have been married 45 years. Joe, Jr. had graduated from business school 10 years ago; he was employed by a large 'down town' firm for 6 years, at which point he decided that he was bored and after having joined an Internet start up that went bust, he wanted to return to the family business. He approached his father with a proposition. "It's clear that we need new blood in this company. You know I'm capable. I have an MBA and lots of outside business experience. Let's make a deal; I'll come back in, but only as president and a plan to buy you out. This would free you up to do what you want. Irene and Mary have wanted to buy larger homes for their children, your grandchildren, nearer you, and Mom wants you to retire so you can finally have some time together before you get too old. Rob is loyal but you know he is not a leader."

Joe considered this an attractive offer and discussed it with Robert who reacted quickly and heatedly. "Never! I've worked too hard in this company! I came to work for you 12 years ago when Joe, Jr. refused. At that time, you promised me a future here. I can't believe that you're even thinking of this!"

Joe, Sr. thinks his older son's offer is quite appealing. And, although he knows that Joe, Jr. is very bright and creative, he worries that he gets bored easily and has a tendency to jump from one thing to another. Nevertheless, he thinks, his older son really seems to have matured during the last few years. And the company's profits have been declining. Moreover, although Robert has been loyal to his father and the company, he may not be the dynamic leader needed to face a future where continued success may be determined by competition and other factors beyond his control.

What do you think Joe, Sr. should do next?
What do you recommend for the business? For the family?
What will happen if Joe, Sr. does nothing?
How would you choose the successor?

Reader Suggestions

The following are suggestions for Joe and his family business, from our readers:

David Kellogg, of Kellogg Associates, suggests:

This succession challenge must be dealt with carefully. If Joe Jr. is immediately given the President's position, it is likely that Robert will leave the company. In addition, there are indications that Joe Jr. may not be the best long term choice as a successor. If Joe Jr. were to be given the Presidency, the personal family dynamics would also be severely and permanently damaged.

I recommend that Joe Sr. be brought in to the company, but not with a guarantee that he will be President. He has not worked in the business, and has a lot to learn from his father, brother and others in the business. He should be rotated through key areas of the company, such as sales, operations, finance, etc. This will give him a chance to learn the business (with less risk that he will screw it up due to lack of experience), and also give Joe Sr. a chance to evaluate both brothers' capabilities.

It is also critical that Joe Sr. hire a consultant who can help him through this process. This consultant would assist Joe Sr. in communicating with the two brothers (and taking some of the heat for decisions made). The consultant would also help Joe Sr. to evaluate the two brothers. It may be that Robert has strong skills, but he has not been able to show his leadership capabilities because his father intimidates him in some way. An outside consultant could work with Joe Sr. with this. The consultant would help Joe Sr. to make the decision about who will be his successor.

David Kellogg
Kellogg Associates, LLC
Providence, RI
Banking and Financing Solutions
Email: dave@kelloggassociates.com

Kristen Armstrong, a Consulting Psychologist from Sonoma CA, recommends:

If Joe, Sr. does nothing, both sons will be very frustrated, hurt and angry with their dad, and the likelihood of the family business surviving as such will be greatly diminished. Unless, of course, one of the sons were to decide that too much was a stake here, that they're all liable to lose if they don't come together on this, and reach out to his brother to begin to devise a workable succession solutions. Once/if they were able to dod this (unlikely without an advisor's help), they could approach Joe Sr. with their ideas and begin a larger family discussion.

If Joe, Sr. acts, he'd do best to obtain the services of a family business advisor to help them have the difficult conversations they all need. If he makes the decision unilaterally, the business is likely to blow up, and the family will, also. If, however, he sets up family meetings where they are helped to hear each other others' needs and wants, and each one's aspirations for the business and family, they will be on their way to devising a much more inclusive, creative solution, keeping both the family and the business intact.
The successor might then be chosen via family discussions, perhaps aided by some skill/interests, and leadership competencies assessments by a consultant. Various options should be considered with respect to their legal and financial ramifications as well as the desires of the family members. Eventually, Joe, Sr. and his wife Kathleen will have to make the decision, but it will be a very much more informed one, and one that is much more likely to be welcomed by all, as they've been a part of its development.

Kristen Armstrong
Consulting Psychologist
Sonoma CA
E mail: KrisArmstong@cs.com

Thank you to our readers for their responses!

* Case is disguised and co-written by Jane Hilburt-Davis and Richard Berner, Esq. for the Second Annual Multifamily Office Forum, New York, Dec. 1, 2003.

** Submitted responses will be published to the Key Resources web site; Key Resources reserves the right to edit submissions for content and/or clarity. Not all submissions will necessarily be published, depending on space limitations.