A dealer, who heads a family business and is old enough to think about mortality, told me this:
“I love my kids equally but at the dealership they don't product equally.
“If I don't address this, there will be a mess after I'm gone. But if I open up this can of worms, my life may be hell, and my family will be in a uproar.
“How do I resolve this issue?”
I asked this fretting dealer if he was paying his sons the same amount for different levels of work. Not surprisingly he said, “Yes.” “Do they own equal amounts of stock?” Again: “Yes.”
Clearly he had identified the problem, but did not know how to resolve it. In almost 25 years of working with car dealers, I have heard this story many times.
When dealing with family members, dealers often disregard sound business practice and make decisions from the heart, instead of what is best for the business. Ironically, this usually backfires, creating family problems on top of business problems.
Equal pay plans, regardless of responsibility or productivity, promoting children before they are ready or qualified, allowing children to operate in a free-wheeling style, coming and going as they please, are failings my succession-planning partners and I see all the time in dealerships.
When your children begin working in your business, apply the same ground rules that you would for any employee. For instance, did they have to qualify for a job in your business on the same basis that non-relatives apply? Would their resumes qualify them to be given their initial jobs? Future jobs?
It is amazingly common for children to be paid the same, regardless of their positions within the dealership. You certainly would not do this with employees who are not related to you.
Undoubtedly this happens because the parent is unwilling to make business decisions that appear to play favorites. There also may be pressure to help children equally so that they can provide for their own families and have similar lifestyles.
Address this problem now if you plan to have your legacy continued via your children. Otherwise, sooner or later the more productive child is not going to put up with equal pay and equal stock ownership when he or she is carrying the major load.
In most cases, the turmoil is brewing below the surface, but it will definitely boil over when the parent is gone, if not before. For a dealership succession plan to succeed, this issue needs to be resolved while the parent is around to help reach a solution.
Many dealers are reluctant to get into this discussion because they fear not being able to find a solution without tearing the family apart. But unless the parent addresses the problem, the family and often the dealership will be torn apart afterwards.
So, a third-party advisor usually is necessary to open up these potentially volatile issues and achieve amicable solutions.
The key to a resolution is engaging all the players in a discussion of their expectations. What do you expect from your sibling? What should your sibling be able to expect from you? What should the dealer principal parent expect from each child working in the dealership? What should they be able to expect from the parent?
Values, job descriptions, roles, responsibilities, decision-making, communications, hours, authority, vacations, pay plans, stock ownership, bonuses and more need to be discussed. The more detail the better. And it needs to be written down.
Often one or more parties see things entirely differently, and this presents problems. As a result, each of the parties is likely to have unreasonable expectations. This is where a third-party intermediary is critical, helping each of the siblings and the dealer to work through differences.
Done properly, this process will take several meetings, culminating in all parties signing on to what has been agreed upon. There is no short cut, if you want to find solutions that will work for everyone.
The stakes are high: the future of your business and the ability of your family to enjoy harmonious relationships. What could be more important?
Certified financial planner Hugh Roberts is president of HB Roberts Co. He can be reached at 818-610-3480 and [email protected].
