Therapy for the Family Business
After 25 years of running their own business, Jack and Alyce Schmidt had a vision. When they retired, their three children would take over and work together happily, each getting equal pay.
Today, the kids are struggling to make the dream come true. In 1991, the Schmidts moved to Florida and handed over Spacesaver Systems, Inc., a $7 million storage-management company in Kensington, Md., to David Craig, 36, Alyce’s son from a previous marriage, and Amy Hamilton, 35, and Carla Adam, 37, Jack’s daughters from his previous marriage.
But long-latent tensions among the three began bubbling to the surface, and this year they sought help when they found they could not resolve disagreements over pay. Ms. Adam, who had joined Spacesaver only three years ago and is now a sales representative, was earning considerably less than Craig, the company president, and Ms. Hamilton, an executive vice president, and she thought raises should be given more often.
“When our parents were here, they called the shots,” Craig said. “Now they’ve said, ‘You guys figure it out.’ And we’re not sure how to do it.”
Instead of hiring a consultant or going to a lawyer to draw up a traditional partnership agreement, though, the three chose a path that lies somewhere between consulting and therapy: a “partnership charter” pioneered by David Gage, a clinical psychologist and founder of BMC Associates in Washington.
According to Gage, a partnership charter is aimed at driving hidden angers and resentments into the open before they can damage or even destroy a business. It is essentially a new way to address an old problem: staving off the sorts of disputes over money and power that have been the undoing of many family enterprises.
Half of the owners of family firms in the United States expect their businesses to be jointly owned and managed someday by at least two of their children, Gage said. Yet the chances of that happening are slim, according to Joe Astrachan, editor in chief of Family Business Review. Seventy percent of family businesses are sold or liquidated before reaching the second generation, he said.
“People often spend a lot of energy avoiding issues because they imagine they won’t be able to handle the intense feelings,” Gage said. “They talk about money, but not in the depth they need to. They say they’ll be equal partners, get equal pay, work full time. But what does full time really mean? Partners often run into problems because someone feels it’s not fair that he’s putting in more hours or bringing in more business than the other person.”
Half of the owners of family firms in the United States expect their businesses to be jointly owned and managed someday by at least two of their children, Gage said. Yet the chances of that happening are slim, according to Joe Astrachan, editor in chief of Family Business Review. Seventy percent of family businesses are sold or liquidated before reaching the second generation, he said.
Half of the owners of family firms in the United States expect their businesses to be jointly owned and managed someday by at least two of their children, Gage said. Yet the chances of that happening are slim, according to Joe Astrachan, editor in chief of Family Business Review. Seventy percent of family businesses are sold or liquidated before reaching the second generation, he said.