Family Businesses

How to work with your family in business - and still get along

May 18, 2009

Atlanta Woman organized a panel of experts in family business who offered their hard-earned insights.

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Moderator: Joe Astrachan is the director of the Cox Family Enterprise Center at Kennesaw State University. Established in 1987, the Cox Family Enterprise Center has been dedicated to the research, education and recognition of family businesses. As one of the first university-based centers of its kind, the CFEC remains on the cutting edge of family business education and research and has played a critical role in serving family businesses and furthering economic development.

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Joe Astrachan: Tell us about your business.

Susana Chavez: We are a national parking company that owns, manages and develops parking facilities. We are the second largest off-airport parking providers, parking shuttle operation, and we're in 18 cities. And we have 15,000 employees nationwide.

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Susana Chavez is vice president and southeast regional manager of Parking Company of America, a family-owned Hispanic business. Named as general manager of PCA’s Hartsfield-Jackson International Airport operations in 1998, Chavez oversees a staff of 550 employees. She was named regional manager when the company expanded to Dallas, Texas, adding 14 properties to the PCA portfolio.
 

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The other thing I was going to say is that I realized, even within these past five years, is my passion is not parking - though I know parking very well and have a real appreciation and love for it - but I realized my passion was working with my family, and with that there are a lot of family dynamics going on. So for me, you really have to want to be in the family business for it to succeed. You have to work through not only business issues that are very difficult at times, but also these family dynamics. It is much easier to say forget it and walk away as opposed to keep doing the work that you need to be doing so people keep coming back.

Astrachan: How long have you been in the business?

Chavez: I've been in the business since 1980, so 29 years.

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Larry Colin, co-author of Family, Inc: How to Manage Parents, Siblings, Spouses, Children & In-Laws in the Family Business, spent 37 years in a 92-year-old family business, Colin Service Systems. Starting out as an entry-level position in his grandfather's small window-cleaning company, Colin became president, CEO, and ultimately, chairman of the facilities support services company. He helped build the company into two multi-state enterprises, including Effective Security Systems, with 10,000 employees and sales approaching $200 million. Colin has been a guest speaker at trade associations on a variety of business topics, including mergers and acquisitions, customer service and business development.

Today, he and his wife, Laura, who is co-author of Family Inc., operate as business partners in providing training and workshops on family business topics.

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Larry Colin: I didn't want to interrupt, but I just wanted to see if you have experienced any change in your feelings from the first five years to the next five years at all?

Chavez: Oh, yeah. Every section has been different because I have been at different points in my life from - Oh, my god, it's just a job to Oh, my god, it's a job I love. I've gone from working at it day-by-day to working strategically, saying what am I really getting out of this? Is it just a job, or do I want more? So yes, there's been many changes through the years.

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Juanita Baranco, executive vice president and chief operating officer, Baranco Automotive Group, is a former assistant attorney general for the state of Georgia who co-founded Baranco Automotive Group with her husband in 1978. Baranco Automotive was one of the first African-American-owned car dealerships in metro Atlanta; with sales of more than $100 million, its nameplates now include Mercedes-Benz and Acura dealerships. Baranco was featured in Essence Magazine as one of the best businesswomen in Atlanta and was also a finalist for the 2003 Time Magazine Quality Dealer Award. She is a member of the American Bar Association and the State Bar associations of Georgia and Louisiana.

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Juanita Baranco: Well, I guess I'll jump in after that and switch horses. You know my husband and I started this business, so I don't think there's a bigger challenge in a marriage than to be in business together. We were first generation, and we started out the way many small business start out - highly undercapitalized and just our wit and intelligence there.

We often joke we started out with five dollars, and that's all we have to lose, so if we lose this we're only losing five dollars because that's all we had was five dollars. I went to law school as a family decision. My husband wanted me to go to law school for the sake of the business. I am licensed to practice both in Louisiana and Georgia.

But my husband and I are very different people. Again, we didn't have any model for this. Both of our parents weren't professional people in the sense that they were doctors, lawyers, dentists. It really evolved with our management style and rules and responsibilities. I wouldn't say quickly, but it wasn't too long until we realized we would have to divide our responsibilities -clearly defined responsibilities - and we did that with a little rule. I think I can give him credit with coming up with this rule. If we were to have a disagreement, and it's in his area of responsibility, then he gets the last word and vice versa.

And now, if it is in that nebulous area and we don't really know whose responsibility it is, then we developed the 70 percent rule. That means if you can support the other one's idea to the degree of 70 percent, then that's it. Whoever gets to the 70 percent decision, then that's it. But you have to agree with that decision 100 percent once you agree with it at least 70 percent.

Then we have a bunch of other little unspoken rules now. In the early days it was just like, 'I told you that was stupid, and guess what, it turns out it was stupid.' So now we allow each other to make mistakes. If it is something that really involves a lot of money and takes a very big decision, then we try to hash it out.

The automobile business is a big business, and it's a franchise business, so you still have to deal with meeting people and having connections, which I'm not very good at that sort of thing. I go to franchise meetings and either they like me or they don't.

But I had four children, and that's what I think has added the dynamic and three that are in the business. They feel like they have grown up in the business. They think that they know as much as their dad and I know, and they really don't. So getting them into a position in the dealership the first thing we realized is: No. 1, you need to go somewhere else and work, and we have plenty of dealer friends, so when you've done three years there, then you can come and work for me.

No. 2, they needed a real job in the dealership, not just running around. They put themselves in that position real quickly and don't go around saying, well, my parents own this joint. No, you have a job, and this is your boss.

One of the things that can happen to them, and I see it with other dealerships, you can walk in a family-owned dealership and you can see the managers, particularly the senior-level managers, operating around those children - you know, making them feel like they're doing something important. But they will flat run over them and operate around them, and that's very disconcerting for me personally. I just don't like to see that. So getting them in a job, getting them proper training to do that job and getting them into a position where they can be successful was really critical. They have to be able to stand head-to-head and toe-to-toe with other folks that are doing the same job. That's one of the lessons learned.

Colin:  Our thoughts are, unless the people that you have put in charge respect the next generation, there's nothing. They're going to have mutiny. Your business is not going to grow. They have to earn it, and positioning them in a place where they can take these small steps and have successes is vital.

Astrachan: Larry, can you put into perspective about the issue of you and your brother developing credibility.

Colin: I came into my grandfather's window cleaning business. We had three employees in the early stages when I got there. My dad turned it into a janitor service business. He had grown it into a million-dollar business called Yonkers Window Cleaning Co. My brother came in, and I never thought of working anywhere else. Plus, no one else would hire me. I hardly got out of high school.

My brother graduated from the University of Pennsylvania. He started structuring the business, and he and I got along great. I was the person that made some rain, and he was the person that could organize and structure it. We went through various levels 60s, 70s, 80s, 90s; we went up to about $60 million when some life-changing things happened to him, and he decided to move to California. He got divorced and ran two businesses. One was a guard business run by a family friend, and the other business was run by me, which was a janitorial business. We started growing; we invested money with him to buy a business in California.

He kept his shares and made equal compensation with me. The business failed, and he returned. We began to have resentment - on his side for having to always take care of the situation and on my side for having to be exposed to the situation.

At that point the business began being too human intensive. If you didn't have any people skills, which I had and he didn't,  (he was more strategic) then it's another cause of  resentment. We had made a contract with a family lawyer and that contract became unclear. It had a provision inside it, which was a buy-sell agreement and a fixed formula based on wonderful times. We ended up having a serious problem, and this business ended up beating the family issue. My brother ended up suing me.

Baranco: Now, when he left to go to California, was that on friendly terms?

Colin: Oh, absolutely. It's a wonderful thing. Here we had two businesses making money, covering the pay and making new money, and then he was going to go out there to start in a new area of the window industry.  I had the majority shares. I had 51 percent, and I was working all the time. I was under a lot of pressure, and he had a position of no accountability because time after time he was unable to deliver. And, like a family with an alcoholic or a drug addict, if you  enable a situation to perpetuate, it really becomes a disastrous problem. We ended up blowing up that dream.

My dad was totally supportive. We went to a psychiatrist; together we tried everything. It didn't work out, got sued by my brother. Our mediation ended up being a great mediation of values, which was from going from my loving family to the issue of someone who was feeling entitled [to] their toy, and it was being taken away. What was good about mediation was that it let air and sun get on the problem. We had an open setting where seven people observed this insanity. We then clicked and realized that we had gone off our core values. We decided the next day that it was only us there, and that no one else could fix this. It was only us, and we concluded it then. I talked to my brother this morning.

Mary Welch: Was there a next generation?

Colin: My brother had a son in the business. He was a great guy. I had real hopes for our relationship, and he ended up being upset with his dad for a bunch of reasons.  He had a sister that was a lawyer, but she didn't want to be part of the business.

I had two kids that were younger than them that were just getting out of college and the relationships, which is the basis of everything, were just so harsh that the last thing I wanted to do was have more people in the conga line telling me why someone parked in their space. So we tried to avoid that. The kids were hit with some money when we sold the business.

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Jennifer M. Pendergast, who has a doctorate in strategy, is senior associate of The Family Business Consulting Group, which was established in 1994 to provide consulting to businesses ranging in size from Fortune 500 operations to smaller, closely held companies. Pendergast specializes in strategic planning, family and business governance, family office structure and facilitation. She has taught undergraduate MBA and executive level programs at Emory University's Goizueta Business School, Georgia Tech and The Wharton Business School.

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Jennifer M. Pendergast: You know what strikes me listening to you is how personal this all is. That's the thing that was so interesting to me coming into the family business. You sit around a Fortune 500 company boardroom, and you're not supposed to show any emotion about what you do. And yet, I think as I have watched the family business succeed, what is good about being in business as a family is the emotion and the passion and the commitment to something that has your name.

Baranco: That was my husband's and my first fight. We were coming to a new area, and we needed to get name recognition. First of all, the name is Baranco; no one is going to be able to pronounce it. But you know, I really didn't want that name on there. We still don't know who was right; we really don't. I know it's saved us in a lot of instances, but it really has a personal burden.

Pendergast: That's the thing - how you manage the stuff that you bring to the table. It's a long-time horizon of commitment to something that you really care about. A lot of times family businesses are places where people want to work because they feel like people are going to be taking care of them.

How you manage the baggage and how you stop to deal with it all is the name of the game. So it's the 70 percent rule, or it's the "If it's in your area, then you get to do it." You have to create a system of dealing with those challenges that come up - otherwise there's just no way to succeed.
 
On the plus side is that people want to do business with family businesses, but you can never get to that unless you create a system to be able to manage all of the other systems.

Pendergast: So then, how do you do that?

Colin: It's like a marriage. You have a certain amount of money coming in, and then there are times you have less things coming in, which can test your relationship. I don't care who you are. The same thing happens in the business. It was wonderful. Out of my 37-year career, I loved it every day for 19 years. It was wonderful. We were building, and then we lost our way.

Astrachan: Jennifer, we've heard about a lot of conflicts, a lot of issues between family members, and I know you do a lot with boards and government systems. What roles can they play in managing some of that? 

Pendergast: I think the board, while there's no perfect answer any situation, can be a useful tool to use for a couple of reasons. One, it brings a lot of perspective. You also get some objectivity. So is my brother really a screw up, or is it that I have this hangover from when he was ten? Third, I would say it creates a subtle forcing mechanism to get all the junk out of the room. So when the board is there, and if you have some big decisions to make, no one wants to embarrass  themselves in front of the set of other business people. So they learn to take it up to a different issue because it doesn't belong at the business table. Those are big reasons.

Another advantage is that it's really easy to let yourself off the hook , saying 'I don't want to deal with this.' So there is accountability, and then there's accountability of I'm the mom.' How do I hold my son accountable? That's hard to do. So having someone else to enforce the, 'Hey, you know what, we had a strategic plan and it said we were going to do this, and it's now September and that hasn't happened yet.' You're not being picked on. The board is just asking you a business question - they're not doing it with all the baggage associated. And, that's why I think the board can be really valuable.

A board can then just ask good questions like any board. 'What did we miss?' And I think a lot of the time families don't take advantage of that because they tend to be really secretive. They don't tend to share a lot, or they think, 'Oh, we're so screwed up.'

Astrachan: If you love your family members and you lose a lot of money, do you still want to work with them? And if you hate your family members, no matter how much money the business is making, you want to get out of there. Susana, in the beginning you were talking about how you love working with your family. Has that been able to see you through some hard times?

Chavez: I think it's seen all of us through some hard times and tough decisions, both in keeping a healthy business and then really working hard to keep a strong family and a healthy family, so at this point we've gone through various things, but we are with each other at Christmas.