Art of Accounting: Someone has to be the Boss in a Family Business
IMGCAP(1)]Someone has to be the boss. When the founder is active, he or she is usually the boss. There are exceptions, but I want to talk about parents who step aside to have their children run the business, particularly where there is more than one child working in the business.
I firmly believe there needs to be a boss, although I have seen some situations where two siblings can run the business as equals. One such time there were two brothers working alongside the father and I was assisting in the succession process. Part of the plan was to evaluate the brothers to see if they were capable of carrying on without the father and how they would interact with each other. In this case they had completely separate functions that each performed very well. One of the sons was in charge of the order entry, fulfillment, manufacturing, packing, distribution, purchasing and inventory. Over 300 people worked in those areas. The other son was in charge of the marketing and sales. While he was a powerhouse, only 10 people worked in those departments. The father maintained control of the finance and administrative functions.
At one of my meetings with the father I explained why there should be a “boss” and that the son with the much greater responsibilities should be made the president when the time came. The other son would be the vice president. This was during one of our usual confidential meetings where ideas were expressed and kicked around. Well, the father told the marketing son that I said his brother should be the boss and that he would work for his brother. The next time I was at their factory he tore into me and told me that I had some nerve making that suggestion and from that point on he would be “my enemy.” This was very upsetting, but the least the father could have done was tell the other son that I suggested he be the president!
That exchange destroyed the free and open advice I was providing to the father since nothing thereafter would be confidential. In effect the father, at that point, lost his confidential adviser. However, over time the full succession plan was implemented, and the company became much more successful with the two sons jointly in charge.
P.S.: When the father stepped aside the marketing son had the personal pleasure of discharging me as their accountant.
Lesson learned: Watch what you say about family members and assume everyone will know everything you say. I believe I do my job very well and also recognize that I need to provide the best advice I can. You just have to be prepared to deal with the consequences.
Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, published by www.CPATrendlines.com and “Managing Your Tax Season, Third Edition,” published by the AICPA. Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or firstname.lastname@example.org.