How to herd off trouble if you flock together
THE FIRST family business in history, to the best of my knowledge, concerned Abraham, whose land was adjacent to Lot’s. Had they lived in the current century, I would have loved to have them as clients. Abraham and Lot, or Barry and Larry as they prefer to be known in business, are uncle and nephew. They have separate plots of land and their own employees but their land is next to each other, so they can benefit from economies of scale. In the past, they have shared irrigation systems, knowhow and some common overheads.
The business thrived for many years until the day when Barry’s employees accused Larry’s of dishonesty. Specifically, it was alleged that Larry’s sheep were not careful about where they grazed and were straying into other people’s property. Barry’s managers were bothered by this behaviour, as it was not how they liked to do business and it could cause potential reputational damage to the entire operation. Also, trust is such a fundamental principle of being in business, it was hard to see how either side could move forward once this trust had been broken.
This scenario is loosely based on historic facts but the issues are as relevant today as they were then. While no two families and no two businesses are the same, the path chosen by Barry and Larry, for those who are familiar with the original story, are relevant and can provide some guidance that we can use to consider current issues in family business environments.
First, although it was the employees who were arguing, it was time for the family to get involved. When it comes to serious disputes, it can be too deeprooted for non-family members to solve alone. The managers might be senior, and themselves trusted in the organisation, but the nuanced nature of such disputes mean that, unlike in other business organisations, it is time to have a meeting with the family members. Larry and Barry personally stepped up and took an active interest when the need arose. Otherwise their business could have been eroded quickly, due to the impasse.
Secondly, talking the issues through and trying to calm down the tension can have a positive outcome. While Barry and Larry’s respective employees were constantly fighting and could no longer talk level-headedly to one another, the family can sometimes see a way through by having an open and honest conversation to air their opinions, with a view to compromise or other resolution.
Thirdly, sometimes, as was the case with the original Barry and Larry, the two have to go their separate ways. Barry offered Larry to move in any direction and he would go the other way. In today’s world, physical distance does not always mean the business cannot still hold together. It may be that there could be a demerger into two subsidiary companies but that the family would still remain in overall control. This could mean that some overheads and other benefits of being in one overall entity were retained, at the cost of not being physically located in adjacent areas.
However the option is always on the table of a complete split into two businesses if necessary — and this is why that might be necessary. Barry said to Larry: “don’t let our employees quarrel, because remember, we are related”. In the end, the family bond is so much more important than anything a business can bring. Of course, all family businesses should aim to maximise and preserve wealth, but wherever possible the family relationship should be sacrosanct.
Geoffrey Hollander is managing partner at Cameron Baum Hollander, Chartered Accountants, specialising in family businesses, 020 7724 8824, Geoffrey@cbh.co.uk