Part of the responsibility of a family business consultant is to assist in identifying problems that should be referred to other professionals. My specialty is in business management, but in my 25 years advising family companies I have often come across a business problem, or a people problem, that turned out to be a health problem, requiring the attention of a physician.
Managers of family businesses are susceptible to the same range of health risks and chronic ailments as the rest of humankind—heart trouble, high blood pressure, cancer, arthritis, depression, drug abuse, alcoholism, and so on. These and other problems can lead to sluggish performance, poor business judgment, and erratic decision-making in top management. In many cases, the person with the problem is the owner-manager or another family member.
Like most of us, busy owners and managers frequently deal with the problem by avoidance—and denial—putting off their regular checkup or refusing to see a doctor at all. In his seminal book on family business, Beyond Survival, LÈon Danco wrote that business founders tend to believe in their immortality. Whether or not they really believe that, they often seem to act that way. When they do consult their physician, moreover, they may demand an instant cure, or argue with the doctor, or ignore his advice. Doctors are as powerful in their own bailiwick as entrepreneurs are in theirs and often the clash of titanic egos generates sparks.
What follows are examples of some of the health problems I've encountered in family companies that have turned into business problems and how they were resolved. I will also offer some observations on general attitudes toward health in family businesses and on such issues as how to choose a doctor and maintain the privacy of your medical records.
Diagnosing a Performance Problem
The grandson and namesake of one business founder I once encountered was considered a chronic marginal performer by his supervisors. In their evaluations, they reported the young man seemed to lack motivation from the time he joined the company. The grandfather was in poor health and no longer running the company, which is a multi-store retail operation. The CEO, a middle-aged cousin of the young man, was perplexed about how to handle this delicate situation. Seeking an independent view, he referred it to me, a consultant to the company on management development.
The grandson, 25 years old, seemed to me to be a fine fellow. During a major company reorganization, he had been put in charge of a department of a retail store. Before that he had been working on a project to apply computer software to the firm's accounting systems. In this one-year assignment and two prior ones, he had performed marginally. Not poorly, but not with distinction.
When I investigated further, I found that his first two supervisors were not very good managers. In his third assignment, the software project, he had worked for a family member who is a superb manager. However, another senior executive had been in charge during the initial phase and the project had been poorly thought out and hurriedly implemented. The family member who succeeded this man was unable to reverse the damage; the project was canceled, through no fault of the grandson.
His new assignment, in the retail store, posed other challenges. His department involved complex merchandising and was undergoing many changes One problem was too little storage space for high-volume items, which required close attention to computer printouts for turnover history, forecasts, orders-in-process, advertising promotions, and schedules.
A few weeks into this new assignment, his new boss wanted him removed. There were too many items out of stock, too many lost sales. The young man was floundering and, untypically for him, often seemed angry. I suggested that he take a series of aptitude tests and also consider a physical exam.
The aptitude tests had to be halted when the psychologist suspected that the young man suffered from dyslexia. People with dyslexia, even some with exceptional intelligence, have problems with reading and with numbers. The young man's problems were deep and longstanding. Why hadn't this been diagnosed earlier—in school or in a pre-employment physical exam? Nobody knew. Family members weren't required to take the company physical. Why hadn't he been sent for aptitude tests after the first two evaluations? Because it wasn't clear after both whether the young man himself, or poor supervisors, were to blame for his mediocre record.
The grandson was referred to specialists. As suspected, the diagnosis was dyslexia. My job then was to recommend ways the company could avoid similar instances of poor supervision. I also recommended that all family employees follow the company's personnel rules, and that management stop overlooking family non-compliance with policy.
Finally, the professionals and the family considered what the next career step for the grandson should be. The medical people suggested a different line of work. I agreed. The aptitude tests had suggested that he work with his hands. He had always enjoyed carpentry and is now an independent contractor in that field.
Two Cases of Alcoholism
It is difficult for a company to distinguish between executives who imbibe occasionally but have their drinking under control, and others who are incapacitated by it. Delay in dealing with a problem drinker, however, can lead to a loss of confidence in the company, both internally and externally, and damage to the executive's reputation.
In defining how much drinking is acceptable—and when it becomes a problem for both the executive and the company—the example set by the CEO looms large. Companies in which the senior managers drink a lot tend to attract employees who drink a lot. The CEO who regularly enjoys two or three drinks plus wine for dinner is likely to tolerate similar habits in his subordinates. Other chief executives, who are total abstainers, may ban drinking at the office or in other business settings. For decades IBM was famous as a “dry” company. Employees were forbidden to drink while on company business. Booze consumed at business lunches could not be expensed. The policy did not adversely affect business, and it saved a huge amount of money.
The majority of firms are much less strict, but few keep liquor on the premises. Outside the office there is much less pressure today to drink with customers who want to be entertained. A fair amount of drinking still makes its way onto expense accounts, however. The health effects on the consumers may be cumulative. But it's not easy to tell when it interferes with performance. In family companies, moreover, it may be even harder to deal with the problem.
In one company in the food processing industry, the cousin of the CEO made a huge error that proved costly to the division he headed. The CEO wanted to remove him. The father and brother of the division head, however, together controlled 50 percent of the stock. They admitted to the CEO that the 46-year-old manager was an alcoholic, and said he needed treatment. But they resisted removing him from the job. Neither the management committee nor the board would approve that approach.
There were a number of ways of dealing with the business problem, and helping the manager solve his problem, while maintaining family harmony. For example, the company could have offered to keep him on the payroll while he went through a detox program, or to find another business he could run, or to give him early retirement so he could pursue his other interests (he already had a net worth of $6 million).
What actually happened made everyone unhappy. The cousin's branch of the family was unable to cash out—or force out—the CEO's branch, so they insisted on splitting the company. It's not likely that members of the two branches will ever speak to each other again.
The trend in business today is to treat excessive drinking with a firmer hand. People who are believed to drink too much can quickly become an expensive liability. If an employee's habit reaches the problem stage, it should be treated as a medical problem and referred to a doctor or clinic.
Preparing for the Worst
The CEO of a 75-year-old family business, a longtime client of mine, was very aware of his family's history of heart trouble. His father had died of a heart attack while he was in high school; his brother had died before reaching 60.
This executive was very conscientious about his health. He had regular checkups and a moderate lifestyle, and had been to the Pritikin Clinic for instruction in nutrition. Early in 1995, he and his family and friends celebrated his 60th birthday.
Four months later he felt flu-like symptoms, which persisted. The preliminary diagnosis was a relatively rare form of cancer. The causes of this cancer are uncertain, but its course is not. Two review centers confirmed the bad news: The CEO was a short-termer.
With anywhere from three months to several years to live, he has had to follow the rule: “Hope for the best, but prepare for the worst.” Succession was an urgent concern: Two of his three sons were pursuing other careers. The one son in the business was several years away from being capable of taking it over, even with coaching and accelerated development. Fortunately, because of his longtime concern with the family's history of heart trouble, the CEO had a contingency plan. He had always maintained a “farm team” of two or three managers who might be able and willing to serve as interim CEO. He had identified the candidates in his mind and done everything he could to prepare them for the role, without telling them. Within three months of receiving the news of his disease, this far-sighted and courageous CEO already had his interim successor (a former outside director of the firm) in place.
There are many types of cancer, and few families do not have a victim of one or another type in their histories. The symptoms are usually elusive, and that's one reason why an annual physical is essential. If the CEO is reluctant to go, the board should require it. Advances in tests of prostate cancer now make it possible to diagnose the problem at an early stage. For female executives there's no excuse for avoiding mammograms and X-rays for breast cancer and pelvic exams for cervical cancer. To excuses that most people make for postponing such exams, the best reply is Joan Rivers's comment, “Oh, grow up!”
A Case of Impaired Judgment
Dr. Lawrence Knight, a Montreal physician who has cared for a number of family business owners in Canada, tells the story of a CEO whose wife came to see him. The woman was concerned because of signs that her husband's memory was failing. At her request, Dr. Knight examined the 70-year-old business owner and decided to refer him to a neurologist. Tests confirmed the presence of early Alzheimer's Disease.
Alzheimer's, which made more news when President Reagan disclosed that he suffers from the disease, affects an estimated 4 million people in the United States. There is still no proven cure or way to arrest the disease, which is characterized by progressive deterioration in memory. Diagnosis, moreover, is difficult, because Alzheimer's is easily confused with other forms of senility (for example, dementia caused by small strokes in the brain). Executives displaying some of the symptoms should be screened for the disease by a multidisciplinary medical team. Though a large majority of those who develop serious symptoms are over 75, many are younger. Even some people in their 40s have been known to develop Alzheimer's, though it is relatively uncommon at that age.
Unlike public companies, privately held family companies often have no established retirement age for their owner- managers. When Alzheimer's strikes a powerful CEO with ownership control, the family thus faces sticky issues in figuring out how to persuade the leader to step down voluntarily.
The CEO examined by Dr. Knight, like many owner-managers, ran his business as a one-man show. “I tried to convince him to sell his business,” Dr. Knight told me. “He refused. ‘This is my whole life,' he said. ‘What else would I do? I'd go nuts.' ”
He held on, the disease progressed, and he made mistakes. The business was run into the ground and, eventually, was reduced to the value of the used equipment.
“Alzheimer's is particularly difficult to deal with if there are several siblings at the top and one of them is developing impaired judgment,” Dr. Knight added. “How does one approach the mentally deteriorating—often elder—brother? This is a sensitive area where a trusted physician may play a crucial role.”
Long-running depression is more common than people realize. An estimated one in five women and one in nine men suffer from this illness, which, unless treated, can interfere with both judgment and productivity. Only recently have people suffering from it become more willing to talk about their symptoms and efforts to conquer it. General Colin Powell's disclosure of his wife Alma's depression at his press conference last November may foster more open discussion of the symptoms and what can be done to control them.
Millions of people experience some depression from time to time. They may speak of having “the blues” or being “down in the dumps.” These dips in mood are considered normal if they're not too frequent and don't persist.
What psychiatrists call clinical depression can be longer lasting and more disabling. The National Foundation for Depressive Illness reports that serious forms of depression are accompanied by a chemical imbalance in the brain. The psychological roots are usually more complex and highly individual. Some physicians maintain that unresolved feelings of anger is a common underlying cause. I have observed this in some family business clients. For example, I have interviewed successors in their 30s or 40s who are angry and seriously depressed because a parent will not relinquish any authority to them. Family members who were pressured to join the business when they were young, and have never worked anywhere else, may have a deep sense of disappointment. They are resentful because they feel that they missed something; they may vehemently deny having feelings of anger and are, instead, deeply depressed.
A third group, sometimes overlapping with the other two, consists of family members who have never gained self-confidence. They have always worked in a building with their family name on it. Promotions and raises have come from other family members. A persistent question nags them: “Could I have succeeded on my own?”
The warning signs of depression include chronic fatigue, signs of aimlessness and flagging productivity, excessive sleep or withdrawal, outbreaks of tears. Sometimes a drinking problem masks a depression. Business executives who exhibit such symptoms should, of course, be checked out by a doctor. Physicians who specialize in treating executives know the right questions to ask to determine whether depression is the underlying cause of feelings of apathy or burnout.
Suprisingly, many executives remain skittish about consulting a psychiatrist or psychologist when their doctor suggests it. Today there is hardly any stigma attached to seeking help for a problem that may be psychological in origin (though privacy may be an issue—as we will see). Anti-depressives such as Prozac and Zoloft on the market today promise victims relief from their misery while they try to grapple with the underlying causes. Moreover, shorter-term therapies are available that can help many patients avoid recurrences.
The Harsh Truth About Drugs
In the past year, several high-profile executives have been in the news because of serious trouble with drugs. Two overdosed on cocaine and were found dead in hotel rooms. In both cases their close colleagues were surprised to learn of their habit. The vice-chairman of one of the top five airlines was arrested for possession of marijuana. This under-50 executive, who has a record of enormous accomplishment, is now dead-in-the-water in his industry. Beyond the headlines are dozens of quiet removals, forceouts, buyouts, and shuntings to the side track in other companies.
Here's a statistic that startled me: Donna Shalala, U.S. secretary of health and human services, reports that 75 percent of regular drug users are employed. These employees are more prevalent in certain high-pressure lines of work, such as advertising, film-making, and stock and currency trading. If you have more than 100 employees, chances are you have at least a couple of drug users on the payroll. Others may appear on your premises as suppliers or customers. They quickly identify with fellow users, and forge links with them.
All too often in family businesses, the problem employee is a family member. Within the family, moreover, there may well be sharply divergent attitudes toward drug use. It can become a more troublesome issue in businesses controlled by several branches of a family, with a number of third- and fourth-generation members working in it. One branch may be adamantly opposed to drug use, in which case, when a problem arises, it may have to battle another branch that has a more permissive attitude.
The company has to have an explicit, consistent policy for dealing with drug users. You can't cut the kids a little slack and hold other employees in line. It won't work, never has. If you want a drug-free company, the kid with the habit has to go unless he can kick it. Period. Likewise, the family member who chooses to go through detox has to abide by the same rules after returning to the company as any other employee. Surely, the family will want to do everything it can to help the drug user get free of addiction. The harsh truth, though, is that some of them don't want to be free of the habit. They just want the money to support their lifestyle.
It's clear that many customers, banks, and other constituencies of family businesses take a dim view of drug use in the workplace—and, for that matter, outside of it. For that reason alone, owners should have a tough policy. Beyond the social stigma of having drug-abusing employees, there are the effects on efficiency and productivity. According to a U.S. Chamber of Commerce study, chronic drug users are 33 percent less productive than employees who eschew drug use. Their medical insurance claim costs are an average of 300 percent higher than the average claim costs of non-users. It should be noted that some claims in this group are not for employees but for a dependent family member.
A Mother's Graceful Exit
The aging widow of a business founder has had two strokes but wishes to remain a member of the board of directors of the company even though she seems to lack the energy and interest to attend most board meetings. What should the CEO—her son—do?
I had known the woman for a decade. She had worked in the business in the early years, but she was now 80 and retired. Since her husband's death, she had occupied his seat on the board.
Over lunch, we discussed the board, its functions, and the company's long-range needs. The company had been gradually moving toward having a majority of outsiders on the board, and we also talked about that. This elderly woman was as sharp as she had always been. She asked, “Are you going to recommend that they fire me?” I told her no, adding:
“The need is for an effective board of experienced people who can help your son carry out the plans for expansion. As the founder's wife, you can remain [on the board] as long as you like. What help do you need in order to be able to be a good director next year?”
She promised to think about it and asked me to call her in a week. When I did, she told me that she had decided it was time to resign. She wanted to continue as a trustee of the family foundation, where she felt competent and comfortable. I suggested that she not resign but simply not stand for re-election. That was several months away and would allow time to recruit a successor.
Some years ago I received an urgent phone call from a CEO who had inherited a very old family business and run it for more than a decade. He was locked in combat with his chief financial officer, who had acquired a 10 percent interest in the company. The CFO was insisting on being named CEO and on being given an option to buy the company. He had long been a smart and aggressive executive, but this sudden, inappropriate demand was a surprise to everyone.
While the day-to-day business went on as usual, the executive offices were totally preoccupied with the problem. The CFO was already acting as if his appointment as chief executive was imminent. He had informed one executive that he would be dismissed and should prepare to leave. My interviews with other executives confirmed the CEO's view that the man was attempting to dominate the company through intimidation.
On my last visit to the company, I met with the CFO, with whom I was only slightly acquainted. After I interviewed him for a half hour, the man launched into a harangue against various other managers. It went on until the end of the day, when I excused myself to have dinner with the CEO and his wife.
“There's a good chance he's mentally ill,” I told them. “We need to talk with your attorney, your outside directors, and his wife.” When we met with the attorney, he expressed the same opinion about the CFO's condition. At his urging, we scheduled a special board meeting for the following afternoon.
Meanwhile, the next morning the CEO's wife visited the CFO's wife to convey the group's concerns about her husband's health. Was she worried, too? She was. The CFO had become so intimidating that she was afraid to disagree with him about anything. She, too, believed that his expectations for taking over the company were unrealistic. Could she get him to a doctor? No, she told the CEO's wife, she could not.
At lunch that day the CEO, the attorney, and I worked out a plan to propose to the board. It called for relieving the CFO of his duties and placing him on medical leave—provided he consulted a doctor. When we returned, the CFO buttonholed me and, in his office, launched into a long denunciation of his boss and the way the company was managed. I countered by expressing concerns about stress in the executive group, and asked him when he had last visited a physician.
We talked of many things: his family, his life, his hopes. When the outside directors walked by his office, he leaped up and followed them into the boardroom.
As the meeting began, he interrupted and demanded to be heard. He insisted on being given control and laid out his plans for the company. When he had finished, the crustiest director broke the silence and said there was no way any of what the CFO described would happen. For about an hour, the directors discussed the reports of the man's behavior. Then they asked him to leave. The attorney presented the plan for removing the CFO from office, with conditional medical leave. Unanimous approval.
At 9 a.m. the next day, the CEO and the attorney relieved him of his duties. His two sons then took him to see a psychiatrist recommended by the human resources people at a nearby manufacturing company. A few weeks later, the CFO resigned and was cashed out. About 18 months later he bought a business that he now operates successfully.
The strong resistance of some family business owners to consulting with specialists in mental health continues—surprisingly—to this day. Doctors I know have attributed this resistance to delusions of various types, narcissism, grandiose egos, and the like. I have found that quite often it is due to their fierce desire for privacy.
Privacy and Responsibility
We all want privacy for our medical histories. Many even believe that they have it. Those people do not understand how the insurance industry works to protect its underwriting. When you apply for life or health insurance, or enter a hospital or clinic, you usually have to sign broad waivers of your privacy rights.
The risks are obvious. Dr. Knight of Montreal tells of an executive who ordered “key man” insurance for his sons in the business. The broker returned with word that the oldest son could not be insured. The underwriter's checks of an industry network turned up evidence of a longstanding cocaine habit, documented in lab reports.
In an era of far-flung computer networks that share information, it's hard to hide personal information of that kind. However, the free market has provided one solution. Within the huge insurance industry, specialist brokers have emerged who deal with sensitive and difficult situations (see box on this page).
Doctors and other health care professionals are obliged to supply such information to insurers when you have signed waivers. You hope that these professionals can be trusted to follow good practice and at least not gossip about you and your family with others. However, if you are a well-known, powerful figure in the community, don't expect they'll all keep their lips buttoned. Some won't.
If you or other family members have a reputation of being difficult or litigious patients, moreover, local physicians may talk among themselves about you for self-protection. You may find that doctors who treat you practice a good deal of “defensive medicine,” asking for an excessive number of tests, for example, in order to avoid being sued. Finally, if you are wealthy and likable, some doctors will share details about you with fund-raisers, so you can be tapped discreetly for contributions.
When an owner-manager is diagnosed as having a terminal or disabling illness, a conflict may arise between the right to privacy of medical records and the need to keep the business going and to implement estate plans. Just such a problem has arisen in the case of the terminally ill business owner mentioned earlier. About six years ago, his corporation and a similar firm in another state formed a joint venture that has, since then, been very successful. His partner was grieved to learn of his condition, but is also concerned to know whether his death will create a sudden demand from the family for cash to pay the estate tax bill.
This is a classic family business tale. When the venture was created, all the attorneys insisted on a buy-sell agreement. The principals, however, elected to ignore the agreement that was drafted because they did not want to value the business at that time. This was a conscious decision, not an oversight. The partners understood, and were willing to live with, any complications that ensued.
The partner's concern with having to do business with an estate that has a huge need for quick cash is legitimate. My client's desire not to have to disclose all the details of his personal estate is also legitimate. As it happens, this good planner has provided for enough liquidity in his estate to pay the tax. The delicate question is whether verbal assurances to his partner will suffice, or whether the partner will be entitled to detailed documentation of liquidity in the estate.
Both the business owner and his personal physician are accustomed to being in charge and giving orders. That's one of the principal reasons there is often tension in their relationship.
When treating business owners, physicians who are inaccessible, uncommunicative, and act like gods quickly find themselves dealing with a visibly irritated patient. The CEO is used to having all the information about a problem and then deciding or managing the decision process. The physician who insists on total control of the treatment options—and does not explain them adequately— is in for trouble.
Family business owners who are happy with their physicians usually praise them for their expertise, discretion, and understanding of the pressures in the mixture of family relationships with business. Their most frequent gripe is the doctor's insensitivity to the value of their time. Doctors are keenly aware of the demands on their own time, but frequently don't care whether others have the same problem.
A longtime friend of mine who is a consultant to doctors confides that some doctors like to goof off, too; their office people are instructed to provide standard cover stories when patients call. “Too often, while the office backs up, Doc is at the hospital coffee bar with his pals,” my friend told me. Business executives are infuriated by delays and evasions when trying to contact their physicians. They are quick to switch doctors if it happens too often.
They also do not suffer doctors who offer off-the-cuff comments about business matters. When doctors make inane comments on matters outside their expertise, they undermine their credibility.
Similarly, leaders of family businesses irritate doctors when they deny illness, don't stick to the prescribed regimen, or keep putting off appointments that might bring bad news. According to some doctors, business owners tend to feel their wealth should protect them from illness. They are used to buying whatever they need or want, and will travel far to seek the best medical advice. As a result, they find it hard to accept when told there is no treatment available, at any price, that will cure them or speed up their recovery.
Senior leaders of family businesses must also consider the health of their executives and their employees. A healthy executive team and a healthy family are precious assets. The CEO's own habits and attitudes toward health set a climate that shapes the attitudes of others in the company. Many businesses that can afford it offer broad health and fitness programs for all employees. At a minimum, a family company should see to it that key managers are regularly examined by a doctor.
Besides the common health risks that I've discussed, there are, of course, others that can be equally debilitating and harmful to the team effort. How much a business owner wishes to be—or should be—involved in the personal medical problems of his team depends on individual circumstances. When illness poses a threat to the well-being of the company and its future, however, the boss is obliged to intervene and to act—especially if it is the boss who is ill.
James E. Barrett, is managing director of Cresheim Management Consultants in Philadelphia and head of the firm's family business practice. He is also a director of the Southeastern Pennsylvania Chapter of the Alzheimer's Association.
Privacy and Executive Treatment
It is not inconvenient today to travel an hour or two to see a doctor in a distant city, unless frequent visits are necessary. Those in good health often make do with a local physician for such minor complaints as tennis elbow or flu, and a distant executive health program for monitoring and treatment of serious health problems.
The rise in status of some suburban hospitals and their new links with the major teaching centers have created one new option for many patients. In major metropolitan areas, it is now less necessary to go to a giant hospital. The labs of some larger hospitals in cities are linked with the better suburban hospitals, and members of the medical staff may, in fact, practice in both places.
Another option are the several dozen medical centers or programs specializing in treatment of business executives. The Executive Clinic at the Greenbrier Resort in White Sulphur Springs, West Virginia, and the Mayo Clinic Executive Program in Rochester, Minnesota, are two of the best known and oldest examples. The Menninger Clinic in Topeka, Kansas, specializes in mental health problems. Most of the other programs are hospital-based, in major metropolitan areas, and usually staffed by a variety of specialists supported by modern, high-tech labs and testing equipment. They provide comprehensive physical exams, second opinions, and, if the patient chooses, surgery or other follow-up treatment. — J.E.B.
Specialists in High-risk CoverageThese specialized brokers help people with pre-existing medical problems get coverage. They usually represent insurance companies with which your broker does not have a business relationship. But your broker, or anyone from whom you buy any insurance, can usually help you find a broker's broker in your community. If the broker's broker gets coverage that's acceptable to you, your regular broker will get a piece of the commission.
Certain insurance companies develop special risk pools for particular medical conditions such as high blood pressure. The companies need a very large pool (over 100,000 is desirable) to make the actuarial odds work. But they can fine-tune their pricing because they become extremely knowledgeable about the condition and its risks. Most other insurance companies protect themselves by simply refusing you coverage.
Companies come and go in this marketplace. The specialist broker's network, however, is well developed and mature. Any metropolitan area of 100,000 people will have one or two that your broker can find without too much trouble.
As for what the coverage costs, don't ask. This market serves people with conditions for which being without insurance is an unacceptable risk.