Theresa Cox shows up at the Cox Paper Products plant quite often these days. Sometimes she has her two children in tow, and the three of them troop into the office of her husband, Robbie Cox. Robbie is president of the Somerville, Massachusetts, company, which makes a line of notebooks, pads, and file folders.
Bill Cox, 43, Robbie’s older brother and executive vice-president of the company, is getting annoyed. It’s not that he minds Robbie’s wife coming to the office. But Bill knows that Robbie’s whole family — including his mother-in-law, who lives with them — has been on a campaign to discourage Robbie from working long hours. Bill feels that Robbie is upset by these visits and that the sullen mood he is in after them hurts everyone’s morale.
“She wants him to leave at the last minute in the morning,” Bill says, “and to be home promptly at 5:30 in the afternoon. She’ll come in at noontime and aggravate him, and hell be devastated for the rest of the day. Or they’ll have ‘a little war’ before he gets to work, and he’ll be tired out when he gets to the office and that affects all of us.”
Robbie, 40, doesn’t always go along with his wife. Though more laid-back than his brother, he carries his share of the load even if he doesn’t put in the hours that Bill does. Robbie feels his older brother overdoes it; both he and Theresa think Bill is too ambitious and doesn’t get much fun out of life.
These differences in outlook and lifestyle would be minor were it not for the demands of the business. Recently, Cox Paper, which has 50 employees and revenues of $6 million, has been given an opportunity that could double its business in a few years. A Fortune 500 company in the Midwest wants the brothers to produce a distinctive notebook binder for conference documents that would be marketed under the big company’s name.
Bill thinks he and his brother should jump at the chance. Robbie recognizes the value of the offer to the business and to the prosperity of both families, as well as their father and grandfather, who are the majority stockholders. But he worries about becoming too dependent on one big account, and he fears the company can’t grow that fast, that the necessary retooling and renovation, and the hiring and training of new workers, would be too much for the brothers to handle.
For her part, Theresa is adamantly opposed. On one of her recent visits, she confronted Bill. “You’ve got a nice business as it is,” she said. “Why do you want to let it get out of control?” When Bill bristled, she added, “You want to turn Robbie into a robot like you. There are more important things in life. “There are a lot of other people involved in this,” Bill replied. “Why don’t you butt out and let Robbie make up his own mind?”
Bill and Robbie grew up in the Boston area in a family with four sisters. When they were children, the older brother always defended his younger siblings in arguments with their mother. Later on, the two brothers were very competitive. Both were basketball stars in high school, and they still have friendly arguments over who was the better player. Their one-on-one games in the driveway at family gatherings can still get fierce, with a lot of pushing and shoving.
Except for family occasions, they don’t mix much socially. Robbie and Theresa have a lot of friends and like parties; Bill and his wife, Ellen, prefer to spend time with each other and lead a quieter life.
At the office, the brothers seem to have worked things out. Their modern plant is conveniently divided into two parts, separated by a blue door; each brother is responsible for the work on one side of it. Robbie, who knows production and gets along well with workers, is in charge of manufacturing, along with shipping and purchasing. On the other side of the door, Bill oversees sales, processing of orders, and bookkeeping.
The business was started in 1928 by their grandfather, who invented a machine for producing notebook covers. The father, Will Cox, ran it for some 30 years, and Robbie joined while he was attending a local college and earning a business degree.
During the recession of the seventies, the company lost a fair amount of business, and Will Cox was slow to react to the new competitive conditions. He wanted to get out of day-to-day management and pursue other business interests. Bill, who has an accounting degree, was working in banking in Chicago when his father asked him to return to Boston and join the business.
Robbie was to retain the title of president. Even though Bill would have a lesser title, the two were to share all major decisions and to have equal pay. Their father and grandfather gave them each 15 percent of the stock and, in addition, each invested $25,000 of his own money in an expansion program that grew out of a strategic plan proposed by Bill.
The arrangement wasn’t put on paper, and during the first year, the brothers had occasional run-ins. Bill acknowledges that Robbie has been in the business longer and knows more about the company’s products and the industry, but feels he knows much more about finance. In the first year, the younger brother occasionally pulled rank, saying things like, “I’m still president, and you answer to me.” But Robbie would later admit this wasn’t so under their handshake agreement.
In fact, the brothers get along fairly well. The blue door is not an impermeable barrier, and they meet weekly to discuss major decisions in each of their areas. They disagree sometimes, but rarely get mad. “Well, maybe one of us will say, ‘You got to me,'” Robbie admits. “Or maybe one of us will throw a pencil. That’s about the extent of our violence.”
A recent dispute with their father and grandfather drew Bill and Robbie closer. They wanted their father and grandfather to sell them more stock, arguing that in the three years Bill has been with the company, they have turned it around. Bill cut costs and paid off some of the debt; he and Robbie introduced two new products that are making money, and Cox Paper has grown almost 18 percent a year.
“We feel a little handicappedbecause we don’t have50 percent of the businessbetween us,” Bill explained.”There are some things we’dlike to do, but we can’t dothem until we get control.”The father and grandfatherthink they were generous ingiving the boys 30 percent,and, before turning overmore, want to see consistentprofits. They say that eventually the brothers will inherit allof the stock.
Bill feels that his father uses his generosity as a club over the sons’ heads. For example, recently his father wanted the business to buy a new sailboat for him and write it off as an expense for entertaining customers. Bill and Robbie refused.
If the brothers are allied on the stock issue, however, their differences in lifestyle have caused considerable tension between them and their spouses. Robbie, who was in college at the tail end of the hippie generation, likes to come to the office dressed in jeans, cord jacket, and sport shirts, which Bill feels are not appropriate in a business. Bill wears a suit and tie. He sees Robbie spending a lot of time during the workday chatting with workers who are his pals. He was shocked to hear that his younger brother has on occasion offered to provide pot to customers.
Bill also believes Robbie has a problem with his wife, Theresa; he knows the couple has seen a counselor a few times. Theresa is the daughter of a doctor who was rarely at home when she was growing up. She and her mother both suffered because of it, and the mother eventually got a divorce. They don’t want the same thing to happen to Theresa and her kids, who are all under 12. Robbie doesn’t know how to handle the pressure that all this puts him under. He doesn’t like working too many hours but in fairness to Bill and the business, he can’t always come home to be with the family, though he doesn’t like to argue the point with Theresa.
Bill and his wife, Ellen, also understand Theresa’s problem. They have no children and sometimes offer to baby-sit for Robbie and Theresa’s kids. Ellen, Bill’s second wife, likes Theresa and feels she gets along well with her, but Bill admits that his sister-in-law “really irritates me.” He knew her before Robbie married her; they frequently were together on double dates and, even in those days, he says, they had an “adversarial relationship.”
In contrast to Theresa, Ellen is a real trooper who helps in the business. At times she has worked all night at the office with him. “She’s a great secretary, and she’ll type anything I want,” Bill says. Robbie and Theresa, however, are a little suspicious of Ellen. They know she goes over to the grandfather’s house many afternoons to have drinks with him. Granddad is 85 and still owns 30 percent of the stock. He and Ellen get along very well, and Theresa worries that he may leave his stock to Bill when he dies. That would give her brother-in-law control of Cox Paper Products.
One day last April, Robbie mentioned Theresa’s fears to his father. Word got back to Bill and he was furious. He said he was sick of Theresa’s whining, and told Robbie that she is undermining the brothers’ relationship — and the business. Robbie argued that he can’t change Theresa, and that Bill sees her as far more disruptive than she really is.
The next month, at a directors’ meeting, the brothers were again at odds. Bill was the only one who favored accepting the long-term order from the Fortune 500 company. The rest of the board — Robbie, their father and grandfather, the company attorney, and a longtime Cox foreman who owns some stock — were opposed.
Robbie and his father argued that the plant expansion would be risky and might have hidden costs, and that Cox Paper would become too dependent on the business of one giant customer. “I like the fact that we’ve been growing,” Robbie said. “But with this customer, we’re talking big hassle.”
“What you’re telling me is that you’re afraid,” Bill told the group. “You’re too timid to take a chance. This business has great potential, and you are all holding it back. You’re playing it safe, and it’s not fair to the employees and to me.”
Now Bill has resolved to act. He calls another board meeting two weeks later and demands that the other directors sell him a controlling interest in the company. He has been talking to bankers in Boston he has dealt with in the past and thinks they will put up the money if the price is right.
“I am the one with the biggest commitment to this company,” he tells them. “I am willing to put in the time, and take the risks. But I won’t do it unless I have the power.”
“Robbie can continue doing what he is doing. We are a good team and I will need him. The rest of the family will continue to benefit from Cox Paper Products. But I just can’t live with this situation any longer. I have made up my mind that unless you sell me the stock, you can try to run this company yourselves. I am going to quit.” A long silence fills the room. The other board members can hardly believe their ears.
The lawyer, who has known the Coxes for many years, wonders whether the family is seeing the issues clearly. He knows there has been some dissension lately because of Theresa, and he therefore proposes that the Coxes hire a family business counselor to help them sort out the issues. For the sake of family harmony, Bill reluctantly agrees to go along.
The Coxes face major decisions that will shape the business for years to come. Their decision on the long-term agreement with the Fortune 500 company must turn, in large measure, on a careful assessment of the numbers — on the business risks and potential profit. What can the Coxes do to ensure that their judgment in this matter is not clouded by family issues? Should the other family members sell a controlling interest to Bill as he demands? Should the management and ownership structure of Cox Paper Products be changed?
What follows are some suggested answers. See if you agree. Then see below and tell us what you’d recommend.
John A. Davis is executive director of the Owner Managed Business Institute in Santa Barbara, California. This Family Business series is based on actual histories in the files of OMBI, although names and some facts have been fictionalized. How the experts see it
Psychologist
FREDDA HERZ BROWN
Director of training, Family Business of Westchester County (N.Y.), and president of Metropolitan Family Business Associates.
Spouse troubles often serve as a smoke signal for fire in the family business. This is even more common when the family members are brothers and the in-laws are female. Women tend to monitor family relationships and are frequently the whistle blowers of the family as well as the mediators.
While the initial part of the case description might indicate in-law problems, the remainder of the story highlights three central difficulties in the Cox family business. The first difficulty is that the stock ownership and management have been unclear for two generations. Why is the grandfather still a majority stockholder? Why wasn’t his stock transferred to his son Will when he became CEO?
The even greater separation of power in the third generation has increased the frustration of both brothers. Before the issue of ownership can be resolved, it must be clarified with regard to the previous generations.
The second issue is the lack of clarity about who is really running the business and the ongoing competitive relationship between Bill and Robbie. It is not obvious why Bill was brought into the company in the first place and what the implication of this was with regard to Robbie’s role. The brothers’ differences in personal and management styles suggest that some shift in management positions and functions is advisable. Despite the incongruity between their family and business positions, the brothers clearly enjoy working with each other. Perhaps they would be willing to realign their responsibilities.
A third issue is the relationship of the spouses to the family business. In my view, the brothers’ wives have more of an influence on the business than they should. When the ownership and management positions of the sons are clarified, there will be less suspicion about the sisters-in-law. In family companies, members who are not involved but are close to those who are should have a forum in which to voice their concerns. When they know they are being heard, they may prove to be less disruptive. They may even play a constructive role in defining potential issues not easily observed by the “insiders.”
Business Advisor
STEVE SWARTZ
Organizational consultant for the Hubler/Swartz division of McGladrey & Pullen, in Minneapolis.
I would encourage the Coxes to identify and address the family and personal issues first. The most powerful of these issues is the relationship tensions and differences between Robbie and Theresa. Theresa’s efforts to “work” these issues by showing up with the kids at Robbie’s office or by injecting herself into major business decisions are ineffective and are clouding a critical business decision.
The counselor can help Robbie and Theresa understand the impact of their families of origin, and the contrast between their relationship and that of Bill and Ellen. Robbie and Bill should address only one business issue at the outset: their individual goals and visions for the business. The discussion should encompass their personal strengths and weaknesses, and the potential for continuing what appears to have been a “synergistic” partnership to this point.
If they decide to sever their working relationship, a plan will be needed to accomplish this. If they decide to continue working together, however, they must immediately confront the strategic issues involved in growth and diversification. As Fredda Herz Brown mentions, they must also address related issues of management structure.
Whatever the brothers’ decision about working together, they will have reached a point of being able to address the ownership question more constructively than issuing an ultimatum to the older generations.
The older generations should finally develop an ownership transition plan. The senior family members appear to have focused primarily on their desire for financial security. They must find a solution to that issue, while addressing two crucial questions that are being masked by tension: First, what ownership system is most likely to promote the long-range continuity of Cox Paper Products as a family owned business? And, second, how can they minimize the significant estate tax cost inherent in the current situation?
Regardless of the eventual decision on the Fortune 500 contract, the families will have begun a process by which they can make sensible business decisions without sacrificing family relationships.
Business Owner
Philip W. Goodwin
Co-owner of Nat Goodwin’s, a men’s clothing store in Norwalk, Connecticut, in business for 52 years before closing in July.
Unless the brothers can get control of the stock, they are hampered in what they can do with the business. If I were a banker, I’d be very hesitant to give a line of credit to a business whose principals are not the major stockholders. At any time, Dad and Grandpa can say “No way,” and pull the rug out from under their decisions.
In addition, Bill should do his homework on the Fortune 500 company deal before going to his banker. He should get a strong long-term commitment from the big company, maybe even a pledge to help Cox Paper Products finance the expansion. Many a small business has paid the price of overdependence on a corporate giant when the big customer drops it like a hot potato.
As for the personal issues, I agree with Bill that Theresa shouldn’t come marching into the office and disrupt the routine. The boys should get this straightened out before embarking on any new venture.
Theresa is made out to be the heavy in this. But Robbie seems to be something of a wimp. He has to make it very plain to Theresa, if he hasn’t already, that the nature of the business is such that he is at times going to have to work after hours.
Giving Bill a lesser title when he came into the business was a serious mistake. That is what has brought Cox Paper Products to the brink. Bill has demonstrated that he can turn it around. Someone has to have the final say. If Robbie wishes to take a less active role in the business, perhaps, to keep peace in the family, he should be willing to give up his title and turn over major responsibility to Bill.
Consultant
JOHN A. DAVIS
Executive director, Owner Managed Business Institute, Santa Barbara, Calif.
Spouses of brothers can improve or disrupt their work relationship. It is equally likely, in my experience, that the spouses are wrongly blamed for stirring up trouble between brothers when all they are really doing is expressing the negative opinions that their husbands harbor themselves.
Theresa Cox seems to be working her own agenda, because of her family history, and also expressing a side of Robbie’s personality. Clearly, the Coxes are in conflict over the strategic direction of Cox Paper Products. Only a vote of its owners can determine whether the business will remain at its current size (a perfectly legitimate outcome) or grow more rapidly.
Bill is justified in asking for a clear decision. If the owners are best served with a stable company, they should clearly say so. Bill would probably feel stifled in such a company. He should follow his heart, even if that means leaving Cox Paper Products.
The pivotal person in the board’s decision is Robbie. He must choose between running a stable company without Bill and running a growing, riskier, more demanding one with Bill. If Robbie and Bill are united for growth, they can probably get their way.
Robbie must resolve his own ambivalence on this issue and work with Theresa to decide how they will live together. This is where the family business counselor should focus his or her attention. If Robbie is in favor of stability, then Bill can be presented with a clear option. If Robbie decides on growth, he and Theresa should agree on realistic expectations about his work commitments that will create the least amount of conflict. Theresa may benefit from counseling about her needs for Robbie’s time.
Once the family and strategic goals are resolved, themanagement structure tomeet those goals can be created. If growth is chosen, themore committed brothershould be the majority ownerand president, and he shouldthus have an opportunity tobuy more stock. Otherwise,they should own and runthe company equally, asthey have thus far. Once thebrothers’ responsibilities havebeen defined, the counselorshould try to foster more direct communication betweenthe two couples and greaterempathy for everyone’s pointof view.