The toughest deal I ever made.

Giving your son control of the business you've run for 30 years is hard enough, says the author. Letting him keep it is harder.

By Nat Shulman

It is not easy to give up a long-term love affair with a business. The pain of separation is intense. I know, for I have experienced it. However, the effort is justified by the rewards of watching a protégé develop and of knowing you have protected the family wealth from the ravages that could be brought about by the sudden death or disability of the founder.

I don't believe that it is possible for strong, aggressive, egotistical, healthy entrepreneurs simply to relinquish power and control in a long-term business environment, no matter what their age. It must be negotiated and planned, and outside help can ease the process immeasurably.

One of the saddest sights in the business community is that of a talented family member who has spent his working life training and waiting for the opportunity to take over, but is never given the reins. Conversely, another needless tragedy is that of the untrained successor who is called upon to run a business upon the sudden death or disability of an owner who never took the time to share its innermost workings with him.

For more than a quarter century, I operated a new-car dealership, Best Chevrolet, which was located in a New England town with a population of 25,000, though its sales and service market extended throughout a metropolitan area of two million people.

My son, Scott, entered the business soon after graduating from college. He was and is goal-oriented, an avid learner and potentially a great owner. However, he and I are both high-powered people and when he reached his thirties, a power struggle began. The conflict between us started to affect the entire organization. Employees were confused as to who was boss, and our managers took advantage of the situation to manipulate the two of us. I was frightened at the prospect of retiring and reluctant to let go of the reins I had held for 30 years, even though letting go was my stated goal.

The inevitable happened. My son came into my office one day and said, "Dad, this is your business. As long as your physical presence is here, it will always be yours. It's impossible for you to let go, and maybe you shouldn't. I want to resign and get my own place."

I was stunned. A wave of anxiety came over me. I had had my fill of fighting the daily battles with GM, with unreasonable customers and irresponsible and ungrateful employees. At 62, I had earned a masters degree in education and was planning a new career in organizational development and successorship consulting. I wanted out, but I did not think he was ready to solo. I told Scott that I really did not want to run the business, and if he quit, I would sell the dealership. I didn't realize it at the time, but I had really laid a heavy decision on him, threatening to dispose of a 30-year family business that was his lifelong identity in the town where he grew up. Unintentionally, I had trapped him!

After a long, emotional meeting, I agreed to stay out of the visible management of the dealership and to operate exclusively through him. If he became the general manager, I would let him function in that capacity so that the other managers and employees would recognize him as the boss. I would take the largely honorary title of chairman of the board.

I also agreed to attend the weekly managers' meetings only when invited. Sound extreme? Think of the meetings that you attend as business owner when you are an observer and not conducting the meeting. Where did the participants' eyes look for confirmation or approval when they were making points in the discussions? If it were your son conducting the meeting, might he be influenced or even intimidated by your presence? Who was generally the focal point of the meeting? You were!

The arrangements we made worked for a while; I really tried to stay out of the way. Soon, however, I was sticking my nose into areas where I did not belong, and tension began to grow again. A Chevrolet warranty reimbursement audit was the catalyst that began the process of our stumbling into the successorship help we sorely needed. The weeks-long audit concluded with a lengthy meeting attended by me, my son, and factory personnel, who justifiably proceeded to recount warranty irregularities in our service department that eventually cost us several thousand dollars in warranty chargebacks. This marathon embarrassment with the factory was a shared father-son experience which had a significant bonding effect.

Starting out with an ulcer

My involvement in family business began almost 40 years ago after a World War II career as a Navy pilot. Upon my return to civilian life, one of my brothers enticed me into accepting a minority interest in a Nash dealership. His intentions were based on fraternal love and a sincere interest in my welfare. The problem was that selling cars was not really what I wanted to do at that time. I accepted his picture of a career for me and sublimated my own wishes to the prospect of making some fast bucks in the postwar new-car market.

My lifetime goal had been to pursue a career in writing. While serving in the Navy, I had planned on going to college under the GI Bill to study for a career in journalism. I wanted to do something creative. As I entered into this partnership, my level of commitment to the automobile business was not nearly as strong as my brother's. The next 10 years were filled with family tensions and personal frustrations that resulted in a peptic ulcer and visits to a psychiatrist. So I resigned. It was necessary for me to regain my identity as an individual-—instead of as a loving brother's clone. I had been branded the "boss's kid brother" by employees and the business community, and I had endured these indignities long enough.

I do not recount this story to complain about a loving but insensitive family business associate, or to lament the fact that I chose a career which was not high on my priority list, but because this scenario is so common in family businesses all over America. Family members, ignoring their own talents and special gifts, enter the business because of family obligation and the security of a known economic quantity. When this happens, the business becomes a place where parents and older siblings innocently "beat up" on family members in the name of love and family loyalty.

In my new role as consultant, I listen to countless candidates for succession voice their frustrations over restricted opportunities to grow in their jobs. Meanwhile, I hear parent-owners complain about a fledgling's inability to make decisions, a situation that illustrates the misunderstanding and gross lack of communication apparent in most family businesses. Based on my contacts with hundreds of automobile dealers and their chosen successors—and on my own painful experience—I perceive an overwhelming need for a process by which each party can convey to the other his real needs and feelings rather than playing ineffective, energy-draining psychological games.

Quit while you're ahead

Retirement is not for everyone. If a capable person elects not to retire and chooses instead to modify his work habits by changing the degree of commitment to the job, he should be encouraged and not made to feel guilty because he isn't conforming to the stereotype.

Working part time, with the freedom to take a vacation whenever one chooses, is ideal. However, this type of partial retirement poses the greatest hazard to a successor unless there are clear agreements as to the role of the predecessor when he is in the office. If a successor is given complete authority when dad's away, then this must hold true when he is present. Scott recently confided to me that he used to dread the first week or so when I returned from an extended vacation or business trip. It seems that invariably I would spend the first few days poking my nose into every department of the dealership, and then pose some "innocent" questions and make suggestions.

I now realize that I was reestablishing my power and control. I call this the "horse-on-the-tether" game. Let him run around just so far, then give a yank. If you want partial retirement, then let it be partial only so far as your time commitment. In matters of operational control and authority, there is no such thing as a part-time manager. A successor must retain full control. One prime reason for this is that successful programs and campaigns in any organization require planning, and these plans require consistent hands-on attention from all managers—including the general manager—so that subordinates maintain their enthusiasm and interest in the goals of the plan.

One of the most common complaints in the dozens of interviews I have conducted with successors is that dad travels in and out of the business so frequently. Each time he comes back, he messes up plans that have been working for months simply by countermanding existing policies and challenging decisions that have been agreed upon by the team of managers.

As famous entertainers have said, "Always leave the audience wanting more." World-class athletes have hung it up when they could still have eked out another win or two, but not in their accustomed style. This attitude is sorely needed in a family business in which an aging owner faces the choice between stepping aside with dignity and holding on too long and creating tension within the business and the family.

A father's prejudice

During my 30-year career as a General Motors dealer, not once did it enter my mind that my daughter might become a member of the family business. In fact, back when I was working for my brother we agreed that our wives were not to be included in any discussions regarding the business. It was an accepted belief that they would not understand business problems and would complicate things "if they knew too much." Female employees were hired to work only in the office and generally worked for less money than males.

Fortunately for me and my business, this Neanderthal mentality has disappeared along with my thinning hair. I have become a champion of women car-dealers. They make top-notch managers and CEOs and have brought many resources to my family business and others. My daughter, Karen, earned a college degree in occupational therapy, got married, and had a child. She later became bored and, disenchanted with her chosen profession, applied for a job as a sales rep for Johnson & Johnson in their Tylenol division. After she was hired, she faced heavy guns during the infamous period when bottles of Tylenol were being tampered with. History has recorded the exemplary fashion in which J & J handled this crisis, and my daughter was in the thick of the battle.

In the meantime, her marriage began to falter, and she became a single parent with a full-time job in a large pharmaceutical company, progressing to a management position at a handsome salary.

During this period, I was blind to my own daughter's talent and professionalism because of all the old images I carried around of what a daughter should be like.

After several years of corporate life, Karen was fed up and came into the family business as the manager of one of our most important divisions. She and her brother, Scott, accomplished this entirely on their own. I was delighted, but wanted to make very sure that this was a mutual decision. I purposely played the devil's advocate and attempted to discourage my son from involving his sister in the business. It would foster complications, I said, and besides, she is doing very well where she is. He became incensed with my apparent lack of family loyalty and told me straight out, "I want her in the business, no matter what you say."

"Well, Scott, it's your and Karen's decision," I replied. "I hope it works out."

"It will!" he shouted at me. "She's damn good at what she does and I want her here!"

I quietly left his office, proud that he was my son and that his sister had overcome the prejudice of a loving, caring, but dreadfully stupid father.

Mom's place

A few years ago, the small consulting firm for family businesses that I operate was called in to advise the Blackwell family (not their real name). Charlie Blackwell was a 70-year-old dealer with a son and a son-in-law in the business. He had been happily married to Janet for 42 years, and his primary interests were his business, family, Rotary, and a not-too-shabby golf game. Charlie retained our firm to improve the performance of the dealership. As our team members became more involved in the operation of the business, it was apparent that a serious problem existed between the relatively immature 29-year-old son and the capable 42-year-old son-in-law. The conflict was hindering the effectiveness of the organization.

Fortunately, it was not too difficult to gain Charlie's cooperation, for he had already named the son-in-law general manager, appointing the son new-car sales manager. This area, however, was where the dealership's most serious problem lay. New-car sales were low, as a direct result of the son's lack of commitment to his job.

The son-in-law had tried sincerely to motivate him, but after years of growing up under the protective umbrella of the dealership in the community, the son was not prepared for the sales manager's job. He also bore a resentment toward his brother-in-law and as a result, often second-guessed the brother-in-law's suggestions for improving new-car sales.

The son-in-law had already told our team members that unless this family obstacle was resolved, he was going to resign and look for a dealership of his own in another state. His wife, the owner's daughter, heartily supported this alternative.

When we recommended that the son be given a less responsible position temporarily, while he continued his training to be a sales manager, Charlie agreed. He wanted to keep his daughter and his grandchildren close by, and if his son would invest a couple more years in learning the business under his brother-in-law's tutelage, then it could be a win-win result for the whole family. Up to this point, nobody had heard from Janet, Charlie's wife, but this soon changed. When Charlie came to work the morning after the proposal was made, Janet was upset that everyone was trying to push her "little boy" out. "Everybody was perfectly okay until those consultants came along and shook everybody up," she complained.

The result was that Charlie backed down. The son-in-law ultimately resigned and opened his own dealership 500 miles away in a town where he was fairly well known. 'The son was permitted to do a mediocre job as new-car sales manager, and Charlie was forced to go back to work, running the dealership. Everyone but Charlie got what they wanted. (The son-in-law is currently doing very well in his own business.)

Janet's position was not unusual. Many mothers whose families are in business together wield a great deal of power over the participants. If for no other reason, it is important that mothers keep in touch with the personal interactions of family members in the workplace, and not rely on gossip.

The problem with the Blackwell family was that Charlie always sheltered Janet from any business problems, including those he was having with their son. When all the negative reports about her son finally reached her, she reacted as any mother would when one of her "cubs" is threatened—she fought! The one-sided version she was getting from her son did not help her to be objective.

In many family business environments, mothers can be effective as clearinghouses for all sorts of valuable information, if the appropriate mechanism is put into place. This means that mom's involvement must go beyond simply being a repository for gossip and griping. In order to become an effective mediator, a role she often fills admirably in family situations, she needs to be included in business discussions.

Janet Blackwell reacted solely as a mother, without any concern for the damage she was causing the entire family's livelihood. If Charlie had not shut her out of the business, and had previously shared more of what was happening, perhaps she would have been able to act less emotionally.

Pressures from the community

Being a member of a family business in a community in which the family also lives creates additional challenges for both the family and the business. The judgments of neighbors and customers significantly affect the performance of the business and the family's position in the community.

In the 30 years I ran the dealership, I was introduced most of the time in local social situations as "Nat Shulman of Best Chevrolet." On many occasions, this introduction would trigger stories of encounters, good and bad, with our operation.

Our family's involvement in community activities encouraged residents of the town to buy cars from us. During one period, 60 percent of my fellow Kiwanis Club members were driving our Chevys, and half of the 20 households in our immediate neighborhood were customers. There were times when I would swap cars with neighbors, driving theirs in for service and returning them in the evening.

I remember becoming angry and depressed when a new car that was not purchased from us showed up in a neighbor's driveway. Many times this would unconsciously affect my personal relationship with this family, for I would feel unjustifiably betrayed because they had bought from someone else.

A great deal of our marketing and advertising efforts focused on the fact that we were a local family-owned business with a reputation in the community that depended on consumer satisfaction. Also, we made a conscious effort to hire local salespeople who could attract friends and neighbors to buy from them.

There is an adage, "Don't do business with friends." Fortunately for our business, my philosophy was to sell cars to all my friends, which I did, prolifically. However, the adage is not without basis, for I can remember several friends who chose to become nonfriends over an automobile service problem.

It became second nature for me to experience my family life in tandem with the operation of the business. Often I would involve myself and my family in community projects and activities because they were beneficial to the business.

My wife and children couldn't avoid hearing complaints. Following shopping or visits to the beauty shop, my wife would often "get on my case" about problems that someone had experienced with the dealership. These could range from incidents of poor repair service to reports that we were several hundred dollars too high on the price of a particular car.

The children's lives in the community and schools were also affected by the family business. Often, their teachers were customers and if they had service problems and complained, it could be embarrassing for the kids.

And, being in the new-car business and apparently having access to all those beautiful new cars, my kids were the envy of many of their friends and classmates. I remember when my daughter got her driver's license, she requested a used Volkswagen. She was in high school and had taken driver's education in Chevy automobiles that my dealership had loaned to the school. Though she was very proud of our family business's reputation in the town, she told me that she "was becoming OD'd on Best Chevy's influence" on her personal life. She wanted to avoid the additional business identification that driving a new Chevy would create, hence the request for an anonymous and ordinary car. Also, the VW Bug was a popular car among the kids at that time.

My reaction to this request was again Neanderthal. I told her that as long as Chevrolet was the principal financial support of the family, she would drive a Chevy. If she wanted to drive "that foreign car," she could find a Volkswagen dealer's family to live with. Also, didn't she realize that her driving a Chevy around town would influence her friends and their families to buy cars from us? She ended up with a four-year-old Chevy.

Looking back over the 25 years in which our family coexisted with our business in the community, I realize how many times the interests of the family came second to the needs of the business. It seems as though I viewed most family members' activities during this period according to how they would affect the community's image of the business.

In research I have done over the past 15 years, I have observed hundreds of new-car dealers and other family businesses owned by fellow members of service clubs such as Rotary, Lions, and Kiwanis. In most cases, I found that the demands of the community on their families were similar to mine. There were several instances in which the impact of the community on the family and the business was significant enough to cause irreparable emotional damage to the family, resulting in alcoholism and divorce.

Conversely, I am sure that there are many successful family business-community relationships in which the lives of the family members have been enriched through the involvement of the business in the community. The level of visibility and the impact the business has on town affairs often determine the quality of life for family members.

Fading away with dignity

During that troubled management transition period, the business experienced phenomenal growth. My son showed tremendous talent and commitment, becoming one of the leading dealers in the city. The increase in volume and in the number of employees was a difficult adjustment for me. I learned the business during a more intimate entrepreneurial time when I knew all my customers' names as well as the families of my 40 employees. I recall more than one occasion within the past five years when I was so removed from the daily workings of the business that I would greet people around the dealership with, "May I help you?"—only to find out that they were employees!

The frenetic activity around the showroom and the daily volume of cars coming into the service department awed and even intimidated me a little. In addition, the complete enslavement of the organization to the tyranny of the in-house computer completed my disassociation with the reality of the current business. I needed to belong to the organization, but I was having difficulty relating to the new methods of selling and servicing new cars.

In addition, the monthly expense structure of the business frightened me to death. It often represented more dollars in one month than I had spent in an entire year. The monthly volume of new-car sales was greater than I had experienced in any quarter of an entire year.

Although my son was a hardworking, capable manager, he still lacked a measure of confidence which only years of experience can provide. As a result, there were several incidents in which he would become extremely defensive if it appeared that I was re-entering the daily operation of the business. For example, if a customer complaint came to my attention for resolution, Scott would ask questions like, "How did they get to you?" Or, if he saw me in lengthy conversation with a manager or an employee, he might say, "What was that all about?" During the transitional years, several management positions were justifiably changed. If managers could not accept reasonable changes that Scott ordered, they were gone. Within the five-year period of transition, an entirely new middle-management team was put in place, and many of the members had been promoted from within.

Giving up some of my routines was painful. To take a small example, each business morning for 25 years the morning mail was delivered to my desk, opened by me personally, and passed on to the office manager for distribution. This procedure would vary only if I was away from the office for an extended period. In fact, there was a time when the post office would hold our mail, and I would pick it up each morning on my way to work.

Opening the business mail was more than a frivolous exercise, for it gave me a window into the inner workings of our organization. It enabled me to give personal attention to customer complaints that might otherwise be ignored. It enabled me to discover any new purchasing trends by department heads and to investigate their reasons for changing from previous companies. This morning ritual also exposed insidious expense abuses, such as high telephone charges and energy costs.

I had enthusiastically instructed Scott to "personally open the dealership mail, whenever possible." Of course, I had intended that he heed my suggestion sometime in the future, perhaps while I was vacationing in Hawaii for the winter, not while I was on the premises. He thought the suggestion was so good that, since the day I told him about it, he has personally opened the mail, taking away another of my daily pleasures. Some mornings I would sit at the window of my office looking for the mail truck. When the mailman arrived, I would race out to greet him, grab the bundle of mail, and retreat to my office with it like a predator with its prey before my son could get to it. We have since negotiated an agreement that it is more important for him to handle the morning mail.

Odd things happen to people when money, power, and control become a part of their daily existence. For 20-plus years, prior to his entry into the business, Scott and I had an intimate father-son relationship. Yet, a few years after he assumed a management position in our business, he grew even more defensive over any intrusion by me into the daily operation of the business, and there were times when I was deeply hurt by his negative reactions. Other times, I felt rejected during my withdrawal period and I may have reacted by retaliating with some power ploys of my own.

In retrospect, I believe that Scott wanted so badly to succeed without Dad's influence that he perceived my presence as threatening, even though the loving, caring relationship still existed between us. Actually, the close relationship exacerbated the resentment, for it was extremely frustrating and difficult for him, the busy CEO, to respond to my reluctance to let go. The most noteworthy phenomenon during the transition was the gradual disappearance of my son's defensive attitude toward my intrusions as his confidence in running the company grew.

I believe that insecurity, inexperience, and instability are at the core of many acts of unkindness and rejection that occur in leadership succession. So my advice is: Don't carry around resentment like an undigested meal. Talk about it and, privately, fight about it. Share your feelings about untenable arangement situations with each other, not with other managers who secretly may enjoy the prospect of the successor's failure. When problems arise between owner and successor, don't accept cop-outs such as, "I don't have time to talk right now." (When you hear this, simply ask, "When?")

Finally, negotiate a plan for transition that will serve the daily needs of all active family business members, not just the ones who wield the power and control. Sharing your vision of a prosperous future for your successors requires that you consider the best interest of everyone involved. And don't forget that the entire successorship process began because of you! Once you have shared your vision of the future for your business, enjoy watching that vision become a reality.

Adapted from the book Sharing the Vision, published by (and available from) the National Automobile Dealers Association, McLean, VA. Copyright @ 1990 by Nat Shulman.


School for successors

Some successor candidates receive a great deal of their training outside the family business. This approach not only permits the fledgling entrepreneur to gain experience and confidence in a neutral environment, but also gives him or her a valuable frame of reference to use in assessing some of the operating techniques of the family business when he joins it.

In addition to this hands-on experience, the successor needs formal training. Automobile manufacturers offer workshops, seminars, and schools designed for dealers' sons and daughters, financial participants, and operating managers with dealer potential. The emphasis is on business management and the monthly dealer operating statement; building and developing the dealership sales team; service and parts management; and contemporary merchandising and selling techniques.

A valuable resource for training interested family members is Northwood Institute, an accredited four-year college which also grants two-year associate degrees. This college has been training entry-level career people since 1959. The college consists of three campuses located in Midland, Michigan; Palm Beach, Florida; and Cedar Hill, Texas. It was founded by two young educators, Arthur E. Turner and R. Gary Stauffer, who saw a need for a new approach to prepare young people for productive careers.

In 1961, the National Automobile Dealers Association (NADA) met with Northwood to plan a dynamic learning environment for young people interested in careers in the retail automobile industry.

In May 1973, this effort culminated in the dedication of the NADA Automotive Marketing Center on Northwood Institute's Michigan campus. This center was built with funds raised entirely by the automobile dealers of America and is a tribute to the men and women of vision who realized the need for professionalizing the field.

Another program grew out of a survey of the 21,000 dealer members of NADA in the 1970s, which revealed:

This survey clearly showed that many dealers were expecting their progeny to succeed them and felt that they needed some form of training. It also showed that dealers were reluctant to conduct the training themselves, as they felt they could not adequately transfer their business experience to a son or daughter.

The program began in January 1979 with a class of 16 candidates, one of whom was my son, Scott. Now called the Dealer Candidate Academy (DCA), the program at present consists of six concurrent 12-month classes, each with 30 candidates Currently, 75 percent of DCA's graduates are successful owners or managers of new-car and new-truck franchises across the country.

A significant part of the Academy curriculum is the "hands-on" dealership training which involves the department heads in the daily work schedule of the candidate. One of the valuable ancillary benefits is the fact that relationships are established between the candidate and the very people who one day will be managed by the potential dealer. The course concludes with a Dealership Management Session, which includes a review of the entire year's program, completion of an individual special project, estate planning, successorship; buy-sell agreements, and legal liabilities and responsibilities.

—N.S.