Author: Kathy Marshack

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Cost Containment or Quality Care? Health Issue


By Kathy J. Marshack, Ph.D., P.S.

Are you a good old-fashioned American Capitalist? Most of you who are reading this article are entrepreneurs or business owners or executive or managerial employees of local businesses. This makes you American capitalists in the truest sense of the word. You believe in working hard, competing for profit, and setting your sights on the American Dream of financial success and security. Is it any surprise then that health insurance companies are American capitalists too? They were founded by visionaries who recognized a market just waiting to be tapped, employers and employees who needed help paying for medical expenses and who were willing to pay in advance for the insurance that the costs would be covered. Being capitalists, they used the existing American system for setting up their businesses and arranged to make a profit. As more people founded insurance companies, the competition began to heat up, which only fueled the enthusiasm of these early entrepreneurs. Competition honed the industry into the incredible, unbeatable American Dream Machine it is today. Don’t some of you secretly wish you could have been in on the ground floor of this multi-billion dollar industry?

Most of you readers were not in on the ground floor, nor do you own a piece of an insurance company. Primarily you have not been looking at the profitability of a particular insurance company, nor the investment potential of the market/insurance industry as a whole. Rather your main interest in the health insurance business is whether you have a fair and cost-effective plan to offer your employees and whether you, yourselves have the type of insurance that will take care of your health needs. However, in making decisions about buying and using health insurance plans, it is important that you understand that health insurance companies are businesses, just like yours. Their goal is to make money by providing a service/product that can be produced as competently and efficiently as possible. The problem is, can insurance business owners make medical decisions that affect your health, without the advice of professionally trained physicians, psychologists, chiropractors, dentists and so on?

The insurance companies of the nineties, and their cost-management sub-contractors, managed care companies, are indeed making medical decisions for each and every member of their plans. And they are doing so without sound medical and/or psychological advice. They are making these decisions based upon actuarial tables, not upon the unique individual needs of each patient. For example if the cost of a mammogram is cheaper than an ultra-sound to detect breast cancer (and it is), your cost-management company may deny the claim for an ultra-sound. If the actuarial tables suggest that most cancer is detected satisfactorily by mammogram and self-exams alone, then to contain costs, they will deny the ultra-sound. However, if you have a history of “breast lumps,” and so far all of them have been benign, but your doctor is concerned that with advancing age there could be an increasing likelihood of cancerous tumors, or that the benign lumps are hiding the tumor, and in your case an ultra-sound is vital, there is still no recourse with the cost-management company. You may still have your claim denied because you do not fit into the range of what is most cost-effective according to the actuarial tables. There just is no room with insurance companies for the exception to the rule.

In psychology and psychotherapy, the picture is even gloomier. If you have a broken arm, the insurance company will authorize treatment. But if you are suffering from anxiety or depression, regardless of the cause or the intensity of the problem, your claim will be challenged by the cost-management company. One reason is that it is not the event per se that is paid for, but your reaction to it. For example, if you are in an automobile accident and your child/passenger loses his or her life, but you survive, you would be expected to be in shock, to be grieving intensely, to be unable to carry on your daily routine for weeks, months or even a year or two. Yet this event may not be allowable under your mental health coverage because you are reacting normally to the stress. In other words, you can only be covered under your mental health coverage if your reaction to the stresses of life are abnormal. But in my experience, even if you are suicidal (which insurance companies do consider abnormal) you will need to get prior authorization from your cost-management company before you can schedule an appointment with a psychologist. Because the psychologist is a specialist, cost-management companies do not make as much money on their services, so they have established a gate to keep the number of referrals to specialists at a minimum. If you are suicidal you must first call your cost-management company for authorization or make an appointment with your primary care physician, who in turn will make a recommendation to the cost-management company to refer you to a psychologist!

What this all amounts to is that psychological and emotional health do not mix very well with health insurance and cost-management companies. It is important to understand the distinctions between the two realms. Health insurance companies and their colleagues, cost-management companies (euphemistically called managed care companies), are in the business of making a profit by containing the costs of health care. While this goal may be needed or even admirable, it has nothing to do with providing the specific medical or psychological care that you or your employee needs today. The kind of mental health treatment that you or your employee needs today should be a decision between the patient and the doctor based upon the specialized needs of one unique human being. While what the patient can afford, either privately or through their insurance plan, should be considered by the doctor and patient, the best medical/psychological treatment that is necessary for this one human being should always be considered first, not secondarily to what the cost-management company will authorize.

Obviously you cannot ignore the costs of health care, even though psychological health care is relatively inexpensive. However, the biggest mistake that patients make is assuming that their cost-management company is making the wisest health care decision for them, when in fact the cost-management company is diagnosing by the actuarial tables. I know of suicidal patients who went untreated because their cost-containment company could not act as quickly as a phone call to the therapist. I know of patients who want a cure for serious clinical depression within the unrealistic five sessions authorized by their cost-containment company.

I know of patients whose personal, confidential medical records are reviewed by the employer’s human resources department before they are reviewed by the cost-containment company clerk, before they are reviewed by the cost-containment supervisor, before they are routed to the insurance company for a similar series of reviews, before the claim is authorized or denied.

Whether the insurance industry needs cost-management or not is not the question here. What is at stake is the quality of your psychological and medical health care. When making these very important decisions about your health care, consider that your insurance company is not the best source of advice on quality of care. They can only advise you on cost of care. For example, if you choose one of their preferred providers the costs may be lower but cost is no guarantee of quality. For quality of care decisions you have more work to do. Searching for a psychologist, for example, requires assessing just what your needs are, what approach would work best for you, what type of professional you can relate to, what credentials and qualifications make this provider better than another and so on. Furthermore, you may wish to work with a psychologist about problems that are perfectly normal, but that you want help with nevertheless, such as a divorce, child behavior problems, career planning, family stresses at work, work stresses at home and so on. Remember, your cost-management company is not under contract to help you with these problems, only those issues that you are handling abnormally.

When it comes to insurance, Americans are soft. We assume that we are entitled to “life, liberty, the pursuit of happiness and health insurance to cover every conceivable medical expense.” Health insurance is an extra. It has its limits. It is time for Americans to build some unused muscle and start making decisions for themselves again. Stop looking for someone to take care of your every health or emotional need. Stop turning these decisions over to cost-management companies. Instead utilize your good old common sense and decide for yourself, with the help of professional advisors such as your trusted doctors, just what is the best psychological or medical treatment for you, your loved ones and your employees.

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Are You The Entrepreneur Or Supportive Spouse?

By Kathy J. Marshack, Ph.D., P.S.

If you have read my columns in the past, you are aware that I frequently refer to couples in business as entrepreneurial couples. Now that I have bandied the term around for several years, it is probably time to formally define just what I mean. In fact there couldn’t be a better time to present my definition, since entrepreneurial couples are at the crest of the enormous wave of business startups in America right now. Some of you may not even recognize yourselves as entrepreneurial couples because you have always been entrepreneurial, or come from entrepreneurial families, or the style is so common (especially here in the Northwest) that you never considered a definition important. However, defining the type of entrepreneurship that you and your spouse share can be very enlightening. Knowing who you are and why you are that way will assist in problem solving and future planning, as the following case examples will show. Even though there are always exceptions to the rule and entrepreneurs being what they are (e.g., extreme individualists) there are three basic entrepreneurial couple styles to start with. You may be a blend of two or even three and you may have changed your style over time. However, I am sure you will find your bedrock image in one of these styles. They include the solo-entrepreneur with a supportive spouse, the dual-entrepreneurial couple, and the copreneurial couple.

Bob and Carol used to work together in their successful nursery and garden supply business, but Bob has since returned to his old employer leaving Carol to manage the business on her own, as a solo-entrepreneur. Bob has become the supportive spouse. He is employed elsewhere, providing emotional support to his wife’s business, but not really involved in the day-to-day management and headaches of running it. Carol, on the other hand, recognizes her talent as an entrepreneur and is much better suited to running the operation on her own as a sole proprietor. Larry and Dorothy, who for 15 years have worked side by side building their farming enterprises, are a copreneurial couple. Copreneurs share ownership, management and responsibility for their business as full-time partners. The term copreneur comes from the blending of the words couple and entrepreneur and was first coined by the husband -and-wife team of Barnett and Barnett in 1988. Copreneurs are different from dual-entrepreneurs in that they operate a joint venture. One partner may have more of the entrepreneurial spirit than the other partner, but they both are equally committed to the enterprise as owners and managers.

Still another style involves dual-entrepreneurs like Sharon and Dave, who each run separately their respective businesses. Sharon is a realtor and Dave runs several successful small businesses. Dual-entrepreneurs are like solo-entrepreneurs in that each spouse is an entrepreneurial spirit tending to their own sole-proprietorship (or even partnership with a non-family member).

They also may function as a support person to their entrepreneurial spouse. What distinguishes dual-entrepreneurial couples from the others is that they each have the entrepreneurial spirit yet they are not in business partnership with their spouses. There are few couples who fit neatly into one category or another. Jonathan, for example, owned a multi-million dollar national advertising company 10 years ago when he met Brooke, whom he later married. Now Brooke heads up a major division of Jonathan’s company. Jonathan and Brooke are copreneurs but often operate as dual-entrepreneurs because of the size of their international business. Anton and Carrie were each solo-entrepreneurs before they married and merged their respective businesses to become copreneurs. Ross and Nalani over the years have experimented with all types of entrepreneurship. In some ventures they are copreneurs. Still in others, each operates as an independent dual-entrepreneur. All the while they consider themselves supportive spouses.

So what is the real value of knowing your style and that of your partner? Stan and Rhonda didn’t evaluate their entrepreneurial style before they launched their successful retail chain, but they could have avoided many painful bumps in the road if they had taken the time to really talk and learn about each other. For years Stan had worked as a controller, transferring to a new company when he needed another challenge. He was good at his chosen career so his moves always bettered his situation. Still he was restless and at mid-life, tired of helping others make their businesses more successful. He wanted to try his hand at running his own successful business.

Rhonda had married Stan after his divorce from Pat, with whom he had three children. She had no children of her own, nor had she been married before. However, Rhonda was well established in her career when she met Stan at work. As an accountant, Rhonda had always found excellent jobs and was quickly promoted. When Stan began talking about starting his own business, Rhonda agreed that they made an excellent team not only because of their love for each other, but because of their combination of professional skills. She was excited to get started on the venture.

Clearly though, this was Stan’s adventure. True to his organizer style, he researched the marketplace to discover the most advantageous industry and location for his new business. He was not so concerned with the type of business, but whether it would be profitable. He was willing to move to a new town where there was a need for his business. Unlike the entrepreneur who pursues a business because they have a passion for a particular industry or product, Stan is the type of entrepreneur who can take any good idea and make it into a profitable venture.

When Stan discovered the right business for him, a store that specializes in a variety of environmentally friendly products for the home remodeler, the couple began the second phase of development. The plan was for Rhonda to keep her job for the steady income and benefits. Stan quit his job and threw himself into the work of getting the business funded and off the ground. Rhonda helped in the evenings and on weekends with whatever odd jobs Stan could not get to.

In this manner the business grew from one retail outlet to two within three years. At this stage the couple needed to reassess Rhonda’s role. Stan could no longer manage alone and still achieve his dream of building a franchise business. Although Rhonda was ready to quit her job and come to work full time with her husband, Stan had other ideas. He was not emotionally ready to share entrepreneurship with Rhonda. Their relationship worked fine when Rhonda was a supportive spouse, but when she left her job, Stan felt that she was usurping his territory. After a tumultuous year of trying to work together as copreneurs, Stan and Rhonda realized that Stan needed to hire professional management and that Rhonda would continue working in corporate America. They just were not cut out for the challenges of running a family business. What best suited this couple is the model of solo-entrepreneur with a supportive spouse.

Speaking of supportive spouses, he or she is often the “unsung hero.” As one wife put it, “My mission is to showcase my husband’s talents.” This wife works side-side-side with her husband in their chain of hardware stores. Her daughter and two sons-in-law are also in the business. While she is vital to the welfare of the business in many ways, her husband operates as the solitary leader of the business. He consults her and the children, but as the founder he has the veto power in all decisions.

Not everyone is cut out to be a supportive spouse…at least not all of the time. Most of us think of marriage as a partnership with give and take, where sometimes we are the leader and sometimes our spouse is the leader. In an entrepreneurial venture, however, this may not always be the case. Entrepreneurs are driven people who can become so consumed with their businesses that they ignore their families. A supportive spouse must do more than stand by and watch. They are often the one holding the entire marriage and family together, so the entrepreneurial spouse can devote his or her undivided attention to the business venture’s success.

Regardless of your style of couple entrepreneurship, all partners eventually must play the part of the supportive spouse. After all, that’s what marriage is about. And the role of supportive spouse is much less complicated if you, as a couple, clearly define the type of entrepreneurship that suits your personalities best. If you are a hard driven, competitive type, probably you will do best as a solo-entrepreneur. If both of you are this type, try dual-entrepreneurship. If you are team players and enjoy sharing the spotlight with the one you love, copreneuring is for you. And if you are the quintessential woman/man-behind-the-scenes, and you don’t really want to be too involved in the daily managing of your partner’s venture, you are well suited to be the supportive spouse.

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Can Husbands and Wives be Business Partners

By Kathy J. Marshack, Ph.D., P.S.

MAN SEEKING WIFE/BUSINESS PARTNER

Successful business man seeks life partner to share my entrepreneurial dream. Must believe in me and be supportive of the long hours required of a start-up venture. Nothing is too much for you in that you are comfortable juggling the many demands of the wife of an entrepreneur…household, childcare, social obligations and working late hours at the office to meet deadlines. Opportunity to develop your own very satisfying career as you help me build my business. Your rewards are financial security, the opportunity to be part of something big, and the chance to work side-by-side with your husband. At work you are my hard-working right hand person. At home you are the loving support that makes the long hours worthwhile.

WOMAN SEEKING HUSBAND/BUSINESS PARTNER

Career-minded, college educated woman with entrepreneurial spirit, tired of facing the “glass ceiling” of corporate life seeks like-minded college educated male to share love and business partnership in a start-up venture. Must believe in egalitarian relationships, sharing fully in the household maintenance as well as sharing equally in the ownership, management and responsibility of our joint business venture. Even though you possess creativity and leadership skills which you use to help me create the “American Dream”, you’re ego is not bruised by my ability to make decisions and take charge. At work, you are dedicated, aggressive and single minded in your pursuit of success for our business. At home you relax and become playful because you are a loving, sensitive, communicative male, who adores me and takes the time to get to know our children.

The “personal ads” I have written above are of course, tongue in cheek. Yet they represent a classic problem that entrepreneurial husbands and wives bring to their partnership. Each spouse has a very different concept of what they would like in a business/marital partner. Because their expectations are so radically different, husbands and wives become confused and frustrated with a partner that they love. They wonder why they ever asked the other to work with them. Sometimes they wonder even if they should remain married.

As more and more couples consider entrepreneurship, it becomes painfully apparent that they are unprepared for the stress business collaboration will cause their personal relationship. Many career-minded husbands and wives have already achieved some success in the work world before embarking on their own venture. Likewise they may feel that their personal relationship is solid and healthy and capable of taking on the added strain of working together. Yet few of these couples discuss the ramifications of working together. They are totally unprepared for the blurring of boundaries and turf when a spouse becomes one’s business partner. However, clarifying the work/home expectations of each spouse/business partner should be the first thing that any entrepreneurial couple does, even before spending a cent on letterhead, or signing the bank loan.

For example, even though Charlene started the real estate company five years before Ted joined her in the business, she found herself deferring to Ted more and more as the two of them worked together. As a traditional couple, who had two grown children, they were used to Ted being the “head of the household.” When they started to work together, they assumed the same roles at the workplace. The problem was that Charlene had nowhere to go with her entrepreneurial spirit and leadership skills. The solution was to redesign the business so that each had their own division to lead and operate.

Frank and Louise had a difficult transition. Although they had a traditional marriage, they operated as equals in the career world, as long as they worked for different companies. When they started their entrepreneurial venture, conflicts arose because they had not discussed expectations at work.

Frank continued to operate as the “head of the house” at work, while Louise designed her work schedule according to the former egalitarian arrangement. Frank started to complain that Louise did not work as hard as he did and that she didn’t care about the success of the business. Louise felt unappreciated because she was working very hard on projects that she felt were important. The problems were (1) that the couple was not talking about work priorities, nor coordinating those priorities and (2) they were using two conflicting models to operate as partners at work. Eventually, the couple decided to maintain the separation of work lives that had worked so well for them in the past. Louise left the business and pursued other interests.

Elise and Aaron were extremely puzzled by the marital conflicts that arose when they decided to move their respective businesses into the same building. They had had a warm and respectful marriage for ten years. Each had built their individual professional practices in that same time and they were thriving. However, when they moved into the same office suite, now seeing each other everyday at work as well as at home, conflicts were happening more often. The tools that the couple had used in the past to resolve problems weren’t working anymore. What was needed was a new set of tools for the changes in the marital/business partnership.

Entrepreneurial couples have a lot of work today to balance the competing demands of home and work. Whatever your style of couple entrepreneurship (a solo proprietorship, co-entrepreneurial couple or dual-entrepreneurs) there are few models to guide you in maintaining a loving marriage and a thriving business simultaneously. There are a myriad of variables to consider. So my advice is to design a model unique to the two of you. Begin by talking with your spouse/partner about the goals each of you has for yourselves individually in life. Then go on to discuss marital goals, family goals and finally business goals. (I have a more comprehensive outline of how to do this in my book ENTREPRENEURIAL COUPLES: Making it Work at Work and at Home.)Ultimately you are searching for a flexible system of relating that can change with the circumstances of your life, your lives together, and the changing marketplace of your business.

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Mom and Grandma: The making of an Entrepreneurial Woman


By Kathy J. Marshack, Ph.D., P.S.

For florists, Mother’s Day is the biggest sale day of the year, bigger even than Valentine’s Day. This is a powerful statement of the value of Mom and her love in our lives. For an entrepreneurial woman, Mother (or Grandmother even) may have provided more than nurturing and support during those difficult growing up years. She may also have served as a role model for female entrepreneurship, even if she operated behind the scenes. This kind of role modeling is often overlooked when entrepreneurs describe their early years and yet it may explain why some girls later become entrepreneurs.

If you are an entrepreneurial woman chances are you have always felt different somehow from your contemporaries. Even as a child you knew that you didn’t quite fit in. Oh yes, you may have had friends and performed well in school, but your thoughts, ideas and behaviors gave you away. You secretly admired the privileges granted the boys. You were a curious, independent-minded, assertive girl. You couldn’t help yourself, even though at times you wished you were more like the others so that you didn’t feel so lonesome and odd.

Nevertheless as an adult you are still different, hopefully with more confidence and pride in those differences. And as you explore entrepreneurship, you finally realize that you have found your niche. For the woman who does not follow the traditional, culturally acceptable path for a female, the going is rough. But the path of entrepreneurship is so rewarding that the hardships are worth it. In fact, entrepreneurship levels out the playing field in some ways for women. If there is a glass ceiling in the corporate world, many women find that the sky’s the limit in self employment. That may be why women-owned business is the fastest growing segment of the self-employed.

Women entrepreneurs do not have the same modeling and clearly defined path to follow that men entrepreneurs have. Women have to look elsewhere for their mentors and guides. Although the research shows that women entrepreneurs are just as motivated as men by achievement needs, desire for independence and the lure of money, they design and run their businesses differently.

With personal relationships as the center of their lives, because it is the way that women define themselves, their businesses reflect this value as well. A woman-owned business is first and foremost an interconnected web of meaningful relationships.

If you are a self employed woman ask yourself where you got your training for entrepreneurship. You may not have entrepreneurship in the family or perhaps only male models. But if you look deeply enough you may find the roots of your entrepreneurial spirit lie closer than you think, perhaps in those meaningful relationships you have had with your mother, your grandmother, an aunt or female close friend of the family. So close to Mother’s Day, perhaps it’s time to honor those women who have helped lay the foundation for your success as a woman entrepreneur.

My Grandmother was one of those important female role models in my life. I loved my Grandma. She made me flannel nighties on her treadle sewing machine. She taught me how to make a quilt by hand. On my birthday she let me help in the kitchen as we created my birthday cake from scratch. She smelled like lavender and wore corsets to trim her waist and support her ample bosom. She was a great hugger. She bought me my first pair of white gloves and taught me the value of being a lady. It was great fun to put on our white gloves, call a taxi and head into town to attend a “show.” I was incredibly proud of my Grandma when I watched her entertain at various social and fund raising functions. She had a one woman show where she sang, whistled, played the piano, and told those humorous Garrison Keilor type of stories in a funny Norwegian accent.

As I think about my entrepreneurial roots, I realize that Grandma had a major role in my growing awareness of myself as a girl, a woman, a scholar and as a self-employed professional.

Not only did Grandma delight me when I was a child, but I realize as an adult that she was a true pioneer. Born at the end of the 19th century, she claimed to be the “first white child” born in Nelson British Columbia. Her life was hard in those early years and to save her family the expense of raising her, she married at age 13. The marriage lasted only a few years and produced two children who died in infancy. Broken hearted Grandma set off for San Francisco to seek her fortune. She worked in a coffee shop, attended business school, and paid her way single-handedly by playing the piano at night in the silent movie houses. But always, she kept her virtue in tact. Being a lady was high on Grandma’s list.

Among the women entrepreneurs that I have had the privilege to know, the values that my Grandma taught me are apparent in them as well. Somehow these women know the importance of balancing their feminine spirit with the confidence and tenacity of making their mark in the world. These women value the qualities of loving relationships that so characterize the female spirit. Yet rugged individualism is not left behind. Rather through relationships with family and friends, women entrepreneurs discover strength to face the challenges, hardships and rewards of the entrepreneurial life.

Thank you to all of those wonderful mothers and grandmothers who paved the way for their girls to grow into entrepreneurial women.

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Compensation planning in a family business

By Kathy J. Marshack, Ph.D., P.S.

For years Arnie looked forward to having his son and daughter join him in his publishing business. Arnie and his wife, Ilsa, had rebuilt the business after Arnie’s father lost everything due to some poor planning and miscalculating the marketplace. Even though the business went under when Arnie was in college, he could see the potential. He had a degree in marketing and knew the publishing business from the inside out. With Ilsa’s accounting background, they systematically restored the business to a healthy functioning. About the time that Arnie’s and Ilsa’s two children were off to college the business was in expansion mode and Arnie was counting on his son and daughter to help take the company into the twenty-first century. The children were eager to help out too. They were getting relevant degrees in college, had acquired internships at publishing houses back East, and upon graduation were ready to come home and learn the family business under Mom’s and Dad’s tutelage.

Arnie and Ilsa had laid the groundwork well for inviting their children into the family business. The kids had seen how hard their parents worked, but they weren’t ignored. The family always came first. Also Arnie and Ilsa involved the children in the business from the start. Even as toddlers, they played in the office. As older children, they helped out with odd projects and straightening up. They were familiar with all of the employees, who felt like one big extended family to them. In high school, the children tried their hands out with some of the professional work. Frequently the family business was a subject for a high school project. It was common knowledge and often discussed that both son and daughter were welcome to work in the family business after they completed college.

All seemed to be going as planned until the day came to discuss the employment agreement with each child. Never before had the family had to consider real business when dealing with each other. As teenagers, the kids had been paid minimum wage or a bit better. There were no benefits or perks because their parents took care of those things. Now the children were adults, responsible for their own lives, which meant that negotiating compensation had to be strictly business. The children couldn’t be expected to work for minimum wage anymore and they expected to be compensated for contributions they made to the company. Arnie and Ilsa had some work cut out for them.

The question was, How to compensate their children, as if they were regular employees, but with the added benefit of having trusted family members to help run the business? Compensating relatives is a sticky business. Not all people are really created equal. It is sometimes very difficult to assess and compare the talents of family members who are also employees. Nor do all family members contribute equally to the business. As a result of the stress that this causes, many family business owners ignore the problem and let compensation become a breeding ground for dissension in the family. For example, many wives in family businesses do not earn a salary at all. The reason given by the CEO for this is that it saves on taxes. The justification is that she is an owner of the business, so she is growing an investment. However, the research also shows that family business wives are invisible when it comes to decision making and that they feel isolated and unappreciated. Lack of a salary or a nominal salary may account for this.

A recent survey by Mass Mutual Insurance Company reports a wide discrepancy between the salaries of sons and the salaries of daughters in family businesses across America. On average the typical son in a family business earns $115,000, while his sister earns only $19,000. These salaries also reflect the tendency of family firms to view the contributions of women as of less value and the strength of primogeniture in succession planning. In other words sons are groomed for leadership while daughters are groomed for supportive roles and paid less than their brothers.

In other situations, CEOs of family firms attempt to avoid the problem of compensation for family member/employees by paying everyone the same, even themselves. Or they hire a family member simply because they are family, regardless of their abilities. The problem with this method is that the talented and creative employees are not rewarded for their work and may become resentful of the family members they must “carry.” And the employees who are overpaid are not getting accurate feedback for their work performance, which makes it hard to improve. Likewise the CEO is not really viewed as sacrificing when he or she takes a low salary. Rather he or she is viewed as a weak leader.

Although it is not easy to put aside the anxiety caused by developing a fair compensation plan for your family members/employees, it is absolutely necessary if business is to thrive. Family relationships built upon honesty are far superior to the games required by compensation plans designed to avoid friction. So if you follow the advice of experts you will design your compensation plan according to these five steps:

  1. Write up accurate job descriptions for each employee. Include responsibilities, level of authority, technical skills, level of experience and education required for each job.
  2. Identify what your compensation philosophy is. Do you want to pay about average, or higher? Do you want to attract talent from other companies? Do you want to offset the typical male/female wage differential? Are you a training ground for young, inexperienced people?
  3. Gather information on the salaries of similar positions in your industry. Size up companies that are similar to yours in number of employees, revenue, product, geographic location, etc. What salaries and other benefits do these similar organizations pay their employees?
  4. Develop a succession plan. How will a successor to the leadership be identified among family member/employees? How will they be prepared for leadership? How will this choice affect the morale of the family/business? How will this successor be compensated?
  5. Design an affordable plan. Obviously you want to do the best you can with the dollars you have. What can you afford to compensate each family member/employee relative to their contribution?

After you have a compensation plan that reflects the family’s values as well as sound business practices, you are in position to negotiate an employment contract with a family member. It is important that everything is spelled out up front so that when you have an annual review, there is a way to compare employee performance with outlined expectations in the job description. Salary increases can then be based upon the employee’s true accomplishments.

It will be hard for Ilsa and Arnie to totally separate their love for their children from this matter-of-fact compensation plan. There is room in any business for discretion in awarding raises and other forms of compensation. However, when the money decisions are made strictly from emotion or avoidance of emotion, there is bound to be trouble. As the CEO of a family business, make the best decision you can for the business. As a parent or a spouse, encourage your family member/employee to achieve their greatest potential within or outside the business. In this way both business and family wins.

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Sex and Infidelity in the Family Firm

By Kathy J. Marshack, Ph.D., P.S.

Bill and Monica and Hillary and Andy and Cathy and Paula and … I’m not sure where the connections stop. Obviously infidelity, sexual improprieties and the abuse of power are hot topics right now. With the whole country entranced by the White House sex scandal, you may wonder how I can come up with a column that will take your attention away from the President’s sex life. But SEX just happens to be the subject of this month’s column … Sex and Infidelity in the Family Firm.

You may wonder, as some of us do, why sex causes such problems for people. After all, the sex drive is a normal and necessary part of human life. The problem isn’t that we have a sex drive. The problem is what we do with that drive. As with most human skills sex can be used in a positive healthy way or it can be used to abuse and manipulate. Sex can lead to pleasure, or a love bond within a relationship. Or sex can lead to pain, suffering and corruption.

There is very little in human life that is instinctual. Although the sex drive may be with us from birth, expression of our sexuality is learned. And unfortunately much of what we learn as we grow up, about appropriate sexual behavior is gathered from unreliable sources such as childhood friends, pornographic materials hidden from our parents, television and movies, or worse, through exploitation by unethical adults. Other than a perfunctory sex-education class in public school, where the emphasis is on health and procreation, where does a child learn about sexual techniques, or the relationship between sex and love, or the subtleties of sex in the workplace? Where do they learn about ethics?

Many parents oppose even the scant sex education offered in the public schools. They maintain that sexuality should be taught by the parents, that it is a private matter, that exposing children to these subjects in school will encourage promiscuity. Regardless of the merit of these arguments, I have met few parents who openly discuss sexuality with their kids. Most parents tell me they are more than willing to answer any questions their kids ask about sex, as if any kid in their right mind will let their parents know they are thinking about sex!

So with that minor digression taken care of, back to sex in the family firm. If most of us get a poor education about how to develop our sexual instincts into a healthy expression of our sexuality, then it’s quite likely that most families experience problems at one time or another such as sexual inappropriateness, infidelity, and even abuse. And if that is true for many families, it is true for many family firms.

Jan and Dale were really scared when I first met them. They had been frustrated for years by the poor work performance of their son, Drake whom they were grooming to take over the business when they retired. Drake just didn’t seem to have leadership abilities and his latest escapade was about to sink everything. A female employee had filed a sexual harassment complaint against Drake. It appeared to be true and well documented.

This was not a simple situation of parents neglecting their sons’ sex education, although they had done that too. Jan and Dale had not dealt with their own unresolved problems regarding sex. In earlier years, Dale had been involved in more than one affair. Each affair ended quietly and the couple never again spoke of the problem. Unfortunately, this lack of communication lead to repeated affairs, rather than resolution of the couple’s marital and sexual problems. While Jan thought she was suffering silently and Dale was always repentant, the couple’s children were being profoundly affected. Drake was angry that his father would betray his mother and he was angry that his mother would let Dale get away with it. What Drake was learning about sexuality as a child is that it is something that should be a secret, that sexual behavior hurts other people but that there is nothing you can do about it, that women are helpless in the face of a man’s advances. It is not surprising that with these mixed up messages, Drake went too far when he propositioned an employee. No one had educated him about how to properly handle his sexual impulses. For Dale and Jan, the sexual harassment lawsuit was a wake up call. Sex was only one area in their marriage that was a problem because of poor communication and inappropriate use of power. But it is not only the marriage that is affected. Employees, vendors, business associates, and customers are all affected when sexual improprieties are hidden in a family firm. Drake’s inability to develop leadership in the workplace was a direct result of having no respect for his father. Dale’s leadership was questioned by employees because his son was so irresponsible. Jan was viewed as a long suffering inept wife rather than the competent chief financial officer that she was capable of being. These are not desirable images and certainly affect the bottom line.

Even if infidelity, sexual improprieties and abuse of power do not affect your bottom line, they certainly affect your sense of self esteem and the health of your relationships with the ones you love. So why do people risk it? Lack of education is one reason, as I have already discussed. But other reasons abound too. Essentially sexual misbehavior is a signal of some deeper problem. With the President it could be that power has gone to his head, that when you’re at the top there is no way to assess what normal is anymore. With Monica it could be that she feels powerless in many ways, except when she is seducing men. With Dale, the affairs represented his lack of confidence in dealing with his well educated wife. For Drake, sexual power over an employee was the only way to feel powerful at all, since he was failing miserably in the family business.

Whatever the reason for the sexual impropriety, don’t keep it a secret. Use the signal for what it is, a message about a much needed change in your life and relationships. Among families in business, because of the need to be supportive, nurturing and protective of family members, sexual improprieties are covered up more often than in other settings. As embarrassing as it is to bring these things out, it is more embarrassing to pass the problem along to the next generation and risk everything you have worked so hard for. Seek professional, confidential help from a psychologist.

The President is about to balance the budget, but what has captured America’s attention is his sexual liaisons. If sex is a problem in your family firm, even if you think it is a tightly held secret, just what do you think your customers, employees and other business associates are talking about?

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