Preparing spouse to manage business can ease succession later

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

Jay was 28 when he founded his sign business. He and his wife Teddie were thrilled when they opened their storefront. As a young couple, they had a lot of energy and worked long hours getting the office and shop ready, buying supplies, developing a business plan, joining the local chamber and greeting their first customers.

Jay took over full management of the operation while Teddie kept her full time job as an account executive for a women’s fashion company. But Teddie was there through all of the growing pains of the business too. She helped with billing and emptied the trash. She took messages for Jay at home in the evening when he was working late. The goal was to build the business to a level where she would quit her job and come to work with Jay. In the meantime her job provided a steady paycheck and other benefits such as insurance.

As the business grew, so did Jay and Teddie’s family and responsibilities. By the time their second daughter was born, the sign business was doing well enough to support the young family without Teddie’s income. It would be tight, but the couple decided to take the plunge. Teddie quit her job to have the flexibility to care for her children and help out at the business.

For years Jay and Teddie ran the business this way. Although they shared equally in the ownership of the business and both worked long hours, Jay was really the manager and Teddie the home manager. Teddie would leave early to pick the kids up from school and get them to soccer practice. On some mornings she would come in late to the office because there was a dental appointment or a school field trip. At the office, however, she was fully in charge of her department . . . everything that Jay didn’t do, such as the bookkeeping, billing, purchasing and replanting the flowerbeds by the front door. Jay did the management, hiring and firing, marketing, customer service and the technical work. Amid all of this the children got more involved with the business, at first just watching dad build a sign, and later learning complex computer work.

If you are typical of most family business owners, you could probably plug your names into this scenario and change only a few details to make it your own story. Likewise, if you are typical of most small business owners, you do not have a succession plan. You have been so busy establishing and growing your business that you haven’t looked that far ahead. You may not even have the confidence yet that your business will be around that long. Or you may decide to sell the business and build several other empires before you retire or die. When you were getting your business underway, it never occurred to you that you were building a legacy; you were just going after your dream.

If you are among the rare few who have considered succession planning, more than likely you and your spouse have discussed which child is best suited to be president or if management responsibilities should be shared by siblings. If you are in partnership with your brother, mother, sister-in-law, or some other family member, you probably have a legal and financial plan for how the partnership will transition should one or the other of you die or wish to be bought out. However, if the family business is a sole proprietorship such as Jay and Teddie have, and the husband is the founder and president, it’s highly unlikely that you have considered your wife as a successor to the business leadership. Yet it is the wife who is most likely to be thrown into that position with the death of the founder where no succession plan has been established.

In 1984 McKinley conducted an interesting study in which she found that a widow was more than willing to take over management of the business upon her husband’s death, especially if she had been working with her husband. But even among those widows not working in the business side-by-side with their husbands, there was a strong desire to take over the management. These widows reported that the business was very meaningful to them that it was a part of their identity, that they had psychologically helped build the business. They did not want the business to pass out of their hands, even if they didn’t know how to run it.

Furthermore, most of the widows studied did not know how to manage their husband’s business, because they had not been trained. Their function had been auxiliary. They provided support such as Teddie has done for Jay. Therefore, these widows, untrained in the ins and outs of managing the family business, had to turn to their attorneys, CPAs and other advisors to educate themselves about the business. This is not sufficient training for the complexity of running a small business, as any business owner knows. But these particular women were determined and they learned as their husbands had done . . .by the seat of their pants.

This seat-of-the-pants training may have been sufficient for the founder, but it seems a waste to have the successor not benefit by her predecessor’s lessons. Unless the business is a professional practice requiring college and certification that your wife could not readily get upon your death, preparing your wife to take over the business is a logical and practical step for most business owners. A side benefit is that once she is trained, the founder can turn his interests elsewhere, such as expansion or developing a second business entity. Growth of an empire is possible only when you have the flexibility and freedom to explore uncharted territory. If you are busy manning the helm, your growth will be limited to raising prices on product or adding a new line.

Preparing a wife for the presidency is no easy feat, however. It means acknowledging that the founder may die or wish to move onto something else. It means putting things into writing, such as compensation plans for your wife. It means letting go of control and allowing your wife to know all of the company secrets. It means that the marriage itself will be challenged. As the protégé grows in ability and leadership, the mentor may find himself eased out of power before he is ready. Can your marriage stand the strain of your wife being the boss, for example?

Making your wife your equal partner at work (provided she wants the job) and teaching her everything you know, will provide a solid succession plan. She will most likely be a devoted fan of yours and the business, and therefore a loyal and responsible guardian for the business. She will be a much better prepared widow than McKinley found in her study and less likely to lose the business. However, this also means redesigning the business today to accommodate two owners, two managers, two leaders. The consensus model of marriage that most Americans accept as the standard today will be brought into the business setting. Not only will husband and wife have to adjust to this change, but so will employees, customers and others used to a more hierarchical model.

Be prepared to change the structure of management when your wife becomes your management partner. No longer can the founder fly by the seat of his pants. Although you may feel that your style is cramped when there are two of you to answer to, remember that having a well trained successor (and one who loves you) means that the business has a much more bright and stable future.

Successful couples in business share traits that keep love, business alive

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

One of the most challenging of lifestyles is working with your spouse in a thriving business. Most entrepreneurial couples love the opportunity to be independent, in charge of their own destinies, and to work along side the one they love and trust most.

What do successful entrepreneurial couples know about keeping a marriage and a business on track? It makes sense to find out what works for them. Out of these strategies, you may find a nugget that applies to you and your spouse.

100% – 100% Rule

Over the years I have had the opportunity to meet many entrepreneurial couples and there is a pattern among those who have long-term happy marriages interwoven with a prosperous business life. First and foremost they follow the 100% – 100% Rule. That is, each partner considers her or himself 100% responsible for the quality of her or his individual life as well as their joint ventures (i.e., parenting, household duties, managing a business).

While most couples follow a 50% – 50% Rule, meeting each other half way, by following the 100% – 100% Rule entrepreneurial couples meet each other all of the way.

They each put his or her whole self, talents, intuitions, and muscle into the relationship and business partnership, making each equally responsible for the outcome. Even though for efficiency’s sake they may divide up duties along the lines of who is most capable or available, they still consider themselves as responsible as their partner for the success of the goal.

Encourage Competition

Without question entrepreneurs are achievers and highly competitive. Without these qualities they could not create a successful business venture. Sometimes it is not always easy to admit that you are in competition with your spouse, but once the truth comes out you are in a much better position to work with the inevitable.

Instead of being embarrassed by your competitive nature, or suppressing it or even denying it, admit it and acknowledge the problem to your spouse. Then do what successful entrepreneurial couples do . . . they encourage it!

Believe it or not, successful entrepreneurial couples actually encourage competition in their partners but they do put their relationship off limits. That is, their love for each other and commitment to their marriage and family life come before business needs.

If they are working full time together in their joint venture, there are rewards and incentives built into the business for each partner to achieve. Instead of paying only the founder of the business, the supportive spouse is also paid what they are worth and not a penny less.

Each partner is encouraged by the other to achieve their dreams, to express their strengths, to utilize their talents. If this means besting your partner in a career or business move, it shouldn’t be threatening to your spouse, but viewed as a challenge to work toward his or her own excellence.

Worrying about ego or pride is a waste of precious energy that can better be used in pursuit of your dreams. Harness that competitive spirit and re-direct your achievement need toward the things you do best at the business or at home. That way not only do you succeed, but your spouse, family, business and community benefits too.

Make Love the Top Priority

With the pull of achievement needs and competitiveness in the business world, entrepreneurial couples have their work cut out for them to sustain balance in their personal lives. Making time for friendship, romance and family togetherness is difficult but imperative.

Again, successful entrepreneurial couples have figured out how to make love the top priority. They have abandoned the old methods that worked when they were younger and had free time. They realize that spontaneity or waiting for the “right moment” is not likely to happen today with their lives full of so many responsibilities.

Rather, they realize that they have to plan for love to happen and be sustained. And they build a structure they can count on to keep these priorities straight.

For example, they schedule once-a-week “dates” with each other. They make time in the morning or at the end of each day for uninterrupted discussions about everything that is necessary to keep the flow smooth. They go on frequent mini-vacations to pull themselves away from the demands of entrepreneurial life. They each volunteer their time to one community cause or child-related activity. All of these approaches help you remember why on earth you are working so hard anyway . . . to share your successes with the ones you love.

Renegotiate the Terms of the Partnership

By making love the top priority, entrepreneurial couples have a simple way to notice when they need to reorient their lives. If there is no time to give or receive love, from each other or the others in their lives, then it becomes time to renegotiate the terms of the partnership. If life isn’t meaningful or fun for either of you, it is time to re-evaluate the marriage or the business partnership or both.

In order to keep a business healthy, a business owner must not only be aware of market trends, but they must also be prepared to alter their business plan accordingly. Within your personal life, it is no different. A marriage agreement that worked when you were twenty, may be outdated for a couple in their forties. Or aspects of the marriage contract may be archaic while others are still solid. Don’t throw the baby out with the bath as the saying goes, but if some things need changing, do it now, or suffer the consequences of a loveless marriage.

I have met too many entrepreneurial couples where the only thing holding them together is the business. They have forgotten that the business is a function of their love for each other. By recognizing that the love is diminishing in your relationship and by being willing to renegotiate the terms of your marriage and partnership, you may be able to rekindle the romance and re-direct the business to new heights.

The Guidelines to Success

Although it is a lot work to maintain a healthy personal relationship among the busy-ness of entrepreneurial life, the methods of doing so are simple. Successful entrepreneurial couples already know these secrets. Now it’s your turn to cash in on what they know.

Follow the 100% – 100% Rule and you will have a trusted full-time partner at your side.

Encourage achievement and competition in your partner and you will share the fruits of his or her success along with your own.

When you make love the top priority, you always have a marker to guide your decisions and direction in life.

Finally, when you get off course, stop and renegotiate the terms of the contract, so that you can nurture and sustain business and marriage growth.

Keeping secrets in your family or business creates a tangled web

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

“It’ll just make things worse if I tell him.”

Janice was getting more and more anxious as the days and weeks went by. The bills were mounting, the creditors were calling, the first bank note was due in one month, and sales were miserable. Janice and her husband had just begun a business expansion that they had dreamed and planned for over the last five years. They were positive it was a winner and were thrilled when the bank backed them up. While Cary blazed ahead with building, hiring, warehousing and so forth, Janice as CFO handled the creative financing.

Unfortunately Janice was just a little too creative with the financing. Because the dream was too important she stretched things further than they could be stretched. Cary never questioned his wife and was unaware that they were heading for financial disaster. Janice on the other hand kept trying to pull a rabbit out of the hat.

When Janice first discovered her miscalculations, she was mortified. She was too embarrassed to tell Cary, so instead tried to solve the problem on her own. As the financial problems increased, she started shifting money from one account to another, staying one step ahead of her creditors. She convinced herself that Cary was too busy with the project to be bothered by the financial problems. She rationalized that these problems were temporary because any day now she would find a solution. Janice loved her husband and didn’t want to disappoint him either. She felt he would be crushed to discover that not only would he have to halt the expansion, but that the entire business might go under. So she lied and she hid the truth in a variety of ways.

Since Cary was not very computer literate and left all of the number crunching to his wife, the secret was not hard to keep. Until of course, the bank called the loan. Then Cary and Janice had two problems to face. The financial woes were their immediate focus so as business partners they busied themselves untangling the mess that Janice had concealed. But as the dust settled from the financial nightmare, husband and wife had a to face a more serious crisis . . . how to restore the broken trust between them.

“What they don’t know won’t hurt them.”

Even a surprise birthday party may be a secret not worth keeping, if the guest of honor doesn’t like them. It is rare that secrets are a good idea and yet they are commonplace in family firms. The major reasons for keeping secrets are (1) to avoid disagreement and confrontation, (2) to protect someone from hurt feelings or even physical distress, (3) fear of punishment or embarassment for a wrong doing, (4) or just because you made a promise not to tell.

Why are secrets so bad if they don’t hurt anyone? This is usually a rationalization. If you have to keep a secret, then it obviously affects other people. The content of the secret may or may not affect the other person adversely, but the question is, will keeping the secret affect the other person adversely? As we saw with Janice and Cary both the secret and keeping it powerfully affected the business and the relationship. There is no telling whether the couple could have saved their business had Cary known earlier of the miscalculations. However, by keeping the secret long after she should have told Cary, Janice seriously damaged the trust and the love between the two.

“But he’ll get mad at me if I tell him the truth!”

No one likes an argument but it is foolish to think that you can go through life, build a marriage and a business without having disagreements. As compatible as family members may be, they are bound to disagree on some things and sometimes these disagreements escalate into angry confrontations. Therefore it is useful to develop conflict resolution skills, rather than avoid the anger.

The excuse that the other person will get mad if you level with him or her is a poor one. First, you never know if he or she will get mad. Second, even if he or she does get mad, the discussion doesn’t have to end. Be brave and venture into conflict resolution. Third, the person may have every right to be upset that you withheld information (or fibbed) that affects his or her life. Think about it. How do you feel when a secret is kept from you, especially if your decisions depend upon the hidden information?

“It would be mean to be honest.”

There is often the fear that you will hurt someone’s feelings if you tell the truth, or worse that they will have a heart attack and die. The problem is that you have no right to assume responsibility for the other person’s life or life decisions. When you keep a secret that affects the life of another, you are robbing them of the opportunity to take responsibility for their own destiny. Because Janice loved her husband, she wanted to insure the success of his dream. But by lying to Cary, she kept him ignorant of the information he needed to make a mid-course correction. He may still have failed had he known earlier what the financial picture looked like, but the success of the business and his own destiny would have been in his hands.

Essentially it is disrespectful to keep secrets. You are treating the other person as if they are incompetent to handle the truth. What makes you better able to handle the truth than the other person? Sometimes the truth hurts. Sometimes it is embarrassing. Sometimes the truth is a powerful leveler without which you would never know you are in over your head. When I received the phone call telling me that my ten-year-old daughter had just missed the cut for the soccer team, I had to tell her the truth. Not only had she failed to make the team, but that she wasn’t quite good enough to play with this team. She cried and sobbed and was heartbroken over the failure. She even refused to eat dinner and went to bed early. However, the next day she obviously had learned an important lesson. She asked for new shinguards and went to the backyard to practice for next year’s tryouts.

“I won’t tell you unless you promise to keep it a secret.”

Signs of maturity are honesty and reliability. When we give our word, we feel a strong compulsion to keep it, to be consistent with our image of an honest and reliable person. However, it is important to realize that promising to keep a secret is not a demonstration of maturity, but actually quite childish. As a businessperson, your success depends upon flexibility. Decisions made in 1982, while accurate at the time may no longer fit the business in the year 2000. You would be foolish to hold to old decisions just because you once made a promise. You are just as foolish to keep a secret just because you want to maintain an image of consistency.

Emerson once wrote, “foolish consistency is the hobgoblin of little minds.” To make a promise to keep a secret in the first place is foolish, but you double your foolishness by keeping the secret when the evidence shows how damaging it can be. To cover for an alcoholic in the family business brings destruction on everyone. To withhold information from your spouse because one of the children has asked you is disrespectful of your spouse and the child’s ability to handle the problem out in the open.

Oh what a tangled web we weave . . .

There may be short-term gain in keeping secrets, but the long-term outcome is not worth the risk, especially when working with the ones you love. Openness in all things is the answer, even if it is embarrassing, anger-provoking, or hurtful. Don’t keep secrets, but if you already have, break them. Admit your failure, apologize to those you have lied to and make a promise you can live with. That is, promise to be responsible for your own actions, and allow others access to their own destiny through the truth.

Kathy J. Marshack, Ph.D., P.S. Licensed Psychologist and Family/Business Consultant is the author of ENTREPRENEUERIAL COUPLES: Making It Work at Work and at Home (Davies-Black, Palo Alto, 1998). She can be reached at (360) 256-0448 or www.kmarshack.com.