When a Family Business is a Lifeline

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By Eileen AJ Connelly, AP Personal Finance Writer

Michael Kaplan had a fallback after losing his high-pressure Wall Street job: the 85-year-old family business.

It wasn't an easy choice. He even considered starting his own company. "I didn't want that feeling of getting bailed out by my parents," Kaplan said. But after some prodding from his parents, Arthur and Lynn, he returned to Palisade Furniture in Englewood, N.J., the family store where he worked during high school.

In today's difficult climate, many people who previously chose other careers might face a similar choice. Some need a lifeline after finding themselves among the country's 26.3 million unemployed or underemployed workers. Others may be hearing calls for help from family members struggling to keep a business alive.

But having a family member step in can create tension and cause difficulties if the plan isn't carefully thought through.

It's business, but also personal

Like Arthur and Lynn Kaplan, many business owners want to help their relatives — emphasizing the "family" part of the business. They brought their son into the business in 2002, as the last recession was winding down, but experiencing a "jobless recovery" similar to the one economists say we're likely entering now.

In such cases, the business is seen as "an instrument to take care of family members in tough times," said Andrew Keyt, executive director of the Loyola University Chicago Family Business Center.

But no matter how much you want to help, it's important to make sure the hiring decision makes sense on a business level. If taking on a new salary causes financial difficulties or the business is already struggling, Keyt said, it could be a source of tension, especially among other workers.

"It may be a short-term solution to put a family member on the payroll, but it may have long-term impact on others," Keyt said. "If you're laying people off left and right, and then you go and hire a family member, what message does that send to other employees?"

There are also situations in which children expect a job, or owners get pressured by other relatives to employ out-of-work offspring or other relatives.

"You cannot allow family members to have a sense of entitlement where they feel like they can just come in and out when the economy gets rough," said Carmen Bianchi, who runs a family business forum at San Diego State University.

Bianchi recalled one recent case in which an owner was pressured by his wife to hire their child, a recent college graduate who had worked in the business before. The father offered an entry-level spot, but the child expected something better because of that experience.

"It caused a tremendous amount of conflict," Bianchi said. "So much so, we had to take the family on retreat."

One way to avoid such dilemmas is to have an advisory board in place that includes some professionals from outside the family, to which the owner can turn to when making difficult decisions. These people could offer unbiased advice, and may be able to help deflect pressure from a spouse or other family members if the relative in question doesn't seem like a good fit.

Another solution may be to hire the relative as a consultant or on contract for a specific time, and revisit the issue after he or she has some performance history to evaluate.

Out with the old?

One of the first things that Michael Kaplan did when he returned to the furniture store was create a computerized database of customer purchases. He also put the store online, creating a Web site that emphasizes their signature customer service.

But his mother won't let him touch the bookkeeping.

When a new generation comes into a business, the impulse to "modernize" the operations may be hard to resist. For the person entering, it may be their attempt to add value, said Joseph Astrachan, executive director of the Cox Family Enterprise Center at Kennisaw (Ga.) State University. Such moves may backfire, however, if the owner or other staff feel like they're being pushed aside in the process.

"That is a traditional tension in family businesses, what needs to change in order to keep up with the times and what do we want to hold onto?" said Keyt, of Loyola Chicago. New employees should first demonstrate they understand the values of the business before trying to make major changes, he said. Like Kaplan, it may make sense to introduce new ideas gradually.

"Once you establish trust, people will allow you to work on bigger things," he said.

One caveat comes when the business is in danger, and the family member was brought in to help save it. "When a business is in crisis, you have more leverage to change things that need to be changed," Keyt said.

Conflicts about things like modernization or changing systems could also reflect long-standing family squabbles that have little to do with the company. Financial difficulties in the business can exacerbate those issues.

All in the family

While there are some drawbacks, working with family also has an upside.

Bianchi, of San Diego State, said there's a level of trust and loyalty from family members that isn't as easy to achieve with other employees. And while just about one-third of family businesses are passed down to the next generation, the hope that the business will survive is always greater when someone can be groomed to take over.

For Michael Kaplan, keeping alive the business started by his great-grandfather, Abe Etish, is one appeal.

There's also the fact that while there are stresses, working in a family owned store means being free of many of the niggling issues that employees elsewhere grapple with. He doesn't have to worry about calling in sick when he isn't feeling well or taking some time to accompany his two children to their first day of school.

"You work on Wall Street, or wherever, for a boss, and you can get grief," he said. "If I'm here at 10:05, it's not the end of the world."
And working with his parents has allowed him the opportunity to be there to help, for instance when his father fell ill a few years ago.

"We're here for each other," he said.

"There are some negatives," said Kaplan. "But I would stress the positives, for sure."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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