Family Ties Can Put Companies in a Bind

This is classic. As much as the U.S. economy revolves around small businesses, most small businesses are owned and operated by families. Whatever the combonation, father & son, husband & wife, brother & sister, brother & brother, cousins etc, etc, it never surprises me to hear of a business going under because of a sibling dispute. It happens often and it usually stems from different opnions about how the business should be managed or where the business should go into the future.

Ironically, all large corporations started as small, family owned businesses. How did they do it while still managing the issues family plays in business? It is possible to manage a successful business regardless of who in the family runs it. I have seen the worst and I have seen the best examples of family businesses. Either way, this an intersting article.

By EMILY MALTBY WSJ

Partnerships Between Siblings, Parents, Cousins Become More Strained Amid Tight Finances, Issues of Future Strategy

For public claims adjuster Franklin Horowitz, merging his business with his cousin’s seemed like a great idea. Both he and his cousin were in the same line of work and Mr. Horowitz believed their different work styles—he was always pushing deals while his cousin was more conservative—would be complementary.

The partners ran MLA Claims LLC in Lafayette Hill, Pa., together for three years, helping policyholders receive compensation from their insurance companies. As the recession set in, the firm’s clients held back on using MLA’s services for smaller claims and the insurance companies were more prone to delay claims.

Mr. Horowitz says fear of how the company would be financially impacted began to hurt the partnership. My cousin “would be conservative no matter what, but with the economy, he was even more so.”

Mr. Horowitz’s cousin, Robert Landow, declined to be interviewed in detail for this article. His attorney also declined to comment.

In family businesses, strain between relatives can be more severe when finances are tight. “I tend to joke that when times are good and there is tension between family members, a new car will solve the problem,” says Ted Clark, executive director of the Northeastern University Center for Family Business in Boston. “But in tough times, they have to actually address the problem.”

More than any other issue, discussions about the company’s future strategy propagate tension, as cited by 37% of respondents to a 2007 PricewaterhouseCoopers Family Business Survey.

According to Mr. Horowitz, the disintegration of the cousins’ business relationship picked up momentum last April, when the company pursued a large case. Mr. Horowitz believed he could get four times the amount the insurance companies were offering, and against Mr. Landow’s judgment, spent a lot of time and money pushing for a higher settlement. Mr. Horowitz declined to provide the names of the insurance companies.

Read More at WSJonliine

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