Last week I started off the story of Maria, a successful owner of a dairy products company where her son Michael was the chief accountant and her daughter Trudy was the head of sales.
Her two other adult children were not involved in the business, while the two in the business would be very happy to retire in the next decade and live off the dividends that the company was generating.
Michael wanted his mother to set up an advisory board so that she could begin the process of transforming the business from a family-owned enterprise into a sustainable business managed and run by non-family professionals.
“A friend of mine is a human resource recruiter and she says finding the kind of expertise we need is not hard,” Michael continued his discussion. Maria cocked her head to the side and gave Michael a baleful stare. “Who told you to start talking to recruiters?”
Michael had anticipated this very reaction and was quick to try and allay his mother’s almost neurotic fear of external takeover.
“You asked me to find ways to help us create a sustainable business. Isn’t that why you sent me for the MBA programme?” he gently responded. “If we were to set this advisory board up, all of us would continue to sit and participate on the board and to be honest, I don’t feel I get the right kind of professional challenge from you and Trudy.”
Michael was well aware that family dynamics came to play out in their monthly management meetings and he sometimes viewed the questioning from his older sister Trudy as an indictment on his youth and lack of corporate exposure.
He also knew that his mother relied heavily on the external auditor to give her assurance that the books of account were being managed accurately following a bruising tax authority audit two years ago that left them with significant penalties to pay.
He had also tried questioning some of Trudy’s sales strategies that had backfired earlier in the year.
Trudy had instituted a deep discount to the large retailers who bought their products, believing that the retailers would pass the price drop on to consumers which should ideally lead to higher sales.
Instead, the retailers had sold at the same old price, product sales remained flat and the business took a significant revenue hit that month that also affected cash flows in the subsequent month.
Trudy had become extremely defensive at the monthly management meeting and their mother had taken on her customary non-alignment policy of not stepping between bickering siblings.
Michael reminded his mother about these dynamics, telling her that sometimes it wouldn’t hurt to have other independent voices in the room that could ask the right questions and bring some external views and experiences that could help them navigate the growth of the business.
“We can set one up with a time limit, say two years. If we find that it’s working for us, all we would do is roll over the terms of the advisory board members for another two years. For those that we don’t like, we won’t renew their terms. Or we can get a new set of members altogether,” he exhorted.
Maria bit her tongue and inhaled deeply. She knew that her two children were in the business to help her keep a handle on things, but they had each told her that they had their own aspirations.
Her two other children had adamantly refused to join, both of them saying that they could not work with their siblings or their mother. Maria had also had a health scare two years ago that had her hospitalised for almost a month. She worried what would happen to all her hard entrepreneurial work if she became completely incapacitated.
The likelihood of her children selling to any one of the investor vultures that had been circulating was a clear and present danger.
By putting an advisory board in place, an opportunity lay to begin putting in the building blocks to an organised exit plan.
An exit that she could control by bringing in the right voices to help the business grow and hopefully some of those voices could become part of the mainboard if she went the external investor way.
To be rich or to be king, is what Michael had asked of her life goals earlier.
In light of her own family dynamics and her health risks, being rich enough to live a quality life with dividends that sustained her through sick and thin might not be a bad option.
“I will give it some serious thought Michael,” she said.
Michael knew that his obstinate mother had just made a critical concession. He would wait for a few weeks and then prod again.
