Rules To Live By

When a Need Arises

The Zutlers are unusual. Most families don't tackle family policy guidelines until the company is flooded with relatives or "until a benign event occurs, such as when the founder faces the succession issue," says Ron Norelli, founder of Norelli & Co., a business consulting firm in Charlotte, North Carolina.

That's what the Gersh family did when father Max decided to retire from Maxons Restorations Inc., the Manhattan, New York, emergency property-damage restoration firm he and his son, Damon, founded 10 years ago. The Gershes' business had almost been toppled once before because of the blurring between business and family policies. "If we had some family guidelines when my older brother David joined the firm several years ago, maybe it would have worked out," says Damon. "We would've set ourselves up for success if everyone's expectations had been addressed in advance. But we didn't do that, and it was a blessing that my brother did an inventory of what he wanted and decided to leave the business. At least we preserved--maybe even strengthened--our personal relationship."

In light of their almost disastrous experience operating without family policy guidelines, the pair did things very differently when Max announced he wanted to retire. Damon and his father scheduled meetings to deal with issues before they became problems. "What resulted from those discussions was a formalized process for the transition," says Damon. "As a result, the succession was very easy."

It's most treacherous to set policy when a legal, financial or family crisis is looming. In this scenario, you're typically under tremendous time pressures that don't allow you to fully explore options and examine the consequences of a decision rationally. Sometimes, if you're lucky, things might turn out all right--for a while. Too often, however, family businesses under the gun set policies they wind up regretting.

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This article was originally published in the February 1999 print edition of Entrepreneur with the headline: Rules To Live By.

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