In spite of family dynamic issues, ABC Auto, a second generation multi franchise dealership group was “successful.” Dad, our original client from 35 years ago, was quite the dynamo. He had been a very successful domestic dealer in a prosperous community. Back in the 80’s he also accumulated an assortment of lucrative import franchises before they were hot. Both of his sons came into the business and worked their way through the various seats with energy, enthusiasm and varying degrees of success. Against my recommendation, however; their dad did not hold them accountable for performance, elevated them quickly to management, paid them and passed ownership to them equally. He just could not bring himself to make a decision as to who would lead and who would follow.
The two sons, now 63 and 58 were less than a dynamic duo. The older, Brian who was more dominant and controlling oversaw the import brands and attempted to be a leader because “I’m the oldest and I was here first.” The younger brother, Philip, was also a good car guy but was more focused on what the dealerships could do for him and his wife. Philip spent more time rebelling against his older brother’s attempt to lead the Group than he did overseeing their three domestic stores, which due to great truck demand, were more or less on auto pilot. Both brothers operated their dealerships independently with the help of their sons and their 85 year old dad and 70 year old CFO overseeing admin. Neither brother wanted the input of the other, being content with their respective kingdoms. They did not want to discuss splitting the dealerships in fear of losing something they could not replace and upsetting their dad’s dream of his boys running the stores together and his grandchildren to ultimately take over. In addition to the relational strain between brothers, their younger sister, who was not actively employed had a son and daughter working with Brian in an import store.
For the last ten years or so, since dad retired, Dr. Merlot and I had been actively involved with the brothers and occasionally their sister who worked part time discussing performance metrics for their children (eight total members of G3), initiation of a successor development program, restricting the transfer of stock to actively employed G3 family members and the hottest topic, teamwork. With a diversity of distracting personal agendas constantly surfacing, most discussions were frustrating and non productive with Dr. Merlot on several occasions unsuccessfully proclaiming “I am not letting you guys out of this room without a decision or a date for the next meeting”. Most of the time we settled for the date that usually got postponed by Philip to remind his older brother that he was not “El Jefe”. Their sister worked in the real estate company and did not want to make or deal with waves; she was the consummate family business pacifist.
‘The sale of a business is a viable succession option’. I would rather my friend’s son have these stores than my grandchildren become an embarrassment and endanger the careers of our employees.
As the cycle of frustration with Brian and Philip continued, Dr. Merlot and I began to feel the pressure of our commitment to Mr. Jack (dad) that we would help his sons develop a leadership structure and prepare his grandchildren for succession. We had recently completed the development and adoption of Operating Covenants that we hoped would relieve the distracting rivalry between Brian and Philip. Much to our disappointment we concluded that the boys had patronized us partially out of respect for longstanding with the family but as it turned out more due to fear that we would tell their dad they had been acting like ten year olds. Contrary to formalized covenants to communicate directly, give one another the benefit of the doubt and collaborate on the development of consistent Group policies, we concluded that we were back in a hole of senseless stonewalling and defiance. At wits end, Dr. Merlot and I felt it was time to come clean with their dad.
We visited him at his office as he continued to come in two or three afternoons a week depending upon how he was feeling. “Mr. Jack I have good news and bad news.”
“Oh crap!” he responded, “give me the good news first. At my age I might get to miss the bad news” he responded with a smile. He never missed a chance to joke about his age.
“OK, I’m game with that plan,” I replied with a laugh. “Your boys are good operators. They both are getting outstanding performance out of their stores; they are printing money! Their management teams are strong and the factories love ’em. Across the board, they have very impressive market share, used cars and CSI. You should be proud as you have developed a couple of very productive dealers.”
“Well thank you,” Mr. Jack replied. “I wish I could take credit for their achievements but as you know they never listened to me. They just fell in love with the business, worked hard and learned big lessons from small mistakes. But you know I can read a statement and that’s not why you are here; what’s up? What’s the bad news?”
“We are striking out on succession Mr. Jack!” blurted Dr. Merlot unable to contain himself. “Although your boys are great operators they could not agree on where to go to lunch. There is a rivalry, a competitiveness that neither Loyd’s mentoring nor my psychology can resolve. But that’s not the bad news!” he again blurted. “The boys are protecting their children’s right to the turf each of them is managing. They are effectively allowing their kids to do as they please. The bad news is, your grandchildren are not going to be operators like their dads, Brian and Philip. The worst news is, they think what they are doing is right, the only smart way to run a family business. In spite of everything you’ve done and we’ve done, our assessment of the prospects for achieving your goal of succession are slim to none. I’m sorry. I really hate to give you this report but honestly we have been unable to move the Succession Success needle related to your specific vision. In fact I believe we are no better off today than we were five years ago.”
Mr. Jack broke eye contact with Dr. Merlot and focused up as though he were searching for a way to bear the heavy burden we had just dropped on him. After a few moments he looked over at me, “you agree Loyd?” “Unfortunately Mr. Jack, we are totally in agreement on this one,” I responded with a heavy heart. “The last time we met with Philip, I thought Doc was going to punch his lights out. Philip all but told Doc he was a dumb ass for not recognizing he was never going to be accountable to his older brother, he had earned the right to be his own boss. On top of that, he will not endeavor to hold his kids accountable. He thinks they are entitled to starting out in management. When we consider all this crap, I think your goal for succession is a formidable stretch.”
“I get it Loyd,” replied Mr. Jack immediately with his arms out portraying the inevitable. “Regrettable but reality!” he professed and continued looking back and forth at both of us with resolve. “Regrettable but reality! What do you mean by that Mr. Jack?” Doc pleaded.
While taking off his glasses and scratching his head, Mr. Jack replied, “What I mean is that I am not blind, dumb or stupid Doc. My boys may think I am wetting my pants and drooling on myself but I get it. I see what is going on. Sure I was hopeful that your optimism would bear some fruit but there’s not enough time.”
“What do you mean, not enough time?” I inquired. “You know that marketing pitch you make, ‘the difficult you do right away, the impossible takes a little…There’s not enough time,” he accentuated with a smile.
“Oh, yeah,” I responded. “Did not know I made that big of an impression on you. If you can remember that, you are definitely not blind, dumb or stupid.”
“And it’s my fault” responded Mr. Jack quickly.
“I never held Brian or Philip accountable so why should I expect them to do something I wouldn’t. It’s just too bad the dealer gene pool got so diluted in the third generation.”
“So what are you going to do?” inquired Doc with relief.
Looking directly at us and with stern confidence Mr. Jack stated, “We are going to sell this sucker Doc. Figure it will take fifteen minutes to get an offer from one of my good friends son’s whom I really respect. I figure in light of your report and my age it’s time to get on with it. I remember another thing that you said Loyd about this regrettable reality, ‘the sale of a business is a viable succession option’. I would rather my friend’s son have these stores than my grandchildren become an embarrassment and endanger the careers of our employees. And Doc, out of appreciation for your effort, I am going to let you be in the room when I announce this to Philip.”
“Thanks Mr. Jack,” Doc responded. “I carry no resentment. I am pleased to help with the meeting but I will not be reveling. The sale of a family business may be a viable succession option but it is not something we celebrate.”