Fair is not always equal and equal is not always fair

Many have heard me make this statement. 

Fair is not always equal and equal is not always fair!  What does it really mean in the world of Family Business?  Why does it apply and how do we as parents accept this to be true?  As parents we always work hard to maintain equality with our kids.  We make sure they have the same opportunities as they grow up.  They get “equal” presents for their birthdays and holidays and we try and spend equal time with each of them for their various activities. 

When our kids finish high school, we want them to have the same post secondary opportunities always making sure that whichever direction they choose, they do it for themselves first (and us second).  We follow their growth in their studies and help them through their difficulties whether they be academic or often social. 

They graduate! We celebrate! They either want to work in the family business or use it as a default destination.  One may thrive at the business and one may just “punch a clock”.  We don’t love them any less that’s for sure.   Do we pay them at the same rate? What about performance bonuses?

Now this is not an article entirely on parenting.  As they progress in their career in the family business, your accountant, lawyer, financial advisors, or even close friends suggest you do some deeper estate planning.  This involves the future ownership of the business.  Most parents want to see their individual children be treated equally as shareholders and “partners” in this business.  The hard questions begin!

Does the child who constantly outperforms expectations and has clear contributions deserve to be treated equally to the “clock puncher”? My answer is very clear!  It depends! Some families face decisions like these when properly guided through a succession process.  In my role, the underperformer is encouraged to take advantage of a clean slate to try and “start over” and prove themselves. Through some difficult discussions, we work to understand the different level of commitments that each child may have to the business.  We work to flush out ALL of the issues that brought us to this point.  Sometimes we bring the “clock puncher” to the table with a new vigor for success. 

Often we do not.  Sometimes we find out their true passion lies outside the business and as parents; we want to support our kids to follow their dreams.

Maybe it is fair that the children be equal shareholders but at very different pay structures that reflect their performance.  Maybe parents need to focus on the legacy of the business and have the child with the real passion be a future majority shareholder with the others in a minority position.  Sometimes those shares are placed in a trust and sometimes the decision is to keep things equal. 

This article is not designed to give you the answers.  It is designed to make you question what the ideal outcome for your family, for your business and for harmony is. 

Share this with those in your circles, amongst your clients, and anyone who you think may be feeling this dilemma is on their mind.  It is time to have a conversation! Family Businesses that can make some tough decisions and take action are often those whose success we read about and work to emulate!