Losing trust in a key manager - management advice - Family Business Case Study - Column

When the McCall brothers--Bob, 35, and Tim, 33--launched McCall Technology two years ago, they had the necessary engineering skills for a start-up, but they lacked critical manufacturing experience. Bob recalls how excited he and Tim were when a friend referred them to Jim Osborn, 43, a production vice president squeezed out of his job during a corporate merger.

"We thought hiring Jim as chief operating officer was a windfall," says Bob. "He had the experience we needed, and he was available. In hindsight, I wish we had been more careful in our selection."

Bob and Tim had seen the potential for manufacturing a circuit board with an innovative design. They were confident that if they got their product to market quickly, maintained high quality and met the changing needs of the fast-paced electronics industry, they would be successful. The company has done so well that the brothers have been receiving unsolicited calls from venture capitalists.

Recently, however, several top customers have questioned McCall's ability to satisfy their increasing needs. On questioning them, the brothers learned that Jim had implied the company was in financial trouble. When they confronted Jim, he denied giving customers that impression.

"We can't understand why he would undermine us this way, especially since he knows we are financially sound," says Tim. He and Bob realize that Jim may be putting his own interests ahead of the company's. They also realize that Jim now knows more about them and McCall Technology than they know about him.

"Since Jim was referred to us by a friend," says Bob, "we didn't bother to check his references, and now we don't know how to protect ourselves or the business. What can we do?"

Strive For Professionalism

The McCall brothers' knowledge of engineering has enable them to realize the early growth of their company, but their inexperience in matters ranging from production to leadership has limited their success.

They did not assigne xufficient gravity to the selection of a COO or take advantage of Jim's experience to mentor them in production. Had they done so, their enhanced knowledge of production, their increased contact with Jim, and their observation of his relationship with customers might have forestalled the present crisis. Their tendency to delegate without remaining involved isolated them and created communication problems.

To protect themselves now, they should:

* Ask their accountant to prepare a prospectus to assure customers of the financial soundness of the company.

* Retain an attorney to help them resolve the issue of Jim's continued employment or termination.

* Learn to see each aspect of the business as equally important and interdependent; lax hiring procedures, for example, have clearly resulted in harm to the company's reputation.

* Define clearly their leadership and management roles.

* Address internal communication issues.

These steps will guide Bob and Tim toward a strategic course of action for McCall Technology.

If the growth of their company is to match the quality of their product, they will need to be responsive to issues outside their area of expertise and assemble a professional management team with business acumen.

Search For Common Ground

The issue is whether Jim has intentionally spread rumors or is merely uninformed about the company's financial situation. Bob and Tim can (1) ask Jim to Leave, which may lead to legal problems; (2) consider legal action against Jim for undermining the business and interfering with its future success and profitability; of (3) attempt to resolve the conflict and continue what has so far been a successful relationship.

Litigation is time-consuming, costly and stressful. Another option is mediation, a voluntary process emphasizing disputants' interest instead of issues or positions. A mediator is a trained, experienced neutral who assists the participants by facilitating discussion. With a mediator's guidance, the McCalls and Jim can reach their own agreement confidentially, quickly, and inexpensively, while preserving their working relationship.

Jim may have no ulterior motives. Perhaps, as a nonfamily member, he has been excluded from financial discussions and is actually unaware of the company's solid position. Mediation may reveal that the simple act of including Jim in discussions can avoid misunderstandings.

If Jim is acting out of self-interest, however, the underlying reasons must be explored and resolved in order to acheive agreement. For example, if Jim thinks he is worth more than he is being paid, mutual interests may be better served if the brothers provide Jim with incentives rather than sever him. Mediation offers Bob, Tim and Jim the opportunity to craft a fair and mutually satisfactory agreement rather than have a decision imposed on them by the court.

This series presents actual family-business dilemmas, commented on by members of the Family Firm Institute and edited by Georgann Crosby, a consulting partner in the Family-Business Roundtable, a consulting organization in Phoenix. Identities are changed to protect family privacy. The authors' opinions do not necessarily reflect the views of the institute. Copyright [c] by the Family Firm Institute, Brookline, Mass.

John D. Atkinson, a Corvallis, Ore., psychologist and marriage and family therapist who specializes in services to family firms and closely held companies.

Roberta R. Jeffrey, a Mill Valley, Calif., mediator, trainer, and consultant who specializes in conflict resolution in the workplace and in family businesses.

COPYRIGHT 1995 U.S. Chamber of Commerce
COPYRIGHT 2004 Gale Group