Keeping a high standard of ethics

My friend Howie is president of a chain of office supply stores that his father founded in the 1950s.

Howie's daughter works with him in corporate headquarters, and his son manages one of the stores. It's a strong, well-run business, with good prospects of being the family's legacy and source of financial security for generations to come. From a business point of view, old Howie and his family are sitting in a very cushy catbird seat.

So I couldn't figure out Howie's mood when I ran into him one morning at the Carolina Moon Cafe's expresso bar. "What's the matter with you?" I asked him.

"I've run into something kind of ugly," he said, "and I don't know how to handle it."

"If you want to talk," I said, "I'll listen."

"Well, you know that my son Dave manages our store in Washington, and he's been doing a good job of it, too. He produces some of the highest sales dollars per square foot in the company, and his profits have been so good the last couple of quarters they're hard to believe."

Howie stirred his coffee, then stared out the window into the parking lot. "Now I know why, and I don't like it."

"Record sales and fat profits? What's not to like?"

"Just listen. This morning I got a call from one of our longtime suppliers. Handles a good line of office furniture. Anyway, he said he didn't want to talk behind anybody's back, but there was something he thought I oughtta know. `What's this?' I said. `Gossiping about a competitor?'"

"The old boy network is at it again, huh?" I laughed.

"He told me," Howie said solemnly, "that Dave has been putting the squeeze on him and some other vendors, telling them to cut their prices to him by 20 to 25 percent or he'd see that they're taken off the list for all the stores. For some of them, losing our account would be losing a big piece of their annual business. On the other hand, I don't think they can keep going if they cut their prices that much."

"Maybe Dave thinks that's sharp negotiating."

"No," Howie said, "he knows better than that. My father drummed it into me that our family plays fair in business, paying fair prices as well as making a fair profit. And I've drummed it into my kids. I can't figure out what's making Dave do something so at odds with our family's values."

"Dave's out of line, all right," I told him. "If he drives a reliable supplier out of business, your stores lose almost as much as the supplier does. You look like you're ready to haul him in for it."

"I sure am," he said. "It might just be a mistake in judgment. But it's one he won't make again. Keeping up our business ethics is the way our company keeps up its self-respect in a pretty rough-and- tumble marketplace. It's one of the things this company and this family are known for."

"Howie, your son is a good man. He'll thank you for straightening him out and reminding him that any family business has to maintain a high standard of ethics in its business practices. And not just for motherhood-and-apple-pie reasons. The credibility that goes with the family name is one of a family business's greatest assets."

"Yeah," Howie sighed, "Dave has to remember what we learned from Dick Nixon."

"Dick Nixon?"

"There's a big difference between `We could do it, but it would be wrong' and `It would be wrong, but we could do it.' You want another cup of coffee?"

Q and A

Q: I've always tried to teach by example in our family's business, demonstrating how things ought to be done and how people ought to act instead of doing a lot of lecturing. I guess I'm not very good at it, because my daughter, who's now head of our creative department, just doesn't get any of my messages. She'll be running the company one of these days, so how can I be sure she's trained properly?

A: Teaching by example isn't a bad idea as long as you remember that not everyone learns by example. Your daughter doesn't have to be especially dense to miss your training messages if you never put them into clear, unmistakable language.

Try taking a more direct approach. Sit down with her regularly and go over the operating procedures, management tools and tricks of the trade that you think she needs to master. Then encourage her to watch how you and others put those things into daily practice. Keep integrating the major lessons to be learned into staff and management team meetings. You'll be amazed how much more effective your training examples can be when you back them up with some straight talk.

Q: My son's wife talks about our family company's business all over town -- our finances, our relations with suppliers, and how family members get along with each other at the shop. When I ask her to keep quiet, she says, "Oh, what's the big secret? It's just a little family business." Any suggestions?

A: Remind her that confidentiality on some matters is essential to the health of the "little family business" that keeps bread on her table. Also, it's just bad manners to gossip.

James Lea, a professor at the University of North Carolina at Chapel Hill, is author of Keeping It In the Family: Successful Succession of the Family Business.

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