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What do we owe our children?

Money isn’t the primary issue. With a commitment to one another’s growth and happiness, business families will thrive.

By Henry D. Landes
November, 2001

One way of approaching compensation?"the elephant in the living room" that too often doesn’t get talked about?is to think of parents in a family business as wearing three hats: those of family leaders, business managers and business owners.

What’s the real bottom line for parents who head up a business family? Perhaps a story will help.

A tourist was admiring the beautiful farms of Lancaster County, Pa. Curious about the crops, the man spied an Amish farmer by the side of the road, stopped his car, got out and asked the farmer, "What are you growing here?"

Pausing for a moment to take off his straw hat and wipe his brow, the farmer smiled and answered, "Well, what we’re really growing here is children."

The days of the family farm, where children (and lots of them) were necessary for success, are a fading memory for most North Americans, but the Amish farmer’s sentiment still rings true. Owners and managers of family businesses are, at rock bottom, in the business of growing people: giving their children the opportunity to grow (in every meaning of that word). In his book Love & Profit: The Art of Caring Leadership, James Autry asserts, "Work can provide the opportunity for spiritual and personal, as well as financial, growth. If it doesn’t, then we’re wasting far too much of our lives on it."

A legacy of values

In between childhood allowances and estate planning, nearly all parents—business owners or not—struggle with the question: What do we owe our children?
Virtually all parents, whether or not they own a business, must wrestle with financial questions. Here are some examples:

• Are childhood allowances entitlements? Are they performance-based ("when you finish your chores")? Or are they a combination of the two?
• What is our philosophy of gifting throughout the life cycle? Do we give cars, vacations, houses, investments to our adult children? Under what circumstances do we make these gifts?
• How do we handle requests for loans? How much are we willing to lend? How formal should our loan terms be? Are there certain times or situations when we offer to lend money to our children?
• How do we support our children’s special needs or vocational interests?
• What is fair? What is responsible? How do we avoid "spoiling" our children or grandchildren? What is enough—but not too much?
• What do we owe our children after we die?

Children keep score

Decisions about money and related matters transmit powerful messages about what and who families (more specifically, parents) value. In Born to Rebel, Frank Sulloway observes: "Children may not know if they are loved less than the children of other parents, but they are painfully aware when they are loved less than a sibling." Lacking other objective measures, children of all ages tend to subconsciously (or consciously) use decisions about money as a shorthand way of keeping emotional score in the family: "Am I valued as much, loved as much, as my siblings?"

In addition, children (that includes all of us) want to feel special! Indeed, parenting might best be defined as "helping each child become the special person he or she was created to be." Successful parents find creative and thoughtful ways to strike the delicate balance between fairness and specialness, two seemingly mutually exclusive values.

While certainly influenced by the practices of their folks, young parents in a new family create their own unique approach to handling money, which evolves over the years. And all along, of course, their own kids are watching?with a keen sense of fairness!

For business families, the questions about money keep coming, thick and fast. Many business owners puzzle?even agonize?over questions such as the following:

• How do we pay or compensate children and other family members who are employed in the business? Do we compensate them equally? Should we pay them based on their contribution to the business (and, yes, performance)? Should compensation be based on years of service?
• How do we distribute stock? Should stock ownership be based on employment? Contribution to the business? Need? Family circumstances? Or should it be based on membership in the family DNA pool?
• How do we continue showing our children that we love all of them equally—unconditionally—when each child brings different talents, commitments, competencies and contributions to the business?
• How can we help our adult children understand that while compensation can’t always be equal, it can be fair?

A meaningful work environment

In addition to their own children, most business owners hire non-family employees, who were raised in different environments. What "compensation" does every employee (family member or not) want from his or her employer?
While employees may be most verbal about financial rewards, research has shown that money is not the most important motivator of employees and certainly should not be the first contribution of parents to children. In study after study, salary and wages are not put at the top of the list of what really matters most to employees. More important than money are the following:

• Recognition for a job well done; affirmation by managers and supervisors.
• Promotion and advancement possibilities.
• Feeling involved in something meaningful; doing satisfying work.
• Job security.

Next in the surveys comes "good salary." Workers want?and deserve?a fair and honest wage. But money nonetheless is subordinate to the less tangible aspects of compensation involving recognition, advancement, meaningful work and job security.

In short, compensation is not just about money.

One of the goals, then, in family business with our own children?and other workers?is to establish a meaningful work culture and climate in which growth is an integral part of the company’s mission. Growth, though, shouldn’t just be a goal for the business itself; it should also be a goal for the people who work there.

The often unspoken connection between love and money is a powerful force in all families, but many business families deal with this issue in spades. (With a "poker face," one might add that people sometimes use dollars as clubs, letting diamonds get the best of their hearts.)

It’s not surprising that compensation is one of the most incendiary, explosive issues facing the business family. But don’t be fooled. It’s not just about money or even mainly about money. Conflicts around compensation often reflect other more fundamental, long-simmering, unresolved family issues. Most families need the assistance of a family business compensation consultant to sort through the complex feelings and values, as well as the vital business considerations that surround compensation.

Since this is such a volatile topic, we strongly advocate thorough and candid family discussions that explore the values out of which the family can develop its philosophy?and policies?of compensation. In order to harness the potential difficulty around compensation, it’s essential that families reach consensus on a compensation policy for family members, along with a well-thought-through compensation plan for the entire company.

In this rapidly changing world, however, a plan that’s great one year might be only mediocre the next. Excellence in this area can be a moving target. It takes energy to keep revisiting and refining compensation policies, keeping them relevant for family members and other workers alike.

On the road to adulthood

Answering the question "What don’t parents owe their children?" in some ways is easier than its opposite. For example, parents in a family business don’t owe their children a free ride, a guaranteed annual income or protection from the trials of life. Though the family business can offer opportunity platforms and learning laboratories, each child/young adult must make it on his or her own merits.

ndeed, the self-actualizing individuation process can at times be painful?for young person and parents alike?but it’s the only road to healthy adulthood (inside or outside the family business).

Laying financial compensation aside for the moment, what do we owe our children?

• A nurturing home.
• A feeling in each child that "I am valuable for who I am, not for what I do or how much money I make."
• A mentoring relationship with each child, in which parents model life-giving values that will endure, including an attitude of gratitude—and learning.
• A good education that equips children for whatever life will bring.
• The freedom for each child to live out his or her life mission, inside or outside the family business. There are, after all, only two lasting bequests parents can give their children: roots and wings.

Our policies and practices around money are powerful ways of teaching and transferring our values. One business-owning couple I know have passed on their legacy of service to their sons by paying for their college educations. The young men then "repay" their parents as they are able, by giving the equivalent amount to those in need. Dad shared how heartwarming it was to him when his second son, who was studying in Central America, called one evening and asked that $1,000 be wired from the youth’s bank account, so that he could give it to the father of his host family. The money would enable the host father to finally finish his law degree. "This is the first installment of repaying my college loan," the son told the father over the phone. These parents have been putting their money where their heart is.

With a commitment to one another, to personal growth, to living balanced lives and to the company’s success, business families will not only survive but also thrive. Having worked through the toughest issues with love and respect, family members can sit down in harmony to Sunday dinner together—and count themselves blessed.

Henry D. Landes is president of the Delaware Valley Family Business Center in Sellersville, Pa.

Originally published in the Family Business Compensation Handbook, October 2001, by Family Business magazine.