Balancing Emotions and Logic in Business Decision-Making

Hard questions need to be asked to figure out what’s truly best for a family-run business
Balancing Emotions and Logic in Business Decision-Making
Wade Pennau, owner of Packerland Portables, and his son, Casey Pennau, go over plans to swap trucks in the field after a breakdown.

When family members own a business together, separating work from family is nearly impossible. While the brain should drive business decisions, emotions and sentiment always come into play when it’s a family-owned business.

“In order for family businesses to succeed and thrive, business owners must distinguish their emotional motivation and sentiment from their logical motivation,” says J. Kelly Newcomb, owner of Newcomb Consulting Group, a family business consulting group, and Thrive!, a company wellness program. “With a family business, you need to step back and look at all the aspects of a decision. In particular, how it will impact both the family and the business.”

Newcomb, who frequently speaks to wastewater, sewer and pumping groups, explained how the family/business dynamic might work for a portable restroom business: If the owner wants to buy another truck or add to the restroom inventory, that extra expense may decrease the business’ profitability and cash flow — which directly affects the family’s finances — before it may increase again.

“Company wellness is so important and all-encompassing,” he says. “It’s about the quality of work, how well the business is doing and quality of life.”

With only 16 percent of family businesses making it to the third generation, Newcomb said company wellness is an important topic.

Family business owners need to identify critical issues and then dig into these issues to create a solution, or in some cases a resolution where a solution isn’t possible. One of the most pressing issues for families is money — something no one wants to really discuss, he adds.

“Family businesses don’t discuss money or they don’t discuss it in a holistic way. People don’t want to talk about money because it’s hard. So many issues with family businesses come down to family issues or money issues.”

Newcomb leaves the big questions about transferring wealth between different generations, such as the tax implications, to financial and tax professionals, but does get involved if it becomes a discussion about how or why wealth is being shared among different family members. Such discussions are often matters of the heart, but require an open mind. He also feels they take time, trust and commitment by all involved.

“For real win-win situations to occur, everyone has to want what’s best for all involved,” he says.

Another given in a family-owned business: favoritism. The company’s employees pick up on that early on. “Parents need to realize what their child’s strengths are,” he says. “As a family business owner, you need to demonstrate credibility and trust to your employees when it comes to how family is involved. This requires being aware of a family member’s character and competencies. Basically, knowing what type of employees the family members are and what they can or cannot contribute to the company being successful.”

Family problems can also find their way into the business. If there are three children for example, but one child is not involved in the business, is it fair for him to get one-third (or cash equal to one-third) of the business when parents retire or pass away?

“I sometimes feel more like a family therapist than a business consultant,” Newcomb says, adding that another common issue parents may not take into account concerns the view that a child’s spouse is “not family,” which is a stance Newcomb disagrees with. “Treating spouses as outsiders is problematic on many levels.

“No one wants half of the family unhappy at Thanksgiving,” he says. “You also have to think about the sacrifices and if they are worth the gain.”

Another family problem is when parents own a business, but their children may not be interested in it. “A family business could be a killer for someone else’s dream,” Newcomb says. “Or the child may not have credibility with current employees and there’s no level of trust there.”

When looking at problems and finding a solution, Newcomb points to the five I’s: identify, impact, importance, immediacy and implementation. “I always ask people: what is one thing you can do today about this issue? You simply can’t ignore critical issues without eventually suffering consequences.”

Businesses call Newcomb in when they are facing challenging questions and issues, and are not sure how to move forward. “It is hard to deal with complexity if we’re emotional,” he says.

For Newcomb, it’s personal. “I think of my growing up in a family business, coming back to help the family out and the challenges with helping them sell the business and leave it behind. I admit I ask hard questions, but I didn’t get into this job to get people to like me. I got into this job so I can help businesses, and the families involved. I am grateful that I get the chance to help other families every day.”



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