Jack shook his head. Three weeks ago he had joined Owen Digital Solutions (ODS) as general manager. He had been excited by the challenge of taking this fast-growing Australian medical-technology and software company into the international market. The owner and managing director, George Owen, had painted a rosy picture. Jack’s own research before accepting the position had confirmed that ODS was a market leader in medical-monitoring data transmission, with world-class technology. After three weeks visiting customers and getting to know staff, Jack was worried. Not everything was as it had seemed.
The core business of ODS was the MedTransData (MTD) device for transmitting data from medical monitors over the internet via satellite. This meant that any ambulance or country hospital could transmit data, in real time, to big medical centres and receive life-saving advice regarding patient treatment and drug administration. The heart of MTD, and its key competitive advantage, was the software algorithm that George Owen himself had developed.
George had a doctorate in medical electronics and was an active researcher. In 1993, George saw the potential of the internet as a means of communicating and integrating vast amounts of patient data. In those days, the limiting factor was transmission speed. Various means of data compression were developed to overcome this problem. George had developed proprietary compression software that was still far in advance of anything else available.
One of the first clinicians to work with the prototypes was Jill Brandtas. Dr Brandtas had won the Nobel prize in 1992 for her work with advanced patient-monitoring systems. She and George hit it off and she became a strong advocate for MTD. She used the technology in her work and developed a wide range of monitoring protocols that further established her reputation as an expert in the field. In recognition of her expertise and support, she accepted an invitation to join the board in 1998.
Because the benefits of MTD were widely recognised and no competitor had an equivalent product, margins were large. George had become wealthy, and staff enjoyed the best remuneration and working conditions.
The new gm
George and his accountant had discussed succession planning and had agreed that George’s daughter Raylene, although talented and hard working, did not yet have the necessary skills to take control of the company. George wanted to pursue other interests, and the thought of leaving the running of the company to a general manager appealed to him. A key role of the general manager would be to work with Raylene and develop her management skills and experience.
Jack Burgess had a diploma in medical electronics and began his career as a medical equipment technician. He was quickly promoted to management and realised that he needed additional skills. Jack commenced an MBA. Through networking during his MBA, he gained a position with a leading medical equipment company as technical services manager. Jack saw the opportunity at ODS as an upward career move. He applied for the position of general manager, had a long second interview with George, and was successful.
At the interview, George explained that the general manager would have two key responsibilities: to take over the day-to-day running of the company from George and to groom Raylene to take over as managing director from George in about five years.
George spoke highly of Raylene and her commitment to the company. In fact, George said Raylene often spent weeks travelling on company business. George felt that much of the success of MTD was due to Raylene and her work with clients and prospects.
Jack was comfortable with this as he believed that a successful five years with ODS would be a stepping stone into a high-level position with an international company.
George was open with Jack and indicated that, because things had been going so well with MTD in the past two years, he had backed off from the day-to-day management of the company. The administration manager looked after most things, and sales and technical support seemed to look after themselves.
The boss’s daughter
Raylene was 26 years old. She had completed a nursing degree in 1994. MTD was then in the development stage and Raylene became involved with the early trials, in which her nursing expertise enabled her to liaise with medical staff using the product. In 1997, when the product was released on to the market, Raylene joined the company full time as a product application specialist. The role was essentially to liaise with prospects and customers, demonstrate the MTD and assist in its use. Technical specialists had responsibility for direct sales to customers. Raylene had a bright personality and a relaxed and professional manner, and she quickly established rapport with prospective customers.
Jack had met some of the sales people and thought they were professional in their approach. They seemed motivated, which was no surprise as most were earning twice the industry average.
In his first three weeks, Jack visited several key customers with George, and their positive comments about MTD confirmed Jack’s opinion that he had made the right decision joining the company. At that time, Raylene had interstate travel commitments and advised Jack that it was not convenient to meet.
Jack first became concerned after his meeting with Dr Brandtas. Jack asked about Raylene’s role and was surprised to hear the opinion that “the boss’s daughter” played no real role in the company. When Jack mentioned that this was not the impression he had got from George, Dr Brandtas laughed, saying: “Well, what do you expect? She is the one and only daughter.”
Jack reflected that none of the customers he had visited with George so far had mentioned Raylene neither had any of the sales specialists.
Jack decided to gather more information and contacted three friends who were using MTD. He had based much of his research before joining the company on their responses to his questions. They had been positive about the company.
Jack rang each of them to say that he had joined the company. In each case he subtly introduced Raylene into the conversation. Each of them said that Raylene was known throughout the industry as “manager, good times”. She was an expert in local restaurants, and when in town she frequently issued dinner invitations to anyone associated with MTD. Her parties were legendary and she was a good source of industry gossip. In short, Raylene was a fun person to be with, but took little real interest in MTD.
The issue came to a head a few days later when Jack was routinely reviewing some financial statements. He was shocked to see that Raylene’s travel and entertainment expenses for the past 12 months were nearly six times higher than for any of the product sales specialists. He became more concerned when he noticed what seemed to be two trips of two weeks each to New Zealand ski resorts charged to the company.
The last straw was when Jack saw an invoice for repairs to Raylene’s company car, a Porsche. The other company cars were Fords and Holdens.
Jack considered these findings in light of the glowing comments George had made about his daughter and the stipulation that it was Jack’s job to groom Raylene for the managing director’s job.
He decided it was time to meet Raylene, and rang her mobile. When Jack explained that he felt they should meet Raylene replied: “Yes, I agree, but it’s not convenient at this time. In any case, I don’t expect to have a lot to do with you as general manager because my role is maintaining relationships with customers on behalf of my father and that hasn’t got much to do with you.”
At this point the mobile battery went flat and the conversation ended.
What should Jack do regarding Raylene’s role with the company? Should he discuss his concerns with her father? Where should Jack start in grooming Raylene to become managing director?
Proposed solution #1
Cathy Bowen is a consultant specialising in small and family-business planning. Her business, Generation to Generation, focuses on the people factor. Bowen is an accredited mediator and trainer in communication strategies. She has close associations with Family Business Australia, LEADR (mediation), Women in Agriculture and AIM.
Anyone with an understanding of family businesses will quickly identify several issues apparent in this case study. We have the three cogs of the value systems common to family businesses founder, business and family trying to turn together.
Jack, a fairly inexperienced manager, must contend with what is not only a company problem but also a family issue. And it is likely that there are other practices in the company that need reviewing. In George’s words: “Sales and tech support seem to look after themselves.”
Having been with ODS for less than a month, it is unlikely that Jack has real clout at this stage. He needs to assess the best course to take because, if he handles this badly, he could witness what happens when the value systems that typify family businesses start to seize up. Not only could it irreparably harm the company, it could end up putting Jack out of a job and harm his career prospects.
Jack should recognise that Raylene may have genuine skills that make her an asset to the company. So an important step is to clarify her role.
Jack should explain the need for accountability in her position, without getting her offside. He needs to explain his apprehensions to George, without getting him offside. He should arrange a meeting with other management people and George, and clarify the problem of Raylene’s current role and the effect on the company. This could be presented as part of a new performance review process for all staff, to soften the blow.
Jack could also employ an outside consultant. This would turn the spotlight away from Jack and serve to lessen any animosity that might erupt in his relationship with Raylene. The consultant could conduct an overall review with management personnel in the company that could put review procedures in place for the future. It would ensure that Raylene was not the focus, thus again minimising harm to relationships and, if necessary, acting as a face-saver for her.
It is common in family businesses that family members are employed to give them some involvement, rather than training them for particular positions.
If Jack is able to communicate the problem and the proposed remedies to George without seeming to threaten Raylene, he will probably gain George’s support. To achieve change in a family business, you must have the support of senior management and the founder.
It is important for Jack to have the support of George because, should Raylene turn the situation into a stand-off, the contest of strength may have negative consequences.
Where does this leave Raylene? A good consultant should work through all scenarios with her. The simple questions need to be asked: “Why are you here?” “What do you want from the company?” “Where do you see your role in this business five years from now?”
But how do Jack and George get Raylene to co-operate? They should consider immediate recognition incentives for her, as opposed to future promises. A limited position on the board would be a powerful persuader.
Jack is the outsider here. His main task is to ensure minimal harm to the company and relationships as he negotiates his way between the people whose roles include father and daughter, boss and employee, founder and heir.
Proposed solution #2
James Bennett is a director of the Brisbane printing firm Copy Print Xpress. Bennett, along with business partner and fellow director Steve Dougherty, has expanded into other companies
including the consultancy Bennett and Dougherty, which provides hardware and digital solutions to an evolving market.
Family companies bring additional >challenges, especially for independent managers with responsibility to the company as well as responsibility to support a family member.
Jack is in an awkward situation. Did Raylene study medicine from a desire to be a nurse or because the family expected it? Is she suited to being managing director? Would she be considered for the job if she were not the boss’s daughter?
Luckily, Jack has advantages in terms of time (he has a five-year window) and the company’s successful market position. However, it is important to ask two questions before proceeding: does Raylene know she is being groomed to take over, and does she want to?
And what exactly is the role of managing director? George has been taking a hands-off approach, and this trend should continue during Jack’s stewardship. If Raylene is to step into George’s shoes, Jack will have to define their relationship early on and ensure the position is not devalued by the time she inherits. It may also be that George’s hands-off approach is the model Raylene wants to adopt, and her lack of interest in the technical side of the business may be related to this.
To begin with, Jack should arrange a meeting with Raylene on her “turf” lunch in a relaxed, non-confrontational environment. By having the meeting outside work, Jack is making it less threatening and has a greater chance of ensuring that Raylene will attend. At this “getting to know you” meeting he can discover her intentions. If she intends to be managing director, he knows where he stands and can begin planning. If she wants to stay in her liaison role then this issue needs to be addressed directly.
George will have to be brought into the talks, and Jack could find himself in a family dispute. Should this occur, Jack must remain neutral, looking after the best interests of the company rather than choosing sides. He may have to orchestrate the meeting, but it is vital that Raylene discuss her plans with her father without making Jack the middleman.
If Raylene wants to stay in her current role then Jack still has an accountability issue. If she wants to be managing director, then Jack has a different, but related, set of problems.
It is important for Jack not to assign blame. He must approach it all as a learning situation and view any solutions as looking for the better development of the company and the people involved.
He will have to acknowledge that Raylene has been operating unchecked for years, and she may believe it is her right to continue doing so. She may also believe that her approach is the best one for her role and, as the company is financial successful, may believe it works.
Jack should be consultative, looking after the entire company and encouraging Raylene towards greater accountability and responsibility. He must avoid being cast as the villain.
It may be advantageous at this point for Jack to bring in a consultant or facilitator to review the company’s structures and act as a buffer between himself and Raylene and George. A consultant’s recommendations may carry more weight due to perceived independence.
One of Jack’s options would be to introduce a new policy covering expenses, sales targets, etc, for all staff. For those account managers already following the procedures this would simply be a reiteration of existing policy. The important thing is that it is not aimed at Raylene but encompasses all staff. Jack can then say he is ensuring that the company stays “number one” (possibly by implementing the consultant’s recommendations) and continues to build on its business platform. This future-looking approach will also help to avoid the blame that can occur when looking backwards.
It is also important for Jack to remember that there is nothing wrong with Raylene being “manager, good times” so long as it is responsibly handled and financially viable.
By implementing the new accountability policies and offering Raylene more responsibility in her current role, Jack is saying “I trust you” as well as beginning the grooming process.
Jack could suggest she attend sales sessions and pursue sales opportunities in the name of expanding the company and gradually give her goals.