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The boss shouldn't have promoted his sons

Business Management

Morale and profit margins plunged when an entrepreneur gave his sons too much responsibility. To save the business, he must reassert authority.

| August 5, 2010

Problem: Bad morale is sinking a boating business.

Above Water, a New Hampshire-based business that sells parts and accessories for private boats, had decades of steady sales. Management is now so dysfunctional that it is affecting every employee's morale. The resulting drop in efficiency and productivity is starting to cut into profits. Two years ago revenue was $22 million. It has declined slightly to $20 million—not bad, considering the economy. But the profit margin has shrunk, from 15 percent to 8 percent.

Founder and owner Jerry worked hard to get the business going. His two sons, Frank and Marcus, have helped him since they left college. Deep down, Jerry knows they aren't particularly competent. They are great salesmen but they aren't shrewd when it comes to closing deals with clients. In fact, Jerry admitted to us that he didn't have a lot of faith in their decision-making prowess. Out of a misplaced sense of fatherly duty, he made them vice-presidents of sales and operations respectively, and gave each a hefty salary. To avoid an increase in overhead, he cut his own pay.

If anything, the moves stoked strife within this family business. The brothers do not get along. Each feels he is in charge. They bicker constantly. Since they are equal in position, no one ever backs down or compromises. Meetings almost always end the same way—with one or the other storming off the workshop floor in a huff.

The ongoing dissension is almost a daily ritual, obvious to all other employees. The kids argue in front of customers. They disagree even on the most minor details. When shouting matches flare up, the workers scatter and pretend they don't hear what's going on. In fact they're listening to every word. On breaks they talk about what a mess these kids are making of the old man's business and how uncomfortable it is to work in an atmosphere with such explosive tension. Some choose not to. The stockroom manager quit first, then Office Manager Janet had enough and gave notice. Before long, nobody was working very hard. Why should they? If the owners of a company aren't going to treat their business with respect, why should the staff?

Worst of all, no one listens to Jerry any more—least of all his sons. Each figures he's the heir apparent. They go around demanding personal loyalty from each employee. Jerry hides in his office. His workers have no clue whom to listen to. They're damned if they do and damned if they don't.

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