One of the things that struck me about the case we’re reading this week is the role of emotions in the decision-making process for what to do with Midwest Lighting.
I have seen it before: The father starts a business and expects the son to take over. Throw in some squishy partnerships and a few dramatic events, and you have a soap opera.
Nepotism can be incredibly helpful in some cases when you want to ensure that leaders have more than just a financial stake in the company. If you spent years building up a business, you’d hope that your offspring won’t mess it up as much as another individual. However, as another generation takes control, do they really have control? Are there other pressures that impact a decision?
Even if it isn’t conscious, there is a little nagging feeling of wanting to make a right decision based on what a founder would have wanted.
In the case of Midwest Lighting, there is some room for Peterson and Scott to make a decision without too much emotion involved. They can have a neutral third party come in, do a valuation, and then they can decide what’s next based on the numbers.
But great business can’t be run strictly by numbers. There is an emotional component whether we like it or not. It’s the balance of these two that is so critical to our case. Can these gentlemen acknowledge there is history, expectations, and a host of other personal feelings involved, in addition to the basics of getting the business taken care of?
I believe it is possible, but it isn’t going to be easy.
In some cases, things can be a bit better when the emotional part of the decision is diffused, either because roles are changed or more partners are brought on board. As noted, just acknowledging the emotions in the situation can help alleviate some of the issues.
The question to ask is: Is there more value in keeping this a family-run business than if someone else were running it? You can assign a monetary value to the passion, experience, and personal ties one manager might have over another. However, it is neccessary to take a look at the calculation, be honest, and determine if there is added value.
We know just as much as emotion might help drive results, it can also have major costs. Does your calculation support the emotional costs? Something to consider.