episode 171 – transcript

Dave Cain: Welcome to unsuitable on Rea Radio, the award-winning financial services and business advisory podcast that challenges your old school business practices and the traditional business suit culture. Our guests are industry professionals and experts who will challenge you to think beyond the suit and tie while offering you meaningful modern solutions to help you enhance your company’s growth. I’m your host Dave Cain. Locally owned family businesses are the backbone of the American economy and we’re so fortunate to be able to work with many of these type of businesses at Rea & Associates.

Dave:  One of the really great things about working with these type of businesses is the excitement and satisfaction that comes when businesses successfully passes through multiple generations. For a parent to be able to pass a legacy business ownership onto their children is a great moment, but it also brings some unique challenges. Today’s guest will help us identify what these challenges are and what multigenerational business owners can do to maintain equality among children while addressing the concerns of some of their long-term employees. Kevin Monaghan has traveled a long way to be here today and we’re so glad he did.

Dave:  As the owner of Intuitive Compensation Group based out of Charlotte, North Carolina, Kevin works with businesses that struggle through these multigenerational challenges. He also understands how important it is to work with long-term employees to achieve as close to a win-win scenario as possible. This is the first of a special two part series with Kevin. On our episode, we will dive into the topic of the golden handcuffs and their impact on employee retention. We’re going to challenge your old school business practices as it pertains to compensation and incentives for your employees. Here we go. Welcome to unsuitable, Kevin.

Kevin Monaghan: Hey, you found your voice. That was good.

Dave:  Oh, boy. You know, thanks for saving me. Thanks for saving me. Appreciate you making the travel up to Columbus, Ohio.

Kevin: It was fun.

Dave:  As an entrepreneur yourself, and we love to talk to entrepreneurs on Rea Radio, tell me a little bit about your company.

Kevin: Sure. I’ll give you the brief how I got to where we are and what we do, but we had a brief stint in comedy. We worked on television show The Office and I always say, “Sometimes when talking about compensation, you need a little bit of comedy.” Then I went overseas. I ran a consulting company over there. We worked with business partners where there was forced partnerships. Overseas in China, you had American and Chinese people who owned companies together. Came back to the U.S. and really wanted to figure out where our niche was going to be best served. While it may not be forced partnerships, a lot of families have these types of issues in there such as I’ve got children or a child in the business.

Kevin: Some children might not be in the business. How do we do this correctly keeping the family together and making sure that everybody’s good?

Dave:  I love the name Intuitive Compensation Group. Great name. Where did you come up with that?

Kevin: I think subliminally. A good friend of mine works at Intuitive Surgical Group. I must have had it in there a little bit and it came out that way. It was just a description of what we did. Somebody told me once, “In the name of your business, tell people what you do.”

Dave:  You absolutely do.

Kevin: True.

Dave:  Let’s dig into this. Family businesses. That’s the first part of our series about family-owned businesses and how you keep the peace if you will. Over the period at Rea, Rea has worked with many family businesses and you guys have done as well, so we know the challenges. The challenges are broad.

Kevin: Yes, they are.

Dave:  Let’s start with how do you set up a compensation system in a family-owned business. Let’s just start there.

Kevin: You’ve got to realize the conflicts of interest that exist between both sides. A business owner, whether a child’s in the business or not, has to position themselves for the best success for the company, keeping in mind what’s best for them. That’s typically you’ve got to be able to keep the company, but the company has to be prepared to sell itself just in case. That could be for a lot of people the best and largest exit, but selling the company can really upset a child who was planning on taking it over. Same token is how do you transfer it.

Kevin: If you’re going to keep it, but then you’re going to start communicating how it’s going to go to the child, how to fairly do that and pass that because a child can get egotistical. They can think that their way is better and vice versa. On the other side, they can think that staying the same is better and how do you handle that overtime. How do you position to transfer this that can give both sides clarity, but at the same time keep it fair even though the parent or parents have to take care of themselves at first as well.

Dave:  Sure. When you talk about being fair, there’s a general discussion there. Let’s say you have a family business where there’s three kids. One is totally qualified to run the business. The other two not so much. Is that where your group can come in and kind of develop a strategy to keep it fair?

Kevin: Right. In that scenario, let’s just say that all three are in the business is one is a leader and another may not be. How do you use compensation packages that everybody understands maybe who is a leader and let’s assume there’s no power struggle-

Dave:  Right.

Kevin: … between the children. Let’s just say they’re agreeable that one person is suitable to lead for it. How can mom and dad position the other two children to say, “Hey, this is a fair way of putting something away for maybe us or them that’s on top of it that protects the business, keeps us all on good terms and has clarity around it so that we know and can move forward with confidence that this would be something that we can get behind.” You also want to have a little bit of flexibility depending on the scenario so that if somebody rises to the occasion.

Kevin: A lot of times we’ll have a 35 year old, 40 year old who’s in there running it and there’s a 23 year old in college who’s more concerned about the cocktail hour than he is about running the business, but what if? What if that person comes in and can rise as a leader and be important? You want to leave some flexibility in there as well.

Dave:  You know, I think you and I both run across situations where this is difficult. It sounds easy as you and I talk about it, but putting it into play can be extremely complicated and challenging.

Kevin: Right. Very. There are a lot of conflicts of interest. What we find is typically addressing the conflicts of interest and typically in front of people helps alleviate and make people aware of why they should move forward, rather than getting caught down in the details. As we were talking before, a lot of times the thing that we do best or we bring to the table best is the ability to draw out what’s important to everybody and come and find a solution to address their concerns that everybody can get behind, so that they can have that clarity that they need to maintain their family relationships.

Dave:  Kind of what we’re talking about is getting to know the family business dynamic and the internal family power struggles that exist. That’s what your company can do is draw that out, but most importantly find a solution.

Kevin: Yes, or help them through the process. While our solution may not be the one that works, we want to leave everybody in a better position than where we started from. We do find out that sometimes it’s best if somebody leaves and maybe that doesn’t include anything else. That has to be on the table for everybody to know that they can go through it and to hear it. You have to have somebody who can deliver it to them in a way that tough love if you will or a lot of reasoning behind it that makes them understand why.

Dave:  That’s interesting. Let’s stay there for a second. Let’s say there is a kid that needs to leave the business. Very challenging. Got any words of wisdom for us there?

Kevin: Sure. Let me use maybe an example of a …

Dave:  Oh, I love stories. You got stories?

Kevin: We have one where there was three children and one wanted control. It wasn’t going to happen. However, some planning had already been done where they already owned a substantial amount of the company to the point where it was an issue, but refused to do anything about it until there, but was receiving a lot of pay. What we had to do was use compensation to position that person to be bought out, but a lot of times especially when you’re fighting about equity and where you stand in the future, we always say instead of agreeing on it, it’s easy to start positioning people where you have that flexibility so nobody’s too committed, but you start positioning everybody towards success.

Kevin: Then it becomes easier when it’s there when you’re looking at exchanging something that’s been building up over time and sometimes time helps. You can get started on another project and then it’s not as important. But sometimes the solution is positioning people for where everybody needs to be rather than making those commitments today, which is where you see a lot of conflict destroy family relationships.

Dave:  In our experience, both yours and mine, probably the number one factor is getting the family to realize, “Hey, there’s a potential issue here.” Do you see that as a growing concern?

Kevin: An ability for a business owner to … I don’t see it as a growing concern, but I see it as a commonality is a business owner knows that their lack of commitment today for the future in 10 years … I always put it this way to them. You wouldn’t buy a house in Florida on the coast today for 10 years into the future, but you might save up for it. Just as a lot of planning happens for these family businesses, the same principle holds true, is the business owner knows that you’re probably best not committing today to something 10 years in the future, which is what makes it so hard for the child because that’s what they want. They want to know exactly what’s in it for them.

Kevin: But to give people the ability to position for the success I think is what makes the difference in our ability to help families get the confidence around, which is usually a money saving some type of plan or change from what they were doing to moving forward helps. As long as it’s a small step that has the flexibility, it’s easier to put yourself in that position.

Dave:  I got a question I’m just dying to ask you. You have a background in comedy and you worked in the writers’ room for The Office and Parks and Recreation. How’d you go from being a writer to a consultant in compensation and incentives and financial planning?

Kevin: Believe it or not, my father was in the compensation business. I always said I was going to come back. Now, it sounds good to say, “I was working in the writers’ room,” but I was literally the guy getting the coffee for everybody.

Dave:  Oh, you were the gofer?

Kevin: Yeah, I was the gofer in the writers’ room.

Dave:  Okay. Now it comes out.

Kevin: Yeah. I wanted to be a comedian. I said I’d give it four years and if I don’t become a comedy writer, I’ve got to go do something else. I think I was interviewing at AIG and MetLife. This was right before the crisis. I just went, “Boy, I’m going to sit at this desk all day and I’m just going to regret not leaving my job.”

Dave:  Right.

Kevin: I said, “I’ve got to go do something extraordinary,” so I went to China. Believe it or not, we found that this type of … Compensation structures between people was bringing us in front of some of the toughest problems to handle. In China, what was really unique was I would go in … Keep in mind, a lot of the partners English was their second or third language. I would draw stick figures on the board, get everybody laughing, and everybody understood what was going on. I was forced to keep things very simple in what can often be very complex situations.

Kevin: From drawing amoebas and a story of amoeba floating down a creek to stick figures with buckets in between them and kids fighting over sandboxes with wizards, believe it or not, that stuff and the comedy aspect goes farther than reason, numbers and data.

Dave:  Well, you just told our listeners that you’re a very creative person looking for creative solutions in family businesses and other related businesses.

Kevin: Correct.

Dave:  In doing some research before our meeting today, I took a look at your website. If you don’t mind, could you share your web information with our listeners?

Kevin: Sure. IntuitiveCompensation.com is our website. If you go to IntuitiveCompensation.com, we have some … We can’t do testimonials because of some of the licensing that we have. However, we put some stories on there so you can get a sense of what we do and family planning is one of the stories that we have on there and how do you balance children power to … Because you have business owners that are leaving a $5 million business to one child. If the average business owner has 80% of their wealth in that business, the other three children who are maybe a teacher, a vet and homeless, I don’t know, they feel … You’re leaving a child feeling like, I don’t know, deprived of love or so forth.

Kevin: It can create conflict in families. Some of the planning has to go beyond just the simple dynamics of who’s in the business, but it’s got to be relevant to the story of the family and how do you keep everybody together.

Dave:  Right. You know, many of our listeners on the podcast are business owners and generational business owners as well. This topic is obviously very sensitive, very delicate. Probably the most thing, it’s hard to get started. If I’m struggling with that and want to have further conversations with you, how do I get started?

Kevin: Sure. Two ways. You can go to our website IntuitiveCompensation.com or you can give us a call to get on our calendar, which is 1-877-70learn. That’s 877-705-3276.

Dave:  Oh, okay. Okay. We’ll get those published as well because again, I think and I hope you concur that the hardest thing is just getting started.

Kevin: It is and that’s the point. You have to bring the most value quickly. I always say what I do is like conception. You’ve got to make them feel that it’s okay to start planning this stuff and give them the confidence to start having those conversations and then they’ll start to drive it. Because when you put it in a way that makes it very comfortable and that you can maintain that flexibility that you probably should want to anyway as a business owner, they start feeling confident to explore. That’s when they start liking the process.

Dave:  In your experience as you travel across the United States with us, you have story after story. No two are alike. Everything’s different.

Kevin: Nope. From Los Angeles to Alaska, to Portland, Maine to Florida, every industry has these issues. They’re all unique to that family.

Dave:  Look, I own a family business. I’m going to make this easy. Got three kids in the business. I’m going to pay them all equal. What do you think of that?

Kevin: Good luck.

Dave:  Good luck, yeah?

Kevin: The productive one will start his own firm and compete against you.

Dave:  Hey, you know what? It’s a good Thanksgiving dinner, good conversation. Nobody’s hacked off.

Kevin: Yeah. Two of them will show up.

Dave:  That’s easy way out if we’re all paid equal.

Kevin: You can try it. It didn’t work well for Cuba.

Dave:  Yeah. Yeah. In kind of talking to Chico in that, we know that that’s not the answer. That’s the easy way out I would think.

Kevin: Yeah. You have to address it and people are looking for leadership around compensation. Bringing ideas that can help business owners, whether it’s family dynamics or not, help understand what’s important to everybody else. What we see a lot today is time is the best asset. People are very aware of how much time and what’s in it for me. There’s a lot more working together than there’s ever been before in cultures and challenging each other. People want a sense of ownership and people want a sense of what’s in it for me is the simplest question that I can boil it down to. Our compensation packages help people explore what those look like and our process helps explore what structuring it can do for them.

Dave:  On next week’s episode of unsuitable, we’re going to talk about golden handcuffs. We’ll dig into that a little bit deeper. On this family business, talk to me a little bit about industry specific. Is there any industry where this works better than others?

Kevin: No. Even myself, I’m in different coaching organizations with a broad range of business owners. What we find is that from dealing with employees to payrolls to a lot of the marketing aspects of it, more and more it’s very similar across the way. I think that’s why you see the growth of even private equity buying a doctor’s firm on one hand and a manufacturing company on another hand and a veterinarian is that there’s a lot of similarities between them and then more so is the uniqueness between the people than anything else. While the industries might have a lot of similarities, it’s the people that are always different.

Dave:  What advice do you have for dad or mom, the business owners? When do they get started in this process? Is there one thing that’s better than the other?

Kevin: No. I would say a general observation, this isn’t statistically proven or anything, this is just where we tend to see it, is that 52 happens to be the age that most people start wanting to address this. My theory behind it is, and I know myself, 40 is I always want to be in control and I like being in control. I like the hustle. I like working hard. I enjoy it. Somewhere around 50 people go, “Well, I’ve been working hard for a long time now.” 50 doesn’t feel it, but then 51 or 52 starts going, “I’ve got 10 years before I want to remove myself. What’s it starting to look like and how does that start to play out?” Earlier the better. Like planting a tree or going to cocktail hour, earlier the better.

Dave:  Sure. Come early, leave late, right?

Kevin: Yes. That’s right. Too many business owners want to leave very, very late, but it tends to be that age that starts prompting to thinking naturally. Then it just becomes kind of honing in on how do we go about this and finding somebody that can help you through it and each person’s different. They got to find somebody who can help them.

Dave:  Age 52. Let me do some quick. That would be maybe the kids are just out of college, just graduated from college. Time to make a change.

Kevin: Young and they’re coming into the business as well, which for a lot of family dynamics might be another triggering point.

Dave:  How difficult is it to sit down with a business owner and say, “After doing the analysis, the kid maybe just isn’t suited to join the business.”

Kevin: Great observation. We find a lot of times that there is that element of … But somewhere before the child has come into the business and before they developed their own skillset to be able to run the business, there’s usually somebody who’s about 40 in between the two. He’s going, “I have helped build this. I have done a lot for this organization. I’m not working for a 23 year old that I heard the stories about them at college. I heard they’re out at night, coming in and they’re sluggish the next day.” A lot of what we then say is if they’re not ready, how do you position the company to continue running while they get ready?

Kevin: How do you face that reality and what’s fair for the people trying to come into it that keeps that middle person in play? You got to treat them like an owner because they’re already worried. They’re already thinking about what’s next because I’m not working for them. How do you keep it fair for them and how do you give that time for that development to happen?

Dave:  You got a good point. I want to expand on that a little bit, but yeah. We’re talking about bringing kids in the business, but at the same time, you have key employees that are playing a big part in the success of the business. You got to take care of them as well.

Kevin: Right.

Dave:  Sometimes the kids maybe take that job or step over, that’s pretty tough dynamic.

Kevin: Very tough and it’s not a good feeling. That’s where we say as an owner, you’ve got to … Like anything else, you would put a lot … If you owned a CPA firm, you’d spend a lot of time learning tax laws, what the problems are. You’d spend a lot of studying time. Compensation should be the same way is how do we do this. You should go through processes to learn what’s out there so that you can bring it to them instead of being reactionary. That’s where you find a lot of the problems are is most people are reactionary versus taking a leadership role and bringing them a solution so that they don’t have to worry about it.

Dave:  Sure. Sure. Have any other stories in the closing minutes we have here? Good, bad or ugly?

Kevin: No. We were talking before the show. Maybe this follows me too closely, but when I came out one day and my truck was spray painted a little bit on the left panel because the Mercedes next to me was covered in orange paint, it was very interesting when we found out what it was. It was he had started working at his father’s business and the manager who is in there had taken a … Didn’t know how to express himself, but perhaps that’s the way it came out. As a business owner, people under you aren’t going to know how to communicate that this is an issue for them.

Dave:  Sure.

Kevin: Being upfront to take steps to try to address it I think is always the best solution.

Dave:  Okay. Let’s close with action plans. Certainly our listeners can contact us Get your contact information. That’s one action plan. If somebody, one of our listeners is in this position, what’s an action plan for the next six months?

Kevin: For us, it starts with getting on our calendar and telling us your story. Just hearing the story of what you’re looking at, what are some of the things you’ve been thinking, what are some of the challenges that are out there will allow us to tell you if what we do is a good fit. If it’s not, something that we can help with. Because we’re in the space, we know a lot of other people, so we might be able to help point you in the right direction.

Dave:  As a consultant, you’re a good listener. That’s what you do. You listen to the story.

Kevin: Yup. Exactly.

Dave:  Yeah, that’s a good point. Every situation is different. There’s no boiler plate here.

Kevin: Correct.

Dave:  I think you’ve pointed that out. Our guest today has been Kevin Monaghan. Really enjoyed our conversation today. It’s always good and hard to make everybody happy in a family business situation, but you hit on some great solution and provided some good insight that others may not have considered before. Listeners, we hope you enjoyed this episode of unsuitable and I hope you’d take a minute to like it and share it. But more importantly, I hope you tune in to next week’s episode and hear Kevin’s perspective on the concept of golden handcuffs and their impact on employee retention. In the meantime, go take a look at Kevin’s website at www.IntuitiveCompensation.com to learn more about the company.

Dave:  If you have questions, email Kevin directly at kmonaghan@financialguide.com. Thanks again for joining us today, Kevin.

Kevin: Thank you for having me.

Dave:  Until next week, I’m Dave Cain, encouraging you loosen up your tie and think outside the box.

Disclaimer:  The views expressed are those of Kevin Monaghan. The information provided is not intended and should not be construed as specific tax or legal advice. Neither Intuitive Compensation Group nor Kevin Monaghan provides tax or legal advice. You should seek advice from your own tax or legal professional for such guidance. Kevin Monaghan is an agent of Massachusetts Mutual Life Insurance Company, MassMutual, Springfield, Massachusetts. Intuitive Compensation Group is not a subsidiary or affiliate of MassMutual.

Disclaimer:  The views expressed on unsuitable on Rea Radio are our own and do not necessarily reflect the views of Rea & Associates. The podcast is for informational and educational purposes only and is not intended to replace the professional advice you would receive elsewhere. Consult with a trusted advisor about your unique situation so they can expertly guide you to the best solution for your specific circumstance.

CRN202102-242649: Monaghan – Rea & Associates Podcast 171 – Family B