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Family Matters
Arkansas Business - November 26, 2001
By French Hill

Stanley Marcus tells the story of the old Jewish merchant who was very ill. He looked at his four sons gathered at his bedside and said, "I appreciate your interest in the state of my health, but who is minding the store?"

Now 96, Marcus, son of a founder of Neiman Marcus, was sharp, warm and the consummate salesman during his recent sales visit to Little Rock 's Bauman's. His local stop caused me to reflect on the Marcus family and their lessons for a successful family business enterprise.

The patriarch was Herbert Marcus. Together with his sister, Carrie, and her husband Al Neiman, they founded Neiman Marcus in Dallas in 1907. Herbert's business principles were illustrated by this admonishment when Stanley joined the company in 1926: "There is never a good sale for Neiman Marcus unless its a good buy for the customer; and, there is no advertisement as potent as a satisfied customer."

At the core of a successful business such as Neiman Marcus is a successful family. Once his three sons were in the business, Herbert established an annual family meeting just before Christmas. He reviewed the past year and the opportunities of the upcoming one. He would then constructively critique each son's performance in and out of the store. He further reminded the assembled to "maintain at all times the highest standard of ethical conduct in both personal and business lives."

The family members were then presented their Christmas gift of equal shares of Neiman Marcus common stock. He urged each son to "safeguard this investment and never let [it] pass to unfriendly hands " - a definition that included former spouses. At Mrs. Marcus' suggestion, wives were full participants in these annual conclaves. Stanley said his father "regarded his business as a member of his family."

Our firm counsels family businesses on their financial and organizational structure. At the heart of this practice is a strong belief that the development of family business model structures can help the family and the family business thrive and survive. The Aspen Family Business Group, a private consulting firm, urges families to carefully consider the governance structure of their family and family business.

In the Aspen Group's view, one of the basic building blocks of family governance is the "family forum." It typically includes all family members over a certain age (they recommend 14), and it includes all spouses. This group should meet at least once a year; for many, more frequent meetings are needed. The operating rules for this body should be included in what is called a family charter.

The family charter sets out the guiding principles by which the family will govern itself. Such guiding principles might include an employment policy on how dependents and spouses may enter and exit the business and how family members and spouses are managed, compensated and evaluated. As with the Marcus family, a principle regarding company stock ownership could be included.

Birthright alone will not ensure long-term success of any family business. Therefore, family consensus and family employment principles are fundamental to any charter. Ideally, each family member would have at least five years of successful work experience before joining the family enterprise.

Herbert Marcus could have used some advice in this arena, since Stanley reports that it "was inconceivable (to him) that any of his sons might even contemplate any other line of endeavor. " One brother, Edward - an exceptional bridge player but lackluster student who had been asked to leave Harvard and the University of Texas - joined Neiman Marcus in 1928 via the ladies' shoe department. Herbert Jr. joined Neiman Marcus in 1932, having never even made an attempt at college. According to Stanley - and his father - young Herbert was lazy and a spendthrift.

Stanley recounts his father's frustration in dealing with his brothers, and these are the types of challenges that make a family business enterprise more complex. A family charter can aid in managing career expectations and make for a better work environment for family and non-family members alike.

With such structures, the family business can grow and thrive as Neiman Marcus has done. But the heart of a family business is a patriarch (or matriarch) who creates a core set of values, determines ways to measure their success and engages family and non-family members alike in building a successful business.