Lessons from Lunds

Lessons from Lunds

Family businesses should take multiple steps to prevent serious conflicts that could end up in court.

I’m saddened when I hear that business families have entered into litigation to resolve their differences. When a family is involved in a legal conflict it rarely addresses the emotional pain of the siblings, parents, children and all other relatives involved.

A recent example is the financial battle among grandchildren of the Lund family founder. The grocery store chain now operates under the name Lunds & Byerlys.

Family-business Framework

  1. Create a common vision to unite the family.
  2. Implement the BOSS system that supports each other’s success.
  3. Apply win-win problem-solving.
  4. Hold family meetings that emphasize the family’s emotional system.
  5. Set up a buy-sell agreement that is based on structure and formality.
  6. Forgive.

I believe that even this high-profile legal conflict could have been prevented if there had been more structure and formality in addressing the emotional as well as financial side of the business. I would have said that to Russell T. Lund Sr. in the 1940s (had I been in practice then), when he started expanding his Minneapolis grocery store business.

And if I’d said it, he would have probably echoed what my clients so often say: “We don’t need all that structure and formality because we love each other.” My response is always the same: “Because you love each other, you need structure and formality.”

We can learn key lessons by taking a different look at the facts of the Lund family conflict. We can examine what might have prevented the dispute and avoided the damage that’s been done.

Do we love to fight?

From my perspective, family members fight with each other because they love and care about each other. I don’t fight with anyone I don’t care about. It’s a waste of energy. Could the Lunds also be individually passionate about their business, its traditions and their purpose in it? Going to court jumps to a new and public level. It’s unfortunate, but it also helps provide the facts so we can relate to the emotions.

Kim Lund is the oldest of two sisters and two brothers who each own one quarter of the Lunds & Byerlys grocery chain. She wanted to cash out her share.

Kim’s legal counsel said the Lunds’ offer was a “fire sale” price, and Lunds’ legal counsel said the valuation for Kim was a “fairy tale.” Family relationships had deteriorated over the years, with Kim and her brother Tres, Lunds CEO, not speaking meaningfully for years.

When family relationships suffer within a family business, pain multiplies. Kim first talked about cashing out some equity many years ago. The issue simmered, and the Lund family held several family meetings between 2006 and 2008 that were guided by their wealth counselors.

A Hennepin County judge ruled in June that Kim was the “prevailing party” in the case. Kim was awarded $45.2 million and Lunds was directed to pay her over 20 years. The judge’s award was less than a valuation prepared for Kim, but roughly double the $21.3 million the company had offered Kim.

Do we need to fight?

Even with these few facts, we can draw conclusions that contain lessons to prevent painful situations from occurring in family businesses.

I believe the Lund family members and their advisors would not have found themselves in court if they had focused on both emotional and financial issues.

Six family business pillars

1.  A family common vision, created out of the family’s values, unites a family. Repeating this every day reminds family members of their reciprocal commitment to each other’s success.

Smith Common Family Vision Example
Our family circle is an unbreakable bond of support, belief in each other and unconditional love. It inspires us to live our lives with humility, integrity and philanthropy. We manifest this through our families, our foundation and our businesses.

2.  The BOSS acronym reminds family members to focus on four crucial parts of their family business system:

  • B is for the business and what it needs to stay successful.
  • O is for other members of the family, knowing what they want and what you want for them. This reciprocal commitment to each other’s success creates a team.
  • S is for self—knowing what you want for yourself, but also realizing there is no team if you only think about yourself.
  • S is for other stakeholders, including the family as a whole, employees, customers, vendors and the board of directors.

3.  A win-win approach to problem-solving recognizes the human and emotional side of disputes by using the collaborative team skills process. By going to court, the Lund family set up a win-lose outcome, which is always lose-lose for family members themselves.

4.  Family meetings, regularly held, help prevent problems from occurring. I use them to combine business and family concerns, to navigate substantive business and financial issues, and at the same time energize people’s emotional sides by helping to strengthen emotional equity within the family.

5.  Structure and formality. Without an apparent buy-sell agreement, given the size and advisor sophistication of the Lund family business, it is surprising that the family business did not have a structure in place that would have prevented the legal dispute.

6.  Forgiveness provides health to families, especially when members also are joined as key members of a business. We can’t help stepping on each other’s toes, so forgive, forget and create a new beginning.

Tom Hubler (tomh@thehublergroup.com) is president of Hubler for Business Families, a family business consulting firm.

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