You Make the Call-Situation 1

question 9

Essay

You Make the Call-Situation 1
Though they are brothers, you might not know it by watching them interact. Even a simple "Good morning" at the start of a workday seems to be more than anyone can manage. No one is happy to be at the office.
The three Patton brothers-John, Richard, and Bill- have been in business together for 25 years, running the janitorial services company that was started by their father. Most of the years were happy ones, but the good times have now faded into distant memory. What could have gone so wrong?
The conflict started when the founder's grandchildren got involved in the business. Today, John's oldest son manages the employees who work with residential accounts, Richard's daughter does most of the bookkeeping, and Bill's son is an outside salesperson for the company. Despite differences in their personal goals and interests, and even in their long-term vision for the company, the cousins get along very well. But the Patton brothers disagree about who should lead the company in the future. As the oldest brother with the most experience in the business, John believes his son is best positioned to take over the reins of the company when the time comes, but Richard and Bill realize that this means opportunities for their kids will be limited. Bill is convinced that his son shows more managerial promise than his nephew, and Richard believes that his daughter is underpaid and underappreciated, even though she is "obviously" the financial mind behind the machine. This is no small matter to the Patton brothers. Early on, the arguments became so heated that the brothers nearly came to blows.
Today, the disagreements are mostly unspoken. Though the business is in no immediate danger of failing, it has not been doing all that well during the last 18 months or so. More importantly, the Patton brothers need to make some major decisions that will position the company for the future, but these are being neglected as the brothers continue their war of silence.
Under the circumstances, progress is impossible. What can be done to get this family business back on track?

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Definitions:

Working Capital

The contrast between a corporation's immediate financial resources and outstanding obligations, illustrating its short-term monetary health and effectiveness in running its operations.

Net Present Value

A method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

Discount Rate

The discount rate refers to the interest rate applied in discounted cash flow analysis to calculate the present value of future cash flows.