Q I am an assistant manager at a hotel. The owner's 16-year-old daughter started working here about a year ago. She does not follow procedure despite my many attempts to guide her. Should I tell the owner?

Amy Lee
Reno, Nevada

Most business owners love their families first and their companies second, which is how it should be. Your priority, of course, is the business. Obviously, this is a situation that calls for diplomacy.

Before you talk to the boss, take one last shot at turning around your difficult charge, advises Tony Simons, an associate professor of leadership and organizational behavior at the School of Hotel Administration at Cornell University in Ithaca, New York. But this time try engaging her rather than simply explaining procedure. Find out what she would like to do and assuming it's reasonable (performing cabaret in the restaurant probably is not) offer her a chance to prove herself. "Try to partner with her," Simons suggests. "Ask her what she wants. Tell her what you want."

If she remains recalcitrant you have to tell on her. Doing so will require all the diplomacy you've developed over years of assuring irate guests that no, the shampoo in those little bottles has not been watered down. Broach the subject with a question ("I'm dealing with a challenge. Can you help me?") rather than a complaint ("Your daughter is driving me nuts!"), advises Jon Handlery, owner of the Handlery Hotel in San Francisco. Handlery, who as a boy worked as a hotel houseman for his father and has employed his own children and other relatives, says family members should be held to higher performance standards than other employees. On one occasion, Handlery was faced with a chronically tardy staffer who also happened to be a family member. Rather than giving her a free pass, he sat her down and asked her if she really wanted to be part of the business. She resigned a few weeks later. Any owner worth his salt will appreciate your honesty, Handlery says, especially if you leaven your criticism with praise for the lass's good qualities.

Of course blood is thicker. The boss may take his daughter's side and penalize--even fire--you, an act for which you have no legal recourse. But if he wants his business to thrive and his progeny to become a responsible adult, chances are good he'll take your concerns seriously. As a last resort, you can always drop the name Paris Hilton.


Q I am thinking about buying a number of companies in a high-growth service industry. Is this a good strategy? What are the likely pitfalls?

Name Withheld
Arlington, Virginia

Roll-ups retain a new-economy taint, probably because they flourished alongside revenueless dot-coms and other ill-starred phenomena of the late '90s. In a go-go age, it was the ultimate go-go strategy--quickly acquire dozens, or even hundreds, of small players to achieve economies of scale, dominate a fragmented industry, and go public. Wayne Huizenga's Waste Management (NYSE:WMI) is probably the poster child for successful roll-ups. But the strategy also produced kennelfuls of dogs that cost investors millions. Today the term provokes a gag reflex in many private equity investors and investment bankers.

These days roll-ups have high barriers to entry. A decade ago, a company needed about $500,000 in EBITDA (earnings before taxes, interest, depreciation, and amortization) to be considered a roll-up candidate by private equity groups. These days, few private equity investors will even consider deals unless companies have between $5 million and $10 million of EBITDA, says Charles Oppenheimer, CEO of Amvest Financial Group, an investment bank in Independence, Missouri, that specializes in roll-ups and consolidations.

The driving philosophy for successful roll-ups isn't "bigger is better" but rather "bigger and better," Oppenheimer says. Although behemoth buying power is nothing to sneeze at, back-end consolidation of stuff such as purchasing, sales, and HR generally produces less than spectacular savings. Real value is created when the new megacorporation can offer customers a broad array of industry services--the holy grail of one-stop shopping.

Process is tricky as well--there's no "roll-ups for dummies" formula. Wolfing down dozens of businesses in a short time is bound to cause legal and managerial indigestion, particularly if the founders of the acquired companies stick around. It's probably wiser to start with a few sips rather than a gulp--a couple of acquisitions over a year or two. That also makes your strategy look more like a consolidation than a roll-up, which should make financing easier, says John Utzschneider, an attorney at Boston's Bingham McCutchen who has guided clients through several roll-ups. "Smaller isn't always better," Utzschneider says. "But it's often more understandable."


For tips on managing family members, visit the Family Business Advice section on the website of American Management Services ( To learn more about buying companies, check out The Synergy Trap: How Companies Lose the Acquisition Game by Mark L. Sirower.