Over the years, I have gotten to know many family business situations and quite frankly, I often see problems that one can only attribute to the overlay of family dynamics on business accountabilities.
1. The Parent Attempts To Control Things After They’ve Left
About two years ago, I was chatting about succession with the CEO of a family business. He told me that he wanted to leave the business to his two sons — 50% each. Alarm bells went off. I asked him why he wanted his two kids to take over the business. The answers were things I’d heard before: ‘I want them to have a comfortable life’; ‘I want them to be close to each other’; ‘I want to leave a legacy.’ Eventually with some persuasion, he decided to take a different course of action. After an offsite conversation, it became clear that one son felt a stronger attachment to the business than the other. His plan was to give that son the business and the other son an equal amount in money and real estate.
If you’re a business owner and you still want your children to have equal ownership positions, then you need to consider separating ownership from decision-making power and putting control in the hands of one of your children.
2. Businesses With a ‘Family’ Culture
When I hear a leader say that the culture of their business is like a ‘family’, in the best case they are telling me they are humane, caring leaders. However, the worst case is more common. Most organizations that describe themselves as having ‘family’ cultures tend to operate in a top-down or autocratic fashion where the President makes all the decisions. The bottom line: a ‘family’ oriented culture can leave employees feeling untrusted and totally disempowered.
3. When the Founder Stays Too Long
The transfer of a business between generations can be tricky. A parent — rightly — wants to do everything they can to ensure the success of the family members taking over. But sometimes, the parent stays around too long. The next generation needs to have the opportunity to make mistakes; that’s how people learn. The parent needs to stand back and let the next generation make decisions and risk mistakes.
4. Kids Enter the Business Before Establishing Themselves
Before they come into the family business, I believe it is absolutely critical for children to establish themselves in the world outside the family business. Being able to succeed outside the family will instill important resources of confidence and strength. Kids who have worked elsewhere tend to be better contributors and, as importantly, happier in their lives. They will know they have what it takes to succeed without the help of the family.
5. Issues Relating to Accountability and Entitlement of Family Members
On occasion, I encounter organizations where there is a perceived double standard for assessing performance and rewarding family and non-family employees. Whether real or not, if non-family members believe that family members receive special treatment or are held to a lower standard, there is a real chance their engagement and motivation will be impacted. I’ve seen situations where really competent employees who aren’t family members leave the business. I truly believe that nepotism in any form is usually detrimental to organizational performance.
Finally, if you’re the owner or part of a family-owned business, I encourage you to read ‘Every Family’s Business: 12 Common Sense Questions to Protect Your Wealth’ by Tom Deans. This excellent book elaborates the importance of difficult but necessary family conversations and clean agreements in successful multi-generational businesses.