Family Business
Advisor & Coach

Family Business: Complex and Complicated

My mother used to say “small children, small problems, big children, big problems.” This may resonate with some business owners as they wrestle with the growth of the business and the family. When the second-generation family members are getting into squabbles over titles or compensation packages, I have had more than one founder say to me some variation of this: “my children OK, yes. I had real pressure and serious problems when I started and grew this business. They’re so lucky to have the business established that they are fighting over stupidness.”  Except that while the founder did indeed face some tough times that the succeeding generations may not encounter, each stage of business and family expansion brings its own challenges. At the founding stage, the single owner wrestles with achieving business credibility and getting capital. He or she works long hours and on weekends and is often absent to his/her family. The family living room or garage is converted into the warehouse and it is all hands on deck as the children, from an early age, are involved in helping out.

As the business expands, it faces the typical business issues—competition, the need for systems and procedures, human resource development, and the mental leap the founder must make from running a one-man show to leading a professional organization. Then as the business matures, it must re-invent itself by launching new initiatives.  While this is occurring, the family is also growing— the children may join the business or at least own it jointly and become what the family business literature terms a Sibling Partnership.  The children get married and introduce the in-law factor. They have children of their own who may eventually inherit the business and form a Cousin Consortium, if things go smoothly

As the business and family grow, things generally become more complicated as more systems and linkages are introduced. Complications, however, are able to be reduced into components that may be recognized and addressed, just like a car could be disassembled, fixed and put back together again. We can form holding companies to simplify ownership structures; we can produce volumes of procedure manuals to instil routine into multi-step tasks; we can hire lawyers to work out buy-sell arrangements – we can work towards simplifying some of the complications. This is necessary but not sufficient in a family business context. Family Business has an additional dimension of complexity when family issues are thrown into the corporate pot.

We need to recognize that every family member is a blend of birth order issues, probable gender bias, sibling relationships, attitude towards money, frustrated career dreams, possible addictions, and a whole host of historical and often emotionally based ingredients. Family relationships are a product of childhood socialization and often the family’s situation at a particular period in its history.  This is particularly glaring in families where the children’s ages vary from those reared in boom times to those born in times of scarcity. This complexity is not as easily recognized –like callaloo, once it is all is blended, the ingredients are no longer readily discernible.

And so it is with family business—complications which may be handled, and complexities that must be considered. People are often unaware of the baggage that they bring into the Board room or a family meeting and often they do not intend to disrupt the family or the business.  However, these ever-present differences in perspectives produce tensions that, in many situations, lead to a family and/or business break up. The sad statistic about family business is the high rate of attrition— historically, only about 1/3 of family businesses survive from generation to generation. And that is only a statistic. It does not mean that your family business has a 66% chance of failure, nor am I suggesting that every family in business needs a family therapist, although I do sometimes refer clients to those and other professionals. It does suggest , though, that family owners and members need to be aware of the complexities involved and not be dismissive or worse even, not interested in the issues behind every person’s position. At the same time, there are structures and systems that could be put in place to help address the challenges that each generation faces.

Some family business scholars consider the Sibling Partnership the most dangerous time for the family business. To begin with, the founder is often still in the picture as the next generation decides to or often is corralled into joining the business.  As the sibling partnership is being formed, the predecessor generation is still involved in the business. Inter-generational tensions pervade the business: Dad and/ or Mom are viewed by the next generation as being too conservative, loyal to old employees that the successors consider long past their expiry date; not willing to cede control, and definitely not open enough to modern ideas. Some of these conflicts can be attributed to “generation gap” issues:  people at different stages in their individual lives have different views and requirements. Additionally, each generation is born into a world era that is vastly different from the previous one.  Many baby boomers are far removed from the wired millennial generation.  These issues become more complicated and complex when the generations attempt to work closely together. It is heart-warming, though to see different generations working together and learning from each other.  It is a feature that family businesses treasure, if (that word again) they are able to manage the destructive dynamics that sometimes is part of the system. Families are often relieved and encouraged to learn that there are mechanisms and policies that could be put in place to help address the challenges that family businesses face, whether at the founding stage, Sibling Partnership or Cousin Consortium. The next article will begin to explore specific challenges and their proposed remedies.