What single characteristic do most funeral homes, car dealerships, heating contractors and construction companies share with large businesses such as Wegmans, Constellation Brands, Samsung and Walmart?
The answer: family ownership
Family businesses employ 62 percent of the U.S. workforce. It’s no overstatement to say their success keeps America running.
Yet the close ties that help family businesses thrive can also contribute to their demise. In addition to the external pressures that challenge all businesses, family enterprises face a potent, internal threat: the emotional intensity of working with other family members.
Mismanaging those relationships by avoiding candid conversation-even if the business makes money-promotes distance and strain. As one family business sibling recently told me, "My brother is not really a brother anymore; he’s a business partner."
Family businesses can go a long way toward fostering calmness and collaboration by skillfully addressing touchy issues instead of sidestepping. Four potentially explosive issues deserve special attention.
Entitlement vs. professionalism
Even though blood type does not dictate competence, some family members act as if they should be afforded special privileges simply because they are family members. When the CEO or president permits such an attitude, nepotism chokes out professionalism, entitlement flourishes, and non-family members begin losing respect for the leader.
They might not say it out loud, but employees typically view a privilege-stoking leader as an avoider who is more interested in harmony than integrity.
Entitlement tends to vary among family members. Many siblings grow up with a solid work ethic, a commitment to the greater good of the business and a sincere desire to provide exceptional value to customers. Often, one member enjoys greater leniency and entitlement than others. That’s what fuels discord.
Family business heads sometimes ask me, in frustration, "What am I supposed to do, fire my own kid?"
It might come to that, but there are plenty of skillful alternatives for keeping entitlement at bay and ensuring proper accountability for family members. First, the leader has to be interested in facing those challenges. Many lack the guts.
By 2050, virtually all closely held and family-owned businesses will lose their primary owner to death or retirement. Cornell University economist Robert Avery estimates that roughly $4.8 trillion will be transferred to the next generation within the next 20 years.
Even so, 55 percent of CEOs due to retire in the next five years have not chosen their successors. In fact, 47 percent of family businesses recently surveyed have no succession plan.
Why is this? The reasons are many, but the driving force is emotional discomfort. That discomfort shows up in two forms: reluctance to let go and unwillingness to face the disapproval of those not chosen as successor.
No two capacities are more important to a family business leader than the clarity to know when to leave and the courage to tolerate the overreactions that often follow a good succession decision.
I have watched many businesses be ruined because a founder refused to choose and mentor a successor. Keep in mind that the most qualified person to take the reins might not be a family member.
Role of the spouse
A few years after their marriage, Jerry and Cheryl founded a manufacturing business in which three of their children eventually wound up having leadership roles. Jerry was the driving force in the business while Cheryl raised the kids.
On paper, Cheryl was "inactive" in the business, but in reality she was the clandestine CEO (chief emotional officer). She insisted on hiring the administrative staff, telling her kids, "I’m better than your father at reading people."
Cheryl routinely interfered in the communication among family members, and she refined the art of pillow talk to secretly influence her husband’s supervision of their adult children through threats and suggestions. Interestingly, many employees regarded her as the real head of the business.
It’s best if the spouse of the primary leader has a defined role, whether or not that spouse works in the business. The same guideline applies for spouses of adult children who marry into the business. The limits of their influence and responsibilities are important topics for open discussion.
Attitude toward non-family leaders
Family ownership of a business does not necessarily qualify the family members to run it. If surnames guaranteed leadership ability, then every member of the Kennedy clan would be an exemplary leader.
Smart patriarchs and matriarchs quickly get beyond the idea that only family members can be trusted to support the best interests of the business. I have observed many family businesses thriving under non-family leaders. The most valuable of these individuals bring objectivity and professionalism, refusing to get sucked into the family’s personal relationship tensions.
That’s not easy. A working knowledge of relationship triangles and how to separate from emotional entanglements is an important survival skill for any non-family leader working in a family business.
Before taking on that potentially sticky position, I would ask myself: Am I observing any signs that family members get a free pass regarding accountability? What is the attitude of family members towards "outsiders"?
Members of even the healthiest families suffer from the blindness of emotional attachment. It’s just plain difficult to see what’s really going on in one’s own family.
If you are one of the fortunate few who maintain emotional neutrality alongside other family members, then you’re in a good position to evaluate entitlement, succession planning, the role of the spouse, and the attitude of family members toward outsiders.
If you are too close to achieve such clarity, you might consider asking a trusted, experienced outsider to help you openly discuss those issues.
John Engels is the founder of the Advanced Leadership Course and president of Leadership Coaching Inc., a Rochester executive development firm. He can be reached at [email protected].
3/22/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected].