Anyone in a family business knows that according to many statistics, the chance of the business surviving declines with each handoff to the next generation. What causes the drop-off? Among the myriad of reasons: times change, dedication levels vary, and talent isn’t always genetic.
If you’re in a family business, do any of the following sound familiar?
Sample #1
Granddaddy toiled day and night. He adored his work and never stopped with the new ideas. Most of his creations met with tremendous success. He just had a knack for knowing what the public wanted. My uncle, on the other hand, has practically run the place into the ground. He’s got an idea-a-minute. Unfortunately, almost everything he dreams up is a dud.
Sample #2
This place certainly has an us-versus-them feel. If you’re family, you get away with murder. If you’re not, the rules are the rules. I’m sick of it. The culture shifted when Jenny married Greg, and he started working here. I’ve dedicated years to this company, and it breaks my heart to see how an entitled spouse has practically ruined it. You’d think Jenny would know better.
Sample #3
Since we were in the cradle, Mother has had us on a path to take over the reins. My brother and I know the business inside, outside and everywhere in between. Perhaps familiarity breeds contempt. Because as the years go by, I see my options slipping away. I’m only 23. Maybe I’ll get the courage before the end of the season to tell my parents I’m leaving to go to law school.
“Family dysfunction junction” is no picnic. It’s even worse when people’s livelihoods are at stake. Often, the longer any issues go unchecked, the more severe they become. But there is good news: it’s almost never too late to confront a problem.
Dysfunction Symptom #1: The people currently in charge are running the business as usual but not innovating. Status quo will lead to hanging a going-out-of-business sign on the door.
Correction Strategy: Not everyone is a driver, nor does just anybody have the creative spark to carry the torch when a dynamic owner steps down. Fortunately, inside this dark cloud of bad news hides a silver lining. Nothing mandates a company to home-grow its top talent; if you’re not suited to the top spot, hire it out. You won’t look weak, you won’t have to give up control of your legacy, and you’ll look smart and humble as you position your organization for future success. Nervous about an outsider? There are many ways to get a fit right. Be specific about what you’re looking for, focus on culture, and find someone who is good at the parts of the business in which you don’t excel.
Dysfunction Symptom #2: The rules don’t apply to everyone the same way. Blood relatives and/or their spouses take advantage of family membership, and it’s negatively impacting culture, morale and attitudes.
Correction Strategy: Addressing this dysfunction requires some tough love and may hurt feelings. When you decide to address the problem, have your data ready and come prepared with plenty of examples. Obviously, the confrontation conversation is easier if you have power. When you don’t, your approach may need some adjustment.
No matter your version of the entitlement dysfunction, one factor is almost certain; this dysfunction is not going to self-correct. At some point, you have to address bad behavior.
Dysfunction Symptom #3: Some of the family work on vacation and others vacation at work.
Correction Strategy: Start by making rules and goals visible and measurable. State the obvious to ensure everyone knows what’s expected. Then, review goals and any rule violations regularly. Sometimes, additional structure and sunlight can go a long way toward correcting an imbalance. Of course, if that doesn’t work, it may be time to talk about a pay-for-performance structure, a split of some sort, or even a buyout. When tackling this challenge, you need to consider your interactions outside the business. Do you still want to have Thanksgiving with these people? Regardless of your answer, the greater relationship ecosystem should inform your decisions.
Dysfunction Symptom #4: The kids want to join the business but see it more as a meal ticket than a career move.
Correction Strategy: Many families that have successfully passed the stewardship of their enterprise from one generation to the next know the value of putting people to work outside the business before they earn a spot on the inside. While nothing is wrong with a short summer stint or afterschool job, if junior hasn’t started as a full-time employee, consider creating a work requirement. If you adopt this strategy, not only will you get someone who has had to earn a paycheck without the cache of the family name, you will have someone who has seen something different than your way of doing business.
Dysfunction Symptom #5: The next generation has little to no interest in the business.
Correction Strategy: Sometimes it’s best to hear “no” the first time. After all, do you care more about the business or about your children having the opportunity to pursue their professional passions and goals? Yes, it’s sad when after a lot of years, the legacy stops; but it’s sadder still when forced participation ruins something beyond the business. The bottom line: when your offspring want to jump ship, hear the message and throw them a life raft.
If you’ve encountered a problem in the family business, you know firsthand that knots rarely untie themselves. In fact, many get tighter and bigger as time goes by. So, if you’re dealing with one of the dysfunctions described above or something else, now’s the time to start planning a correction strategy and setting a timetable in which to execute it.
