Last Updated on March 24, 2024 by Dave Schoenbeck
Running a family business is unique in ways that other firms typically aren’t. The family is all-in, and separating business issues from family matters can be difficult.
Recently, I published an article about 3 all-too-common family business problems and how you can solve them. This week, I want to keep expanding on that idea because let’s face it: Having a family business is excellent until things get sticky.
It’s hard to narrow down the complexities faced by family endeavors that aren’t present similarly for non-family businesses. However, I think it’s essential to address the ideas I mentioned in my previous blog post and the ones below.
Here are 3 more family business problems and what you can do to head them off before they sink the ship.
Family Business Problems # 4: When a legacy member passes the company to the next generation, the direction must be clarified.
Just a third of family businesses make it from the first generation of leaders to the second, and only 10-15% of those successful transitions continue onto a third-generation change. This has been quoted in dozens of print and online articles, yet it’s nearly impossible to trace its source.
Regardless of where the statistic initially came from, we should take a moment to ponder the why of it. Why do so many family business problems lead to failure when the time comes for things to be passed on to the next generation of leaders?
The biggest reason: Going from a complete hands-on boss to a mentorship position is a drastic and often painful transition for matriarch or patriarch leaders.
The business founder often sees their creation as their “baby.” Watching someone else come in and make changes – regardless of how minimal those changes may be or the fact that the person implementing said changes is a family member – can be like seeing their life’s work fall into ruin and take an entirely unrelated path.
Also, releasing complete control over business dealings may be difficult for these retiring leaders. Suppose they are concerned with what will happen to the company after they step down (as the vast majority will be) and how their legacy will play out. In that case, it may be difficult or nearly impossible for them to psychologically separate their previous responsibilities from their new role as a mentor (or, in some cases, ultimately retreat from the business).
How to Solve It:
Talk openly and honestly about plans for the future. Who will move into new roles? Why are they qualified for those responsibilities? How and when will the founder step down? What role, if any, will they play as the business continues under the new direction of someone else? These are all questions that should have definitive answers. Don’t be afraid to broach this subject and to discuss it often.
Be clear about everyone’s role in the company and set specific guidelines on what abilities and strengths are necessary for each job so you can avoid ever needing to discuss controversial appointments or concerns about showing favoritism.
Family Business Problems #5: Technological changes or additions are met with disagreement.
This can relate to the problem above: Changes suggested by younger family members can be met with opposition from older generational leaders.
As the market continues to grow and change and as technology soars into new realms, it’s becoming more apparent that most businesses unwilling to adapt are doomed to close their doors. While this isn’t always the case—take, for instance, companies that continue to operate on a cash-only basis and do not accept credit card payments—it rings true for most.
How to Solve It:
There’s certainly a time and a place for “early adopters,” but that doesn’t always need to be your business. Give new business technology time to cure and grow before adding it to your company. This will lead to more open feedback from other adopters, fewer “kinks” that need to be ironed out, and a smoother transition for your business from the start of the implementation.
If opposition leaders play a significant role in company decisions, talk extensively about the pros and cons of using new programs or hardware. Use all the information at your disposal to debate. If you’ve waited for innovations to mature, you’ll likely have more data and sound reasoning to support your side.
Family Business Problems #6: Family and non-family workers are frustrated about uneven or unequal contributions to the business.
Often, the personality roles within a family business follow the personality traits within the family. Outspoken individuals remain the most vocal in the enterprise and frequently hold more prominent roles regardless of how much they actively contribute or how well-suited they are for the position. This can create an environment that is subconsciously hostile toward those individuals or one that operates in a constant cloud of negativity.
Conversely, from the vantage point of nonfamily workers, there may be perceived favoritism among and between family members. Non-family team members view the business from the outside in. Outsiders need more reason for company leaders to cut them slack or grant them favors. If it seems like family member workers are constantly let “off the hook” while non-family workers are not, it can spell trouble for the business.
How to Solve It:
It’s challenging to separate business problems from family problems or avoid using familial relationships to dictate how things happen within the company. Family relationships must be “checked at the door despite these difficulties.”
“Business as usual” shouldn’t revolve around anything but what is in the company’s best interest. Ensure to strictly prohibit discussions about family matters during working hours and avoid discussing business topics outside the office. This will help keep things separated appropriately and maintain peace during tough times.
Family businesses face unique uphill battles. They can be overwhelming, create rifts between loved ones, and cause seemingly irreparable damage. However, they can also be exceedingly rewarding, bring families closer together, and grow to become healthy and efficient ventures.
Don’t let common family business problems stand in the way of your company’s success. Generate open lines of communication with all your team members – family and non-family—and be clear about expectations and goals for both the short and long term. Exercising wisdom will make your family business more likely to survive in the next generation.
If you’d like to learn more about maintaining harmony within your family business, please fill out my contact form to schedule a complimentary one-hour coaching session with me. I am very confident that I can help your business thrive.
Coach Dave
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