“Despite having to contend with internal family tensions on top of the usual work stresses family businesses still outperform non-family businesses. At the end of the day it’s not what they succeed at but the way they succeed that makes the difference.”
– Jane Hilburt-Davis

Thus consultants to family firms, who work with the owners and the family as well as the business, must be prepared to help their clients work through the emotions they experience as they make changes to improve the health of both their families and their businesses. Professionals who consult to the business only, and not other systems (i.e. family and ownership), are not working as family business consultants.
– Excerpted from Consulting to Family Businesses

I’m a strong believer that family owned businesses are critical to the health of our local, state and national economy. 80-90% of businesses in the United States are family owned and these businesses employ half the nation’s workforce and create more than seventy percent of all new jobs. When they work well they are wonderful for the family, the employees and the community.

However, there is a dark side that the founders of family businesses often do not consider carefully enough. In fact, at a recent breakfast a client who owns a highly respected family business suggested that I write a column warning people to keep business and family separate. He should know. He is a good man and runs a great business. However, like many family business leaders, he welcomed family members into the business with little thought to what they could contribute. If they were family, they had a job and a clear path to management. As a result, for almost seven years he has not talked with his daughter. His sister is perpetually mad at him for not giving her husband a job. Extended family dinners are rare. In short, mixing family and business without care has caused multi-generational harm that will probably never be resolved.

If you think this is unique, think again. Here are a few more examples:

• Two brothers have not spoken in years. The older son got to buy 60% of the company and makes the big bucks. The younger son simply has a job. Their children are first cousins but have never met. The father and mother who founded the business are heartbroken.
• Two brothers got into a fist fight at Christmas dinner three years ago. Neither they nor their wives have spoken since.
• A young man was given a job in the family business with a great paycheck but few expectations. He became deeply involved in drugs, had two children by someone other than his wife and ultimately took his own life, leaving a devastating legacy.
• A daughter took over the helm of her fourth-generation family business amid much fanfare. While she was a good person, she simply was not competent to lead the firm. When the business closed she was personally bankrupt and 30 employees lost their jobs.

It is hard to imagine a more difficult type of business to run than a family business. When your family members are your coworkers, every family grudge, every childhood hurt, and every skeleton in the family closet accompany them to the office every day. In addition, adult children bring different personality traits, aptitudes and interests to the workplace. Some fit well in a business, some do not and some never will. However, the majority of family business owners REALLY want their kids in the business, whether there is a good fit or not, and the consequences can be disastrous. It almost seems as though the desire to perpetuate the family business is embedded in the DNA of the owners and overrules rational thinking and planning.

Decisions around management succession and transferring control to the next generation are especially challenging for family owned businesses. Even the savviest executive may find it difficult to admit that his child doesn’t have the capabilities or drive to take over the business. In fact, family businesses typically do not fail because of competitive or economic pressures; they fail because they are unable to navigate the familial stress of strategic succession planning and balancing the complex psychological issues inherent in running a family business.

If you see any of these issues in your family business, ignore them at your own peril. Even small missteps can cause generations of estrangement between family members and can shatter the business, as well. Here are a few rules for managers considering involving family members in the business:

1. Develop and implement clear policies about allowing family members to join the business. Deal up front with issues like education, outside experience and emotional maturity.
2. Make clear what is required for family members to rise to management. If you promote based primarily on last name rather than merit, you will have problems keeping non-family members who are strong performers.
3. Run the business like a business. Have clear policies that apply to family and non-family alike. Create clarity of expectations and responsibilities.
4. Consider creating an outside advisory board. At the very least, develop an ongoing relationship with a consultant with proven expertise in working with family businesses. A good consultant must be experienced in both business consulting and family/emotional issues.
5. Make sure you are experienced in identifying conflicts and able to handle them in a mature manner.
6. Create a written strategic plan that includes a long-term succession strategy.