Navigating the Choppy Waters of Family Owned Business
By Dr. J. Mitchell Perry
JM Perry Learning Technologies
The US Small Business Administration reports that family owned businesses in this country are alive and well. In fact, 90% of small businesses are family owned. So the good news is that there are a lot of families out there involved in owning and managing businesses. The bad news is that managing the business while keeping family members functional, well adjusted, and happy is a tall order indeed. Most family businesses have poor futures: 3 in 10 will survive transition of ownership to the next generation. Why?
Most of the time the issues that arise center around reconciling: 1. For the business: power, control, and succession, and 2. For the Family: Love, loyalty, and #147;fairness#148;
On one hand, family members often have good intentions. They want to feel love, loyalty and protective of each other. Too often feelings of suspicion, self-protection, jealousy, hostility, betrayal, avarice, and guilt take center stage when conflicts emerge surrounding the major omnipresent question: #147;How do we make this business grow, become profitable, and be successful while at the same time making family members involved feel loved, reinforced and rewarded?#148;
Many times huge conflicts evolve that either break up families and/or ruin businesses because the efforts to answer this question are managed so poorly. Because you love a family member has often little to do with that same member being competent, equipped, or suited to handle a specific job in the company. Your interest in being #147;fair#148; can be in direct conflict what is best for the company. Problems arose at International Rectifier in the mid 90s when the two sons of International Rectifier chairman Eric Lidow almost lost the company due to sibling rivalry. Alex Lidow, current CEO of the company, said about his brother, #147;We were products of a competitive upbringing and I had to resolve a lifetime of issues.#148;
What can your company do?
KEEP THE DIALOGUE GOING: The moment family members quit talking for whatever reason is the minute the conflicts become untenable and the stage is set for lawyers to take over. Remember, the more talking and conversations occur the better the chance for resolution.
GET OUTSIDE HELP: Too often, family members are too emotionally involved and therefore will have trouble thinking objectively about what is good for the business. So, get outside facilitation, mediation, and consultation when it comes to securing succession plans, control assignments, and organizational changes.
STAY FOCUSSED ON THE BUSINESS: Make the hard calls on what the business needs. Sometimes that means removing and/or reassigning some family members. While tactically this is often painful, strategically this will insure the business being solvent and secure.
REGULARLY DISCUSS THE PLANS AND GET THEM IN WRITING: Have family members participate in the making the agreements and plans. Make sure you write them down in plain English and then review them periodically.
MAKE SURE LOVE IN THE FAMILY IS DEMONSTRATED IN OTHER WAYS: If love is shown only through compensation, control, status, and other rewards in the business, you have trouble. Take the time to develop and nurture other dimensions of family closeness outside the business.
MAINTAIN THE USE OF MULTILE OPTIONS: People naturally polarize when there is conflict and tension. This creates right/wrong, good/bad, win/lose, success/failure thinking which results in escalation of anger, suspicion and defensiveness. Remember that 3 options or more will always calm down this problem. Always use the magic of multiple options and you will be amazed how you can balance business with family priorities.
Remember the purpose of business is to be successful which requires competence and intelligent planning. At the same time, family success is determined by different variables like love, reinforcement, loyalty, and closeness. Managing these two major systems requires skillful navigation in often stormy seas. Keep the above ideas on your radar and the sailing is likely to be much smoother.
Dr. J. Mitchell Perry is CEO of JM Perry Learning Technologies. To reach him call 800 JM PERRY or go to
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