Keeping the family, and the business, together
or small, multinational corporation or corner grocery, when we say
business, we really mean family business.
According to the Arthur Andersen/Massachusetts Mutual
1997 American Family Business Survey, an estimated 90 percent of
all businesses in North America are family owned, including nearly
35 percent of the Fortune 500. Family enterprises make Campbell's
soups, SC Johnson home cleaning products, Mars candies and Coors
In addition to producing the products we use, family
businesses also account for 78 percent of new-job creation, 60 percent
of the nation's employment and 50 percent of America's gross domestic
Now, these big family firms are getting smaller company.
Since the last round of corporate downsizing a decade ago, family-owned
small businesses have flourished, some of them launched with buyouts
and severance packages from corporate giants that were themselves
the gleam in some entrepreneur's eye just a couple generations ago.
Where business is concerned, statistically most of
us either work in someone else's family business or have one of
our own. Drawing on the relative strengths of a family many times
can help sustain a venture.
But surviving as a family business takes more than
common blood. Generally speaking, fewer than a third of all family
businesses survive to the second generation. Those that do often
Family ties vs. business needs
The current economic downturn highlights the strengths and potential
weaknesses of the family-run business.
"If you're working for a company and you see
that you're going to be laid off, you might seek to go elsewhere
to work," says Laurie Pickard, psychotherapist
and author of Family
Business: United We Stand, Divided We Fall. "If you're
part of a family-run business, there's loyalty there that might
prevent you from looking outside."
But according to family
business counselor Ruth Hayden, author of For
Richer, Not Poorer: The Money Book for Couples, retaining
Cousin Johnny might be more the problem than the solution.
"When the economy is roaring, there can be a
lot of dysfunction within a company and they're still fine,"
she says. "But the tighter it gets, the more the dysfunction
starts to glare.
"There are a lot of family-run companies that
are struggling right now with internal dynamics because the market
is less forgiving," she notes. "Now we have to be more
efficient, and if Johnny is doing a horrible job of managing that
branch, we can't tolerate it anymore because our family is not going
to allow it, and if we're a publicly held company, our shareholders
are not going to accept it.
"Now we have to do something about Johnny."
Can you prune the family tree?
What to do about Johnny cuts to the core of the family business
Can you sufficiently separate your family life --
the complex relationships, emotions, expectations and conflicts
-- to make the clear-headed decisions it takes to succeed as a business?
Can you make the tough decisions, such as pruning the family tree
when Johnny isn't making the grade?
That's a tall order for anyone.
That dilemma could help account for the associated
proliferation of family business counselors over the past decade.
There are an estimated 120 family business institutes in the United
States, many of them affiliated with major universities. They pull
together professionals from law, finance, management and the social
sciences to help families cope with the many challenges of leading
"Family-run businesses tend to be pretty dysfunctional,"
says Hayden. "They bring the personal into the business, and
it gets all muddled up together."
Strong families, stronger businesses
Jane Hilbert Davis, executive director of the Cambridge Center for
Creative Enterprise, says her clients often have difficulty maintaining
a healthy boundary between home and work. Agreeing not to talk business
at the dinner table or family problems at work is a necessity for
But Davis says some selective borrowing from across
the work-home border can be healthy.
"There needs to be communications between those
two parts," she says. "There's a lot of strength in the
family that needs to be transferred to the business, and a lot of
times the family can benefit from taking tools from the business,
such as strategic planning. You should try to capitalize from one
to the other."
For example, during a downturn, a family business
may draw strength from the family side to pull through on the job.
"You may have people in the family who are willing
to work longer hours, harder, for a lot less and pitch in,"
says Davis. "That's not necessarily good, but you have this
supply of, if you will, cheap labor.
"It's tough on the family, but it may get them
through a tough time."
Using disputes to improve the
Families also must learn to benefit from their disagreements.
"One of the things that we know about healthy
families and healthy businesses is that they have a history of resolved
and managed conflict," Davis says. "It's a bad sign if
they have no conflict, or if they have a lot of conflict that they've
never really managed or resolved.
"Good fights that are resolved in some way make
for very good businesses and good families."
Davis says families should also have a shared vision,
both for the business and for the family, and a strategic plan that
addresses the three Ws:
- What do we want to accomplish?
- Who does it?
- By when?
"Visioning is great, but if you cannot translate
that into an action plan, you're not going to get anywhere,"
Different families, same problems
And while there are many types of families, they tend to encounter
similar family business problems.
Succession is often stressful. The next generation
feels the old guard won't let go; the old guard feels the next generation
isn't ready to lead.
Sometimes children have become too dependent on the
Often entrepreneurs have given their life to the business
and view retirement as a loss of identity.
And bringing in a spouse or a child for the first
time can be delicate.
Breaking the code of silence
It's also common for family businesses to gloss over or ignore these
issues until they reach the breaking point.
"Normally, a family won't talk about what's going
on inside of a family business outside of the family unit,"
says Pickard. "In that respect, a family can be very isolated
because they feel a sense of shame, that they've failed as an entire
The experts agree, you can hear it now or hear it
later. Treat your family business as a business first. Hammer out
your business plan in writing. Hold regular business meetings and
encourage open, honest input.
Define job roles and responsibilities just as you
would for any employee, and make sure the compensation for each
is based on fair market value, neither higher nor lower. Structure
your organization properly, and where possible, avoid having family
members reporting to other family members.
Above all, make sure the lines of communication remain
open and at-work interaction remains professional at all times.
Davis says it's not a bad idea to get to know a local
family-business counselor before you open the doors. Such an adviser
can get you off on a good foot, both as a family and a business.
"When family businesses are working well, there's
nothing quite as good or fulfilling," says Davis, "because
you not only have that successful company, but you have a family
that is working together and cares about each other and is able
to do things together.
"When it is working well, there is nothing like
Jay MacDonald is a contributing editor
based in Florida.
-- Posted: June 29, 2001