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University of Massachusetts Amherst

Family Business Center

Are You Turning the Crank or Turning the Tide in Your Family Business?

An Informal and Informative Review

By Ira Bryck

If you work with your family (or for someone else’s) you may wonder how people so genetically similar can be such strangers; or amazed at how such an un-business-like business or can actually make money. Money makes the world go round, but family business, creating the vast portion of global wealth, can make your head spin, if you don’t proactively or responsively control the chaos.

Academic researchers have coined the obvious term, “Familiness” to describe a family company’s competitive advantages of goodwill, telepathy, all-for-one-and-one-for-all feeling is and to be high in that factor is to say you make it look easy to govern yourself without whipping yourself, plan ahead without careening off track, and, as the UMass Amherst Family Business Center motto advises: “Treat Your Family Like a Family and Your Business Like a Business.”

The research suggests that the high failure rate of family businesses (66% fail in their transition to generation 2; 85% have failed by generation 3) is largely caused by policies that are too lax and self serving, strategic plans comprised of the hunches or secrets of reigning parents or siblings, and compensation strategies based on personal needs rather than contributions to the bottom line.

To beat these odds, your family business will benefit from challenging some sacred cows, which are based on antiquated, convenient assumptions. It may feel dangerous to discuss that the business is coddling family members, enabling bad behaviors, and serving the family to the detriment of the business (and not doing any favors for either).

The problem in many family businesses is that so many policies were made on the fly, rather than based on good theory. It takes a brave and determined family, smart enough to take time away from their busy day, to build a solid company and a supportive family. In discussing the following questions and afterthoughts, consider the benefits of trading in the quick fix and the convenient perk for the solid and businesslike foundation your company requires.

As with many situations, admitting the problem is half the solution. Come prepared for an honest, confronting, liberating discussion of some very core issues, usually improved by skilled, objective facilitation by someone who is neutral, but informed. Your answers to the following questions should include precise processes to cure what ails you through ongoing honest inspection and systems.

Ask yourselves: How do we reward family employees, and what message does it send? Do we pay equally; scared to admit some family members contribute more than others? Do we think paychecks indicate how much we are loved? Have we awkwardly given minority stock, with no rights or value, to non-participating family?

Consider: If you reward only talent and production, including non-owners and non-family, you’ll attract the best, and lose the rest. Think about what you need done today to have a meritocracy in five years, and do it!

Ask yourselves: Do we hire family to keep them in the nest and off the streets, or only if you have passion and talent for what we do? How can we communicate that joining the business is a privilege and not a right?

Consider: To really live in a land of opportunity, realize that not every job is the right opportunity. You’re still family, and we cherish you, but follow your dreams, not your nightmares!)

Ask yourselves: Do we tolerate family’s misbehavior, entitlement, or mistreatment, or create clearly defined roles and expectations, insisting that family comply?

Consider: Maybe it’s unfair to say family must be twice as good to get half the credit, but you probably need to be better to not feel overpaid and secretly ashamed. There’s no better lesson than a good example, and your family’s good example can be the better mousetrap that attracts great employees.

Ask yourselves: Does our senior generation make the important decisions, limiting sensitive discussions; or encourage and empower us to broach “undiscussables”? How can we stop assuming and mind-reading, and have the bravery and honesty to talk about death, money, emotions, power?

Consider: Everyone’s thinking it, so you might as well talk about it more accurately, and make important decisions and sign important documents.

Ask yourselves: Can’t we acknowledge there are inevitable conflicts of interest? What estate planning can achieve our wishes, recognizing our children have varied needs and our success has created some complicated scenarios? How can seniors feel protected and preserve their wealth without hindering the ability of their children to take needed risks?

Consider: Bring the experts into a conversation about solving the problems that will only fester if ignored, and may have more win/win solutions than you realized.

Ask yourselves: Are our multiple generations prepared to pass and receive the torch and enjoy their next life chapters? Are successors mentally, financially and managerially ready to step up to the plate? Are seniors equipped for this next stage, financially and with a sense of purpose?

Consider: It won’t kill you to state your gratitude, acknowledge your fear, and get a bit of coaching or counseling. Be yourself, even if that means discovering a new you.

This Q&A can provide the breadcrumbs and signposts that lead you to your best-case scenario. Working on your business- and your life, not just in them, means taking time to examine challenging issues. Turning the crank is easy. Turning the tide is harder.

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Ira Bryck is Director of the UMass Amherst Family Business Center

More at www.umass.edu/fambiz

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