The Challenges of Family Business

17th May , 2016

What keeps a family a successful Family Business.

Family businesses play a major part in our economy and society. Many owners want to see their children and grandchildren carry on the tradition but only 30% pass to the second Gen and only 15 % to the third Gen.

The reasons vary but include:

  1. Family members did not communicate well or handle confrontation or conflict. This festered, and problems impacted the business.
  2. Making each family member happy, took precedence over business and the business became uncompetitive, unfocused, unproductive and undercapitalized.
  3. People reacted to one another according to their family roles, not business roles.
  4. The business was run unprofessionally at random, informal and without good business practices and the lack of effective business coaching.
  5. The first Gen created innovative products or services with early success, but lacked continuous adaptation to competition and a changing customer demand.
  6. The first Gen’s energy and passion was not transmitted fully to the successive generations.

These challenges are not impossible to overcome. Family members can work together to make their businesses successful and engender positive family relationships.

What successful families businesses do to overcome the problems above:

  • Successful family businesses meet as adults and leave behind the emotional baggage that accumulates during growing up i.e. not a “parent-child” mode of relating move to an “adult-adult” approach and parents do not need to be “in charge”. This allows the family members to connect on a level playing field.
  • Successful family businesses develop the skills, trust and mutual respect necessary to openly deal with sensitive issues without becoming overly defensive.
  • Sometimes problems arise with family members inhibiting candid discussions. Successful family businesses solve this by tackling all complex business issues with open communication so the issues are identified and potential solution explored.
  • Parents offer counsel and support but must ultimately leave it up to their children to make choices and experience their own consequences. Furthermore successful family businesses all work together aware of interpersonal boundaries and any limitations of each other’s behaviour and don’t try to “fix” one other.
  • Successful family businesses anticipate when family conflict is escalating. They have ways to defuse it and not allowing damaging heat of the moment actions or responses that are hard to take back and recover from. For example, ultimatums may be dangerous and need to be dealt with.
  • Successful family businesses value and commit resources to time together, celebrating family and nurturing their binding relationships. Family get-togethers have a high priority as time to reconnect, have fun and just enjoy one another’s company. This is extremely valuable.

Combining these factors help to keep a successful family business positively connected over time, and sets the framework to succeed in times of difficulties. Although, only few families manage to practice these things systematically, nevertheless, these are all necessary factors to keep the family members aligned and helps direct them back on course when things get off track.

David Cartney
International Business Mentors

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