The Three Critical Components of Any Family Business
Every family business has three critical components…the business itself, the partnership, and, of course, the family. Ignore any one of them and trouble will be knocking at your door. Yet that is exactly what I often see when working with family businesses. At least one of these components is ignored altogether or is shoved to the side as one of the others bubbles to the surface. It’s not easy to be in a partnership, whether it’s two or twenty partners. But when you add in the additional element of the family, it’s a whole different ballgame.
Every business starts from the same place. Someone or a combination of people have an idea for a product or service and believe they can provide this product or service to the marketplace with an advantage over the competition. They are full of excitement and possibility. When two or more individuals come together to build this business they form a partnership, whether it’s a legal entity or a partnership in name only, they come together for a common cause and everyone is working toward the same goals. Everything seems possible and the shared vision and excitement overshadows the possible pitfalls lurking around the corner.
Now we add in the element of family. Maybe it’s a first-generation business (more on second-generation family businesses later and in future articles) and siblings, parents/children, cousins, aunts/uncles…family members come together in the spirit of building an enterprise that serves many family members. Maybe one family member, let’s say a brother, has been in business a while and asks his brother to join him to become a ‘partner’. How the business becomes a family business is not significant as it relates to the three components discussed in this article.
Over time businesses change, they have to in order to survive and stay competitive. They may add new products or services, become global, look for new revenue sources, adjust their sales or marketing strategies…they change and morph in any number of ways. When the business is a partnership the changes that occur aren’t simply about what makes good sense for the growth and stability of the business. It includes what now suits the needs of the individual partners. Partners’ needs change…it’s a fact of life. Perhaps they aren’t willing to work 60-70-80 hours a week anymore. Flying first class or staying in five-star hotels becomes important. Their view of the direction of the business may be 100% different than even a year ago. Lots of things change about what they want for themselves or the business. It’s simply human nature, but when needs are no longer in alignment with others it will lead to frustration, disputes, and even bigger problems.
Part three is adding ‘the family’ into the mix. If you think the family is only the people involved with the day-to-day running of the business you are delusional. Every family member who works in the business has their own nuclear family that is involved and impacts the business. Spouses share their ideas on how to run the business or how compensation should be allocated, and a multitude of other considerations. These become part of what is brought into the workplace and colors the thinking and decisions of everyone involved.
Sprinkle in spouses that don’t get along with other family member spouses or a deadbeat family member in the business but everyone knows they suck up space and resources without adding anything or unequal ownership, and it’s a recipe for chaos. Consider the brother who started the business and now his sibling is working with him. Except the sibling isn’t doing things the way the brother wants or has done and sibling rivalry surfaces.
The point is, you can’t ignore any of these three parts of a family business as they are all intertwined and connected. You can’t see them as separate from each other and if you do, you are naive. Each must be nurtured and the key is frequent, constant, regular communication.
Communication that is finger pointing, accusations, and door slamming isn’t productive. Everyone is entitled to their views, and no one view is more right than anyone else. What has to be taken into consideration is how can the business survive and thrive? I worked with a company where the ultimate decision was to have one family member buy out the other. The business could thrive, but not with both of them involved. In another situation the father, wife, and step-son went into therapy together to work through the family dynamics interfering with the business. There are many ways to come to a solution that works for everyone.
Family businesses are a unique entity because of the family component. It adds another layer of complexity to an already complex situation, the partnership. The reality is that the business itself–where it’s going, how you’re going to get there, what are the plans–the business is the reason the partnership exists and the family is involved. Ignoring any part, or putting a higher importance on one over the other, will eventually be the demise of the business and often any family relationships as well. Take care not to let this happen to you.
Are you battling with your family business partners on company direction, roles, decision making, and just about everything else? Not sure if it can get better? Schedule a complimentary thirty-minute call with Linda to discuss your unique situation and discover if you could benefit from partnership coaching.
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