Typical Problem Series: Keeping up with the family business

family

 

“I run the family business, which was started by my parents. They asked me to take over, but now they can’t let go. They keep undermining my decisions and staff are getting confused about whose instructions to follow”

 

Family businesses present all sorts of challenges. Multi-generational responsibilities and questions of succession can be sensitive topics and must be handled with delicacy.

 

Often, businesses that come on the Business Growth Programme were founded by what are the parents of the people who are now running the business. Those parents are often still involved to a certain extent, and may have significant ownership of the business in financial terms, such as a majority shareholding. That in itself creates the first problem for family businesses, because it can lead to interference, and confusion among employees as to who is in control.

 

It is understandable that the parents are still interested in the business; it is their baby after all – they started it. Often, they can be sceptical about some of the things that the new managers – their children, or it could be their grandchildren – are doing with the business. They might say things like: ‘It wasn’t like that in our day’, or ‘We tried that and it didn’t work’, or ‘That’s not going to make us money’.

 

As a result of this, these people can also become significant time-stealers. They will wander into the office very interested in what is going on, sit down with someone and take an hour of their time talking about what they are doing and saying things like: ‘You shouldn’t do it like that’.

 

In this way, employees can often receive instructions from several different people – and these instructions are often contradictory. There can be a real complexity of authority in family businesses which has never been bottomed out or formalised, because that would require family counsel. To sit down and agree those kinds of things, you have to navigate the complexities of sibling and parent-child relationships. Sitting in family counsel saying: ‘Look, father, you have just got to butt out. You’re interfering, and it’s really not helpful’ – that’s quite confrontational.

 

Another problem you get in family businesses is conflicting perceptions of entitlement. How this manifests itself is that, even though you’re in charge, as your brother I feel entitled to say things to you that I wouldn’t necessarily say if we were unrelated and working in an organisation where you were the MD and I was your employee.

 

Where family dynamics can become even trickier is in questions of succession and succession planning. What happens if someone gets run over by a bus? Who will take over? How will the business develop in the future? Will it stay within the family or not?

 

In family businesses, the ownership and the management of the business are often merged, and can be very difficult to separate out. People often don’t think about how the business is going to have to change in the future, as the number of family members it supports expands with each subsequent generation.

 

Family businesses have to very quickly decide their purpose. Is the business there to support the whole family financially, or to create an opportunity for people within the family to work in it and benefit from it? Is the purpose of the business to deliver a product or service – because that in itself is worthwhile – or to create a pot of gold that can be once and for all distributed and then moved on from? If your purpose is to provide a certain lifestyle for the family members who work in the business, then you’re not really interested in creating a business that is ultimately saleable. If, however, you want to create quantity in the business either in order to sell it or to float it, you will run the business quite differently.


With thanks to Mike Meldrum


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