by Bonni Carson DiMatteo, CMC
When only 30% of family businesses survive to
the second generation and 10% to the third,
it begs the question: Why do family
businesses die so quickly? Since 92% of
businesses are family-owned, they employ a
vast majority of the country's workers. The
success of family-owned business affects
everyone.
There are several unique challenges in
running a family business. The most obvious
is you can't get away from coworkers at the
end of the day because they are eternally
tied to your personal life. The inverse of
that is equally true. What falls out between
you and your sibling at Thanksgiving dinner
will ultimately impact your working
relationship. It is this very merger of
personal and business relationship which led
corporations years ago to discourage romantic
relationships and nepotism in the staff.
How many pieces of the pie?
Roles and positions in family firms are not
always tailored to the particular skill set.
Often it is a noncompetitive recruitment
initiative that designs the job around the
candidate rather than vice versa. On the
other hand, the collective passion of the
family team can be a driving force if
unproductive competitions, communications,
and complacencies do not undermine the business.
Founder Charisma
A family business is a unique culture. Often
it is tied to the charisma and vision of the
founder. He or she creates the bonds of staff
to management and the culture that often
makes many of the staff feel like part of the
family. Unfortunately, more often the not, it
is difficult for the founder to let go until
well into his 70s or 80s. By then, the
entrepreneurial passion of the successor who
is usually 50-60 might have significantly waned.
Succession Issues
As everyone watches the next generation grow
up, the anticipation and concerns about
succession abound. Unlike most public firms
that typically replace CEOs five times more
than family firms, the founders hold onto the
culture and the knowledge, creating a
knowing-doing gap with the next generation
unless careful attention to progressive
succession is cultivated.
What are the pitfalls or pillars of
successful family businesses?
We would like to suggest it is the following:
respect, roles, rules, responsibility,
relationship management, regeneration, and
results.
Respect: Can family members treat each
other with respect? Do people value different
perspectives? How are differences handled?
Are there established ground rules?
Roles: Are the roles clear, and are
authority and responsibility compensated with
the roles? Is there confusion about who does
what? Are there job descriptions?
Rules: What assumptions do people make
about the rules? Are there written agreements
about equity, compensation, time off?
Responsibility: Is there a sense of
responsibility, duty, commitment, or a sense
of entitlement? What are the values and
culture that are perpetrated about
obligations, loyalty, and excellence in the
firm? Is there a sense of servant leader?
Relationship/Management: How are
relationships managed? Are conflict and
communication addressed? Are there standards
of behavior that are reinforced or discarded?
Results: Is there accountability
around performance, follow through, focus,
action plans? Is this a commitment to provide
training to increase results? Are there
consequences when results are not met? Are
targets met? Is there a board of directors?
How is incompetence managed?
Regeneration: What is the company
doing to create growth? Is there a strategic
plan? Is there a succession plan? Are the
vision, values, and mission of the company
revised and reviewed at transitions? Is there
evidence throughout the company what those
are, or is there alignment among corporate,
department, and individual goals? Is the
company committed to growing the talent pool
to contribute to company regeneration? How is
innovation cultivated? Has the business model
or lines of business chance?
The challenge of a family firm can be
mitigated by careful attention to the
pitfalls and pillars suggested. Successful
companies of any description can grow by
keeping an eye on respect, roles, rules,
responsibility, relationship management,
results, and regeneration.
