Focus On the Family and the Business

I am often asked what is more important in a family business, the family or the business.

My first instinct is to explain that this is not really the proper question as it assumes that you can only have success in one area and not both. While sometimes difficult to achieve, you can have family harmony and a successful business.

One place the question often arises is when the family squabbles have become so intense or so intractable that someone declares we should all throw in the towel and sell the business. Sometimes it comes simply because there is no more energy to deal with the issues. Not to be misunderstood, there are many family businesses where the smart move is to cash out and move into the business of managing money (although, with the gyrations of the stock market and world economy at the moment, I would not advise anyone to be hasty).

I had a client who would regularly threaten to sell the business when he was not having a good day, people were not responding to his bad ideas, or he was simply not being shown the respect he felt he deserved. What he could not see was that he was the problem. The company had grown beyond his capabilities. Family business owners are prone to falling into this trap: it’s my business, so I can get away with pretending to be the expert in various areas. “And if anyone wants to question me they can look for another job”, he would say. What he did not realize was that the other family members had actually come to realize that if they could not get him to stop meddling and hindering progress, then unfortunately the best answer would be to sell the business.

The issue also occurs when the family does not want to discuss or face obvious issues for fear of hurting a family member’s feelings. Compensation is out of line, performance or contribution to the company is not what it should be, or someone is really not cut out to be doing their job. Many family businesses choose to overlook these areas of underperformance for the sake of maintaining “family harmony”. Certainly, as any parent of young children can tell you, you need to pick your battles. Nothing is ever going to be perfect, and don’t try. But when the performance of the business is taking a dip because a family member is not adding value, should you allow it to continue?

However, the more common situation is not when the company is in trouble but when it is simply not reaching its potential. Everyone is getting paid, has plenty of vacation, and the business is making due with 3% net profit. Because everyone is “ok”, this environment makes it more challenging to instigate the conversation with that family member whose contribution is holding the business hostage.

So answering the question is not as easy as it might seem. Looking at this in a more direct and binary fashion, what if the business failed and the family succeeded? What we mean by business failing is that it lost much of its value. If the family business collapsed as a direct result of the involvement, or lack of involvement, of a family member then the only way back to harmony is simple forgiveness. You can’t give the business another try, it is gone. On the other hand, what would happen if the business succeeded and the family failed? We all made our money, but no one shares Thanksgiving dinner together. While no one is happy about this, the opportunity still exists every day to make things right.

What we know for a fact is that the most successful businesses are the ones that are run as businesses. However, we also know is that those family businesses that have a high degree of trust, and practice open and honest communication, are the highest performing of all businesses. When it comes to family businesses the whole can be greater than the sum of the parts.

Henry Hutcheson is president of Family Business USA and specializes in helping family and privately held businesses successfully manage transition, maintain harmony, and improve operations. He is a popular speaker at professional, university and corporate-sponsored events, and is author of “Dirty Little Secrets of Family Business.”

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