How (NOT) to Destroy A Family Business

Family businesses are neither passe, nor obsolete as you might believe. Long before regional and global multinational corporations, family businesses were the backbone of human evolution, economic stability and social structure. In fact, family businesses are the biggest global contributor to financial markets. In plain numbers, family businesses account for more than 70% of worldwide gross domestic product. Even in the most advanced economies (US, EU, & UK), family-controlled businesses account for more than 60% of the GDP and the bulk of the workforce.

Awkwardly, the prospects of any family business are not as positive as the statistics might imply. This is because family businesses come and go, while their weight in the society remains the same. And they usually come and go – in a specific order. Typically, the first generation starts the business, the second generation grows it quite well, and the third generation wastes it to the ground. The first to make this analysis where the Imperial Chinese while the most up to date consulting firms will testify to the same patterns happening pretty much in the same fashion today.

Family businesses have an inherent conflict between tradition and modernity. This is where the gap enlarges between the first and the third generation. The silverline is that respect for the core values that worked in the past must be merged with fresh ideas towards new challenges. For family businesses to stay relevant, collaboration and alignment between stakeholders must be the main ingredients of growth. One would think that these traits would be so obvious in family business settings – but they are not. Still, history doesn’t have to repeat itself and there are ways to make sure that a family business remains relevant and able to serve multiple generations.

The way to accomplish this, is with clarity of responsibilities and factual capabilities of each family member – instead of power and ego driven personal desires. There must be clearly defined roles and responsibilities and a transparent yet flexible roadmap forward with mid and long term horizons. On the contrary, most family businesses have vague or zero job descriptions. But with no proper management structure and clearly defined job roles there is no organisation. And as we know, organisation is the bed stone of stability and creativity. And organisation comes with certain personal abilities and liabilities. In fact, keeping the ‘family’ dynamic out of your family business is the key:

  • Avoid Nepotism
  • Outsource Expertise
  • Objective Leadership
  • Formalise Business Roles
  • Establish Healthy Boundaries
  • Listen to Employees & Customers
  • Separate Personal & Business expenses

Most family businesses have family secrets that they want to keep private. These are sensitive issues for most family members that they constantly avoid to face or discuss between them. Only trusted advisors outside the family can offer a birds eye view perspective of the operations and strategy – and can offer objective guidance to all family members. Business experts can provide the helpful advice that the family requires but avoids to examine. Reliable and trusted consultants are a great way to ensure that family secrets remain within the family while, at the same time, making sure that your business remains relevant and profitable for generations to come.

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