The Family Business – Dynamics and Dangers

Written by Jay McDonald on .

Despite decades of growth and profitability, Hallmark Cards and the Mars Candy companies are exceptions to the rule because long-term, generational, highly successful, thriving family businesses are few and far between. The truth is, there are dangers associated with family business models, and many never make it past the first generation of entrepreneurs. Sure, businesses of all types face challenges. Managing employees, dealing with unsatisfied customers and staying ahead of the competition are common obstacles to long-term success. But overlay those challenges with typical family dynamics and it’s easy to see how leadership in family-owned enterprises struggle. So what are some of the dangers associated with family business models? Misinterpreting The Many Faces of Family Business There are all kinds of family business models, each with their own unique set of opportunities and challenges. Some businesses are literally “Mom and Pop,” who were actively involved in teaching their children how to carry on the family name. Others may be second, even third generation working together. In other cases, family members may not be interested or even qualified to take an active role in the family business but are happy to maintain ownership while non-family members run the show. Still, other family businesses have evolved over the years to a point where there are no family members actively involved in the management of the business at all, but select a professional management team to grow the company. Ignoring Informal Family Status  There are certainly unique challenges that come with family-owned enterprises, but one of the most common ones have to do with status. Status can be perceived or real, but it is always the informal ranking system of family members within the business. Status plays a critical role in defining social issues that surround a business and often set the stage for culture, communications and even decision-making. Sibling rivalries, habits and patterns of behavior that have evolved over a lifetime can’t be avoided, and are present in everything that goes on inside the business. For example, poor communication between siblings can make it difficult to gather information to make important decisions. Staying True to Legacy, Values and Dealing With Change Regardless of the type of family business model, the same dynamics are involved in trying to keep the legacy, values and founding principles of the original family members in place. The challenge is in learning how to stay true to those ideals while updating and changing over time to fit the current business climate that exists. Some of these challenges center around people feeling entitled because they are family members and as such, they may or may not contribute to the enterprise in any significant way. It’s often a delicate balance running a successful business made up of loved ones and family members. Unfortunately, there are more family businesses that do not survive beyond one generation than ones who do. Those who flourish over several generations have grown successful by blending a high quality mix of family ownership and professional leadership.  While its often difficult to separate the business decisions from the family dynamics, it is imperative to view these two groups separately while being sensitive to the inter-relationships of the two.  Objectivity needs to trump emotion for the ultimate well being of both the family and the business.  

Jay McDonald

With a unique breadth of knowledge earned through decades of hands- on experience, Jay is recognized as a strategic visionary whose high energy, quick wit and straight talk combined with a passion for mentoring others allows him to help executives achieve greater results and enjoy more rewarding personal lives. Connect with Jay McDonald on Google+

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