The Challenges of Families That Work Together

When you think about family businesses, what comes to mind? Dallas’ Ewing Brothers and their jealousy, greed and back-stabbing? Or the real life family empires like the Bingham newspaper family, torn apart by in-fighting? Or the neighborhood ethnic restaurant you frequent where the parents, grandparents and children all work together to cook serve and clean in a joyous, harmonious fashion?

Family Business Images

Whatever image comes to mind, family-owned businesses are a phenomenon to which more of us are paying attention. Family-owned businesses are increasing in size and impact at an incomparable rate as many couples and families are starting businesses together. There was an 82 percent increase from 1980 to 1985 in the number of businesses started by couples (265,3980 to 482,993). And there is a strong trend for women to start their own businesses, especially when the reach the “Glass Ceiling” in large corporations. Women-owned businesses have increased in numbers from 2½ million in 1980 to over 4 million in 1986: an increase of over 63 percent (close to twice the increase in businesses owned by men). In addition, since many new businesses were formed at the end of WWII, these family businesses are now facing the crisis of succession, another reason for new attention to family businesses. When we define “Family Business” as one in which family members have legal control, 90 percent of all U.S. businesses are family businesses. They produce one-half of the gross national product and employ one-half of the country’s workforce. Of these businesses, many employ multiple family members. It is to these families that our attention is directed in this chapter.

Creating or Solving Problems?

Family business may be the answer to some dilemmas in our modern lives, but they can create many others. For example, many women begin their own businesses when they find that they can no longer progress in the large American corporation. Having one’s own business can yield flexibility in childcare arrangements-another challenge of our modern times.

Contrary to past generations when working for a large corporation meant long-term employment security, many employees feel insecure working for these firms during this ear of hostile corporate take-overs. Many people feel that if they have their own firm, they can be sure they will be able to take care of their own.

Families who own businesses bring special advantages to the business. Typically, families whose names are attached to a business have a greater commitment to the business success, a longer-range perspective (generations vs. current quarter), and often create a caring environment for employees. The advantages to a family in business together include the opportunity for jobs for family members, revenue for them, flexibility in roles and policies and having more control over one’s destiny.

Many entrepreneurs tire of the limits on their creative and earning potential while working for others. Finally, many families find that sharing a business experience gives them “something in common” to discuss and brings them closer together. Yet working side by side with members of one’s family can be very stressful, resulting in problems both in the family and in the business. We often see inter-generational disputes, role conflicts, communication problems, rivalry with the business and an assortment of family problems played out in the business area.

One example of inter-generational conflict is the 60 year old father who can’t let go of his control of the business while his 35 year old son wants to make his mark in the business through the creation of new products and new business strategies. The father wants to maintain status quo; he’s tired after 40 years of running the business. Yet his identity is tied to the business and like many entrepreneurs, he doesn’t know what he would do or even who he would be without the business.

Another common problem is role conflict: allowing family members in the business because of (or making decisions based on) their importance in the family, not because of their value to the business. These roles often collide. Consider the daughter who takes care of everyone at home and is loved for that, yet at work is not a good supervisor because she has trouble holding employees accountable for their work assignments. Many mothers and fathers find themselves in a bind when they see that having their child in the business is a mistake. As a parent, they find it difficult if not impossible to fire their child; as a boss they realize it is a poor business practice to keep an incompetent employee on the job.

Stew Leonard, of Connecticut supermarket fame, related such a story. He invited one “problem employee” son to his house for a swim and said:

“Son, being in a family business can be very tough. I must wear so many hats. I’m putting on my boss’ hat now: you’re fired! Now I’m putting on my father’s hat: Son, I heard you lost your job. I’m sorry, what can I do to help?”

Communication problems in the family may also end up interfering with sound business practices, yielding frustration and costly error all around. Conflict between the family and the business for shared resources such as time and money also surface as issues in family-owned businesses.

Many sons and daughters in family businesses have felt “sibling rivalry” with their parents’ firm: “Sometimes I feel mom and dad eat, drink and sleep ‘hardware!’ They almost never have time to take us anywhere. I sometimes feel like the business is more important to them than I am!”

One dilemma is the ability of family members to feel an autonomous sense of accomplishment: It’s hard to find your place in the sun, when you’re in the shade of the family tree! Some family businesses solve this dilemma by giving each family member a different realm of responsibility. For example, David Chatham, of Atlanta’s Chatham Homes was quoted as saying, “We’ve been able to distinguish ourselves in our fields without stepping on each other’s toes, without being in the shadow of someone.” In their case, the Chatham’s have one family member in a family owned bank, another heading up a landscape division, while others work in construction, interior design, etc.

Why So Complex?

Family businesses can be compared to a three ring circus, each ring has its own activities, stars and equipment.

In this case, the three systems include the family, the business and the individuals, each with its own needs, goals and developmental stages. When all three systems are synchronized, conflict is at a minimum. However, it is rare that these systems are synchronized. Thus, the conflicting stages or needs become the challenges which family businesses and their advisors must resolve to maintain healthy businesses and families.

Let’s look at an example: The Smiths own a plumbing supply house. When they were first married, Mr. Smith was a plumber working for someone else. When he started his own business, Mrs. Smith helped by doing the books and answering the telephone. When their son was born, Mrs. Smith stayed home and Mr. Smith, who had another plumber and an apprentice working for him, hired an office manager. In the next five years, Mr. Smith added a plumbing supply division, and the couple had another child.

The business grew and Mrs. Smith occasionally helped by pinch-hitting in the office or assisting with inventory. By the time the children were seven or eight years old, they would regularly come to the store and “help”. During summer vacations, as the children grew older, their son would help at the plumbers and their daughter helped at the supply counter, filing orders. The son knew he wanted to follow in his fathers’ footsteps, so he learned the plumbing trade by joining his father after high school. The daughter had little interest in the business and went on to college, helping us at the business to make extra money.

When the children left home, Mrs. Smith began wondering what she could do and look to the business for activity. At this point, we can look at the family circle and see the “Empty Nest” stage: Mother at 44 is in the “Mid-life Transition” (individual life stage) having completed her full-time job as mother and feeling avoid. She looks to the business to fill this void, where there is no clear role for her currently. Son, at 23 wants to do things his own way, establishing himself as an autonomous adult. He is at the “entering” Adult World stage of life. He seeks dad’s acceptance and more power to run the business, yet his competence to do so is in question. Dad, at 48 is “Entering Middle Adulthood”: he doesn’t quite trust his son’s judgment yet and thus is afraid to leave his “baby” (the business) in his son’s hands. Like many entrepreneurs, Mr. Smith as a tremendous need to control his business and finds it difficult to trust others with it. He works long hours and rarely takes vacations.

The business’ stage is moving towards “Delegation” from central control: that is, the business is too big to be controlled solely at the top, requiring delegation, while controls must be established to allow the delegation to be handled responsibly, and to allow for the comfort of the entrepreneur. As noted above, entrepreneurs are not always good at letting go or at establishing systems. Thus, there are several points of conflict between the individual, family and business stages that create the conflicts experienced by Mr. Smith:

1. The business needs systems and controls at its stage of development and none of the family (or employees) appear to be prepared to establish them. Father needs to delegate more but finds it difficult to do so since he lacks confidence in his son. The business requires outside assistance to move from this stage of development.
2. The son feels stymied in his development by his father’s retention of control and lack of confidence and is quite frustrated. He and father bicker frequently and father feels his son is disrespectful and unappreciative (inter-generational and role conflict).
3. Mother’s development and the business’ development are not in sync either. The business doesn’t need an extra clerical person and mothers’ skills are not appropriate elsewhere in the business. Here, Mr. Smith feels pulled: he puts Mrs. Smith on the payroll, but knows he’s doing that as a husband, not as a good manager. This creates some morale problems in the office and must be addressed. The Smiths help us to understand how families in business together must keep their personal, family and business agenda clear and separate. When family business owners feel that the business must address all the family needs and the family must address all the business needs, none of the systems is very successful.

Guidelines for Staying Healthy in the Family Business

The following principles can assist family business leader to create well-being in all three systems. These guidelines fall into four categories: Integrity, Clarity, Respect and Understanding.

Integrity

The healthiest family businesses have a set of values by which they operate their lives and businesses. They steadfastly maintain these values. The company’s reputation (and often its success) is based upon the quality that is anchored in these values. The members of the family also demonstrate integrity in their clear sense of identity as part of and apart from the business. They are proud of their affiliation with the family and the business, and they have other interests as well. The integrity or wholeness of the individual is essential to the health of all three systems.

Clarity

Integrity is facilitated by clarity of roles, rules and boundaries. Clarity of roles refers to the importance of clear expectations (often via written job descriptions) for the roles to be performed by each family employee. Related to roles are interpersonal boundaries. It is important that each family member has a strong sense of his/her own identity, role at work and role at home and that all these roles are clearly defined and respected by each other. “Clear Boundaries” also refers to the line that is drawn between home and office: family issues should be discussed at home, business issues at work. Finally, leaders of the healthy family business establish clear rules for how business is conducted, how family members can join the business, etc. These rules help create an atmosphere of trust, equity and professionalism.

Respect

Involvement in the family business must be based upon mutual respect, not just kinship. When a family member enters the business without that respect, it is a set-up for conflict, lowered morale and self-esteem. For this reason, we advise that relatives who join the business bring their own portfolio of talents that are needed by this business. Children should work elsewhere before full-time employment in the family firm. This generally increases their respect for the parents’ way of doing business as well as making the child more valuable to the business. One manifestation of respect is shared power. The strongest family businesses have leaders who can share power because of the trust and respect they hold for others in the firm. (note: “shared” does not mean “equal”). In addition, respect is demonstrated for each relative’s autonomy, privacy and individuality. Finally, families who respect themselves and the business recognize that they must carefully maintain the “three cycle engine” of family, business and individual. They spend time asking questions such as “how are we doing as a team?” “Are we achieving our individual, family and business goals?” They spend time learning and growing together as well as utilizing other organizational development strategies to maintain the well-being of this complex system. In other words, they continually show respect for the complexity of the overlapping systems.

Understanding

The final guideline to healthy family life in business is to work at mutual understanding. This understanding is based on genuine concern and love for one another as well as the respect. The skills or talents required to understand are listening and patience. If family members carefully listen to one another , with the goal of understanding (rather than judging), misunderstanding and destructive conflict are minimized. Thorough, consistent, open, multidirectional communication is an essential key to success in any business: and particularly in the family business. One aspect of the family business that is often overlooked is that segment of the family that is not active in or employed by the business. It is very important that they, too, understand what is happening in the family firm so that they can be supportive of those efforts, and to prevent them from feeling like outsiders at family gatherings.

The Crisis of Families Who Work Together

Working with one’s relatives can be filled with crises: crises within the family, in the business, and/or in the personal lives of individuals. The Chinese have a wonderful way of looking at “crisis”.

Their symbol for this concept includes one character signifying “danger,” another signifying “opportunity.” The challenges or dangers of working with one’s family are great: and so are the opportunities and pay-offs. With careful attention to all three systems and reverence for the delicate balance one must maintain, families can work miracles together.

The Family Business Quiz

Integrity

• Our family values are clearly articulated and are observable in our decisions, policies and day-to-day interactions. Bonus Point: we have a written family charter or statement of philosophy.
• Most members of the family team have a clear, comfortable sense of their individual identities, beliefs and interests.

Clarity

• Family members clearly understand what their roles are at work and at home and keep these separate.
• There are accurate written job descriptions for each position in the company (for all family employees as well).

Respect

• There are clear guidelines for how members of the family may join the business.
• Authority and responsibility are delegated throughout the organization.
• Key issues are discussed with other family employees before decisions are made.
• We are self-conscious about our operations, i.e. we discuss how we are accomplishing our tasks, goals and meeting the needs of individuals and the business.

Understanding

• We spend more time trying to understand each other’s perspective than arguing for our own.
• We regularly include family members who are not active in the business in discussions of company status.