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“Family businesses generally start out with a very informal management system. The loose and informal style of management offers a high degree of flexibility – not of lot of rules, regulations and red tape. There are not many standard polices and practices to get in the way of the entrepreneurial spontaneity associated with start-up family businesses,” suggests leading family business expert Don Schwerzler. “However, many family businesses never evolve beyond this level of management style. It is one of the reasons that only about 30% of family businesses successfully transition to the second generation; only about 12% successfully transition to the third generation; and only about 4% successfully make it to the fourth generation.” Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and is the founder of the Family Business Institute. "If there is any one lesson I have learned in working with many hundreds of family businesses, it is that every family business is unique and complex in its own way," says Schwerzler. A strategy that works well for one family business will be a disaster for another family business. Problem-solving in a family business can be like being in a room of mirrors - each reflection or memory is slightly altered, each in a different way - for every member of the family. For a family business troubleshooter, it is often difficult to identify reality from carefully constructed and long-held memories, even fantasies - and difficult to discern cleverly worded fictions. An important lesson to learn is that a “family business” is the business of relationships. Without family relationships, the problems of family businesses are no different from those faced by non-family businesses. Thus, the heart of family business is family relationships. The family relationships may not appear to be critical to the success of family business until succession time - or when there is a crisis due to family bickering, backbiting or outright conflict. The threat or conflict is increased when multiple family members are involved. The complexity and intensity of family conflicts in a business depend on the degree of overlap among the day-to-day management of the business, its ownership and the family. If there are multiple family branches and family members involved, the threat for family conflict can be a time bomb for the business. The lack of infrastructure becomes problematic to the sustainability of the family business - an informal management structure can actually inhibit the growth and profitability of the business – a kind of glass ceiling that keeps the family business from achieving the true potential of the business. Successful family businesses make the transition from the informal management style to a more formal or professional style of management. Indications that a family business is changing to a more professional management style include:
Conflict negotiations in a family business are difficult because a family business has three major systems or spheres of interest – family issues, business issues and ownership issues. A dispute that occurs in one area can quickly cascade into the other areas. “Every family business is unique and complex in its own way,” observes Schwerzler, "Boiler plate solutions rarely work." “We are successful in dealing with family business conflict negotiations because we take a holistic approach,” notes Schwerzler. “We address all three systems so we are able to develop a negotiation strategy that connects all the elements of a family business.” Many family businesses seek help from professionals they know – their CPA, attorney, financial planner, family therapist, etc. But because these professionals are competent to address one dimension of the problem, the process generally creates "sequential solutions" from a group of experts, a process that mostly does more harm than good. When family businesses contact us for help in dealing with family feuds, conflicts about business strategy or tactics, succession issues, the first step we take is to conduct a Family Business Assessment (FBA). The Family Business Assessment can generally be done over a two day period. The process we use when we conduct the FBA enables us to understand the family dynamics and construct reasonable and productive conflict negotiation tactics - Conflict negotiations that produce successful outcomes! If you are involved in a family business where every day seems to be a “battleground”, contact us to learn more about our expertise in dealing with family business conflict negotiations -We Can Help! The Family Business Institute and their on-line organization Family Business Experts sponsor the Family Business Help Desk. Simply use the ASK THE EXPERT form to start the process towards better days for your family and your family's business.
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