Beware of an implosion

Biggest threats may come from within

The high seas of business have a breed of pirate known as the corporate raider. Active in the ’80s, these carnivores still prowl some 35 years later.

Public entities have fortified their cannons with poison pill strategies and prayers for the white knight. Piracy was business as usual during the first globalization, the push westward to new lands and territory. During this second globalization, it is alive and well, not just near Somalia, but in the corporate boardroom.

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This column is not about publicly traded companies, although family businesses can be public companies. It is about the family business, usually devoid of the external attacks that are common in the rest of the corporate landscape. Family businesses are usually attacked from within their own ranks – by family or trusted advisors. Family businesses are susceptible to implosion.

So what is an implosion? It’s an insidious cancer from within and usually from an unsuspecting source. Family members are busy running the business and wearing many hats while they do.  They sometimes fail or forget to check on those closest to them. The harmless gambling habit started by the son; the drinking dad, self-medicating the anxiety of the responsibility; the daughter with access to money who develops a heroin addiction. These implosions could be fairly nuclear and often, sadly lethal, not only to the person involved but also to the family and the business.

As family businesses are usually measured in decades rather than years, the implosion can come from a ticking time bomb such as a petty family squabble. Sibling rivalries, personality differences, even arguments over who someone will marry all have brought down the family company from inside.

After years of working with family businesses, I am convinced one of the largest internal challenges comes from having money, which gives access to self-destructing resources.
Perhaps when you read this you will ask yourself, “Why would anyone want to go into a family business? This column is always so dire.” Fair critique and issue. The truth is that family businesses are more susceptible to internal challenges, while being far more capable of rebuffing external challenges due to the control they exercise. But the internal flares must be managed.  Giving junior a gold card at a young age is not smart, even if the company can afford it. It is normal for family businesses to expect more and set a higher bar for their own kid and kin. Loyalty is not a birthright and needs to be won by earning it. This is one reason so many successful family businesses won’t allow generation next to hold a job within the family firm until after they have proven themselves externally first, for a non-family business.

There is the family who had a child with a cocaine habit (gender and details omitted to protect the family). The child, with access to cash, nearly brought down the multi-generational family business. To defend against this internal predator, the family basically disowned its own child – both emotionally and legally. Cutting off the cash flow was not enough, as desperation leads to reckless decisions.

Remember that with a family business, there is a family name and while many things can be withheld and removed, the name can’t be expunged. This is why so many family businesses work so feverishly to protect the family name. They work behind the scenes to keep things out of the press and the mainstream discussion. Who can blame them? There is much more riding on a family member than just that individual – there is the family, the family business and all those who rely on it for sustenance.

But this is not a column of despair. Family businesses must pay attention to the internal forces at work. Hold quarterly meetings; go away on family retreats; laugh, work and play together. Menomonee Falls-based Glenroy Inc. has mastered this tactic, and it is a good one used by so many successful family businesses.

I also have found that families who pray together, regardless of what that faith might be, are less likely to have internal strife. Take stock of the people around you, especially those closest to you. Encourage communication with them and others more removed. Listen to what others have to say; don’t dismiss or think, “My son would never do that.” The truth is your business is likely to fail because you failed to manage the internal factors, leading to an implosion.

-David Borst, Ed.D., is executive director and chief operating officer of the Family Business Legacy Institute, a regional resource hub for family business. He can be reached at davidb@fbli-usa.com.

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Dr. Borst is the retired Dean of Business at Concordia University. He started up five businesses under borstthebrand.com and is COO of the Family Business Legacy Institute. He can be heard every Saturday morning as Dr. Dave at 6:20am on WTMJ radio with the FBLI show- "All Business". Dr. Borst is an entrepreneur, author, speaker, and blogger of a variety of topics from religion to politics or any of the topics you are not supposed to discuss.

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