Closely-held secrets: avoiding the pitfalls that divide

Last updated on May 13th, 2019 at 02:23 pm

There are human dynamics unique to family-operated businesses. Fathers and sons, aunts and nieces, spouses, siblings, cousins — sometimes all of those and grandkids, too, can be working under the same roof, or at least the same logo. There are more than 12 million family-owned and operated businesses in this country alone.

Obviously there are advantages, or you wouldn’t hear so often from other business leaders, “We operate this business like one big family.” As Thomas Petzinger writes in his book The New Pioneers, “Family business has become a model for all business. … Business today, more than at any time in a century or longer, is built on relationships — the very stuff of which families too are made.”

The biggest plus for family-owned and operated enterprises is, of course, loyalty in the ranks. A family business can be a vehicle for preserving family values and family wealth. Or it can be a vehicle for the disintegration of relationships to the point that formerly close relatives stop speaking to each other for a lifetime. You’ve probably seen both.

Sometimes I get a call when the first flags of a rift appear, and the owners recognize that they need outside help to put some tools in place to ensure family harmony and business success. More often I get called when there is an impending sense of family doom. In the best scenario, before opening the doors, family members include in the business plan clear steps for handling the tough challenges they’ll face when money, power and family emotions are all in the same mix.

Over the years, I’ve learned some of the principles that can help families avoid the pitfalls and share in the rewards that can emerge from this tricky business structure.

Have fun – Excitement can be in short supply in a family business if people are brought in without regard to their talents and aspirations. Quentin J. Fleming, in his excellent book Keep the Family Baggage Out of the Family Business, says many family-owned companies fail because the children have joined out of duty rather than desire.

One business owner I coached insisted that his offspring work five years in another business before joining his organization. Close attention to career paths with ample opportunities for learning and growth can heighten the excitement each employee brings to the job. A commitment to having fun along with the hard work can prevent stagnation — one of the biggest threats to a family business.

Create a family council – How families choose to communicate is key. Without a plan or structure to foster healthy and open sharing of information, triangulation will occur. Triangles have sharp corners that can tear a family business to shreds. Triangles are lurking everywhere, all those conversations that sound like “I think Dad is having a lot of meetings with Jimmy. What do you think that means?” Or “Can I count on you to stand with me when I propose this new product? Everyone else seems to be against it.” Or “I’m not sure Aunt Julia is with it any more. How can we get her off the board?”

A family council is created to deal with business issues that affect everyone in the family; in one model, all family members are included in the regular meetings, whether or not they are employees of the firm. The family council doesn’t deal with operational issues, but everything else. How things are going, the professional development of individual employees, direction for the future, how the organization is responding to outside events, all of that. If there is this dependable venue for dialogue, family social gatherings can be social indeed instead of opportunities to grasp at bits of information about the business, perhaps from Uncle Charley out on the porch after he’s had a couple of cocktails.

In one model for a family council described by John Torinus, the second half of the meeting deals “with strictly family issues, such as care for elderly family members, estate planning, education trusts and even the sharing of a family cottage.” I like this model. Whatever model is used, I think a family council with regular meetings is essential. It does not replace the advisory board or board of directors, and information must flow between these entities.

Develop a clear succession plan – “We need to make decisions about the next generation based on the skills they have and what the business needs in the future,” advises Bob Bailey, leader of the successful family-operated Orchard View Farms. The succession plan is an open document, based on specific criteria for the transfer of power. The successor, hopefully, will drive the business farther than the founder, and his role will never be the same as a founder. The founder may have operated with singular authority. The successor will have different areas of expertise and likely will need to rely on non-family managers for success as they reinvent the firm. Clear strategies for succession can ensure support and respect from all family members for the new brand of leadership.

No in-laws – This sounds harsh, and often it’s too late to impose this rule when I meet with a client. Yet I adhere to it because if the business fails, one breadwinner in the family can still be bringing in a paycheck. And if a marriage breaks up, the sad process of divorce can at least not contaminate the family business. All of this can be clearly decided, documented and communicated ahead of any schisms which may, unfortunately, occur. And all in-laws are included in the family council meetings.

Tell family stories – Successful family businesses, large and small, are driven by profit and continuity of core values. There is no better way than story-telling to keep those family values and traditions alive in the business. Look up Elizabeth Stone’s 1988 New York Times article “Stories make family.” Along with leading-edge business practices, steps need to be in place to ensure that elements of the family culture are handed down to each generation. Whatever it takes — a formal oral history or an ethical will such as used by some Jewish families for hundreds of years, this important function cannot be left to chance.

Search for resources – The magazine Family Business is an inexpensive tool, and there are several good books available. Experienced coaches and consultants with specialized expertise can offer objective guidance.

Success in any business, and certainly the family-controlled ones, doesn’t just happen. If you recognize and prepare for the unique challenges, your family business can bestow many kinds of blessings on your loved ones and your community at large.

Jo Hawkins Donovan has a coaching and psychotherapy firm in Milwaukee, and can be reached at 414-271-5848 or The firm’s Web site is Hawkins Donovan will respond to your questions in this column. Her column appears in every other issue of SBT.

February 15, 2002 Small Business Times, Milwaukee

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