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When the family tree falls

Kate Zabriskie

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Generational business fails and what to do about them.

Anyone in a family business knows the chance of the business surviving declines with each handoff to the next generation. What causes the drop off? Among the myriad reasons: times change, dedication levels vary and talent isn’t always genetic.

Family dysfunction is no picnic. It’s even worse when people’s livelihoods are at stake. The longer any issues go unchecked, the more severe they become. But there is good news — it’s almost never too late to confront a problem.

Dysfunction symptom No. 1

The people currently in charge are running the business as usual but aren’t innovating. Status quo will lead to hanging a going-out-of-business sign on the door.

Correction strategy: Not everyone is a driver, nor does just anybody have the creative spark to carry the torch when a dynamic owner steps down. Fortunately, inside this dark cloud of bad news hides a silver lining. Nothing mandates a company to home grow its top talent.

If you’re not suited to the top spot, hire it out. You won’t look weak, you won’t have to give up control of your legacy, and you’ll look smart and humble as you position your organization for future success.

Nervous about an outsider? There are many ways to get a fit right. Be specific about what you’re looking for, focus on culture and find someone who is good at the parts of the business where you don’t excel.

Dysfunction symptom No. 2

The rules don’t apply to everyone the same way. Blood relatives and/or their spouses take advantage of family membership, and it’s negatively impacting culture, morale and attitudes.

Correction strategy: Addressing this dysfunction requires some tough love and may hurt feelings. When you decide to address the problem, have your data ready and come prepared with plenty of examples. Obviously, the confrontation conversation is easier if you have power. When you don’t, your approach may need some adjustment.

No matter your version of the entitlement dysfunction, one factor is almost certain: This dysfunction is not going to self-correct. At some point, you’re going to have to address bad behavior.

Dysfunction symptom No. 3

Some of the family work on vacation, and others vacation at work.

Correction strategy: Start by making rules and goals visible and measurable. State the obvious to ensure everyone knows what’s expected. Then review goals and any rule violations regularly. Sometimes additional structure and sunlight can go a long way toward correcting an imbalance.

Of course, if that doesn’t work, it may be time to talk about a pay-for-performance structure, a split of some sort or even a buyout. When tackling this challenge, you need to consider your interactions outside the business. Do you still want to have holidays with these people? Regardless of your answer, the greater relationship ecosystem should inform your decisions.

If you or a client has encountered a problem in the family business, you know firsthand that knots rarely untie themselves.

Dysfunction symptom No. 4

The kids want to join the business but see it more as a meal ticket than a career move.

Correction strategy: Many families that have successfully passed the stewardship of their enterprise from one generation to the next know the value of putting people to work outside the business before they earn a spot on the inside.

While nothing is wrong with a short summer stint or after-school job, if junior hasn’t started as a full-time employee, consider creating a work requirement. If you adopt this strategy, not only will you get someone who has had to earn a paycheck without the cache of the family name, you will have someone who has seen something different than your way of doing business.

Dysfunction symptom No. 5

The next generation has little to no interest in the business.

Correction strategy: Sometimes it’s best to hear “no” the first time. After all, do you care more about the business or about your children having the opportunity to pursue their professional passions and goals? Yes, it’s sad when, after many years, the legacy stops, but it’s sadder still when forced participation ruins something beyond the business. The bottom line: When your offspring want to jump ship, hear the message and throw them a life raft.

If you or a client has encountered a problem in the family business, you know firsthand that knots rarely untie themselves. In fact, many get tighter and bigger as time goes by. So, if you’re dealing with one of the dysfunctions described above or something else, now’s the time to start planning a correction strategy and setting a timetable to execute it.

Kate Zabriskie is president of Business Training Works Inc. She helps businesses establish client service strategies and train their team members to live up to what’s promised. For more information, visit businesstrainingworks.com.

 

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