Making family businesses work
What major problems typically arise in family firms?
Expectations are rarely talked about. When the next generation comes into the business, what is not talked about is whose needs are being met.
Often children join the business because there’s some sort of birth right. But is it the parents’ needs being met or the kids’? Those expectations need to be put on the table, they need to be transparent. Are kids coming into the business because they see it as a good opportunity, because it’s the only thing they can do, or because they haven’t looked at alternatives? I ask families searching questions up front – what is this business here for? Is it for employment? Is it a financial support for the family? Is it here for the duration? Is it here to support particular generations of the family, then pass it on to the next?
Very rarely do you talk to the founding generation and hear them say, ‘I started this business because I wanted it to be a family business’. They generally started it because they had a dream of self-employment, they wanted to make money, they had an invention or a vision.
Does communication break down because older and younger generations don’t understand each other?
A lot of the family businesses I work with have incumbent owners in the 65-80 age bracket who grew up in a very autocratic, top down, ‘do as you’re told’, ‘keep your head down’-type of environment. That leadership style is still pretty prevalent, especially among men. The younger generation coming through is much more collegial, much more open and wanting to discuss things. So you have a gap in intergenerational communication that can sometimes be very difficult.
There’s also a gap between the rhetoric and the reality. My generation has learned the rhetoric about sharing and collaboration and empowerment, but the reality is we’re not very comfortable with that sort of stuff.
How can family businesses define the roles each generation will have?
This is going to sound really trite, but it’s ‘talk’. It’s so hard – particularly for the incumbent generation – to actually sit around a table and be honest about expectations. The number of kids I see joining a family business who should never be there, in some ways it’s cruel. Often people are putting their own expectations and dreams onto their kids, and their kids can’t live up to it.
Often that incumbent generation was very entrepreneurial, there were very few rules and not a lot of discipline. This next generation can’t cope with that, they need boundaries and rules and processes.
The advice I’d give is not some sort of mega plan or getting the finances in place, it’s actually sitting down and having meaningful discussion, not just with the people who work in the business, but the key stakeholders. Often those stakeholders are not owners, they don’t work in the business, they’re marriage partners or life partners who can have a huge influence. Often they’re just ignored. It’s about having the extended family discussion because the business impacts on everybody’s life.
Can people put a wall between business and family life – and should they?
It’s possible and in theory you should. But the reality is, how do you do that? If you’re a young man and you’ve joined the family business, what happens to the relationship with your father? Your dad is now your managing director or your shareholder.
If the family understands those issues, they can make some rules about when that separation takes place. I’ve heard sons say, ‘I went for dinner at the parents’ place last night and dad couldn’t do anything but talk about the business.’ Or, ‘we went to my grandmother’s funeral and all he wanted to know was what’s happened with the sales figures.’
You can deal with that by having rules like, when we’re around the dinner table, we’re a family. Again, that’s not easy, because emotions run very deep and we don’t separate our behaviour at work from our behaviour at home.
Why don’t families like talking about business succession?
It brings up the issue of mortality. My experience of working with clients over 25 years is men have much more of an issue with mortality than women. If your life has been your business and everything about you is identified by it, it’s bloody difficult to let it go.
How important are independent voices?
They’re extremely important, but the most important thing when we work with families is we have to understand that family is the most precious commodity. We don’t have enough people with the requisite skill and understanding of that business environment.
We need to understand the legal and tax side and cashflows and things, but we also need to understand we’re dealing with some very fragile human beings at times. Sometimes outside voices aren’t understanding enough. My experience in the UK is the training doesn’t deal with that. If you’re an accountant or a lawyer or a banker, you’re coming from a very ‘left brain’ perspective. A lot of it is black and white, it’s transactional and technical. When you’re dealing with relationships, it’s not as simple as that. Professionals working with families should take time to understand what they’re dealing with.
How did you get into working with families running their own businesses?
My wife and I had a family business for 14 years. It was only after the business went into receivership in 1992 that I went to university and did a Masters in Organisational Development and started asking about the demise of my own family business. I asked my daughters questions about what it was like for them to grow up in a family business and talked to my wife about what it was like for her to have her dreams subjugated because she thought she had to support me in the family business.
Understanding what was going on in my own family fired up my whole interest in this area and I’ve now been in family business consultancy for about 25 years.
John Tucker is the director of the Bristol-based International Centre for Families in Business. He’ll be speaking at the third annual Family Business Forum in Auckland on 10 April.