To read the first post in this series, click here.
Which to choose: Family first or business first?
Those who recognize the presence of a paradox would say: “Yes, both!” However, many families feel compelled to make a choice.
Let’s look at one case where this paradox was not managed well. The fictional Smith family often worried about the family interfering with the business, and over the years, set out to pursue business-first decision making. A merit-based employment policy required family members to work outside the company for five years and earn their MBA before applying for employment at Smithco. Family members were expected to be more qualified than non-family applicants, and could only apply to the company when an open, existing position matched their skills and experience.
On the five-person Board, two slots were designated for family directors. To qualify for consideration, the family member had to have at least 10 years of demonstrated success in a top business leadership role and at least five years of experience on a Board of Directors in a related field. No family meetings or family council was felt to be needed.
Now entering its fourth generation of family ownership, only one G3 family member was working in the business and she was nearing retirement. No G4s had expressed interest in the business because most were pursuing careers in other fields and other cities. The two current G3 family directors were nearing their retirement age, and serious doubts existed as to whether any G4s would qualify as Directors.
The current owners of Smithco, while proud of the non-family management and directors that had been so important to its continued success, were quite disconnected from the business they owned. Outside of dividends, they experienced no benefits from their family ownership and knew very little about the business. Because of these factors, a committee of the board has begun exploring sale of the business.
A sale is not necessarily a negative outcome, but if the goal of the family was to remain a family business, balancing their business-first approaches with some attention to family-first actions might have led to a different outcome. Family-first actions such as educational family meetings for family owners not working in the business, tours of facilities or summer internships for younger family members could have yielded vastly different results.
The Smith family worried that unqualified family influence on the family business would bring about its destruction. Paradoxically, keeping family away from their business may well have created the very conditions they most feared.
Taking one side of a paradox to the exclusion of the other, always leads to suboptimal results. In our next post, we look at a positive example of managing the “Business First/Family First” paradox.
My deep thanks to Dr. Barry Johnson for his pioneering work and inspiration in this field. Please see www.polaritypartnerships.com for more on polarities and paradox.