The Impact of Emotional Issues on Family Businesses

Carol Ryan
Carol Ryan

As a family business consultant who has a background as a family therapist, I often reflect on the profound impact of emotional issues on family business functioning.   

For example, I have always thought that from a developmental perspective it’s a bit wrong to grow up in a family, live with a family and then go work with your family. I say that not because I don’t believe in family businesses (I do!), but rather because it’s very difficult to become an individual AND to hold your own inside of your family system. And this can be made even more difficult by working with your family every day and maybe getting a bit “stuck” in your family role.

Developmentally, you need some kind of break, you need to spread your wings, go out in the world, work for someone else, make your own way and gather your self esteem from what you accomplish for yourself using your own brains, charm, personality, skills etc. This is certainly some of the reason that best practices suggest children work outside the business for three to five years before deciding to join the business.

When you move right into the family business sometimes you are locked into your role in the family, you are locked in by yourself, your parents, your sisters, brothers, cousins etc. and you probably do the same thing to them!

Some of you might find your ‘assigned family role’ is positive.  Maybe you are the one everyone thinks of as the leader so you get to continue with this role. But what if you are the troublesome black sheep?

How do you get past that and not continue to be labeled by your family?

In my case, I laugh about how at 52 years old my family still thinks of me as “the kid who constantly gets in car wrecks”….they used to call me Crash.

When I was talking about the car I recently purchased with my family members, the first thing out of everyone’s mouth was have you wrecked it yet?

Funny thing, I haven’t wrecked a car or gotten a speeding ticket for more than twenty years! But old labels take a long time to die – and apparently, some never really do…!

And on one hand it’s okay, as long as you still can stand up to people and forge ahead being who you are and not just becoming the person that everyone expects you to be. I promise you, I will not be having any car wrecks just to make my family happy or right!

People do change, we have to stand up and hold firm in our families and not cave to our “role” if it no longer suits us.

And even if you were always thought of as the leader that is not always such a great label either. Because when do you get a chance to NOT be that person? Leaders can really disappoint people when they don’t do what others expect, and the expectations are high – that is a heavy burden to carry.

I feel like all of us who are involved in the world of family businesses need to remember that these issues around family are always there and can be the most complicated, the most embedded, the most deeply internalized.

The emotional issues are difficult to deal with, but when you do, when as a family we start to respect who each member is, as part of a group AND as an individual, it opens up communication, it frees us from ourselves and our own internalized beliefs about who people think we are and it really makes us happier people. I believe that, and I have seen this truth in action countless times.

 In addition, once we can be authentic, mature individuals who have a perspective based on our individual experiences, as well as our family experiences, our contribution to the business can be even greater.

There is nothing more liberating than knowing who you are and letting your family see that, and then finding out that the reality is they accept us….because down deep families want the best for each other and more than likely, just want you to be happy.

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CEO parents are usually NOT best suited for making the tough call.

Drew Mendoza
Drew Mendoza

Family firm CEO founders often make really bad decisions when given the opportunity to select their successor.  They’re terrific at running the company, unequaled in closing deals and driving a hard bargain but ask them to name their successor and watch them lose their ability for human reason and corporate leadership.  “After much thought, (I decree that) my successor will be insert-first-name-here

“Much though” is often the son, daughter, niece or nephew s/he thinks will upset as few people as possible or the one with the longest tenure.   No matter – the real kicker is this:  selection of successor CEOs, by all rights, belongs in the sandbox of the Board of Directors.  If the board consists of family and inside managers only, it’s a safe bet they’ll do whatever it is the senior leader – usually parent to many – decides.  No open debate among qualified, experienced business people.  No obvious linkage between next generation shareholder vision, corporate strategic objectives and successor skill sets.  Simply the decree.

Then estate plans are drawn up, control willed to the successor at the death of the second parent to die (if a first to second generation transfer) and, “by golly – I sure handled that well.  No arguments among the kids and no room for arguments later on because control is in the hand of the anointed one”  the founder assures himself.

Nothing could be farther, father, from the truth!  Instead, what may likely happen is the siblings or cousins not given any control will find ways to express their wishes.  They will argue during holiday dinners on matters of compensation and reward.  They will try to gang up on the new CEO.  They may even punish you and your spouse during the waning years of your life by withholding visitation with grandchildren. 

Estate plans and bifurcated stock do not equal family harmony.  Family and shareholder harmony in family enterprise is achieved through robust governance, perceived procedural justice and healthy debate with unbiased input from serious-minded, experienced business people with no stake in the outcome.

And – here’s another reason to abdicate the decision to a more impartial process and jury.  Life is hard enough.  You’ve built a terrific enterprise,  the source of employment and financial security to all those families.  You’ve bested the competition in tough times.  You have earned the right to dodge this bullet and avoid being the source of future family discord.   Over the long haul – you’ll stand a much better chance of being remembered as a great leader and terrific parent.

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Should Family Council Members be Paid?

 

Amy Schuman
Amy Schuman

One family pays its Family Council President a salary comparable to that of the company President and CEO. The underlying theory is that both roles are equally important to the successful continuity of the family enterprise.

Another family has a young cousin that spends 20 hours/week on family council matters, but will not accept a salary. Her perspective is that she is not working actively in the business, but gains tremendous financial rewards from the business. She sees her participation in the Family Council as a way of ‘earning’ those financial benefits.

In another case, a family with a California-based retail business began paying Family Council members a small salary after years of intensive, unpaid work on family council activities. Instead of having a positive result, this practice led to widespread bad feelings. Family members that had worked on family council activities in the past – with no compensation – felt unfairly treated. If the current family council really cared, they reasoned, they wouldn’t accept any financial compensation for this service. Tensions in the family were heightened until the practice was discontinued.

So, once again, we are faced with a situation that has no clear ‘right’ answer. Paying a salary for Family Governance service is an individual decision, and each family will approach it differently.

It would be fascinating to hear your experiences on this matter – what is working for you?

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Tensions in Family Governance

 

Amy Schuman
Amy Schuman

A large family business in the Midwest with an active – and highly effective – Family Council has been struggling recently with two nagging questions: 

  • Should the bulk of Family Council work be done by one designated leader, or should it be spread out among committees and committee chairs?
  • Should we pay Family Council leaders and committee members for their time and efforts? If so – how much pay is reasonable?

Clearly, on the first question, a ‘both/and’ approach is desired, but not always easy to accomplish. 

One strong, designated leader provides efficiency and clear accountability, but can also lead to a de-motivated and disconnected family.  Relying too much on one person for a long period of time may lead to their burnout, with no prepared successor. Others in the family may not fully develop their leadership abilities or have the pleasure of serving as leader. 

On the other hand, an active group of committee members and committee chairs provides a wider family connection and fosters family passion and commitment, but can take a lot more time to get things accomplished. It’s hard to hold a group accountable for results, and the Family Council can bog down in the face of multiple, often diverging approaches and opinions. 

This paradox – the need for both “Strong Centralized Leader and Strong Dispersed Group” – is probably very familiar to you. Although at first the two appear to be mutually exclusive, upon closer examination we can see that they actually support each other. A strong individual leader will foster strength in committees, and strong committees create conditions for strong individual leadership. 

Have you faced this common tension – and if so, what has been your experience? 

We’ll talk about Family Council compensation later this week… stay tuned.

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Governance : Why is it so hard to define?

 

Amy Schuman
Amy Schuman

This week I’ll be speaking to a group of family business owners in the Milwaukee area, and the topic they chose was “Governance”.  When they requested that topic, first I felt excitement – but it was soon followed by a bit of dread.

I felt excited because governance is such an essential component in family enterprise strength and continuity. I also felt dread because, even after years of helping families reap the benefits of governance structures like Family Councils and Boards of Directors, I still find it difficult to come up with a simple, clear definition of governance.

Like most people, my mind immediately seizes upon Boards of Directors as the prime example of governance. Indeed, a web search on the term ‘governance’ quickly yielded the following:

That relatively simple (!) definition may work for public companies, but, the complexities of family enterprise can require more of a multi-faceted approach to governance.

For example, as families become larger and more complex, they also appreciate the benefits of more formal family governance, most often in the form of a Family Council.

Families that pursue their own foundations and other philanthropic efforts come to appreciate the benefits of strong governance in the form of Foundation Boards.

As families move into the cousin stage – and beyond – they seek governance structures to serve their larger, more dispersed ownership group. Often called Ownership Councils, these bodies provide a structure for balanced participation and oversight on behalf of shareholders.

Families with Family Offices also find significant benefits from the oversight and expertise of an objective governance group of some kind.

Given all this complexity – what’s a good, simple definition of family business governance? To inspire you, I will go out on a limb and offer my own working definition – as follows:

  • Family enterprise governance provides an established set of systems and structures that ensure sound and fair actions and decisions, often by a small number of well-qualified people on behalf of a larger number of stakeholders.

I know this definition has plenty of room for improvement – what’s missing? What’s your current working definition of ‘family enterprise governance’  – and how does it help you get the results you seek?

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Forgiveness is a selfish act

Drew Mendoza

I don’t know who first coined the expression but it rings true for me.

In my work with enterprising families I am astounded at the frequency with which past hurts have a tendency to continue to have a seat at the family table; sometimes long after the people involved are deceased .  Maybe it is because family firms tend to have great institutional memories.   Whatever the reason, forgiveness can be elusive in family firms.  And, more often than not, the thing that got in the way – the thoughtless act, the poor judgment, the words that can never be taken back – was probably not the root cause, just the straw.  The complexities and paradoxes inherent in multi-generational family business certainly explain the presence of the hurts.

And, sometimes it’s not a she, him or them we will not forgive.  Sometimes, and this I do see more often in founding entrepreneurs, it is ourselves.  Imagine this scenario:  An entrepreneur in the winter of her life.  She built a company from nothing that today feeds, clothes and insures almost a thousand employees and their families.  They have stopped outside competitors in their tracks from entering their markets.  Members of the community speak often of her generosity and what a great company it is to work for.  And yet – this same entrepreneur breaks down to tears because she listened to the wrong attorney and made an irrevocable gift of stock to someone she now wishes she hadn’t.  And, as a result, she has saddled the next generation, her children, with an owner who for all intents and purposes, should not have a seat at the table.  “I’ve spent my life to build this company and with that one stroke of the pen – I ruined everything!”

In 2005 the Journal of Personality reported research that demonstrated that those that forgive have an increase in cognitive flexibility, overall life satisfaction, positive emotions, and measurable decreases in anger, anxiety and depression.   The authors write that forgiveness increases self-esteem in the forgiver, personal hope, lifts the weight of psychological depression and reduces anxiety. 

Entrepreneurs are usually as hard on themselves as they are on others and, when it comes to self-forgiveness, I find them to be hardest of all which is ironic because business-owning families are, as a general rule, generous and forgiving; sometimes to a fault.

Speaking for myself, when I’m able to get over a personal hurt by forgiving the offending party – or forgiving myself for some stupidity, my back feels better.  The more upset I am, the more likely my back is going to go out. 

The funny thing about this particular blog posting?  A few days ago my 19 year old daughter came home with a tattoo on her shoulder:  Memento te esse morte (Remember, you are mortal).  I’m not sure how she managed to get to the tattoo parlor (she never has gas money let alone tattoo money).  Talk about irony!

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Welcome to the new FBCG Blog

Stephanie Brun de Pontet
Stephanie Brun de Pontet

Welcome to FBCG’s new more active (and hopefully interactive) Blog. As we transition from our monthly newsletter, to a mix of new media: sending articles to all our contacts by email, developing comprehensive webinars to dive deep on a topic, and reaching out to a broader public via this blog space – we hope to touch a wider audience, and engage folks in conversation about all things family business. In fact, in our experience a lot of issues in family business are more threatening to the business or the family when ‘things are left unsaid’ than when we grab the bull by the horns and broach the topic as adults. We hope these short communications may serve as a vehicle to facilitate ‘starting an important conversation’ for a number of our readers. In addition, we hope to provide you with fun facts, tips, or advice that can help you navigate the complex world that is the family-business overlap. As with our earlier blog, we will certainly address topics relating to education, but we will also speak to issues on governance, family meetings, family relationships, best business practices, and many others. In fact, we would welcome your input on topics you’d like to see covered here. Also, if you have a general question on which you’d like our thoughts – please feel free to post this and we will share our thoughts and offer some advice as appropriate. We genuinely hope you’ll join the conversation and help us make this a great resource for all folks involved in family enterprises.

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