How Many Hats Are You Wearing in Your Family Held Company?

When you work in a private or public organization, your role is clearly defined; you do not face the ambiguity that comes with family and ownership. However, when you hold a position in your family company it gets complicated. As a shareholder member of the family you wear more than one hat. The tough part is figuring out which hat to wear when faced with a particular situation.

Three Hats

A family member may hold many positions within the organization. Regardless of their role, each member wears three hats as a shareholder that works in the family company, and each hat requires a different approach to the business. Deciding which hat to wear in a given situation is not always black or white.

Owner

Owners have a financial stake in the success of the business; they must see the big picture and focus on the long-term goals and strategy that drives the company to success. Their financial and emotional investment in the company is high and if the enterprise fails to prosper their entire economic well-being could be at stake. The pressure of being a business owner increases exponentially when the financial health of your extended family is also at risk.

There are many rewards and challenges that come with being an owner in a family held organization. One of the most stressful times for most owners is when the interests of the business conflict with the family. E.g., when the Director of Sales fails to hit established sales goals the company suffers a financial setback. If the Director repeatedly fails, they must be removed from their position in order to ensure the survival of the organization. In a typical employment situation, the Director would either be fired or demoted. However, when the Director is your brother you are not just firing a poor performer, you are negatively affecting the economic situation of your family member. In this scenario, the Owner hat must be firmly in place in order to make the correct decision for the company because erring on the side of the family could cripple the business.

Positional Role

Each family member working in the business holds a specific role in the organization. They may manage other family or non-family members, or be an individual contributor. They are still owners regardless of their position in the company.

Being an owner/contributor is a delicate balance. Your relationship with non-family staff can be complicated because they know you are also an owner. They may not be willing to share information with you in the same way they would with other team members. The good news is there are actions we can take to minimize the potential negative impact of the “owner” perception.

  • Hold everyone in the business to the same standards to reduce the risk of being treated as “the boss” rather than a team member.
  • Avoid calling family by relationship—i.e. use Susan rather than Aunt Susie.
  • Treat family as peers rather than relatives.
  • Promote the most qualified person regardless of family association by benchmarking the position within the company and appropriately aligning people to positions based on their knowledge, skill, and ability.

The goal is to remove the owner hat and focus on the job at hand.

Family member

Family members may decide to sell their interest in the company. Alternatively, they may choose to leave their role in the organization to try something new. The owner and job role are transient and subject to change--we make a conscious choice to wear these hats. We are born wearing our family hat; we do not get to choose.

The informality and comfort level we have with our family can make it difficult to treat each other as peers and co-workers. We may shout at each other and use harsh words during a disagreement; something most of us would never consider doing with unrelated co-workers.

Setting ground rules can help everyone understand when to wear or set aside their family hat.

  • Benchmark the position; define key accountabilities (KA’s) and objectives for each position within the organization.
  • Clearly define the level of autonomous decision-making authority for the job.

Practical Application

Stop to consider which hat you are wearing in critical situations, and make a conscious decision about whether it is the right hat. Mentally step back and try to view the circumstances objectively.

Find a mentor or external advisor to use as a sounding board when you are unsure which hat is appropriate for a particular situation. Remember, it is always better to seek counsel than to worsen the situation by acting incorrectly.

Establish a board of directors that includes members who are not family, who understand the culture of the company and are external to the organization. When the majority of the board members are independent, it takes the family bias out of the decision-making process and focuses objectively on the business at hand.


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter -  @BrentPatmos and connect with him on LinkedIn.

 


10 Facts about Dealing with Dysfunction in a Family Business

I’ve been working in, leading or advising privately held and family owned and operated businesses for over 28 years. In my experience, one of the biggest—and hardest--challenges a family owned business faces is managing and maintaining their relationships with the other members of the family that run the company. The family dynamic can be difficult to deal with around the Thanksgiving dinner table; throw in the stress of running a business and you have a pressure cooker situation on your hands.

Myths Abound

There are countless myths out there about owning and running a business with your nearest and dearest:

  • We love each other, so running a business together will be easy.
  • We’ll agree on everything because we are family.
  • We can keep family issues, and business matters separate.

The fact is that family baggage--sibling rivalry, jealousy, controlling parents, unresolved conflicts--doesn’t just disappear when you walk through the company door.

Just the Facts

Taking an honest look at the situation is the fastest road to a resolution. So rather than focusing on the myths of running a family owned company, let’s take a look at the facts. We’ll explore the three C’s (Communication, Collaboration, and Cooperation) of dealing with family dysfunction in our next article, but for now I think it is critical that we begin to recognize how dysfunction can take hold in a family operated organization.

Every Business is Dysfunctional at Some Level

Every business is dysfunctional, it is just easier to disguise in large corporations. It stands to reason that every family owned and operated business is dysfunctional at some level.

There is No Perfect Family Unit

Perfection is a particularly insidious myth about families (and businesses) because it relies on an impossible standard. No one is perfect; we are just humans, and people are by definition imperfect beings. In my experience, we tend to be less perfect around our family, and sometimes our family brings out reactions and emotions that no one else ever sees.

The Myth of Perfection makes it Tougher

Family members do not like to highlight dysfunction that’s impacting their family relationships and business because it shatters the myth of perfection. This reticence towards transparency and authenticity on family matters makes it difficult to deal with the issues in a constructive way.

Choosing Sides is Destructive

When things start to go wrong, old resentments may surface, and family relationships are tested. Family members can let their emotions overtake logic. They often choose sides based on their own bias or allegiance towards family allegiance, and they lose site of the real issue creating the dysfunction.

Their Heart is in the Right Place

Dysfunctional or not, the one thing most families have in common is a wish to see their loved ones thrive. This is especially true in a family owned company where an emphasis on well executed communication and interaction can lead to performance success and translate into prosperity for all.

Respect Their Feelings

Fundamental change takes hard work and commitment. Changing a dysfunctional situation with a family member requires that we recognize and respect their feelings. If we don’t deal with the difficult situations in a respectful way, we won’t achieve the genuine culture change required to minimize the dysfunction or eliminate the dysfunctional behavior.

Dysfunction Does not Go Away

You will not eliminate dysfunction within the family business, but you can minimize the negative impact it has on the company.

It can be Managed

Dysfunction can be acknowledged, understood and effectively dealt with or it can go underground, create unspoken conflict and leave core issues un-discussed and un-resolved.

  • Unresolved issues lead to deep seeded dysfunction and create silos within the family and business
  • The key is knowing how to communicate effectively, collaborate and compromise

Fixing it takes Commitment

There is a fundamental difference between thinking you want to address dysfunction, knowing you need to address dysfunction, and the commitment required to act on dysfunction.

Resolution Requires Hard Work

Resolving dysfunction through the foundation of communication is hard work. Family members know how to talk but in many cases, they do not know how to communicate. Without understanding how to communicate there can be no collaboration or cooperation by which family members sort out dysfunction and focus on the real objective of advancing and growing their business.

We must continue working on the foundation of communication and authentically in order to achieve transformative performance results and develop a functional culture in your family operated business.


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter -  @BrentPatmos and connect with him on LinkedIn.


Perpetual Development

Is Your Family Business Ready for the Generational Relay?

Building a family business--or any business for that matter—is like running a relay race. You start with a sprint, set a good pace, and eventually hand off to the next person chosen to carry the baton. The baton is passed to the successor, and the race continues. The big difference between publicly owned firms and family owned businesses are how they choose a successor. While publicly owned firms tend to replace outgoing leaders through a selective succession and recruitment process, in a family owned company the hand-off is usually to another family member.

The ability to successfully transfer the leadership of a family enterprise from one generation to the next requires well-defined skill and strategy. Unfortunately, only about one-third of family businesses are successfully handed off to the next generation. Lack of careful and thoughtful planning is one of the key reasons that many family owned businesses do not continue past the first generation. So what can we do to ensure a successful generational hand-off?

Planning for Transition

The first thing we must do is create a comprehensive transition plan. This is not an easy task, and many founders feel a sense of loss when they contemplate handing off the company to someone else. However, a successful transition is critical to sustaining the business and keeping it in the family.

Start Early

A smooth change in generational leadership takes time, and requires time for careful planning and implementation. Prepare a detailed transfer and sustainability plan a minimum of 24 months in advance of the actual exit from the business. This will allow ample time to prepare, coach, mentor, and support the leader in their new role.

Share the Vision

Do not create your transition plan in a vacuum. Discuss the plan with your team. Communication and clarity regarding timeline and decision-making accountabilities are fundamental to transition success.

Culture is Crucial

Your successor should understand and value the company culture. Ensure you clearly explain the culture of the organization and the values used to make decisions.  If these values do not exist in your successor, you may want to consider other options for the transition of leadership.

Integrating the Next Gen

Integrate the next generation of leadership into their position ahead of exiting the business. Here is where the 24-months I mentioned earlier come into play, since you should begin this process a full 2-years before your planned exit.

  1. For the first 12-months the exiting leader works collaboratively in partnership with their successor. However, the Decision Making Accountability (DMA) remains with the current leader.
  2. For the next 6-months the current and future leaders should work in partnership with DMA being transferred to the successor. DMA should not be imposed by the current leader unless the decision represents a fatal flaw to the company.
  3. For the final 6-months prior to full transition the exiting leader becomes an advisor to the successor with accountability and DMA now residing with the next generation of leadership.

Leave Room

Transitioning leadership of the company is difficult at best. It is not easy to let go when one invests their life into creating a successful business. Passing the leadership baton does not mean there is no place for the former generation. You can leverage their business acumen by giving them meaningful assignments that serve the company; identify them as a mentor and assign a mentee; or ask them to serve as a company representative for an industry association. Provide clearly defined roles that allow involvement and contribution in the business, but that are not connected to the day-to-day decision making of the organization.


Brent Patmos is the founder and President of Perpetual Development, Inc., an organizational performance company serving the exclusive needs of privately-held and family-owned business leaders. You can contact Brent via email: ContactPDI@perpetualdevelopment.com or by phone at 480-812-2200. You can follow Brent on twitter -  @BrentPatmos and connect with him on LinkedIn.