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Family-Owned Business Leadership is Different From Leadership in Other Corporations
Leaders of corporations that are not family-owned know they are relatively independent from the company. For example, with proper notice, leaders can seek a different job or resign at will for other reasons. The corporation is also self-governing. Company executives are free to replace leaders who are hired by another business, promoted within the company, fired or laid-off. Even though most leaders want to maintain good relationships when they leave, employees have the option to grant themselves a true divorce from the company, disappear on a desert island and choose never to send a postcard to anyone related to that business.
This level of independence rarely exists in a family business because leaders in family-owned companies are glued to many company employees (family members) in some way until death. This enmeshment is often so messy that family ties create stress and conflicts, as I explained in a previous article about some of the common potholes in a family business leadership structure.
Family-owned businesses have many other differences from other companies. One example relevant to this article is that non-family owned corporations are usually governed by a Board of Directors with a bottom-line business approach concerning profit and loss. Generally, this promotes proactive approaches regulated by policies determined in advance with clear, written guidelines. A classic illustration of this difference in governance is that non-family businesses have a clear line of leadership succession designed to ensure an orderly transition. Many family businesses lack this clarity, resulting in problems described later in this article.
What is the Value of Leadership Coaching for a Family-Owned Business?
Leadership coaching has often been credited with being the difference between success and failure for an entire family business, not just the business leader. Even though about 90% of U.S. businesses are family-owned or controlled, most fail. Although the majority of family business founders have the intention of forming an ongoing business and a legacy or income for their dependents, less than half of all family-owned businesses become second-generation businesses. Even fewer (less that 15%) survive to be run by a third generation of family members.
Many founders of family businesses are talented, enthusiastic, visionary entrepreneurs fully capable of building a stellar business. Too often, however, as addressed in an earlier article, they are not equipped to manage the company through various developmental stages of change required for its successful evolution.
Company founders often lack the ability to objectively coach company personnel (family members) to improve their performance. Business founders often fail to update their vision for the business after it has become well established. Instead, they concentrate on immediate problems because they feel a need to produce a rapid result. When they don’t understand the importance of consistently renewing and focusing on a long-term vision and introducing proactive innovations, these visionary business builders lose their original competitive advantages.
Business leadership coaches are often hired to help resolve family-owned business issues because coaches are objective, work well with other professions, are highly trained in business and leadership skills and maintain confidentiality. Coaches can teach family business founders how to identify and empower an ideal management team for each stage of the company’s growth. Coaches are also trained in conflict resolution skills that can help resolve fiery arguments among family members, lawsuits and other legal battles that often emerge after the death of a leader, a change in the company structure or formal dissolution of the business. Leadership coaching also has a proven track record of preventing all of these problems.
Why Do Family Businesses Experience Such Intense Challenges?
Although there are many family-owned businesses that are healthy, vibrant and quite profitable, family businesses usually struggle for multiple reasons, as described below.
Many families begin businesses expecting success, in spite of the fact the founders lack adequate business expertise, funds or training. Often, with no marketing or business plan and a meager cash flow, family members sell products made as a hobby and assume demand will grow because their friends and family appreciate their wares. Even when the business is offering services instead of being burdened with an expensive physical inventory, without a solid marketing and sales program and appropriate personnel, founders make a mistake if they base optimism on initial success.
Internal Family Conflicts and Inappropriate Loyalties
Family jealousies and quarrels about personal matters are often allowed to infect business decisions. Key decision-makers may refuse to fire an incompetent family member. Kids may assume their parent supervisor will overlook their errors when they make mistakes at work because this is the family’s pattern at home. Parents may hire a child simply because the child needs money instead of selecting a more appropriate employee. Family business are often rife with sibling rivalries about everything from a parent’s attention at work to their place in a family member’s will.
Dual Roles and Inappropriate Duties
Children may not be interested or qualified for the jobs they are assigned by their parents. The fact that family members have dual roles with relatives in the business often create conflicts. A classic example is when an older sibling becomes the quality management supervisor of a younger sibling they quarrel with. It’s also difficult to supervise someone who changed your diapers or convey your displeasure in the work quality of the relative who just invited you to Thanksgiving dinner.
Personal Traumas That Become Business Traumas
Unlike in a non-family corporation, the business often doesn’t just carry-on when leaders and employees experience personal traumas. Classic examples include lawsuits between spouses embroiled in divorce settlements and custody battles, especially when other employees (family members with vested interests in the outcome) want to give their advice about your personal life or how it relates to their grandchildren, nieces and nephews.
Historical Perceptions of Relative’s Competencies Relate to Generational Conflicts
Family members have images in their minds based on your history with them. Those who observed many of your failures as a child may never be objective about your competencies as an adult. Generational conflicts flow both directions. Most kids dread providing a performance review for Mom or telling an Uncle he needs to attend training to improve his skills.
Exhausted Couples Who Harm the Business
Couples who become married to the business often divorce or constantly bicker because they’re both exhausted and they can’t remember their last time they took a week off work. They’ve totally lost perspective about work-life balance. Both their immediate family (children) and their extended family suffer. Depending on their positions in the business, the negative effects can ripple across multiple areas of the family business.
Insiders Who Resist Allowing Other People to Contribute
Older family members often refuse to retire and let younger members lead the clan. Family ties can also exclude talented outsiders from becoming staff members in essential ways. Beliefs like “Dad started this business, so he knows best and makes the key decisions” often result in a lack of proactive planning and fresh approaches, even when profits are tanking. When outsiders are hired, since blood is thicker than water, outsiders often complain of biases regarding how they’re valued or treated.
Lack of a Thoughtfully Constructed, Evolutionary Succession Plan
The fact that many family members are thrust into business roles that are inconsistent with their innate strengths, personalities and interests becomes particularly challenging because the number of family-owned businesses without a clear succession plan is shocking. Beliefs like, “We do things this way because we always have” prevent innovations that can cut costs and improve market share.
A Family Business Starved for Effective Planning and Innovation
Far too many family businesses have no business plan and operate on the same shoestring budget they were born with, in spite of their potential to expand in healthy ways. These are just examples of the problems I identified during years of coaching members of family-owned businesses and reported in the article mentioned above concerning why and when companies need a new approach.
Why is Women’s Leadership Coaching So Helpful for Family Businesses?
Family-owned business problems can be particularly difficult for women if their families are traditional and the business is a patriarchy (directed by a male, especially if he is perceived as the elder of the family tribe). I’ve coached many women in family-owned business who said they couldn’t appeal an inappropriate decision their boss made because “We’re a father-knows-best business. Even though I know I’m right, we have no HR Department and my father makes all of the important decisions. It seems like my only choice is to leave the business because I cannot use my leadership skills where I’m working.”
Even when the family-owned company is not managed by a family patriarch, most women with leadership potential are conditioned by their families and society to take on more than their share of responsibility for the well-being of their families and to place other people’s needs before their own. When this is true, even women with the strongest leadership potential often play roles like rescuing an incompetent uncle who makes poor business decisions or trying to elevate the job title and salary of a child so he can support his family instead of pursuing the woman’s own career as she would do in a corporate business.
As described in this article, the need for supportive relationships and work-life balance is especially critical for women who are emerging leaders, striving to identify their innate, authentic leadership style. Leadership coaching is a proven way to help emerging women leaders overcome their inner critic so they can blossom in a leadership role.
What are Examples of Proven Ways to Turn Struggling Family-Owned Businesses Into Thriving Companies?
If you want to ensure a prosperous family business and also enjoy healthy family relationships, ask a coach who has significant experience untangling the sticky webs associated with family-owned businesses to help you and other relevant company leaders and employees. Frequent goals include clarifying troubled family communication traps, developing essential business skills and using proven conflict resolution techniques. A qualified, experienced coach can share proven tools that will help you create a strong team to run the company, while ensuring what your family needs for a successful legacy business.
It is always wise to review instances of “default tenure” that are not merit based so you can design a proactive succession plan instead of waiting until you must quickly react to a leader’s death or another sudden change in the business. When I coach family-owned businesses, we do pre- and post-assessments so the results are transparent and guide our next steps. We often use 360-degree performance reviews designed to ensure that personnel are trained and supported to fulfill their assignments.
Since I collect this data and maintain confidentiality in appropriate ways, I guarantee you that, after coaching, family members will enjoy better relationships with each other once they learn new communication and conflict resolution skills. We also make sure job tasks match the personnel assigned to do them, clarify personnel policies and ensure a fair performance review process.
The results include family members who feel more secure about their own future as well as the long-term stability of the company. As your coach, I help you grow from every challenge by openly addressing it. We review family patterns that facilitate progress and modify destructive patterns. Coaching helps family members make essential adjustments in productive, non-judgmental ways while other relatives applaud their courage and support their growth steps.
Everything we do together is customized for your particular situation. For example, after we begin working together, we may or may not explore the benefits of engaging an Advisory Council you trust. Your company may or may not hire a specialized consultant related to a particularly troublesome area of your business.
Regardless of which proven strategies you take, when you use Family-Owned Business Coaching, you can expect the following additional benefits my clients have expressed when they evaluated my work.
- Family members committed to a united business mission and vision that is in tune with current times instead of continuing to be fashioned on needs at the time the business was founded
- Crystal-clear business goals that are well-known, agreed on and consistent with the co-created business mission and vision
- A fair performance review process that is understood by everyone who will be evaluated
- A systematic personnel training plan based on a comprehensive needs assessment
- Proactive planning instead of a focus on reacting to crises and challenges that threaten the business
- A better relationship with family members because relatives now enjoy a cooperative business model and environment
- Expansion of the concept of “family” to employees and essential consultants who are not blood related but their skills are essential to the company’s success
- Enhanced peace of mind for many reasons, including a transparent management plan and family members no longer worried about being considered disloyal when they disagree with a business goal or decision. These employees say they become more loyal to the business that feeds them because they know family business leaders are now more aware of their personal needs. You can see how this makes all family employees more engaged in improving every aspect of the business.
- Family members who are leaders in the business also state they gain work-life balance as a result of the above.
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In addition to coaching multiple family-owned business leaders and employees, I’ve personally experienced both the power and pitfalls of family-owned businesses, some of which I’ve co-owned. In addition to coaching, I’ve conducted many seminars for family-owned business leaders during the last 20 years of my experience.
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© 2019 Doris Helge, Ph.D. as interviewed on “The Today Show,” CNN and NPR. Certified Master Leadership and Executive Coach Doris Helge is author of bestselling books, including “Joy on the Job” and “Transforming Pain Into Power.” Doris has helped hundreds of leaders like you meet every challenge you’re facing. To make sure you receive each weekly tip, click here to join our mailing list.