Family-owned businesses are much more than just the oldest form of economic organization. They may actually be the most important to today’s economy! According to the U.S. Bureau of the Census, about 90 percent of all businesses in America – roughly 5.5 million – are family-owned or controlled. More than that, these family businesses contribute over 50% of the U.S. gross domestic product, and they employ more than 60% of the workforce in our country.

That all sounds great, but the overwhelming majority of these family businesses will not succeed from one generation to the next unless we do something about it. Only about 30% of all family-owned businesses successfully continue from their first to their second generation. Third and fourth-generation family businesses are even more rare at only 12% and 3%, respectively. That’s quite frightening when nearly 90% of these same families’ wealth will literally disappear during that same timeframe when they don’t successfully maintain their businesses.

One of the key challenges is that family businesses are often ripe with relational chaos and emotionally-charged environments that don’t exist in other business settings. So what can we do to enhance the long-term success of these family-owned businesses? Improve the working relationships between parents (not to mention aunts and uncles, for that matter) and their employed children! The following are four key strategies to help you manage this complex dynamic when your children are your direct reports at work.

  • “Both/and”, not “either/or” – Family business in and of itself is somewhat of an oxymoron. Are you a family, or are you a business? Which do you prioritize in your day-to-day activities? Most family business leaders I support tend to lean towards family first when making business decisions. When you hire your children simply because they need help at work or your children need jobs, for example, bad things tend to happen. When you simply turn to your children first when considering who best to hire for available positions, you tend to create a better fit in your business.

The reality is that it’s about creating a healthy balance of “both/and” in family businesses rather than making a strict “either/or” distinction. If there is an open spot, hire the best person for the position – whether that person is a family member or not. When you focus on developing your next-generation leaders, make sure all of them receive the same opportunities and support, not just your children.

  • Work at work, family at home – I am a huge advocate for employee engagement in the workplace and encourage all the leaders I support to get to know their employees and especially their broader interests away from work. In that light, it’s perfectly acceptable – in fact, probably most appropriate – for you to ask your employed children about their personal activities, your grandchildren, etc. It would be reverse discrimination not to build this kind of rich relationship with your employees just because they are your children.

With that said, it is often more productive and sustainable to keep your work conversations to the workplace, not have them around the dining room table. The same is true for bringing “kitchen talk” to work and especially into the Boardroom. You can have short conversations with your employed children about personal matters at work as long as you do so in the same manner you would with any other employee. If you want to discuss work with your employed children at home, that’s OK too as long as you keep it to the “How was your day?” conversational level rather than deep-diving into any specific issues or opportunities. Keep those more detailed conversations at work when everyone is in the right frame of mind.

  • Leader-like, not childlike – Within the context of my family, I will always be my father’s son, and he will always be my dad. That is by the very nature of our relationship, and it has me act in certain ways towards him out of respect – and perhaps fear or anxiety at times. My dad is a wonderful man, and I love him dearly. That doesn’t mean that I don’t act like a child much of the time when I am with him though.

If my father were my boss, I trust he would depend upon me to be leader-like at work, not childlike. Leaders lead activities, share opinions, make decisions, and solve problems. Children don’t typically act in this same responsible manner. Instead, they typically ask their parents for permission or wait to be given direction to do something. As such, parents often relate to them as children – even at work! Moving forward, encourage your children to demonstrate their leadership capabilities rather than defer to you all the time. Set them up for success and treat them like your peers and trusted advisors. If you treat your next-generation leaders like children at work, it’s less likely they will act like the leaders they intend and you want them to be.

  • Family Council & other governance structures – Back to the first point about creating “both/and” balance in family businesses, it is critical to your long-term, multi-generational success to implement the structures any complex organization requires to succeed. In the case of a family business, this likely includes assembling a Family Council to provide a forum for open dialogue among family members when issues or concerns do arise. It also likely entails developing a Family Charter and Family Business Succession Plan to more clearly articulate your wants and desires for the family business to future generations while you still can.

Beyond these formal governance structures, I would also offer that using familial names like Mom and Dad at work reinforces the family-first dynamic we are trying to mitigate. While it may seem odd to some, children who call their parents by their first names at work make an explicit statement about their leadership and professionalism. They also demonstrate for other employees that being a bloodline relative does not create an unfair advantage or otherwise influence organizational outcomes. Familial references detract from professional identities and relationships, whereas first names promote a business-first mindset without being disrespectful.

Family businesses, by design, are complex organizations. That’s why it’s so important to leave your family drama and relationships at the door when you go to work. It can also be invaluable to explicitly and symbolically announce which hat you are wearing at all times – parent or boss, child or leader. To that end, give us a call at 310.589.4610 or email us if we can help you reap the benefits of being BOTH a family AND a business. You can also visit the Family Business page of our website to see how we support our family business clients in succeeding from one generation to the next to create even greater success in the future.

 

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