Working with family can be a blessing or a curse — for the family and for the business — depending on how you handle it. Here is some practical guidance for keeping your business and family life healthy.
The ugly truth is that some family members can have an entitlement mentality that can be a big problem for both the business and the family. They assume they deserve everything and should automatically come in at the top, and they can get offended if they think they are not getting what they believe they deserve. Based on what I have seen in my years of experience working with family-owned businesses of all sizes, I often discuss with clients the need for not only an investment banker and a lawyer, but also for a psychologist and a business coach to help them manage these touchy situations.
As an example of a family that did things “right,” recently I met with the owners of a manufacturing business where the son began working at the business at the entry level while he was in high school. He got to know everyone and every facet of the business, from the bottom up. Along the way, he developed strong relationships and earned the team’s respect. Eventually, he became the president and an equal co-owner of the business along with his brother and father. He expanded the business far beyond what his father had done and contributed so much more than his sibling that eventually his father restructured the equity so he would be better rewarded for his accomplishments. Today, the son continues to successfully run the company as the majority holder while working with his father and brother, and everyone is happy.
That family is one of the lucky ones. Others encounter major challenges while trying to incorporate or distance themselves from family members wanting to join the business. Years ago, I met with an 80-year-old patriarch who wanted to sell the successful family business. When I asked why he did not want to keep the business in the family, he pointed at his 50-year-old son sitting next to him who had been working at the company for many years and shouted: “What, am I going to leave my business to him? That would be the end of the business.” The son sank in his chair. This was demoralizing for his son, and there is no telling how this has affected the family relationship.
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Fact is, family members often have to say “no” to those who may not be a good fit, despite their blood ties. The key is to deliver the message in the right way, or you can destroy the family and/or the business. While you need to be clear and direct, it is important to consider your unique family dynamics and err on the side of politeness and tact.
There is no doubt that families and businesses can be devastated by issues that arise, such as jealousies between siblings who are competing for the same positions or when an under-qualified or disruptive spouse wants to enter the business. Years ago, I became acquainted with a family business that the father had founded, and his two sons took control of. One brother was phenomenal, but the other was not as talented. Eventually, the phenomenal one had the presence of mind to suggest to his brother that he would increase his salary as long as he was no longer actively involved in the business. He did this in a nonoffensive way, and the brother accepted the arrangement. The family and the business thrived.
It can be easy for business owners to overestimate or underestimate the experience and capabilities of their family members and thereby place them in the wrong positions with too much or too little responsibility. In my experience, I have seen companies derive great value from giving people tests to ensure that they are in the right positions. There are all sorts of psychological and business aptitude tests to choose from that can help you make more informed business decisions. I have also seen companies benefit from relying on external boards or bringing in outside business consultants to help navigate these decisions and conversations. Having the family members trained by non-family members can also help.
Working with family can be very rewarding and a tremendous opportunity, but like most things in life, it must be managed right. The bottom line: It is important to apply sound business practices and be honest with your family, while at the same time using good psychology and managing things with tact.
James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. He may be reached via email at firstname.lastname@example.org or via LinkedIn at https://www.linkedin.com/in/jamesscassel. His website is: www.casselsalpeter.com