Did Someone Suggest Starting a Family Business? Run the Other Way!

Kevin P. Dincher

…or at least think long and hard before starting or joining a business run by members of your family.

The idea of starting a family business must be incredibly appealing to Americans.  According to the US Small Business Administration 90% of the 21 million small businesses in the US are family owned—and 62% of employed Americans work for family-owned companies.   But The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber is a good reminder that just because you are good at baking pies doesn’t mean you are ready to run a bakery and pie shop.  The success rate of small businesses—and of small family-owned small businesses in particular—is amazingly low.

Hiring Family Members

Family interests and family dynamics often conflict with business interests and with sound business practices.  For example, families often fill positions with family members simply because they are family members rather because they are the best suited for the position.  If your business is going to succeed, then you need “the right person in the right job.”  If you are going to succeed, then you need to be “the right person in the right job.”

Family busines 1Invisible Stakeholders

Another way that family interests conflict with business interests is the presence of invisible stakeholders—people who have no official position in the company but who exert influence on decision-making.   You and your siblings own a distribution company—and each of you has a spouse?  Those spouses are invisible stakeholders.   Your retired parents passed on a construction business to you and your brother?   Your parents are invisible stakeholders.  You bought your restaurant from Uncle Nick who comes in every day for lunch?  An invisible stakeholder.   As long as these stakeholders are invisible, their influence is covert and potentially undermining.  If your business is going to succeed, then you need to identify the invisible stakeholders and develop ways of working with their influence overtly.

Two Overlapping Complex Systems

The presence of invisible stakeholders raises something that may seem obvious but is often overlooked by family-owned businesses:  in family-owned businesses, the family and the business cannot be separated.

As if the family system and business system were not complex and challenging enough on their own, when you overlay one with the other, complexity goes through the roof. You move from the realm of “just” trying to solve business challenges, to trying to solve them in the context of relationships amongst and between generations of the family business owners. The family business consultant often steps into the proverbial “hornet’s nest,” where the business is experiencing challenges, in no small part brought on by ineffective communications processes and protocols amongst the family members. (What Does A Family Business Consultant Do? by Paul Morin)Family busines 2

Families are usually a mixed bag of healthy and unhealthy patterns, styles, rules and boundaries.  For example, to the extent that a family embodies communication patterns that are open, clear and direct, then the family members will bring patterns of open, clear and direct communication to their business.    If the family communication style allows for a free exchange (i.e., disagreement) and positively working through conflict, then the family members will bring that style to their business.  Conversely, if communication in the family is closed or indirect, if the family avoids confrontation, conflict and disagreement, then the family members will bring that style to their business.   The same holds true for family rules and for family boundaries.  What is crazy-making in the family will be crazy-making in the business.

So, before you start or join a family-owned business take a good look at the family.  Who makes decisions?  How are decisions made? How do family members communicate?  What are the family rules and boundaries?  The answers to these question will tall you a great deal about what family business.


Kevin Dincher is an organization development consultant, professional development coach and educator with 30 years of experience that includes not only OD consulting but also work in adult education,  counseling psychology and crisis management, program and operations management, and human resources.

LinkedIn: Kevin Dincher

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