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Helping Family Businesses
Prosper Across Generations®

Family Business is No Excuse

By Craig E. Aronoff, Ph.D.

We're a family business. When we work with family businesses trying to understand their goals and practices, we ask many questions about behaviors we observe, thought processes we confront and actions that we see. When we ask questions about why things are as they are, we often get a quizzical look, as if to say: You know the answer. It is because we are a family business.

Because we have worked with thousands of family businesses, we ve seen an amazing variety of philosophies and behaviors. What seems natural and normal to one family business might seem bizarre to another. Because many family businesses lack the opportunity to observe others in depth, they just assume that the way they do things is normal, just like other family businesses. They cannot answer questions about why they behave or think as they do, because their way of doing things just seems natural and they haven t analyzed things any deeper. So they answer: We're a family business.

Three brothers working together reportedly had frequent arguments in front of their employees. A little investigation determined that the employees shopped the brothers, seeking the answers they wanted. If an employee asked one brother and got an answer he didn t want, he d have two more chances to get the desired response.

The brothers, however, were left stepping on each other s toes and lashing out at one another. What really allowed this to happen was that the brothers business lacked a clear organizational structure and that their respective responsibilities were unclear. When asked who was responsible for what in the business, they each responded similarly. We're all owners and we re all responsible for everything. As a family business consultant you should understand that we are just being a family business.

Being a family business, I explained, is no excuse for lacking organizational structure, a chain of command and clear responsibilities and accountability for managers. Being a family business is no excuse for not doing what you need to do to run your business well. Each brother took responsibility for different parts of the business. Each became accountable for the performance of his profit center. The arguments stopped. Productivity and profitability improved. The brothers supported each other. They became a better business, a better family and a better family business.

A third-generation family member was promoted to an important position in the family business. He was smart and a hard worker, but he was young and lacked experience in the area for which he was given responsibility. When other managers, family members and non-family, saw him struggling to get his hands around his new responsibilities, first they tried to help. Then they worked around him. People became frustrated. The cousin in the position for which he wasn t prepared became the most frustrated of all.

The consultant asked how it had been decided that the young man should be put in that position? Why was it done? The answers had much more to do with his position in the family than his preparation in the business. After all, they explained, this is a family business.

Being a family business is no excuse for promoting family members into positions for which they are not qualified. Family members can be carefully groomed and their careers managed to maximize potential and contributions, but that usually requires thoughtful planning, not just dropping people into important management slots because they are family.

We hear it again and again. Why are so many family members who have so little business knowledge and experience on the board of directors? Why is your niece allowed to continue in a job that she is unable to do well? Why is your son allowed to violate policies related to illegal substances? Why can t one family member be promoted instead of another, despite the feelings of the disappointed party? Why is sub-par business performance acceptable? The answer that we hear to these and many other similarly hard hitting questions is the same: Because we are a family business. And while simultaneously pursuing goals of being a good family and a good business can be a fantastically complicated challenge, it should never be an excuse for doing the wrong thing or not finding a way to do the right thing.

Good family businesses decide that business decisions should be made for business reasons and that family members take responsibility for their own feelings. Structures and processes such as boards of directors and family councils are developed, understood and supported so that family owners are more likely to make good decisions in the best interests of all, building knowledge, commitment, cohesiveness and discipline. Successor generations receive education, communication, development and nurturing all of which help them to become effective leaders, executives, directors, owners and family members. But none of this can be achieved if being a family business becomes an excuse for poor performance, inadequate discipline, or the failure to come to grips with challenging circumstances or tough decisions.

We're a family business should be a declaration of pride, quality and excellence. It should never be an excuse.

 

 

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