The Burdens of Ownership
Virtually every owner of a successful family business at one time or another asks, “Is this worth it?” Some ponder that question daily. Despite the benefits of business success, the challenges of melding family and business can be daunting. The burdens are real. While the public perceives the advantages and privileges of ownership, we think it’s helpful and important for those in—and out of—family businesses to also appreciate the weight of responsibility and the demons of doubt borne by so many family business leaders.
Some of the business owner’s burdens relate to money. While some people think that business owners are rich, they rarely feel that way themselves. They often feel financially insecure. Many put their personal assets at risk, backing bank loans to the business. Others bear the risk of having all their assets tied up in the business, when financial planners would argue that diversification would be more appropriate. Taxes seem burdensome and unfair. On top of these pressures, business leaders often struggle with balancing the need for money to grow the business with family pressures to take money out. Parents bear the added burden of teaching their children to maintain perspective about money.
The competition between business and family not only for money but for time, attention, emotional energy and every other personal resource is a source of many burdens. As one family business leader put it, “Wearing two or three hats all the time will give you a real headache.”
In talking with family business leaders, we often hear phrases like “If I didn’t care so much…” Indeed, perhaps the most prevalent burden is the stress and time demands associated with deeply and intensely caring. Consider the following dilemma of a family business successor.
“I feel like I’m working at least a job and a half. In addition to doing everything I’m supposed to do as an employee, I have to work even harder because, as an owner, I care so much about the company. I feel guilty if I don’t fix everything I see that is wrong. If I don’t attend to something, I worry that employees will think I don’t care—then they won’t care! Consequently, I put so much on my plate that I get stressed out!”
Family members not active in the business rarely appreciate these burdens fully. They think that family members who work in the business have lots of perks and the freedom to do whatever they want. Those outside the business are often envious of those inside, seeing a job and its rewards as privileges. It’s our view that in most cases, family members not in the business underestimate the emotional load carried by family members in the business. Calculating the value of such duty of care and its worth in compensation is almost impossible.
We’re not just talking workload. Successors in the business worry whether they are satisfactorily protecting the interests of all the family members. They are stressed by the realization that their mistakes not only are expensive, but may risk their family’s legacy and reputation. And they are constantly compared to examples of success set by prior generations.
Family business owners add even more to their loads when they take time to strengthen the family team and work to plan for family continuity. These efforts require several more hours per week. Perhaps a conscientious owner has one and three-quarters jobs at once—compromising family time and personal time.
There are several other burdens peculiar to business-owning families. Continued ownership raises the serious concern that future generations of family will feel obliged to enter the business. If being a part of the family business is felt as a duty to parents or to history, the involvement is rarely fulfilling or sustainable. Keeping involvement and ownership in perspective requires a real commitment. Helping and educating the family regarding perspective can be a continuous responsibility.
Many owners also feel a deep responsibility to employees. They agonize over employee selection, development and well-being. Often, employees are viewed as extended family and treated accordingly. If layoffs become necessary, owners struggle with this painful decision and may feel personally responsible for failing to provide ongoing employment.
Business owners also have to deal with community expectations. With so much money tied up in the business, it can be difficult to meet the expectations of local charities. The decision not to contribute can create strained relations with friends and colleagues. One next-generation member of a sizable business struggled with never-ending invitations to charitable functions that she could not afford to attend. While she was wealthy on paper, she had limited cash flow to support so many charitable causes. The visibility of being an owner is also a burden. We’ve known families who have changed their family names or their company names or locations to increase the possibility of having some privacy and anonymity.
Being a family business also raises some conflict of interest issues. Should a business owner curb his or her entrepreneurial instincts and not invest personally in suppliers or customers if the opportunity arises? If there are other family shareholders, perhaps yes. Often it is necessary to ignore personal opportunities and the chance to increase personal wealth and income for the sake of the business and as a precedent for future generations.
Business ownership can also prompt tension with spouses. Practical advice may urge signing a prenuptial agreement, but that often causes pain to the newlyweds. Marrying into a business-owning family can be difficult for spouses who have not grown up with the pressures of business ownership. Spouses must also live in the light of public expectations. For example, one wife complained, “I’m expected to be perfect…always ‘on.’ I have to represent the family at lots of events. I have to deflect those who are looking for gossip about the business, and I feel awkward when I walk into the business; all eyes are on me.” Spouses also struggle with the time commitment required to attend family meetings and business events.
Why would a family put up with these burdens? We find that several answers—some good, some bad—are frequently given:
“I’m expected to join the business and to carry on ownership. If I didn’t, I’d feel like I was rebuking my parents wishes for me.” We find that thinking to be very negative.
“Passing on the business is sure better than the alternatives. I’d be afraid our kids might be spoiled by wealth if we sold. But I don’t want to give it away either.” This reasoning is missing the point: Someday all children of successful business owners will have some privileges. The sooner they learn to cope with wealth and position, the better.
“Figuring out how to sustain our business across generations is a formidable challenge, but it’s one that strengthens and binds our family together.” Many families argue that succeeding against tough odds is rewarding and fun.
“By keeping our business in the family, we ensure that our values will be sustained in the company and even more broadly in our community and with other stakeholders.” We find passing on family values or sharing the family’s business as an example or model of how to help society to be the most compelling reason for continuing. These families share with their children a sense of motivation and mission, of being part of something important and greater than any one individual.
With family business ownership comes several burdens. We hope those family members who are not employees appreciate the extra load carried by family members who are in the business. We hope everyone in the family will seek to understand how different family members carry different burdens.
We also hope the business-owning family explicitly defines the special meaning and value of family ownership. The more compelling the mission of the family and the business, the less burdensome ownership feels.
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