Family matters Featured

9:32am EDT October 31, 2002
Managing a closely held business is not easy. When family is involved, objectivity is often replaced by emotion. Behavior and performance that would never be permitted by employees is tolerated from family members.

The key to success in a family business is to operate it like any other business. Yet successful owners who possess a well-developed ability for rational thought seem to lose it when confronted with a decision they perceive could affect the family.

Succession planning provides a great example.

There are not many fathers who don't believe their son is the best candidate to become the next president of the family business. An honest and objective reality check may prove this isn't true.

It may even identify the son as incompetent, immature and disliked by most people in the organization. If the father ignores this, then emotion has trumped reality, and trouble is on the horizon.

Sometimes, the overwhelming wish of the owner to keep the family together in the business can create another problem. Even companies that follow otherwise good management practices can fall into the trap of ignoring advice from trusted outside advisers if it contradicts the "all-the-family-forever-in the-business" mindset. This can only lead to disaster.

If you ignore reality, you could transfer the company to a second generation that is simply not capable of furthering the business. The better alternative may be to sell the company and let members of the second generation establish their own lives with funds from the sale.

Organizational problems are also inevitable when family members who should not be in the business are allowed to remain. Other family members resent that their sibling (or cousin or brother-in-law) is not carrying his or her own weight. Employees also resent the underperforming family member and recognize that standards are different for their own performance.

The ultimate success of a family business depends on removing emotion from the equation. Otherwise, reality is poorly served. Joel Strom (jstrom@jsagrowth.com) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.