What It's Like to Advise the Family Business: Stories from the Trenches
October 9, 2019
Everyone who works with family businesses can think of a few horror stories -- the brother with a drinking problem, the wife who covers personal expenses with the company checkbook, the cousin who takes extended vacations with the company car, the husband who makes a mess of the accounting system, the younger son who treats long-term employees with disrespect and disregard.
Working as an advisor with family businesses can be uniquely challenging and immensely rewarding. Unlike non-family business engagements, how the work is done can often be just as important as important as the work itself. Personal and family issues are often closely intertwined with straightforward business decision-making, so working with family businesses can be messy, emotional, and fraught with danger. It's not for those with a stony heart or a tin ear.
Family businesses come in many shapes and sizes. They can be as simple as a husband and a wife, a brother and a sister, a father and a son. They can also be consderably more complicated, with several extended family generations, cousins, aunts and uncles, children and grandchildren, and in-laws. Some dynamics of family businesses, though, are common to most of them at some point in their corporate lives. A few things advisors to family businesses can expect and should be prepared to embrace:
- There will be discord. Sometimes this is heated and vocal, sometimes it's passive-aggressive and vehemently denied. In most family businesses, this ebbs and wanes with the financial stremgth of the business and with other stresses on the family group. An advisor may need to know when discord needs to be actively managed and when it should be waited out. An advisor can also listen to what is said -- and what is not being said -- and can help put in place a process that regularly brings family members together for discussions that focus on the importance of being heard.
- Family businesses put unique stresses on marriages, whether spouses work together in the business or not. In a family business, spouses may walk a thin line between supporting the person they're married to and the ones they're related to. The financial strength of the family business has a significant effect on the financial health of the family. An advisor may need to be creative in thinking of ways the family can diversify its financial security outside the family business. By remaining focused on the business fundamentals that make the family business financially healthy, the advisor can help ensure the family's financial security.
- Family business owners are regularly called upon to make choices between what is best for the business and what is best for the family. Sometimes this is a temporary problem that can be negotiated to a successful conclusion, but not always. A family advisor can be a sounding board and, when necessary, the fall guy for a tough decision. Oftentimes, the family advisor is called upon to say the hard stuff -- the stuff that if the family members said it to each other would place too great a strain.
- Generational issues are often more obvious and painful because of the disparate power and experience between generations. The younger generation may chafe at the lack of power and control, while the older generation may not welcome changes and new ideas. As the older generation nears or enters retirement, the former owner's loss of control can be painful. An advisor who has experienced many entrances and exits can be helpful in putting these significant life changes in perspective.
- Not every family member will be as strong as every other, which puts stress on both the business and the family. Office gossip can be intensely personal and divisive. Advisors must remain neutral, and as a neutral third party can be helpful in making suggestions in how to use each family member's talents in the best possible way. Advisors are in a position to ask meaningful questions that can flesh out areas of opportunity for those who are not currently in the right place in the business or shouldn't be in the business at all.
- Business owners can fire an employee without ever having to see him or her again, but that can't be done in a family business. No matter what happens in the business, children and grandchildren, cousins and in-laws should be able to attend graduation ceremonies, weddings, and Thanksgiving dinners together. Advisors can help highlight what's important and what isn't in the business. To some extent, in many cases, the advisor can even help point out what's important in the family, and can encourage family members to not sweat the small stuff.
- Tolstoy said that happy families are all alike; every unhappy family is unhappy in its own way. In working with family businesses, advisors find that the stressors that affect family businesses are often very similar across many types of families and many types of businesses. Helping families in business solve the causes of their unhappiness and succeed as businesses and as families is an advisor's highest goal.
To talk about solutions for your family business, please contact: