When the boys took over the business after their Dad retired, it was expected that Scott would take on a management position. It was quite a change for Scott who was used to the variety that comes with being out on the road and meeting lots of people. Now he was spending 95% of his time at a desk. He felt trapped.
Scott didn't realize until too late just how exhausted he was from trying to adapt to this new role. He didn't want to let the family down so he struggled on. He sunk deeper and deeper into despair until eventually he had a complete breakdown.
It's fairly common for family members to be assigned roles in the business that don't align with their natural instincts or capabilities. Unfortunately, when the focus of one area of a family business encroaches upon the objectives of another area, one or both can suffer. Too often the dividing line between family and business is hard to discern. Where does the business end and the family begin?
As the first of seven typical complexities, no clear definition between family and business is the most crucial to address. The melding of people and relationships with the demands and objectives of the business world is a major source of conflict within the family business.
Priorities for the business differ greatly from those of the family unit. Even though the family unit is the core of the family business, there needs to be clarity around the objectives of the two entities. While the family mission is about empathy and support for the individual family members, the business needs to operate with policies, processes and best practices to the fore so that the company is competitive in its marketplace.
While it is true that a strong family unit is vital to the success of the business, it is crucial that the two entities can function independently and that the rules, expectations and system of governance of one do not adversely impact the other. Similarly, the differing objectives between the family and ownership circles, or the ownership and business circles, must be recognized and considered during planning, decision-making and implementation.
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Similarly, the differing objectives between the family and ownership circles, or the ownership and business circles, must be recognized and considered during planning, decision-making and implementation.
It took a while, but with the family's help, Scott has made a full recovery. Instead of putting the focus solely on the needs of the business, the family shifted to the objectives of the family circle to ensure Scott had the support he needed. Scott is now back at the plant, but in his previous role, doing what he does best, and a non-family member has taken on the role of Chief Operating Officer.
Here are a couple of other examples of how the objectives of the family circle can spill over to the business circle and vice versa.
Cathy has worked in the family business since finishing college 20 years ago. Her father just turned 65 and if her mother has her way, Thom will likely retire in a couple of years.
As the only “offspring” directly involved in the business, Cathy feels she should be the one to take over when Thom retires. She certainly believes she has more knowledge of the business than Brian, her sister's husband, who is currently controller of the shipping division. She is somewhat concerned that she might be overlooked because of her gender. Thom had his hopes set on his son taking an interest in the business but Derek has other aspirations. It's possible that Thom will shift his attention to the only other male family member in the business — his son-in-law.
It's not always easy to separate family from business when it comes to choosing a successor. In the family circle, everyone is equal, but in business it is about choosing the best candidate for the job. Neither Cathy's gender nor the fact that she has been there longer should have any bearing on who eventually becomes CEO. Cognitive, affective and conative assessments will enable Thom to clarify what strengths the role requires and help him find the best candidate.
Derek is upset with the entire family. He brought his girlfriend over for dinner the other night, but the family were all so absorbed in discussions about the business, they hardly even noticed she was there.
A guest at the dinner table certainly does not present the best forum for business discussions. More importantly, conducting business during family functions frequently leaves those not directly involved in the business feeling alienated and undervalued. For a family business to continue beyond the first generation, it is very important to protect and treasure opportunities to connect as a family. At the same time, discussing business matters is equally important, so it is vital that there is a regularly-scheduled business meeting forum.
As a family business owner or member, consider what you can do to clearly define your family and business philosophies.
For more information on this and the other six complexities to address when planning for the transition of your business, contact your BDO advisor or our Business Transition Services team at 1.800.598.6400.