Over the past few weeks, a few interesting conversations have brought me to the conclusion that the most overlooked aspect of family business is the family itself. This is surprising because it is the family that created the foundation of the business. Simply put, one of the keys to the success of big business (especially family business) and the most integral part of the business is the family.
Let me explain further, as we may all know it, business is a set of processes that get a desired product or service to a customer or client at a profit.
As economies have developed, we have learned that processes and procedures can be optimized, and data from the processes, can be captured and used for effective decision making.
Business can easily be grown, and formulas adjusted to allow the business to succeed at its best. It all sounds easy, right? Well, if it weren't for founders, there wouldn't be businesses. If there weren't those individuals that could identify the need and mobilize resources to cater to satisfy the deficiency or need, then there wouldn't be business. For business to begin, there is a need for "someone" to start it. And, the most complex driver that makes a family business succeed or fail is the family. Family equals to the human factor. And time and experience have taught us all that human beings are incredibly complicated and, at times, unpredictable. And when combined with a business, it's not a simple solution. A family is made up of members, each one an individual who is then found in a space where they are part of a process that gets a desired product or service to a client. And the profit from this process then gives the family financial gain. The financial benefit is the ability to have money to allow them to live a lifestyle they prefer.
However, a family in itself is complex. Not all families are successful, and not all families are "normal." And every family has its own mechanisms of sustainability. Families have cultures, "the way we do things around here."
With this in mind, it may be clear that not all families are not suited to becoming families that succeed at working effectively and efficiently to be a successful economic venture.
Some of the reasons why some families may fail at running businesses:
Discord on financial management - there are many situations that can illustrate discord in financial management; however, in this example, I am going to go for the most common two scenarios. These happen, more-so at the beginning of the operations. Scenario number one, when a business is set up, especially in a marriage, and one party invests what they deem as "my money," and at some point, the other party also invests "their money" to assist their spouse. Without clear demarcation and understanding of "who owns" the business, this can at a later stage cause conflict and lead to other complex problems. Especially if the marriage is one of community of property. Each spouse will rightfully feel entitled to the business because they worked together in building the business. Whether it was through financial or manual contribution, all contributions must be accounted for, and accountability as to the value of each contribution factored. It may seem very clinical, as the two parties were supporting each other because of filial commitments. However, history and experience have grown to show that when relationships sour, so do business relations. Equally so in our second scenario, where siblings go into partnerships. And no clear contract or understanding is put on paper. This can lead to rifts and huge misunderstandings. Business agreements should have clarity of communication and demarcations on who is doing what and how they will be compensated. When there is too fluid an understanding, it may lead to egos clashing and individuals becoming toxic to themselves and the business.
Instability of marriage - as with the case of discord in financial management, not all marriages are made equal. The coming together of two individuals to ideally form a unit that works in tandem does not always necessarily automatically assume the fact. Notably, globally divorce rates have increased. And usually, where there is disagreement, there is destruction. And if the parties to the marriage were key players in the business, their animosity often spills over into the business, causing disruptions in operations and influencing the employees adversely. If a family is not stable, inevitably, the business will be affected negatively. As the proverb goes, one rotten apple will spoil the basket.
Poor Communication between key principals - communication is critical everywhere. Our bodies function simply because communication is routed through a central point, the brain, which then sends the right signals to the rest of the body as to what to do next. As I am compiling this article, my thoughts have to be communicated to my fingers to type it out. Similarly, in any relationship, clear communication maintains the relationship and grows it. Miscommunication, implied communication, assumptions due to lack of communication, and outright lack of communication lead to conflict. And most times, it's not positive conflict, but it's the type that brews like tea in a cup and can potentially become in-consumable. Having clear lines of communication and systems of communication allows the principals of a business to understand each other better and operate with each playing their part meticulously.
Mental health - As life develops, especially in a growing business, so does stress and pressures that affect mental health. Many business founders work very hard in the startup phase and continue to be the centre of business growth by managing, as well as at times micromanaging. This often leads to mental health issues. Some minor and some major. But as we all know, when not identified and recognized, a seemingly small, insignificant issue can become a huge insurmountable one. Depression is one of the biggest plights of business owners but it's not the only one. However, any significant mental health issues can be disruptive to the business and its operations. When a family member is dealing with anxiety or depression, it can manifest itself in a variety of ways:
Poor job performance
Moodiness or mood swings
Inability to work with others
When an employee has these types of work issues, it's a problem, but when it's a family member, it can have an even farther-reaching impact on the business.
Physical health - like mental health, any physical health issues neglected can lead to time out of the business and, at times, to a tragedy that can leave the business unattended.
How do we best help families overcome these issues:
Identifying issues. A family should endeavor to always quickly identify issues that are family-related and are negatively affecting the business.
Seeking help. This should not be seen as a weakness but as a strength, especially for families who are responsible. The business is a tool that gives the family financial stability. It's a responsible act to ensure that the family continues to operate at maximum optimization. If it is not, it's the family's responsibility to find assistance to ensure it does.
Engaging the right consultants and advisors. Every problem has a solution. And every area has an expert. That outsider looking in focused on helping a family to optimize its operations is a necessity in all businesses. Consultants have the necessary experience providing solutions to similar situations, and therefore tapping into this helps solve potential issues and recurring issues more swiftly.
It may sound repetitive or like common sense, but I will say it anyway. Creating new cultures and learning how to communicate is key to many problems family businesses face. There is need for the family to communicate better between themselves and then with their organizations. Identifying toxic cultures and managing them in a way that dilutes them or destroys them and replaces them with cultures that nurture growth as a family and subsequently, its business.