When family business turns family feud

Resolving conflict in the kin-connected workplace

Family politics can rattle even close-knit clans. And running a business also comes with a big set of challenges.

At the convergence of those truisms sit family businesses.

The people who run them face especially thorny versions of such issues as fairness, authority, conflict resolution, and succession.

A harmonious family can carry good relations into the business world. But there can be special complications when the boss is Mom or Dad and co-workers are siblings, cousins, in-laws, or step-relatives.

Enter family-business consultants, outside advisers trained to handle family dynamics in the workplace. This growing field includes lawyers, accountants, management consultants, mediators, and psychologists.

The number of family businesses varies widely depending on the definition (see story at right). But it appears to be significant.

Family-owned companies generate half of the nation's GDP, according to the Family Firm Institute in Boston. Some are on shaky ground. Nearly 70 percent of family firms fail before the second generation takes over.

Still, only about 50 percent of all US startups make it past the first five years. And many experts on entrepreneurship say family businesses often are the ones with the potential to last.

"Of the 100-year-old companies in the US today, most are family businesses, whether they are privately owned or publicly traded," says Craig Aronoff, founder of the Family Enterprise Center at Kennesaw State University, Marietta, Ga.

Family-business consultants aim to build on that success. They approach family businesses with an eye for the emotional issues that underlie all business ones.

"I'm not a trained therapist, but I spend more time doing business therapy than accounting or tax advising," says Arthur Levy, president of a business consulting and accounting firm in New York. "How do you fire a child? Family businesses have a unique set of problems."

When John Messervey, consultant at the National Family Business Council in Lake Forest, Ill., asks people if they would go into business with their siblings or parents, most respond, "Are you kidding? Forget it!"

"So you can imagine what we're dealing with here," Mr. Messervey says.

"Many [family businesses] pay their key employees to build the company and a financial adviser to build wealth, but they don't address the family issue. They shrug and say, 'It's my family - kind of nutty!' " Messervey says.

But the family issue seeps into all aspects of the business, he says. He and other consultants usually get called into a family business when there has been a blowout or when the business has reached a crisis point.

Outside advisers say that they invariably uncover a web of emotional issues having to do with relatives' rivalry, equality, resentment, fairness, gender issues, and birth-order issues. The hottest topic in family businesses is succession: Who is going to take over the business and when.

Entrepreneurs who started businesses after World War II are now passing them along, creating the largest intergenerational transfer of wealth in US history.

In the next five years, 39 percent of family-owned businesses will change leadership due to retirement, according to the Family Firm Institute. But who is best qualified to take over? And does that person even want the job?

Succession brings up deep-seated family issues, including the touchy subject of "who is family, really?" In one family business Mr. Levy advised, the founder's daughter-in-law was more qualified to take over the business than his son.

"He couldn't deal with it," Mr. Levy says of the patriarch. "He had to keep the business in the family. So he fired the daughter-in-law and the business suffered."

Consultants advise clients to create a family council that is separate from the board of the business and includes all family members, even those not in the business. "Issues can be brought forth and dealt with without coming out in the workplace, which creates gossip and causes problems," says Carmen Bianchi, a family-business consultant in Buffalo, N.Y.

Written agreements, from memos of understanding to a family constitution or mission statement, specify how the family interacts with the business. Some even lay out how family members should address each other at work, such as calling bosses by their first names rather than Mom or Dad.

A family policy should also explain how step-relatives, half-siblings, and in-laws are included in the business, for example as nonvoting board members or as equal shareholders. "Once it's in the family creed, then it's like the business's bylaws," Bianchi says, "it's consistent and you can't differentiate."

(c) Copyright 1999. The Christian Science Publishing Society